world bank document · 2016. 7. 11. · kpi key project indicators m&e monitoring and evaluation...
TRANSCRIPT
-
Document of
The World Bank
Report No: ICR00002005
IMPLEMENTATION COMPLETION AND RESULTS REPORT
(IDA-35670, IDA-3567A)
ON A
CREDIT
IN THE AMOUNT OF SDR 19 MILLION
(US$23.8 MILLION EQUIVALENT
TO THE
REPUBLIC OF MADAGASCAR
FOR THE
SECOND PRIVATE SECTOR DEVELOPMENT PROJECT
June 30, 2011
Finance and Private Sector Development
AFCS4
Africa Region
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
-
CURRENCY EQUIVALENTS
(Exchange Rate Effective December 31, 2010
Currency Unit = Malagasy Ariary (MGA)
US$1.00 = MGA 2,174
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
ACM Aviation Civile de Madagascar / Civil Aviation Authority
ADEMA Aéroports de Madagascar / Madagascar Airports
ADF Airport Development Fund
AGOA African Growth and Opportunity Act
ATI African Trading Insurance
BPI Business Partners International
CAPE Comité d‘Appui au Pilotage de la relance de l‘Entreprise / Support
Committee for Enterprise Relaunch Pilot
CAS Country Assistance Strategy
CFEC Center for Facilitation of Enterprise Creation
CP Comité de Privatisation / Interministerial Privatization Committee
CRC Comité de Réflexion pour la Compétitivité / Competitiveness Review
Committee
DCA Development Credit Agreement
EDBM Economic Development Board of Madagascar
EMP Environmental Management Plan
EPZ Export Processing Zone
FASP Fonds d'Appui au Secteur Privé / Private Sector Support Fund
FDI Foreign Direct Investment
FIAS Foreign Investment Advisory Services
FMI Financial Management Initiative
FSADR Fond Social d'Appui au Développement Régional / Social and Regional
Development Fund
GDP Gross Domestic Product
GOTICOM Groupement des Opérateurs des Technologies de l'Information et
Communication / Private Sector Association of ICT Operations
GOM Government of Madagascar
GUIDE Guichet Unique des Investissements et du Développement des Entreprises /
One-Stop Shop for Business Development and Investment Promotion
HASYMA Hasy Malagasy / Cotton Company
HIPC Heavily Indebted Poor Country
ICB International Competitive Bidding
-
ICR Implementation Completion and Results
ICT Information and Communication Technology
IDA International Development Agency
IFC International Finance Corporation
IMF International Monetary Fund
IMS Information Management System
IPP Independent Power Producer
I-PRSP Interim Poverty Reduction Strategy Paper
IVATO International Airport of Antananarivo
JIRAMA Jiro Sy Rano Malagasy / Power and Water Company
KPI Key Project Indicators
M&E Monitoring and Evaluation
MAP Madagascar Action Plan
MDSPP Ministère du Développement du Secteur Privé et de la Privatisation /
Ministry of Private Sector Development and Privatization
MSE Micro and Small Enterprises
NBC National Competitive Bidding
NPV Net Present Value
OECD Organisation for Economic Cooperation and Development
ONE Office National de 1'Environnement / National Environment Agency
OMERT Office Malgache pour l'Etude et la Régulation des Télécommunications /
Telecoms Regulator
OMH Office Malgache des Hydrocarbures / Petroleum Regulator
OPCS Operations Policy and Country Services
PAD Project Appraisal Document
PASERP Programme d'Appui Social et Economique pour la Réinsertion
Professionnelle /
Retraining Program
PATESP Private Sector and Capacity Building Project
PCU Program Coordination Unit
PDO Project Development Objective
PIU Project Implementation Unit
PMR Project Monitoring Reports
PNSP Programme National d'Appui au Secteur Privé / Private Sector Support
National Program
PPP Public Private Partnership or Purchasing Power Parity
PSD Private Sector Development
PSDP2 Second Private Sector Development Project
PTF / FPP Privatization Trust Fund / Fonds de Portage et de Privatisation
SADC Southern Africa Development Community
SIRAMA Siramamy Malagasy / Sugar Company
SME Small and Medium-sized Enterprises
SODIP Société pour le Développement Industriel des Plantes de Madagascar /
Madagascar Company for the Industrial Development of Plants
SOE State-Owned Enterprise
SOLIMA Solitany Malagasy / National Oil company of Madagascar
-
STP Secrétariat Technique à la Privatisation / Privatization Secretariat
TELMA Telecom Malagasy
TOR Terms of Reference
UCP Unité de Coordination du Projet / Project Implementation Unit
USF Universal Service Fund
VOIP Voice over Internet Protocol
Vice President: Obiageli Katryn Ezekewesili
Country Director: Haleh Bridi
Sector Manager: Michael J. Fuchs
Task Team Leader: Josiane V. Raveloarison
ICR Team Leader: Michael O. Engman
-
MADAGASCAR
SECOND PRIVATE SECTOR DEVELOPMENT PROJECT
CONTENTS
Data Sheet
A. Basic Information
B. Key Dates
C. Ratings Summary
D. Sector and Theme Codes
E. Bank Staff
F. Results Framework Analysis
G. Ratings of Project Performance in ISRs
H. Restructuring
I. Disbursement Graph
Contents
1. Project Context, Development Objectives and Design ............................................................... 1
2. Key Factors Affecting Implementation and Outcomes .............................................................. 9
3. Assessment of Outcomes .......................................................................................................... 17
4. Assessment of Risk to Development Outcome ......................................................................... 23
5. Assessment of Bank and Borrower Performance ..................................................................... 24
6. Lessons Learned........................................................................................................................ 27
Annex 1. Project Costs and Financing .......................................................................................... 30
Annex 2. Outcome by Component................................................................................................ 32
Annex 3. Economic and Financial Analysis ................................................................................. 58
Annex 4. Bank Lending and Implementation Support/Supervision Processes ............................. 61
Annex 5. Beneficiary Survey Results ........................................................................................... 64
Annex 6. Privatization transactions supported by the Project in 2002-2010 ................................ 66
Annex 7. Summary of Borrower‘s ICR and/or Comments on Draft ICR .................................... 69
Annex 8. Comments of Co-financiers and Other Partners/Stakeholders ...................................... 78
Annex 9. List of Supporting Documents ...................................................................................... 79
Annex 10. Map of Madagascar ..................................................................................................... 80
-
A. Basic Information
Country: Madagascar Project Name: MG - Prviate Sector
Development II
Project ID: P072160 L/C/TF Number(s): IDA-35670,IDA-3567A
ICR Date: 06/30/2011 ICR Type: Core ICR
Lending Instrument: SIL Borrower: REPUBLIC OF
MADAGASCAR
Original Total
Commitment: XDR 19.0M Disbursed Amount: XDR 15.7M
Revised Amount: XDR 15.7M
Environmental Category: B
Implementing Agencies:
Secretariat Technique a la Privatisation (STP)
Cofinanciers and Other External Partners:
B. Key Dates
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review: 08/07/2000 Effectiveness: 11/12/2002 11/12/2002
Appraisal: 01/12/2001 Restructuring(s):
11/12/2002
03/06/2003
04/28/2005
06/14/2006
12/21/2007
05/03/2010
Approval: 08/28/2001 Mid-term Review: 07/18/2005 07/25/2005
Closing: 06/30/2006 12/31/2010
C. Ratings Summary
C.1 Performance Rating by ICR
Outcomes: Moderately Unsatisfactory
Risk to Development Outcome: Moderate
Bank Performance: Moderately Unsatisfactory
Borrower Performance: Moderately Unsatisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)
Bank Ratings Borrower Ratings
Quality at Entry: Moderately Satisfactory Government: Moderately
Unsatisfactory
Quality of Supervision: Moderately
Unsatisfactory
Implementing
Agency/Agencies: Moderately Satisfactory
-
Overall Bank
Performance:
Moderately
Unsatisfactory Overall Borrower
Performance:
Moderately
Unsatisfactory
C.3 Quality at Entry and Implementation Performance Indicators
Implementation
Performance Indicators
QAG Assessments (if
any) Rating
Potential Problem Project
at any time (Yes/No): No
Quality at Entry
(QEA): None
Problem Project at any time
(Yes/No): Yes
Quality of Supervision
(QSA): None
DO rating before
Closing/Inactive status:
Moderately
Satisfactory
D. Sector and Theme Codes
Original Actual
Sector Code (as % of total Bank financing)
Central government administration 95 67
General finance sector 2 5
General industry and trade sector 2 26
Micro- and SME finance 1 2
Theme Code (as % of total Bank financing)
Regulation and competition policy 40 17
Small and medium enterprise support 20 33
State enterprise/bank restructuring and privatization 40 50
E. Bank Staff
Positions At ICR At Approval
Vice President: Obiageli Katryn Ezekwesili Callisto E. Madavo
Country Director: Haleh Z. Bridi Hafez M. H. Ghanem
Sector Manager: Michael J. Fuchs Demba Ba
Project Team Leader: Josiane V. Raveloarison Marie-Ange Saraka-Yao
ICR Team Leader: Michael Olavi Engman
ICR Primary Author: Michael Olavi Engman
-
F. Results Framework Analysis
Project Development Objectives (from Project Appraisal Document)
The objective of the project is to assist the Borrower to improve access, reliability and
affordability of key utilities, through completion of the divestiture program of key state-owned
enterprises, and capacity building initiatives to strengthen the capacity of autonomous regulators
and privatization agencies, and facilitate entry of new operators in the deregulated sectors.
