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Document of

The World Bank

Report No: ICR1639

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IBRD-74160)

ON 4 CREDITS

IN THE AMOUNT OF US$ 210 MILLION EQUIVALENT

TO THE

REPUBLIC OF MAURITIUS

FOR A

PROGRAMMATIC DPL 1-2-3-4 SERIES

May 25, 2012

Poverty Reduction and Economic Management 1

Africa Region

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Government Fiscal Year

January 1 – December 31 (starting 2010)

July 1- December 31 (2009)

July 1 – June 30 (prior to July 2009)

CURRENCY EQUIVALENTS

(Exchange Rate Effective as of August 27, 2009)

Currency Unit = Mauritius Rupee

US$1.00 = Rs.32.65

Weights and Measures

Metric System

ACRONYMS and ABREVIATIONS

AAA Analytic and Advisory Activities

AfDB African Development Bank

BOI Board of Investment

BOM Bank of Mauritius

CEB Central Electricity Board

CEM Country Economic Memorandum

DBM Development Bank of Mauritius

DDO Deferred Drawdown Option

DPL Development Policy Loan

DPO Development Policy Operation

DPs Development Partners

EAP Eradicating Absolute Poverty

EPZ Export Processing Zone

ESW Economic Sector Work

ICR Implementation Completion and

Results Report

ICT Information and Communication

Technologies

ICTA Information and Communication

Technologies Authority of Mauritius

IMF International Monetary Fund

IPLCs International Private Leased Circuits

MBGS Mauritius Business Growth Scheme

MFA Multi-Fiber Agreement

MOFED Ministry of Finance and Economic

Development

MRA Mauritius Revenue Authority

MTEF Medium Term Expenditure Framework

NEF National Empowerment Foundation

NLTPS National Long-Term Perspective Study

NPC National Pay Council

NTB Non-Tariff Barriers

NTMs Non-Tariff Measures

PBB Program Based Budgeting

PDO Program Development Objectives

PFM Public Financial Management

ROSC Report on the Observance of Standards

and Codes

SAFE South African Far East Cable

SEHDA Small Enterprise and Handicraft

Development Authority

SMEs Small Medium Enterprises

SMEDA Small and Medium Enterprise

Development Authority

SMSTs Sector Ministry Support Teams

WMA Waste Management Authority

ZEP Zones d‟Education Prioritaires

Vice President: Makhtar Diop

Country Director: Haleh Z. Bridi

Sector Manager: John Panzer

Task Team Leader: Rafael Munoz Moreno

ICR Team Leader: Sawkut Rojid

This ICR was produced with contributions and support from Rafael Munoz (Senior Economist,

AFTP1), Alain D‟Hoore (Lead Economist, AFTP1), Zhanar Abdildina (Senior Operations

Officer), Khurshid Noorwalla (Team Assistant), and Wenda Rabot (Team Assistant). The team

thanks Fernando Blanco for peer reviewing the document.

3

REPUBLIC OF MAURITIUS

IMPLEMENTATION COMPLETION AND RESULTS REPORT

CONTENTS

Data Sheet 5

A. Basic Information 5

B. Key Dates 5

C. Ratings Summary 6

D. Sector and Theme Codes 6

E. Bank Staff 7

F. Results Framework Analysis 7

1. Program Context, Development Objectives and Design: 13

1.1 Context at Appraisal 15

1.2 Original Program Development Objectives (PDO) and Key Indicators 16

1.3. Revised PDO 16

1.4. Original Policy Areas Supported by the Program 16

1.5. Revised Policy Areas 19

1.6. Other significant changes 19

2. Key Factors Affecting Implementation and Outcomes 19

2.1 Program Performance: 19

2.2 Major Factors Affecting Implementation 23

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 25

2.4 Expected Next Phase/Follow-up Operation 26

3. Assessment of Outcomes 26

3.1 Relevance of Objectives, Design and Implementation 26

3.2 Achievement of PDO 28

3.3 Justification of Overall Outcome Rating 34

3.4 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 37

4. Assessment of Risk to Development Outcome 37

5. Assessment of Bank and Borrower Performance 38

5.1 Bank Performance 38

4

5.2 Borrower Performance 41

5. Lessons Learned 42

6. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 44

Annex 1 Bank Lending and Implementation Support/Supervision Processes 52

(a) Task Team members 52

(b) Staff Time and Cost 53

Annex 2. Beneficiary Survey Results 54

Annex 3. Stakeholder Workshop Report and Results 54

Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR 54

Annex 5. Comments of Co financiers and Other Partners/Stakeholders 54

Annex 6. List of Supporting Documents 54

5

Data Sheet

A. Basic Information

Country: Mauritius Program Name: Development Policy

Loan 1,2,3,4

Program ID: P101570, P106650,

P112369, P116608 L/C/TF Number(s): IBRD-

ICR Date: 10/04/2012 ICR Type: Core ICR

Lending Instrument: DPL Borrower: Government of

Mauritius

Original Total

Commitment: USD 210.00M Disbursed Amount: USD 210.00 M

Revised Amount: USD 210.00M

Implementing Agencies: Ministry of Finance and Economic Development

Co Financiers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review:

DPL 1

DPL 2

DPL 3

DPL 4

21-Sep-2006

04-Sep-2007

08-Sep-2008

26-Aug-2009

Effectiveness:

DPL 1

DPL 2

DPL 3

DPL 4

31-Jan-2007

29-May-2008

22-May-2009

28-Jan-2010

Appraisal:

DPL 1

DPL 2

DPL 3

DPL 4

18-Oct-2006

18-Dec-2007

17-Feb-2009

21-Sep-2009

Restructuring(s):

Approval:

DPL 1

DPL 2

DPL 3

DPL 4

12-Dec-2006

28-Feb-2008

31-Mar-2009

12-Nov-2009

Mid-term Review:

Closing:

DPL 1

31-Dec-2007

6

DPL 2

DPL 3

DPL 4

31-Dec-2008

31-Dec-2011

31-Dec-2011

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Highly Satisfactory

Risk to Development Outcome: Moderate

Bank Performance: Highly Satisfactory

Borrower Performance: Highly Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments

(if any) Rating:

Potential Problem

Program at any time

(Yes/No):

No Quality at Entry

(QEA): None

Problem Program at any

time (Yes/No): No

Quality of

Supervision (QSA): None

DO rating before

Closing/Inactive status:

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing) – DPL 1

Central government administration

45

General industry and trade sector 30

General education sector 15

Power 5

General water, sanitation and flood protection sector 5

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Highly Satisfactory Government: Highly Satisfactory

Quality of Supervision: Highly Satisfactory Implementing

Agency/Agencies: Highly Satisfactory

Overall Bank

Performance: Highly Satisfactory

Overall Borrower

Performance: Highly Satisfactory

7

Theme Code (as % of total Bank financing) – DPL 1

Administrative and civil service reform 27

Public expenditure, financial management and

procurement 18

Debt management and fiscal sustainability 18

Export development and competitiveness 18

Education for the knowledge economy 18

F. Results Framework Analysis

Program Development Objectives (from Project Appraisal Document)

The objective of the program was to support the comprehensive structural reforms which

respond to two major challenges: (i) the “triple trade shock” of trade preference erosion and high

oil prices and (ii) the transition from low wage, low skill sugar and apparel exporter to

innovative, knowledge and skill based services economy. The reform program was anchored on

four pillars: (i) consolidating fiscal performance and improving public sector efficiency; (ii)

improving trade competitiveness; (iii) improving the investment climate; and (iv) democratizing

the economy through participation, social inclusion and sustainability.

E. Bank Staff

Positions At ICR At Approval

Vice President:

Makhtar Diop

DPL 1:

Gobind T Nankani

DPL 2,3 & 4:

Obiageli Katryn Ezekwesili

Country Director:

Haleh Z. Bridi

DPL 1& 2:

Ritva Reinikka

DPL 3 & 4:

Ruth Kagia

Sector Manager: John Panzer

DPL 1:

Emmanuel Akpa

DPL 2,3&4:

John Panzer

Program Team Leader: Rafael Munoz Moreno

DPL 1 & 2

Robert Keyfitz

DPL 3 & 4:

Fabiano Bastos

ICR Team Leader: Sawkut Rojid

ICR Primary Author: Sawkut Rojid

8

Revised Program Development Objectives (if any, as approved by original approving

authority) Program Development Objectives were not revised

(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

Value as at

December

31, 2011

Indicator 1: GDP Growth

Value (Quantitative or

Qualitative) 3.7 5

4.1

4.1

Date Achieved 6/1/2006 6/1/2010

12/31/2010

Comments (incl. % of

Achievement)

GDP growth rate indeed started to increase. It was 5.7% in

2007, 5.5% in 2008. However because of the global crisis, it

shrunk to 3.1 in 2009 but improved again in 2010 and 2011 to

4.1 %.