(DCA).
To enable the Government of Madagascar (GOM) to improve access, reliability, and
affordability of key utilities, including transport (PAD).
Revised Project Development Objectives (as approved by original approving authority)
The objective of the Project is to assist the Borrower to improve access, reliability and
affordability of key utilities, through completion of the divestiture program of key state-owned
enterprises, and capacity building initiatives to strengthen the capacity of autonomous regulators
and privatization agencies, and facilitate entry of new operators in the deregulated sectors and
increase the competitiveness of Malagasy companies. (as approved by the Board in November
2002)
(a) PDO Indicator(s)
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target Values
Actual Value
Achieved at
Completion or
Target Years
Indicator 1 : Private investment in the targeted sectors increased by US$100 million annually from
2004 to 2007
Value
quantitative or
Qualitative)
NA Annual increase by
$100 million
Private investment in
telecoms increased
from $13 million in
2004 to $120 million
in 2007. Data for
private investment in
the petroleum sector
were not available
but anecdotal
evidence indicates
that the target was
not reached.
Date achieved 08/01/2001 12/31/2007 12/31/2010
Comments
(incl. %
achievement)
Political uncertainty made investment a poor indicator of success. Roughly one-third of
the target was achieved in telecoms. Team monitored FDI/GDP but there was
insufficient causality between this measure and project for it to be considered in ICR.
Indicator 2 : Improve access to reliable, affordable, and quality services for key utilities
Value
quantitative or
Qualitative)
# of telephone lines (mobile
+ fixed) per 100 inhabitants:
0.8 percent in 2000.
# of Internet users 10,000 in
# of telephone lines
(mobile + fixed) per
100 inhabitants: 1.5
percent in 2004
# of telephone lines
per 100 inhabitants:
2.3 percent in 2004,
26.2 percent in 2008.
-
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target Values
Actual Value
Achieved at
Completion or
Target Years
2000
Telecom services rates as
for 2000
# of Internet users
60,000 in 2005
Telecom services
rates reduced by
2006 in line with the
average rate of
telecom services of
other countries in
region
# of internet users
100,000 in 2005 and
316,000 in 2008.
Price of a 3-min local
call in 2006
(Mada/SSA):
$045/0.68 for mobile
and $0.18/0.09 for
fixed, down from
$3.19/
Date achieved 08/01/2001 12/31/2006 12/31/2009 12/31/2010
Comments
(incl. %
achievement)
Access: targets exceeded - 100%.
Affordability: achieved for mobile but nor fixed services.
Indicator 3 : Strengthen the capacity of autonomous regulators and privatization agencies and
facilitate entry of new operators
Value
quantitative or
Qualitative)
Insufficient capacity of
Privatization Secretariat
(STP) and Telecom
regulator (OMERT)
Capacity building of
Privatization
Secretariat (STP)
and Telecom
regulator (OMERT)
The STP was
strengthened
significantly during
the course of the
project and became
the de facto PIU in
2006. OMERT
received training.
Date achieved 08/01/2001 12/31/2010
Comments
(incl. %
achievement)
STP was dismantled upon project closing. Industry insiders and civil servants argue that
the technical capacity of OMERT is rather good but it lacks meaningful autonomy.
Indicator 4 : Complete divestiture program of key state-owned enterprises
Value
quantitative or
Qualitative)
Complete/Implement
divestiture strategy for
TELMA, HASYMA,
JIRAMA and SIRAMA
Privatize TELMA
by 2002;
SIRAMA by 2002;
International Airport
of Antananarivo
(IVATO) by 2003;
HASYMA by 2003
The
Government
made several
changes to the
list, including
dropping and
adding
companies.
TELMA and
HASYMA privatized
in 2004. JIRAMA
partly under private
management
contract. SIRAMA:
no
launch of
privatization
process; 15 public
enterprises liquidated
and 12 partly
liquidated.
Date achieved 08/01/2001 12/31/2010
Comments
(incl. %
The work of preparing and executing this process was satisfactory but the lack of
commitment by the Government made it impossible to complete the agenda.
-
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target Values
Actual Value
Achieved at
Completion or
Target Years
achievement) Significant achievements still made.
Indicator 5 : Increase competitiveness of Malagasy companies
Value
quantitative or
Qualitative)
None (Total value of
investments. Job
created. Job sustained
Number of MSMEs assisted
- were mentioned)
Number of
investments in
SMEs: Year 1
(2007): 15 Year 2:
18; Year 3: 18 Year
4 24 and Year 5: 27)
There is little
evidence that the
activities helped
increase the
competitiveness of
Malagasy companies.
EDBM helped to
significantly reduce
the transaction costs
of starting a business
and obtaining
permits. It is
impossible to
establish any causal
link
Date achieved 11/12/2002 12/31/2010
Comments
(incl. %
achievement)
The indicators for this sub-section of the PDO were ill-defined and causality unclear.
Data were often not available or collected.
(b) Intermediate Outcome Indicator(s)
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised Target
Values
Actual Value
Achieved at
Completion or
Target Years
Indicator 1 :
Carry out environmental audit of petroleum sites in order to assess environmental
impact, identify risk sharing arrangements, and propose a remedial action plan and risk
mitigation measures
Value
(quantitative
or Qualitative)
No baseline audit available
Core team of trained
qualified individuals
in place at OMH
(petroleum
regulator). Establish
procedures to
monitor
environmental
hazards
Target partly
achieved. 2005:
environmental audit
for phase I delivered.
2006: committee
decides to develop an
action plan to protect
and minimize risk.
2007: 79% of service
stations cleaned up.
2008: Galana
Refinery terminal is
renovated.
Date achieved 08/01/2001 12/31/2004 12/31/2010
-
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised Target
Values
Actual Value
Achieved at
Completion or
Target Years
Comments
(incl. %
achievement)
The output targets were largely met but the Government did not adequately address all
the recommendations of the audit.
Indicator 2 : Reduce the steps to create a firm (60 days and 10 steps at mid term review)
Value
(quantitative
or Qualitative)
157 days and 17 steps in
2002
Ease of doing
business ranking in
2010 report is better
than 144th (in DB
report 2009)
The project was
catalytic in achieving
these results during
the first years when it
established the one
stop shop (GUIDE)
that was later
incorporated into
EDBM, which
reformed the process
significantly.
Date achieved 12/01/2003 12/31/2009 12/31/2010
Comments
(incl. %
achievement)
Indicator 3 : Reduce the steps to create a firm (60 days and 10 steps at mid term review)
Value
(quantitative
or Qualitative)
157 days and 17 steps in
2002
Ease of doing
business ranking in
2010 report is better
than 144th (in DB
report 2009)
Date achieved 12/01/2003 12/31/2009 12/31/2010
Comments
(incl. %
achievement)
Sources: Doing Business report and EDBM
Indicator 4 : Facilitate growth exports through setting up EPZ. Implementation of the pilot zone in
Tsarakofafa - Tamatave
Value
(quantitative
or Qualitative)
Off-site infrastructure
investments are completed:
electricity, water and
telecommunication network
Partnership
agreement between
GoM and developer
concluded
Date achieved 08/01/2005 12/31/2009 12/31/2010
Comments
(incl. %
achievement)
Sources: Ministry of Economy and Industry. FILATEX
Indicator 5 : Encourage participation of nationals in the privatization process
Value
(quantitative
or Qualitative)
Shares not shared.
a) 10% of shares of
the targeted private
enterprises have
been transferred to
the Privatization
This activity did
neither achieve
significant results not
its targets
-
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised Target
Values
Actual Value
Achieved at
Completion or
Target Years
Trust Fund (PTF) at
the closing of each
transaction;
b) PTF has offered
these shares for sale
to local small
investors.
Date achieved 08/01/2001 12/31/2010
Comments
(incl. %
achievement)
Privatization Trust Fund was created, and staffed with a Fund Manager. Although
GOM took years to make progress on this activity, since its creation a few Government
shares in privatized companies have been transferred to PTF.
Indicator 6 : Increase ROI of the targeted companies: ADEMA. HASYMA, SIRAMA and TELMA
Value
(quantitative
or Qualitative)
None None
Unclear. ISR:
HASYMA ROI: -
0.2% in 2004; -
55.5% in 2005; -
3426% in 2006; 1.3%
in 2007 and -31.7%
in June 2008.
TELMA ROI: -
84.2% in 2004;
10.5% in 2005; 2.8%
in 2006; 1.2% in
2007; -5.4% in 2008
and 0.6% in 2009.
Date achieved 12/31/2010
Comments
(incl. %
achievement)
This indicator was insufficiently estimated and monitored
-
G. Ratings of Project Performance in ISRs
No. Date ISR
Archived DO IP
Actual Disbursements
(USD millions)
1 01/29/2002 Satisfactory Satisfactory 0.00
2 05/20/2002 Satisfactory Unsatisfactory 0.00
3 12/19/2002 Unsatisfactory Unsatisfactory 0.00
4 05/28/2003 Satisfactory Satisfactory 0.75
5 11/25/2003 Satisfactory Unsatisfactory 3.00
6 05/05/2004 Satisfactory Satisfactory 6.12
7 06/17/2004 Satisfactory Satisfactory 6.12
8 06/18/2004 Satisfactory Satisfactory 6.12
9 12/16/2004 Satisfactory Satisfactory 9.07
10 06/23/2005 Satisfactory Satisfactory 11.98
11 12/28/2005 Satisfactory Satisfactory 14.41
12 02/04/2006 Satisfactory Satisfactory 15.14
13 07/18/2006 Satisfactory Satisfactory 16.79
14 12/21/2006 Satisfactory Satisfactory 20.44
15 06/28/2007 Satisfactory Satisfactory 22.27
16 11/15/2007 Satisfactory Satisfactory 22.20
17 12/19/2007 Satisfactory Satisfactory 22.20
18 05/30/2008 Satisfactory Satisfactory 23.24
19 12/23/2008 Satisfactory Satisfactory 24.12
20 05/15/2009 Satisfactory Satisfactory 24.47
21 12/23/2009 Moderately Satisfactory Moderately Satisfactory 24.47
22 06/30/2010 Moderately Satisfactory Moderately Satisfactory 24.47
23 01/11/2011 Moderately Unsatisfactory Moderately Unsatisfactory 24.84
-
H. Restructuring (if any)
Restructuring
Date(s)
Board
Approved PDO
Change
ISR Ratings at
Restructuring
Amount
Disbursed at
Restructuring
in USD millions
Reason for Restructuring & Key
Changes Made DO IP
11/12/2002 Y S U 0.00
03/06/2003 N U U 0.75
Second order restructuring for
amending project description,
allocation of funds to credit
components, and the financial and
institutional arrangements
governing project implementation
04/28/2005 N S S 11.69
Second order restructuring for
utilizing project savings to fund a
technical assistance facility
targeting local SMEs, to finance
an insurance facility component of
the Project, following
Madagascar# s admission as
member of ATI, and amending
various procurement thresholds
06/14/2006 S S 16.79
Second order restructuring for
extending the closing date of the
Project to December 31, 2007, and
reallocating some project funds
12/21/2007 N S S 22.20
Second order restructuring for
extending the closing date of the
Project to December 31, 2009, and
reallocating project funds
05/03/2010 MS MS 24.47
Second order restructuring for
extending the closing date of the
Project to December 31, 2010
within the framework of OP 7.30
Dealing with de facto government.
If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body)
enter ratings below:
Outcome Ratings
Against Original PDO/Targets Unsatisfactory
Against Formally Revised PDO/Targets Moderately Unsatisfactory
Overall (weighted) rating Moderately Unsatisfactory
-
I. Disbursement Profile
-
1
1. Project Context, Development Objectives and Design
1.1 Context at Appraisal
1. Country context: Madagascar was one of the poorest countries in the world at the turn of the century. In 2001, the country‘s gross domestic product (GDP) per capita at purchasing
power parity (PPP) was US$848; or 59 percent of the average value in Sub-Saharan Africa.1
Following Board approval of the Second Private Sector Development project (PSDP2) (or, the
Project), on August 28, 2001, the economy has mostly expanded, partly as a result of increased
exports of agricultural and garments products, debt service relief under the enhanced Heavily
Indebted Poor Countries (HIPC) Initiative, and two major investments in the mining industry.2 In
the past decade, the Malagasy economy stood up reasonably well to environmental and economic
shocks, such as devastating cyclones and deteriorating terms of trade, as well as currency
volatility. In 2002-2008, the country embarked on an ambitious reform path that brought
improvements in social, economic and governance indicators. However, the Malagasy economy
contracted in 2002 and 2009 due to political turmoil.
2. Rationale for Bank assistance: The Project‘s interventions aimed to lock in earlier achievements and to strengthen the reform process embarked upon by the country in the second
half of the 1990s. An earlier reform program, supported by the (first) Private Sector
Development and Capacity Building Project (PATESP, CR.2956, 1997-2002), encouraged
private sector development through changes in the legal business environment. Markets were
liberalized and some 50 companies privatized, including eight of the largest state-owned
enterprises (SOEs) and two financial institutions, and the Government of Madagascar (GOM)
established regulatory agencies before the transactions of the privatization process were
concluded. Hence, the Project was prepared and designed in a positive environment categorized
by expectations that the Second Private Sector Development Project would be able to capitalize
on the momentum enjoyed by the Private Sector Development and Capacity Building Project.
3. The Project‘s interventions were designed to support the objectives of the Country Assistance Strategy (CAS) (16249-MAG), of January 17, 1997, which aimed to reduce poverty
through high growth and ―quantum leaps in investment‖. According to the Interim Poverty
Reduction Strategy Paper (I-PRSP), of November 28, 2000, economic performance was expected
to improve by completing the GOM‘s ongoing financial and economic reform program. It
included the implementation of a new legal framework that would promote transparent business
rules, private investment, and local enterprise development in sectors with high growth potential
such as tourism, mining, manufacturing, telecommunications and seafood. It also covered the
finalization of the privatization program and the expansion of infrastructure. The Project
supported these goals and aimed to improve efficiency and expansion of key infrastructure
services that were identified in the I-PRSP as the main constraints to potential sources of growth.
1 World Bank (2011a).
2 IMF (2000), IMF (2004).
-
2
1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)
4. According to the Project Appraisal Document (PAD), the principal objective of the project was ―to enable the Government of Madagascar to improve access, reliability, and
affordability of key utilities, including transport‖. The Development Credit Agreement (DCA)
dated October 5, 2001, was somewhat more comprehensive in definition and stated that the PDO
was ―to assist the Borrower to improve access, reliability and affordability of key utilities,
through completion of the divestiture program of key state-owned enterprises, and capacity
building initiatives to strengthen the capacity of autonomous regulators and privatization
agencies, and facilitate entry of new operators in the deregulated sectors.‖
5. The Project was designed to achieve two specific goals. The first goal was to complete the divestiture of four key state-owned enterprises (SOEs) and 30 small and medium-sized
enterprises (SMEs) as well as to liberalize the agro-industry, air transport, energy, finance, and
telecommunications markets. This was meant to improve efficiency of the companies and create
opportunities for new private entry and investment. The second goal was to strengthen the
capacity of GOM to regulate privatized sectors. See Table 1 for the original key indicators to
assess the achievement of the development objectives.