Indicator 2: Unemployment Rate


Qualitative) 9.5 <8

7.6

7.9

Date Achieved 6/1/2006 6/1/2010

2007/08


Achievement) Achieved

Indicator 3: Total Number Employed


Qualitative) 511.3 >550

542.2

600

Date Achieved 6/1/2006 6/1/2010

12/31/2010


Achievement)

Total number employed increased throughout the years and the

target of 550 was achieved in 2011.

9

Indicator 4: FDI as a % of GDP


Qualitative) 1.6 >1.6

3.5

2.9

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 5: Stabilize Revenue as a % of GDP above 19.0


Qualitative) 20.1 >19

21.2

21.3

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 6: Public sector debt as a % of GDP


Qualitative) 68.8 <68.8

60.7

57.5

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 7: Primary Spending as % of GDP


Qualitative) 21.6 <21.6

22.3

21.9

Date Achieved 6/1/2006 6/1/2010

12/31/2010


Achievement)

The target was already achieved by 2007/08 (20.2%). However,

because of increased expenditure to stimulate the economy

during the crisis, primary spending as a percentage of GDP

increased to 22.3%. Fiscal consolidation continued in 2011 and

primary spending was brought back on a decreasing trend.

Indicator 8: Trade tariff lines with 0 tariff rate


Qualitative) 74 95

87

88

Date Achieved 6/1/2006 6/1/2010

12/31/2010


Achievement)

While the ratio increased, the target was not attained. This is

because of unanticipated effects of speedy liberalization on

some domestic manufacturing industries which were highly

protected. The Government took a one year respite in the move

toward a duty free island, and continued to cut tariffs thereafter.

10

Indicator 9: Raise Exports as a % of GDP



52.5

53.4

Date Achieved 6/1/2006 6/1/2010

12/31/2010


Achievement)

Not achieved. Exports as a percentage of GDP fell since 2007

and stagnated around 53 percent.

Indicator 10: Increase Tourist Arrivals (million)



0.93

0.94

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 11: Unify regulatory regime across EPZ, non-EPZ sectors


Qualitative) No Yes

Yes

Yes

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 12: Increase international internet bandwidth (Mbps)


Qualitative) 123 >123

1864

1864

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 13: Increase ICT sector as a % of GDP


Qualitative) 5.2 >6

6.4

6.7

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 14: Increase FDI (million Rupees)


Qualitative) 2807 >10,000

12000

9,456

Date Achieved 6/1/2006 6/1/2010

12/31/2010



11

Indicator 15: Number of days to start a business


Qualitative) 46 <46

6

6

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 16: Number of days it takes to enforce commercial Contracts


Qualitative) 750 <750

645

645

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 17: Public credit registry (% of adults)


Qualitative) 0 >0

49.8

49.8

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 18: Number of days spent dealing with construction permits


Qualitative) 162 <162

136

136

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 19: Reduce difficulty of firing index


Qualitative) 50 <50

36.8

No

indicators

available

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 20: Percentage of mentored SME firms that show increase in profitability


Qualitative) 75 80

N/A N/A

Date Achieved 6/1/2006 6/1/2010

12/31/2010


Achievement) Data not available

12

Indicator 21: Trained workers under empowerment program

(refer to placement program only)


Qualitative) 0 12000

8200 12200

Date Achieved 6/1/2006 6/1/2010

12/31/2010


Achievement) Achieved in 2011

Indicator 22: Place women displaced from textile sector into jobs


Qualitative) 45 600

200 234

Date Achieved 6/1/2006 6/1/2010

12/31/2010


Achievement) Not Achieved.

Indicator 23: Number of SMEs supported through matching grants


Qualitative) 22 50

16 58

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 24: Raise Primary completion rate


Qualitative) 64.9 70

68.1

71.4

Date Achieved 6/1/2006 6/1/2010

12/31/2010



Indicator 25: Raise secondary completion rate


Qualitative) 78.4 80

78.8

79.2

Date Achieved 6/1/2006 6/1/2010

12/31/2010


Achievement) Almost achieved in 2011

13

1. Program Context, Development Objectives and Design:

1. This Implementation Completion and Results Report (ICR) is prepared following the

completion of the first Development Policy Loan (DPL) programmatic series in Mauritius. The

objectives of this series were to support the country to transit from an economy which benefited

from decades of preference agreements for its trade activities to one in which the firms were to

face more competition, and to transit from a low skill highly concentrated economy to a more

innovative service based economy. To achieve these objectives, the Government of Mauritius

implemented a program of structural reforms which was bold and covered a wide range of areas.