1.3 Revised PDO and Key Outcome Indicators
6. Shortly after the Project was approved by the Board of Directors on August 28, 2001, a lengthy political crisis erupted that paralyzed the public sector, plunged the economy into
decline, and delayed Project effectiveness. Following the installation of a new Government and
upon its request to the World Bank, on October 22, 2002, the President of the World Bank called
for the Board of Executive Directors to approve several proposed changes to the World Bank
portfolio in the post-conflict environment, including the DCA of the Project, through the
approval of the Regional Vice President.3
7. The Project‘s DCA was thus amended on November 12, 2002 to better reflect the priorities of the new Government. The amendment led to Project effectiveness and was the actual
starting point for the Project as no disbursements had been made prior to the restructuring. The
Project Development Objective (PDO) was amended with a slight addition to the original PDO
with the final words in bold: ―to assist the Borrower to improve access, reliability and
affordability of key utilities, through completion of the divestiture program of key state-owned
enterprises, and capacity building initiatives to strengthen the capacity of autonomous
regulators and privatization agencies, and facilitate entry of new operators in the deregulated
sectors and increase the competitiveness of Malagasy companies‖. In addition, the outcome
indicator on ‗transport‘ was dropped from the Project at the restructuring mission and this change
was thereafter reflected in the second amendment to the DCA.
8. On May 6, 2003, the Country Director and the Government agreed to amend the DCA a second time with modifications to introduce miscellaneous changes to the project description, the
allocation of funds to credit components, and financial and institutional arrangements governing
project implementation. These amendments were not resubmitted to the Board but they followed
3 World Bank (2002).
-
3
the requests outlined by the World Bank President and that had been submitted to the Board of
Directors in the fall of 2002.
Table 1. Key performance indicators
Outcome indicators
Private investment in the targeted sectors increased by US$100 million annually from 2004 to 2007
Telecommunications
The number of telephone lines (fixed line + mobile) per 100 inhabitants (penetration rate) increased from 0.8
percent in 2000 to 1.5 percent in 2004;
Internet users increased from 10,000 in 2000 to 40,000 in 2004, and 60,000 in 2005;
Telecom services rates will be reduced by end 2006 in line with the average rate of telecom services of
countries in the region facing a level of competition in their telecom sector similar to that of Madagascar
Transport
Cost of international and regional airline tickets reduced in line with published economy and charter fares for
competing destinations (such as Reunion) by 2004;
Ground handling fees will be reduced by 8 to 10% by 2004
Output Indicators
Regulatory framework
The regulatory framework for the insurance sector comprising of application decrees mentioned in the
insurance code has been adopted in 2003
Capacity Building
The regulatory agencies responsible for civil aviation, petroleum, and telecommunications are fully
operational by December 2003 and have established monitoring procedures to ensure compliance with
technical and economic regulations and national environmental norms and World Bank Group (WBG)
policies;
The council of insurance and the authority in charge of oversight and monitoring of the insurance sector are
fully operational in 2004, have established yearly procedures to ensure compliance of insurance institutions
to international standards and are disclosing a yearly statistics report on the sector's activities by Dec. 2004;
The Center for Facilitation of Enterprise Creation (CFEC) is adequately funded, staffed and fully operational
by December 2003
Privatization
Privatization transactions are completed in the time-frame below, in compliance with transparency and competition
rules acceptable to the WBG:
Telecoms Malagasy (TELMA) completed by 2002;
Sugar Company (SIRAMA) completed by 2002;
International Airport of Antananarivo (IVATO) completed by 2003;
Cotton Company (HASYMA) completed by 2003;
Ten percent of shares of the targeted private enterprises have been transferred to the Privatization
Trust Fund (PTF) at the closing of each transaction; and
PTF has offered these shares for sale to local small investors
New PSD activities
New strategies in priority sectors identified by Government adopted by 2003;
The Center for the promotion of micro and small enterprises (OMPE) is fully operational in 2003, adequately
staffed and has established adequate procedures to support MSEs;
Product development and training services provided to ten local start-ups by 2005
-
4
1.4 Main Beneficiaries
9. The PAD did not identify specific beneficiaries. The rationale was that the Project would benefit the overall economy through increased competition, adoption of productivity enhancing
initiatives by the private sector, and investments boosting access and lowering prices of utility
services. The ceding of control of loss-making companies to the private sector was expected to
generate cost savings that could be reinvested to expand basic services. For the local private
sector, benefits were expected to be significant as the reforms would facilitate the development
of local entrepreneurship. By targeting backbone services, such as transport and telecoms, the
PAD explicitly assumed that the benefits of improved access and competitive rates would spill
over into other sectors, thereby giving rise to a significant multiplier effect. Simplified
procedures for enterprise registration, and easier and cheaper access to key business services,
would benefit entrepreneurship.
1.5 Original Components
10. The PAD outlined three broad project components: (i) regulatory capacity building; (ii) transaction implementation; and (iii) ‗new Private Sector Development (PSD) activities‘. These
project components are summarized below with a brief assessment of the causal linkages
between component activities and PDO outcomes.
(i) Regulatory Capacity Building
11. The first component would strengthen the regulatory capacity of autonomous sector regulators for air transport, petroleum and telecoms, and in particular: (i) improve their
efficiency in undertaking technical and economic regulation; and (ii) monitor environmental
hazards in compliance with national legislation, sector standards and World Bank Group (WBG)
policies. In addition, it would build in-house capacity of the Center for Facilitation of Enterprise
Creation (CFEC), and strengthen the insurance sector.
12. From a causality perspective, strengthening regulatory capacity to enhance competition, improve policy and monitor markets was an essential requirement in order to achieve the PDOs
of enhancing access, reliability and affordability of targeted utility sectors. It was also a key pre-
condition for a successful outcome from the privatization and reform program of public
enterprises. The CFEC was a worthwhile initiative to support market entry in the newly
liberalized and other sectors.
(ii) Transaction Implementation
13. The second component would provide support for institutional capacity building, a local ownership development scheme, and privatization implementation. First, it would strengthen the
Privatization Secretariat (STP) through technical assistance, including for environmental
screening and auditing, retraining through the Programme d'Appui Social et Economique pour la
Réinsertion Professionnelle (PASERP), and through arbitration. Second, it would help divest of
Privatization Trust Fund (PTF) shares to local investors, provide financial advisory services to
PTF to implement regulations and safeguards, hire a private fund manager to oversee and
manage the fund, create a registry for shares, explore the feasibility of developing mutual funds,
and launch a communications campaign. Third, it would support completion of the remaining
-
5
key companies and small and medium-size enterprises (SMEs) of the ongoing privatization
program (telecoms, the main airports, sugar and cotton). It would also provide financing to assist
in the structuring and closing of the transactions, including legal advisory support to resolve land
and title issues pertaining to ownership transfers, and carry out environmental audits of select
companies.
14. The successful implementation of the activities in this component was essential in boosting competition, freeing up GOM time and resources wasted on mostly unproductive and/or
failing enterprises to be invested elsewhere, and in allowing for the restructuring of these
businesses. By attacking some of the vested interests, including between civil servants,
politicians and executives, and imperfect markets, the proposed activities were likely to reduce
inefficiencies and waste, boost competition, provide a fairer and more conducive investment
climate, and strengthen the Malagasy economy in the long-term.
(iii) Developing new PSD activities
15. The third and final component would: (i) provide support to the operational set up and efficient development of a center (OMPE) created to coordinate activities of micro and small
enterprises (MSE); and (ii) develop strategies to support the implementation of activities
identified in the I-PRSP. In addition, it would provide advisory services to develop a strategy to
promote MSEs and use OMPE to allow MSEs to access market information and technology. It
was also expected to help jump-start the development of priority sectors identified by GOM
using pilot projects, including by assisting GOM in developing new PSD strategies, and provide
assistance to new local business start-ups.
16. The causal link between the activities in this third component and in facilitating entry of new operators in the deregulated sectors—the relevant part of the PDO—was clear. Yet the
anticipated reduction of transaction and information costs would have benefited in particular
MSEs. The large investments and expertise generally required to enter utility markets indicate
that the activities in component 3 were insufficient to have any significant contribution to
achieving the PDO.
17. In summary, successful implementation of the activities would have improved access and reliability to services critical in achieving higher growth (CAS objective).
4 It is also highly likely
that they would have helped reduce poverty through private sector-led growth (CAS goal) in the
long-term. The link to affordability was not obvious, however. Effective regulation—a high
priority in the PAD—would help alleviate some of the potentially negative effects and so would
the training program aimed at facilitating the transfer of retrenched workers into new productive
activities. The activities and selected outputs are therefore likely to have had a positive impact on
achieving some of the PDO outcomes, as analyzed in detail below. Causality for the
interventions of the transport component and its associated outcome indicators were not
convincing given the limited investment and technical assistance interventions as well as
ambitious price reduction targets (see Table 1 for indicators and Annex 1 for budget allocation).
This component was cancelled before implementation begun; thus it is not explored in this
report.
4 World Bank (2003).
-
6
1.6 Revised Components
18. The three headline components remained unchanged during the course of the Project. However, modifications were made to sub-components: some were dropped and others added as
the management team sought to adjust the project design to reflect evolving political and
economic priorities, simplify a comprehensive and complex undertaking, and incorporate new
development tools that were perceived as effective means to achieve the objectives. The
restructuring in November 2002 was initiated by a formal letter sent by the President of the
World Bank in which he requested approval for a number of modifications, as noted in the
previous section. These and some other modifications were then recorded in the amended DCA
of May 2003. The amendment to the DCA at the mid-term review in 2005 was minor and added
two sub-components to the third component. Table 2 presents and explains the changes made to
individual subcomponents during the course of the Project. Table 3 then presents a summary of
the three components and the changes in their sub-components.
Table 2. Revised project components
Original component New component and nature of
modification [year]
Comment
1 – REGULATORY AND CAPACITY BUILDING
Telecoms:
(i) technical assistance to OMERT to strengthen
its regulatory capacity (training and advisory
assistance),
(ii) acquisition of frequency spectrum
management equipment, and
(iii) advisory services to design a rural telecom
policy and funding mechanism
Item (ii) dropped [2002]
A TF (PPIAF) financed most of
the TA identified for (i).
(ii) was to be self-financed by
OMERT. (iii) Project financed the
rural telecom strategy. DCA
amendment in 2002. Requested
by WBG President.
Air transport:
(i) technical assistance for designing and
implementing an information management
system to improve monitoring/regulatory
capacity and
(ii) training for the utilization of the IMS and
enhancement of the regulatory capability of the
personnel.
Component dropped [2003]
The decision by GOM to
restructure Air Madagascar via a
management contract with
Lufthansa Consulting made this
component irrelevant.
Center for facilitating enterprise creation:
(i) advisory services for training of staff,
(ii) purchases of equipment for center set-up
One stop shop for business development
and investment promotion [2002]:
(i) recruitment of staff;
(ii) technical assistance for design of most
adequate structure,
(iii) equipment for center set-up,
(iv) promotion to companies
Creation of GUIDE, one stop
shop for business facilitation.
Strengthening the financial system
Provision of TA and other material support to
establish a regulatory framework governing the
insurance sector, strengthen capacity to control
and supervise the insurance sector, and
undertake reform of the CNaPS
Component dropped [2002]
Requested by WBG President
Sequence of events: (i) decision
made to undertake first the joint
Bank IMF FSAP (2004) and (ii)
launch the financial sector reform
with the current Financial
Services Project.
-
7
Original component New component and nature of
modification [year]
Comment
2 – TRANSACTION IMPLEMENTATION / PRIVATIZATION5
Privatization capacity building:
(i) TA for streamlining procedures of PA
capacity building to carry out complex
transactions,
(ii) TA for legal assistance,
(iii) international environmental expert for in
the field training at STP, and
(iv) liaison environmental expert at ONE.
Supporting the privatization process
[2002]:
(i) operating expenses of STP,
(ii) TA for legal assistance,
(iii) TA for environmental assistance,
(iv) communication campaign on
privatization.
Original component had budgeted
too much for the privatization unit
while ignoring public
communication. Requested by
WBG President
3 – DEVELOPING NEW PSD ACTIVITIES
OPME is operational
Component dropped [2002] Support to micro enterprises is
done through existing and
separate projects. Requested by
WBG President.
Strategies to support PRSP and incubators in
place
Component dropped [2002] Activities to support business
incubators were not considered a
priority. Strategy work was
considered part of CAPE (below).
Requested by WBG President.
New component: Developing Export
Processing Zones [2002]:
(i) feasibility studies,
(ii) TA to implement strategy on EPZs,
(iii) infrastructure investments
The objective was to support the
Malagasy export industry
following the crisis that had a
negative effect on investment,
including some 80,000 lost jobs in
EPZs and build an industrial zone
close to the country‘ s main port.
Requested by WBG President.
New component: Strengthening
Madagascar’s image to attract FDI
[2002]:
(i) hiring of an international expert to
represent Malagasy interests abroad,
(ii) marketing and promotion actions,
(iii) set-up of an internet based database
Requested by WBG President.
New component: Supporting the tourism
industry [2002]: design and implementation
of a tourism master plan.
Requested by WBG President.
New component: Developing a long-term
strategy on PSD issues [2002]:
(i) assistance to CAPE,
(ii) animation of a private/public sector
dialogue forum.
CAPE was a forum established by
GOM to articulate reform
strategies within the framework of
a public private dialogue.
Requested by WBG President.
New component: Insurance facility [2005]:
Provision of support for an insurance
facility against Covered Risks that will be
implemented by ATI in accordance with the
Agreement Establishing ATI
As approved by the Board and
recorded in DCA amendment
letter dated May 18, 2005.
New component: SME Risk Capital Fund
[2005]:
Provision of support to the Risk Capital
Fund through provision of TA Loans to the
Fund‘s SME beneficiaries
As approved by the Board and
recorded in DCA amendment
letter dated May 18, 2005.
5 In the WBG President‘s request for Project restructuring in October 2002, it was suggested that section (iii) ‗TA
for executing a large communication campaign‘ under the ‗Local ownership development scheme (PTF)‘ sub-
component would be dropped; however, this activity was kept.
-
8
1.7 Other significant changes
19. In addition to the Project restructuring in November 2002, the DCA was amended on: (i) May 6, 2003, by the Country Director for amending project description, allocation of funds to
credit components, and the financial and institutional arrangements governing project
implementation; (ii) April 18, 2005, by the Board for utilizing project savings to fund a technical
assistance facility targeting local SMEs, to finance an insurance facility component of the
Project, following Madagascar‘s admission as member of Africa Trading Insurance (ATI), and
amending various procurement thresholds; (iii) June 14, 2006, by the Country Director for
extending the closing date of the Project to December 31, 2007, and reallocating some project
funds; (iv) December 21, 2007 by the Regional Vice-President for extending the closing date of
the Project to December 31, 2009, and reallocating project funds; and (v) May 3, 2010, by the
Vice President of Operations for extending the closing date of the Project to December 31, 2010
within the framework of OP 7.30 Dealing with de facto government. The extensions of the
closing dates were requested by the Government to lend support to ongoing activities (see Figure
1).
Table 3. Summary table of changes to sub-components
Project
Appraisal
Project
restructuring
12/11/2002
Mid-term
review
18/04/2005
1 - Regulatory capacity building
Petroleum regulator (OMH) X X X
Telecoms regulator (OMERT) X X X
Civil aviation authority X - -
CFEC X - -
Strengthening of the financial system X - -
2 - Transaction implementation
Institutional capacity (STP) X X X
Local ownership scheme (PTF) X X X
Privatization transactions X X X
3 - New PSD Activities
Center for the promotion of micro and
small enterprises (OMPE)
X - -
PSD Strategies in support of PRSP X - -
One Stop Shop (GUIDE) - X X
Develop EPZs - X X
Trade and Investment promotion - X X
Support to the tourism sector - X X
CAPE / PPD forum - X X
African Trading Insurance (ATI) - - X
SME support (BPI) - - X
Note: ‗X‘ implies that the sub-component was included and ‗-‗ implies that the sub-component was excluded.