This program was strongly owned by the Government at the highest level and the commitment to

make the right changes, at times even politically sensitive, was strong. The program itself was

build based on rigorous analytical work. The reform program has been very successful as

measures by two factors: (i) the resilience of the economy during the crisis of 2008, and (ii) the

attainment of most of the targets on indicators identified to measure success.

2. The results of the reform program have been impressive, even at a very early stage in

the process. Substantial progress was already achieved in just two years of reforms. By 2008,

for example, debt to GDP ratio already fell to 53.7 percent (from 68.8 in 2006), primary

spending 20.2 percent (from 21.6 in 2006), unemployment rate 7.2 percent (from 9.5 in 2006),

the number of days to start a business was 6 (from 46 in 2006), and tourist arrivals 0.93 million

(from 0.78 in 2006). When the financial crisis set in 2008, some of the measure had to be relaxed

in order to address the short-term concerns and to stimulate the economy, but commitment for

refrom and progress was sustained throughout the operation.

3. The response to the crisis was targeted and time-bound. As a result of structural reforms

introduced since 2006 Mauritius entered the global crisis with strong fundamentals. In fact, the

fiscal space created due to the reform process until 2008 improved the economy‟s resilience to

better absorb the impact of the shock. The package of measures that were implemented to

counter the impact of the global crisis and to support in stimulating the economy was

comprehensive and innovative. The fiscal stimulus (around 5 percent of GDP) were primarily

focused to accelerate infrastructure investment projects crucial for long-term economic growth,

and to facilitate restructuring of firms to improve their competitiveness and at the same time

preserve jobs and improve capacity. Institutions were put in place (for example a project plan

committee) to ensure that only investments that have a satisfactory rate of return, and fast-

tracking and front loading public investments. To deal with capacity constraints, schemes were

put in place to facilitate recruitment of local/international expertise in specific areas to assist the

government in formulation, design and evaluation of projects and programs. Microeconomic

interventions targeting firms and protecting vulnerable employees were introduced. In this

context, an innovative initiative called the Mechanism for Transitional Support to Private Sector

(MTSP) was introduced. In the MTSP, the Government became an equity partner to guarantee

survival of, otherwise sound firms, facing severe distress during the crisis. However, the

Government would only intervene if the Banks and shareholders were jointly willing to finance

60 percent of the restructuring costs, thus ensuring only market conforming intervention.

Coordination between monetary policy loosening and fiscal policy stimulus was timely and well

calibrated. The floating exchange rate regime also played an important role as a shock absorber,

contributing directly to the balance of payments sustainability. Overall, a high quality

14

macroeconomic policy framework effectively helped to sustain stability and avoid derailment of

achievements. The response to the crisis, of course, resulted in easing, to some extent, the fiscal

consolidation component of the reform program.

4. The momentum of the reform program has been maintained even after the crisis. The

experience of improving the resilience of the economy during the crisis due to the reforms

undertaken until 2008 was in itself a motivating factor to continue the implementation of the

reform agenda. The authorities ascertained that they were on the right track and were determined

to continue the implementation of the reform program. This is evident from the results

framework of the DPO project. Despite some of the indicators fell off-track during the crisis

period, yet they have been brought on track after the crisis and most of them have been achieved.

For example, the debt to GDP ratio which increased to 60.2 percent in 2009 is back on a

declining trend and stood at 57.5 percent in December 2011, and tourist arrivals which fell to

0.87 million in 2009 is consistently increasing and reached 0.96 million in 2011.

5. This programmatic series closely supported the Government in its policy reform

agenda. This programmatic series has been used as a vehicle to harmonizing policy dialogue of

development partners with the Government and has also served as a mechanism to ensure

coordination among development partners in the country. This series was also flexible in

responding to the needs of the country. Initially this series consisted of three operations for an

amount of USD 90 million (USD 30 million each). However, to respond to the additional fiscal

challenges of the client in order to cushion the impact of the unexpected financial crisis of 2008,

the Bank increased the amount for the third operation to USD 100 million and introduced in the

operation a Deferred Drawdown Option (DDO). A fourth operation, of USD 50 million, was also

added to this series to continue supporting the reform agenda, since election was due in a year‟s

time and it would not have been the right timing to start a new series. This programmatic series

ended up with four operations for a total amount of USD 210 million.