-
9
Figure 1. Project timeline
2. Key Factors Affecting Implementation and Outcomes
2.1 Project Preparation, Design and Quality at Entry
20. The background analysis was sound, lessons learned from the first project were stressed in project design, private sector consultations were organized and recorded, and the rationale for
the Bank‘s intervention was clear. The Government had prior to project design developed a
strategic vision for private sector development as part of its National Support Program for the
Private Sector. Project preparation and design also benefitted from the extensive expertise
developed in the PATESP Project that was approved by the Board on May 29, 1997, which
closed on December 31, 2002.6 The Project focused on deepening the market deregulation and
divestiture activities that were undertaken in PATESP. Concerns and priorities were well
identified, and several analytical reports underpinned the project, including on environmental
safeguard issues.7 The volatile political context and the fragility of local institutions were
prominently acknowledged in the PAD as political turmoil had affected PATESP.
21. The PAD stressed the importance of ensuring improved transparency and increased local participation in the privatization process but also highlighted the significant risk associated with
political instability and limited capacity of local institutions. The PAD dedicated significant
attention to improving transparency in the reform process: for example by proposing separation
of the policy-making and regulatory functions of public agencies, by providing modern
management information systems, by moving toward financial autonomy of the regulatory
agencies, and by applying best practices in the privatization process. The Project also intended to
scale up local private participation in the divestiture program to make necessary reforms
palatable to a public audience who too often associated privatization with foreign takeovers of
domestic assets. It proposed that local investors would be invited to bid in a joint venture with
foreign equity and technical partners. It also aimed at establishing procedures for distributing
shares or mutual funds which would contain a stipulated share of each divested firm. Finally, it
would facilitate the expansion of indigenous local firms, in particular micro-enterprises which
would be provided start-up services. These initiatives were taken amid great political uncertainty
and with acknowledged weaknesses in governance.
6 World Bank (2003).
7 World Bank (2000).
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Board
approval
1st political
crisis erupts
Restructuring
& Project
effectiveness
DCA
amendment
Mid-term
review
DCA
amendment
and PIU
restructuring
DCA
amendment
DCA
amendment
Project
closing
2nd political
crisis erupts:
OP/BP 7.30
-
10
22. The high complexity and comprehensive scope of the Project coupled with its sensitive nature required a high level of government commitment and collaboration between several
public institutions. The project was highly demanding of the Government and the
implementation team and it came at a high political cost. The privatization agenda was unpopular
among many stakeholders and the Government was concerned about the loss of labor. The
incumbent Government was committed at least on paper at the time of project preparation and
project design but reform pressure was also applied by the International Monetary Fund (IMF)
through its programs. Project documentation highlighted the high risk associated with reform
fatigue. Key issues such as political fragility, political economy concerns, and limited
government capacity to build solid institutions within tight deadlines were indicators that the
risks were high. The significant complexity of the Project could have been reduced if the new
PSD activities component had been left out at the design stage and left aside for another Project
that focused on SME support. The project did not include external partners and co-financiers
outside of GOM and the attention to environmental and social safeguards was high.
23. The PDO of improving access, reliability and affordability of key utilities was highly relevant for private sector development, investment promotion and shared growth. The
regulatory capacity building and privatization components were both essential building blocks in
GOM‘s development agenda. Market liberalization, competition and effective regulation are
necessary components to improve market performance. By focusing on key factor markets
(finance, telecoms, transport) as well as inefficient monopolies (airports, cotton, sugar), GOM
would have been well placed to achieve its development objectives if reforms were properly
implemented with attention to competition and effective regulation. Significant progress had
already been made in the 1990s, particularly through the PATESP project, to prepare and start
the liberalization process. Thus, the main objective was consistent with the prevailing economic
priorities of the Government.
24. The ‗new PSD activities‘ component was not closely associated with the PDO before it was restructured in November 2002. The title of the third component, ‗New PSD Activities‘, was
somewhat misleading: ‗SME promotion‘ could have been more appropriate. One of the three
sub-components—‗New strategies in priority sectors identified by Government‘—for ‗New PSD
Activities‘ was not defined at the start. While the establishment of the one stop shop (GUIDE)
was a targeted and practical sub-component that benefited all prospective entrepreneurs, the aim
to train only ten local startups was largely irrelevant and the aim to support future priority sectors
of the Government offered flexibility but limited guidance to the team. While this added
flexibility to adapt part of the Project to GOM‘s evolving agenda may have been appreciated by
the client, this component that performed particularly poorly as the new activities were weak
either in design or implementation. The initial resources allocated for the third component were
less than 6 percent of total resources. In addition, the limited resource allocation (US$0.28
million) for the transport sub-component covering some narrow technical assistance
interventions was unlikely to achieve the ambitious outcome indicators on transport prices. In
transport, it would also have been difficult to determine causality between identified
interventions and the two outcome indicators (Table 1).
-
11
25. Some targets should have been more specific and performance indicators more comprehensive. The combined targets of improving access, lowering prices and improving
quality/reliability were ambitious despite the lack of quality and poor access as well as relatively
high prices of services. While the experiences from many other countries show that access and
quality often improve substantially as a result of market liberalization, absolute price changes are
often marginal. Large improvements in access, choice, and quality raise the utility for
consumers. Competition facilitates price segmentation which by extension can result in both
lower and higher prices depending on the service in question. Price is also closely related to
taxation as illustrated in the petroleum sector. Potential efficiency gains can therefore be
captured by increased rents and increased taxes can neutralize any efficiency gains and even
raise the overall price. The retail price is therefore an imperfect target. There was furthermore no
performance indicator defined for reliability. In addition, the outcome indicator of significantly
increasing private investment in targeted sectors was not a useful measurement of the successful
reforms because political uncertainty scared off investors for years following each crisis.
26. Proactive measures to ensure competitive markets could have been more prominent in project design. Market liberalization and privatization do not necessarily ensure competitive
markets. Proper phasing and sequencing of reform measures are critical and so is the autonomy
of regulatory bodies. The existing literature on market liberalization does pay much attention to
ensuring a healthy dose of competition in order to boost reliability and affordability. While an
important body of this literature was developed in the years subsequent to project launch, the
project could have highlighted these issues more upfront in the design. The PAD mentioned
competition as a byproduct resulting from a strengthened regulator; however, ensuring autonomy
was arguably just as important as building technical expertise in order to induce a higher level of
market competition. In addition, the design of the privatization process could have promoted the
breakup of national monopolies into two or more providers in order to stimulate competition.
Transparency clauses could have conditioned transaction support: openness and simplicity would
have been the key principles in an approach that particularly stressed competitive markets. Clear
rules and punishments would have been established. Price caps could have been considered for
some sectors. These types of initiatives are often necessary but not sufficient to promote
competition.
2.2 Implementation
27. Political developments beyond the control of the Project team had serious implications for the Project. Project implementation was severely delayed at the start due to the unraveling of
a political crisis that paralyzed the Government and the civil service; and at the end due to a
similar political crisis. In December 2001, shortly after the Project was approved by the Board of
Directors and the signing of the Credit Agreement, the incumbent President (Didier Ratsiraka)
and his main opponent (Marc Ravalomanana) both claimed victory in the presidential elections.
In April 2002, after months of sporadic violence and considerable economic disruption, the High
Constitutional Court pronounced Ravalomanana as President following a recount of votes. In
July 2002, Ratsiraka left the country and Ravalomanana effectively gained control of power. The
new political context and harsh economic environment left the new Government unwilling to
implement painful new reforms and divest politically sensitive enterprises.