6. The objectives set out for this series has been broadly achieved. Mauritius indeed

transitioned from a low wage, low skill economy to an innovative and skill based economy. For

example, the country experienced a high real growth rate for the ICT sector (above 13 percent in

2009 and 2010). The value added of the ICT sector in 2010 was 14.1 percent higher than in

2009. Exports of ICT goods, including re-export rose by 68.1 percent in 2010 and exports of ICT

services increased by 21.6 percent in the same year. Employment in the ICT sector increased by

3.7 percent in 2010. The ICT Development Index (IDI) which measures countries‟ progress

towards becoming information societies improved to 4.03 in 2010 from 3.83 in 2009, and

Mauritius is ranked second among African countries after Seychelles. From 2001 to 2011, while

labor input for the whole economy grew by an average of 1.3 percent annually, labor

productivity grew by 3.0 percent. While attribution is not only linked to the reform program, yet

this denotes that the economy is becoming more skilled and productive. Employment in higher

skilled jobs (financial intermediation, education, health and real estate and business activities)

has increased by 2.5 percent between 2010 and 2011.

15

1.1 Context at Appraisal

7. Mauritius had achieved important economic success since independence in 1968, but

positive outcomes could not be sustained. Mauritius grew at a yearly average of 5 percent (6

percent between 1980 and 1990) causing GDP per capita to rise substantially from 48 percent of

the world average in 1980 to 78 percent of world average in 2004. This impressive achievement

was possible largely due to the opportunistic use of preferential trade agreements for sugar and

textiles, sound institutions to ensure growth and redistribution, and prudent macroeconomic

management. However, the positive outcomes could not be sustained, and growth rate deviated

downwards. In 2005, economic outlook became somber and the pessimism increased in the wake

of the phasing out of the Multi-Fiber Agreement (MFA) for textiles (December 2004), the

gradual decline of the EU guaranteed price of sugar (starting 2006), and the sharp rises in oil and

food prices at that time. These three factors are combined together as the „triple trade shock‟ in

the PDO.

8. At appraisal for the first operation, macroeconomic indicators were worrisome. Budget

deficit was 5 percent and increasing. The International Monetary Fund (IMF) noted that if public

enterprise deficit and cash interest payments on an accrual basis is accounted for, then the overall

fiscal deficit is in fact 6.6 percent of GDP for 2004/05 and not 5 percent. Unemployment rate

was 9 percent, its highest level in 20 years, inflation was 11 percent, FDI declined 1.5 percent of

GDP, and public debt-to-GDP ratio stood at 72 percent at the end of June 2005, up from 55

percent in 1995. The Fund noted that a real GDP growth of about 3 percent would worsen the

fiscal deficit (widen to around 7 percent) over time and public sector debt would become

unsustainable. External accounts deteriorated. Current account deteriorated, following increased

trade deficit (fall in textiles exports coupled with increased import bill as fuel prices hiked) and

this led to a drop in the net official foreign reserves (from 7.5 months on imports in 2003/04 to

less than 5 months of imports in 2005/06) and depreciation of the real effective exchange rate

(3.8 percent in 2003/04 and 6 percent in 2004/05). The authorities, by the end of 2004 started a

comprehensive structural reform program to diversify the economy and enhance competitiveness

to maintain high growth rates. The team‟s assessment of the macroeconomic policy framework at

the start of each operation was sound and realistic, and this helped responding to the needs of the

client.

9. Economic reforms accelerated when a new government took office in 2005 and

recognized the need for fundamental reforms to boost competitiveness and to ensure fiscal

sustainability over the medium term. The Government elected in 2005 maintained substantial

policy continuity but accelerated the on-going reform process, which were in line with the

National Long-Term Perspective Study (NLTPS). The goal was to diversify the economy by

moving towards high value-added, skill and knowledge intensive service sectors, with explicit

reference to the Information and Communication Technologies (ICT) sector. In 2006, the

implementation of a bold package of policies and institutional reforms started. It deepened many

of the efforts initiated in the preceding years and it aimed at addressing some politically-sensitive

reforms as well, like reduction in custom tariffs and linking wage increase to productivity. The

reform program was informed by the Aid for Trade Report in 2006 that the Government

prepared with the support of the Bank.