-
12
28. In November 2002, soon after the new cabinet had been installed, the country project portfolio was restructured, including the Project, to better reflect the priorities of the new
administration. This was a necessary step to enhance Project ownership in the new
administration. Significant reallocation of funds was made and some components were dropped
and others introduced. The outcome was a project that better responded to the priorities in the
aftermath of the crisis with a less ambitious agenda on privatization and a more ambitious
agenda on rebuilding the private sector and promoting business. At the time, these initiatives
must have been regarded as rather drastic but it would turn out that these amendments did not go
far enough to reflect the evolving priorities of the new administration. In particular the
Government‘s commitment to the privatization agenda was weak.
29. The supervision reports reveal a sense of frustration of progress: on privatization in general and on New PSD Activities in particular. The project faced significant challenges in
building new institutions such as the One Stop Shop for Investment and Business Development
(GUIDE) and CAPE (see Annex 2, component 3); in strengthening the existing implementation
units; and in creating an environment conducive to collaboration between public agencies. The
willingness by the Government to take difficult decisions was often lacking. The new
Government hesitated over further privatization and supervision records raise questions of
ownership in this process. No doubt, the privatization of enterprises took longer than anticipated
and Madagascar Airports (Aéroports de Madagascar, ADEMA), Madagascar Power and Water
Company (Jiro Sy Rano Malagasy, JIRAMA) and Madagascar Sugar Industry (Siramamy
Malagasy, SIRAMA) were never privatized. The fact that several of the public enterprises were
poorly managed did not help. For example, SIRAMA was already bankrupt, many companies did
not have accounts, environmental audits had to be done, assets identified and recorded, etc. In
addition, a combination of insufficiently allocated counterpart funding and bureaucratic
procurement procedures adopted by the Project Implementation Unit (PIU) led to significant
arrears that slowed down progress as contractors and consultants faced great uncertainty about
remuneration. The economic crisis left the Government short of funds and the International
Development Association (IDA) credit was therefore increased to 100 percent.
30. To regain momentum, the Client and the World Bank developed a short-term action plan to closely monitor progress and new staff was recruited to accelerate implementation. The results
achieved under this plan in six months were to decide the future of the Project and in December
2003, the supervision team concluded that this initiative had brought significant improvements.
The supervision reports indicate that several experts were hired to help alleviate shortages of
manpower and guidance was provided in action plans, including several recommendations to
establish frequent meetings and bring all parties to the table. The initiatives to enhance the
institutional capacity of the Privatization Secretariat (Secrétariat Technique à la Privatisation,
STP) in the fall of 2003—following resignations of key staff members transferred from PATESP
to PSDP2 due to salary reductions—were decisive to complete the privatization of the Cotton
Company (Hasy Malagasy, HASYMA) and the Telephone Company (Telecom Malagasy,
TELMA). A program of staff training in privatization and public-private partnerships (PPPs) was
launched and study tours organized with focus on practical aspects of implementing programs
and divestiture. The capacity building activities at STP was later key for the success of the public
enterprise reform program.
-
13
31. Project implementation was impeded by the organizational structure during the first half of the Project. The initial project management structure could have been more supportive to
effectively address the multitude of challenges that the complex project posed to the team. The
Government official who was appointed head of the Implementation Agency (or Unité de
Coordination du Projet, UCP) could have been more proactive and results oriented (PIU = UCP
+ STP + PSD units). The first professional who was hired to be in charge of the crucial
monitoring and evaluation (M&E) activities did not have the training and experience for the role.
The two advisory and implementation units—STP for components 1-2 and the PSD unit for
component 3—that the UCP oversaw did not communicate and coordinate as necessary (see
Figure 2). STP, a ministry unit, was more responsive to the Ministry of Finance and Budget than
to the head of PIU. It worked closely with the ministries in charge of the state-owned enterprises
(SOEs) during divestiture preparation. The PSD unit—an implementation unit created inside the
Project—was more responsive to the Ministry of Economy and Industry (previously Ministry of
Industry, Trade and Private Sector Development) than UCP. This organizational structure was
implemented to strengthen the commitment of various ministries but it also imposed high
coordination costs, as highlighted in the government Report in Annex 7.
32. The PIU was initially over staffed and bureaucratic and the organization was drastically restructured to a slimmer and more efficient implementation unit in June 2006. Each unit (UCP,
STP, PSD) in the PIU had its own procurement and accounting team; and the PIU counted 69
staff on renewable one-year contracts by the end of 2005. Many of these staff members were
government officials transferred to the new institutions originally hosted under the PIU umbrella.
They were not paid by the PIU and performed public services, such as issuing work permits and
business licenses at the GUIDE. This arrangement was meant to offer flexibility in future staff
decisions. While the supervision records highlight organizational weaknesses, and there was
some trimming of unnecessary staff that was transferred from PATESP to PSDP2 and more
reliance was transferred to World Bank staff, decisive action to correct the situation would take
until early 2006. As the Project was heading towards closing in December 2005, and there was
significant uncertainty whether the Project would be extended or not, some high-level officials
left the PIU, including the head of UCP. Many staff members also left as a natural result of the
completion of sub-components such as the Support Committee for the Enterprise Relaunch Pilot
(Comité d‘Appui au Pilotage de la Relance de l‘Entreprise, CAPE) (11 staff) and GUIDE (13
staff). The PSD unit (AGEX B in Figure 2) was removed from the organizational chart and the
government-sponsored civil servants at UCP were transferred back to the Ministry of Finance
and Budget. The team took this opportunity to significantly restructure the organization, which
resulted in a much slimmer organization (see Figure 2). Several sub-components in the PSD unit
were also removed and none of the Project staff associated with this unit had their contracts
renewed. The number of staff was thus cut from 69 to 11.
-
14
Figure 2: Organizational structure in 2002-2006 (left) vs. 2006-2010 (right)
Source: STP Director‘s report (2011).
33. The mid-term review was used to add two new sub-components and provide advice on how to reactivate some non-performing sub-components. It offered an opportunity to the Project
to disassociate itself from some sub-components that were not progressing and focus support on
those that were more promising. However, no sub-component was removed and the opportunity
to cut losses was not seized at this time. Instead, the supervision records of the mission following
the mid-term review (January 2006) were more candid, emphasizing disappointments and lack of
achievements, and suggesting more drastic measures to address existing problems. For example,
the Privatization Trust Fund (PTF) was a non-performing sub-component and the supervision
mission in January 2006 recommended dropping this sub-component from the project. The same
held for the privatization of SIRAMA. It also recommended GOM to cancel the contract with the
Export Processing Zone (EPZ) property developer (GETIM) given a number of irregularities and
weaknesses in performance (see Annex 2, component 3). It advised that EDBM would take over
GUIDE and implicitly adopt the role of CAPE, which had exhausted its effort in enhancing
public private dialogue.
34. The most recent political crisis and the ensuing non-replenishment of the project special account under OP/BP 7.30 led to a standstill of the project‘s implementation from March 17,
2009, to the project closing date of December 31, 2010. This development led to a freeze of most
Project activities and necessary action to conclude ongoing initiatives could not be taken. During
this crisis, the country was suspended by the African Union (AU, then the Organisation of
African Unity) and the Southern African Development Community (SADC). Another outcome
was that as of January 1, 2010, Madagascar is no longer designated as beneficiary of U.S. trade
preferences offered in the African Growth and Opportunity Act (AGOA).8 The country‘s
eligibility of AGOA preferences, starting October 2000, helped it establish a significant textiles
and clothing sector—export processing zone (EPZ) exports were worth US$0.82 billion in 2008
(EIU, 2010)—that has been seriously damaged in the last two years. As of April 2011, the
international community including several governments, bilateral and multilateral donors still
does not recognize the current de facto Government (i.e. Haute Autorité de la Transition).
8 U.S. Government (2009).
-
15
2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization
35. The design of the M&E framework should have been better tailored to the PDO and to existing baseline data sources. While performance in the telecom sector was adequately
measured, outcome indicators for other sectors were left out from the M&E framework,
including the petroleum sector. To measure progress on access, reliability and affordability of
key utility services, a more comprehensive set of indicators would have been required and more
independent data collection would have been necessary. The restructuring in November 2002
partly addressed this issue as a number of new performance indicators were added to the
monitoring framework and others modified. The PIU also modified the M&E framework to keep
it more relevant and easier to monitor. The M&E framework remained weak, however, and the
supervision teams struggled with the M&E function. Most aide-memoires of supervision
missions did not measure performance according to the pre-defined performance indicators.