16

10. The programmatic DPL series was the right vehicle to respond to the reform program

set out by the Government. It provided both financial assistance and technical assistance to the

Government to undertake its reform program, and had in-built flexibility. This DPL series

completely aligned with the priorities of the Government. These priorities are outlined in the

Government‟s budget speeches and the Country Partnership Strategy (CPS) 2007-20131. The

CPS stressed that the challenge for Mauritius was to boost economic growth through higher

productivity; develop human capital through education and labor market reforms; promote new

emerging sectors and develop a knowledge based economy, while preserving its long standing

commitment to social welfare. The CPS objective was to help the Government deal with short-

term trade shocks and the transition to a more competitive and sophisticated economy, while

minimizing negative social impacts. The Government was consistent in its long term policy

objective throughout the series. Technical assistance was provided in a number of areas to

support implementation of policy decisions. For example, in the area of fiscal consolidation, the

WB Treasury provided assistance to the Bank of Mauritius (BOM) and the Ministry of Finance

and Economic Development (MOFED) to jointly develop an action plan for improving Public

Debt Management, and also provided training workshops which proved helpful in strengthening

the relationship with key counterparts and advancing this agenda. Due to its flexibility, at the

time of the crisis in 2008, this series responded rapidly to the needs of the authorities.

1.2 Original Program Development Objectives (PDO) and Key Indicators:

11. The objective of the program was to support the comprehensive structural reforms

which respond to two major challenges: (i) the “triple trade shock” of trade preference erosion

and high oil prices and (ii) the transition from low wage, low skill sugar and apparel exporter to

innovative, knowledge and skill based services economy. The reform program was anchored on

four pillars: (i) consolidating fiscal performance and improving public sector efficiency; (ii)

improving trade competitiveness; (iii) improving the investment climate; and (iv) democratizing

the economy through participation, social inclusion and sustainability.

1.3. Revised PDO and Key Indicators, and reasons/justification:

12. The development objective was not revised during the series.

1.4. Original Policy Areas Supported by the Program:

13. Policy area I, Consolidating fiscal performance and improving public sector efficiency:

In 2005/06, debt to GDP ratio already exceeded prudent levels, at 69.2 percentage of GDP. The

IMF has warned the authority of significant risks to the outlook and urged the authorities to make

bigger and faster adjustments in 2006/07. The IMF projected that with adverse developments in

growth and world interest rates, a no-adjustment situation could quickly get out of control

increasing debt to 112.3 percent of GDP. Demands on the state for discipline, strategic resource

allocation and economic restructuring increased. The government self-imposed fiscal rules in the

budget of 2006/07. These rules included the following (i) that Government should borrow only

for investment and not for recurrent expenditure, and (ii) that public debt to GDP should decline.

1 The CPS progress report prepared in 2011 extended the CPS period to 2015.

17

To attain these objectives, the MOFED set up Sector Ministry Support Teams (SMSTs) to

coordinate budget preparation with sector ministries in line with the self-imposed rules. The goal

was to help sector ministries improve allocative efficiency in expenditure. The Government

program aimed at: (i) stabilizing total revenue at above 19 percent of GDP and (ii) reducing re-

current expenditure.

14. The DPL series supported a number of policy changes in these areas. On the revenue

side, the program supported the Government to adopt policies to reduce distortions and increase

equity in the tax code, relinquishing discretionary powers to grant tax and duty exemptions and

operationalizing the Mauritius Revenue Authority (MRA)2. On the expenditure side, the program

supported the Government to adopt a Medium Term Expenditure Framework (MTEF), to

implement Program Based Budgeting (PBB) in order to increase predictability of resource

envelopes for planning purposes, to align the chart of accounts of the Treasury accounting

system to the Government Finance Statistics Manual 2001, to upgrade the Borrower‟s financial

management information system to enable budget implementation and reporting of financial and

non-financial data, and to prepare sector strategies in line with PBB requirements.

15. Policy area II, Enhancing trade competitiveness: Mauritius faced ineffective regulation,

anti-export biased policy distortions, red tape and discretionary interventions, which impacted

negatively on trade competitiveness thereby impeding flow of resources to growth sectors.