36. The M&E framework could have been used more extensively during the first half of the Project. Data for several of the key project indicators (KPIs) were not systematically collected,
partly due to the fact that they were not easily accessible in standard databases. For example, one
of the KPIs was sector specific inflows of private investment. While these variables are reported
in central World Bank databases and by the Central Bank, the information is not available for all
years and it is particularly lacking for Madagascar. Many KPIs were output indicators and to
measure progress on competitiveness, the project could have made more use of indicators on
enterprise creation and private sector productivity. The first person who was hired for the M&E
activities had no prior experience or training in monitoring or evaluation. The M&E function
suffered as a result. It was not until a new person was recruited in the mid-term of the Project
that the PIU became more proactive in collecting data and monitoring project performance
according to the indicators. But it was then too late to retrieve some of the historical data and the
complexity of some of the existing indicators and a general lack of data left the M&E function
underutilized.
2.4 Safeguard and Fiduciary Compliance
37. The respect of safeguard issues is rated satisfactory. The Project was originally rated as environmental category B (partial assessment). Three main provisions were incorporated in
Project design to ensure compliance with safeguards. First, the Project would prepare
environmental partial and full audits for listed candidates. Second, the project would offer
capacity building to the privatization agency and the national environmental agency. Third, the
project would support public involvement through comprehensive consultations and a
communications campaign. Safeguard policies were deemed applicable only to environmental
assessment (OP 4.01, BP 4.01, GP 4.01). An environmental pre-audit was conducted for each
listed privatization candidate following a comprehensive consultation process.
38. Environmental audits were conducted for ADEMA, HASYMA, SIRAMA and the National Oil Company of Madagascar (Solitany Malagasy, SOLIMA) (post-audit) as planned in
project design. They were approved by World Bank teams with technical assessments provided
by the World Bank‘s Environment and Natural Resource Management Unit for the Africa
Region (AFTEN) and publicly discussed and disclosed. These environmental audits were very
-
16
large undertakings that recorded and assessed the situation in reports several hundred pages long.
For example, the SOLIMA report was 833 pages long not including addendums. In the
privatization of SOLIMA, which had by far the most critical environmental impact, the
environmental cleanup was assigned to the new private companies, in particular by Galana,
which was required to take care of the issues linked to the main pipeline and old refinery and this
was arguably a good solution.
39. The PAD dedicated significant attention in assessing the client‘s procurement and financial management capacity, and in providing recommendations to boost this capacity.
Procurement is rated satisfactory because the PIU followed the rules, procedures and guidelines
according to the World Bank‘s Procurement Specialist. Financial Management is rated
moderately satisfactory because payment schedules were not adequately respected for parts of
the Project; in particular during the first years when the inflow of counterpart funding was
irregular and the PIU organization contained two layers of procurement and financial
management personnel. The PIU cleared outstanding arrears during the last two years of the
Project and it also expediently produced detailed and exhaustive accounts requested by the
Implementation Completion and Results (ICR) Report author. Disbursement lagged due to the
political crises of 2001/2002 and 2009/2010 but disbursement caught up rapidly once the Project
was allowed to operate.
2.5 Post-completion Operation/Next Phase
40. There is no proposal to implement a third PSD project. The World Bank‘s Finance and Private Sector Development Department in the Africa Region is implementing a US$170 million
Integrated Growth Poles Project (effective September 28, 2005; closing December 31, 2012) that
is covering several activities that both complement and sustain some of the Project‘s previous
activities (e.g. EDBM). A second Growth Poles Project would be particularly relevant given the
priorities of private sector-led growth. The Government still holds a portfolio of poorly
performing public enterprises that would benefit from initiatives that would strengthen
management. Some of them need to be financially restructured or closed down. Developing a
stronger public private partnership framework is a high priority that the World Bank currently is
being drafted into providing support for.
41. Continuing efforts to strengthen the regulatory capacity of key sectors would be useful to lock in the Project‘s achievements in building institutions. Capacity building of the telecom
regulator is part of the IDA financed Madagascar Communications Infrastructure Project
(PICOM). Future activities may benefit from conditions that regulators are made meaningfully
independent, that competition plays a greater role in its objectives, and that revenues are
accounted for transparently. The establishment of the EDBM, which incorporated GUIDE and
role of CAPE, is an institution that has achieved very positive results and sustaining this
institution through permanent staff and a financial commitment by GOM is essential for
promoting entrepreneurship and investment.
-
17
3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation
42. The relevance of objectives, design and implementation is rated moderately satisfactory.
43. The PDO of improving access and reliability of key utilities was highly relevant for private sector development, investment promotion and shared growth. It remains highly relevant
until this day. Market liberalization, competition and effective regulation are necessary
components to improve market performance. By focusing on key factor markets (energy,
finance, telecoms, transport) as well as inefficient monopolies (airports, cotton, sugar), GOM
would have been well placed to achieve its development objectives in case reforms were
properly implemented. The current CAS (2007-2011)9 is organized around two main pillars:
activities that will help remove constraints to investment; and activities geared toward improving
the scope and quality of service delivery. Both pillars were the focus of the Project. In addition,
the CAS supports the Government‘s Madagascar Action Plan (MAP) 2007-2012, which was
prepared through extensive dialogue with the private sector and civil society, and includes eight
commitments of which the second commitment ―connected infrastructure‖ and sixth
commitment ―high growth economy‖ commensurate with the Project. Significantly increasing
investment to promote high growth is one of the key priority areas in this plan.10
Finally, the
World Bank Country Economist noted in April 2011 that achieving this PDO will remain a high
priority in the years to come.
44. The original design of focusing primarily on strengthening regulatory capacity and divesting of poorly performing public enterprises was also highly relevant but the case for
including the new PSD activities component was less apparent to achieve the PDO. These first
two components were essential for achieving the PDO and the project design reflected proper
diagnosis of a development priority that remains relevant. The design could have included more
concrete provisions for mechanisms controlling for market competition and ensuring that
regulatory agencies gained sufficient autonomy. The third component, in the PAD, ―New PSD
activities‖, was a weak and vaguely designed component. While establishing a center for the
promotion of MSEs (GUIDE) was useful in general, the design of the enlarged ‗New PSD
Activities‘ component following both the 2002 restructuring and the 2005 mid-term review
lacked in terms of demand analysis and few interventions did effectively address the
―competitiveness‖ of Malagasy companies. The redesign of this component affected the Project
negatively during implementation. In addition, the causality of some activities and PDO
achievement was vague and the PAD lacked an economic and financial analysis section.
45. The actions taken in the implementation process were proactive and flexible but some difficult decisions could have been taken earlier. The World Bank‘s implementation assistance
was adaptive to change, as the Project underwent one major and several minor restructurings,
and it was responsive to the needs of the country, as the priority of private sector competitiveness
was elevated. However, the willingness to add sub-components resulted in a Project that lost
9 World Bank (2007).
10 Government of Madagascar (2006).
-
18
some focus and covered too many activities. The focus on output indicators and limited
usefulness of the M&E framework led to lenient ratings of progress
3.2 Achievement of Project Development Objectives
46. The achievement of the PDO, as summarized and derived in Tables 4-5, and analyzed in detail in Annex 2, is rated moderately unsatisfactory. This rating is in line with the final
Implementation Status Report (ISR) rating that stressed that no progress towards PDO
achievement had been recorded following the implementation of OP/BP 7.30 in March 2009.
Table 4 presents a summary of achievements of the PDO based on the lengthy analysis in Annex
2. The first column divides the PDO up into five separate sections and presents the perceived
level of importance. The second column presents the achievement of key indicators while the
third column summarizes the achievement of PDOs and the ICR author‘s ratings.
Table 4. Summary of ratings and achievements of PDOs
PDO Achievement of indicators (see
Annex 2 for details)
Achievement of PDO (see Annex 2 for details)
1. Assist the
Borrower to improve
access, reliability
and affordability of
key utilities
[High relative
importance]
1.) Telecoms
The KPI targets on access and