Incentives in place were geared more toward production for domestic markets than exports,

product and process innovations were not encouraged and policies to deal with the constraints of

Small Medium Enterprises (SMEs) were not priorities. The reform agenda put in place by the

government addresses these problems by revamping incentives, eliminating the distinction

between Export Processing Zone (EPZ) and non-EPZ firms, tariff liberalization, eliminating

investment tax credit, and lightening regulatory burdens.

16. The DPL series supported a number of reforms under this component. DPL1 and DPL2

focused on reducing the cost of international connectivity and increasing capacity, and DPL2

also called for a review of telecommunications regulation3. Informed policy dialogue in the area

of competitiveness and regulatory framework was enhanced following the Bank‟s Economic

Sector Work (ESW), which identified a number of inappropriate non-tariff trade-related

regulations and implementation, bottlenecks which compromise competitiveness in Mauritius.

Strong Government interest on the subject nurtured a productive policy dialogue and set-up of a

permanent regulatory review committee, as recommended. To support these policies, some of the

prior actions that the DPL series followed up are: acquisition of additional capacity on the South

African Far East Cable (SAFE) cable by Mauritius Telecom, issuing of decision by Information

and Communication Technologies Authority of Mauritius (ICTA) on Mauritius Telecom‟s

2 The MRA‟s legal basis dates from 2004, but it became fully operational only in July 2006 with new premises, a

full complement of professional staff having their own scheme of service, and equipped with a clear mandate and a

modern client focus 3 Regulatory challenges have centered on balancing the interests of the incumbent, Mauritius Telecom, with other

competitors in the sector, especially MT‟s exclusive control over the landing point for international communications

and participation in the SAFE consortium. Good practice thinking on regulation has evolved considerably since

2001 when the ICTA was established under the Telecommunications Act, shifting away from licensing entry to

promoting efficient market outcomes.

18

application for 20 percent price reduction on asymmetric digital subscriber line (ADSL) charges,

initiation of regulatory review of ICTA, continue implementation of the duty free island policy

by significantly reducing average tariff rate and number of top rated tariff lines and establishing

a joint Public-Private Sector Standing Committee to review the design and implementation of

regulatory measures relative to import and export licenses with a view to eliminate unwarranted

barriers to trade.

17. Policy area III, Improving the investment climate: A number of constraints inhibited

investment to the country. Some of these constraints were: shortage of human capital, rigidity in

regulation on entry of foreign workers, inflexible labor market, linking wage setting to

productivity rather than index-linked and poor port and road infrastructure. The Government

embarked on reforms to eliminate bureaucratic obstacles. The Registrar of Companies was

designated as a one stop focal agency for business registration and the Board of Investment

(BOI) converted from being an administrator of programs to a facilitator and promoter. Whereas

firms previously had to obtain ex-ante fire and health certificates to start operations, new rules

were set up for ex-post verification of adherence to published guidelines. Other measures include

merging development and building permits, easing entry of foreign workers by combining

residence and work permits into a single occupation permit and tying wages more closely to

productivity by replacing the tripartite wage setting mechanism with a National Pay Council

(NPC). In addition, land administration and management was being modernized with the

introduction of a cadastre system and establishment of transparent and predictable procedures for

transfers of ownership and usage.

18. The DPL series supported various components toward improving investment climate.

In March 2004, the Bank submitted the “Report on the Observance of Standards and Codes

(ROSC) of Insolvency and Creditor Rights Systems for Mauritius” and made recommendations

on how to improve the statutory insolvency framework in Mauritius. Other areas of support

included the establishment and operationalization of a new wage negotiating mechanism,

introduction of a flexi-security scheme, and the appointment of the Competition Commission of

Mauritius.

19. Policy area IV, Democratizing the economy through participation, social inclusion and

sustainability. The objectives are to make better use of available human resources, create job

opportunities, empowering people through active labor market programs, and providing adequate

social safety nets for the vulnerable. In this context, an Empowerment program was incorporated

for the following purposes/ activities: (i) land for social housing; (ii) land for small

entrepreneurs; (iii) a workfare program emphasizing training and re-skilling; (iv) special

programs for unemployed women; (v) tourist villages; (vi) assistance for outsourcing; and (vii)

support for development of new entrepreneurs and SMEs. Government also embarked on

reforms of the administration of social safety nets to strengthen financial viability and focus

support on the truly needy and emphasis was also laid on increasing access to education and

(re)training.

20. In this pillar, the DPL series supported the expanding opportunities through education,

empowerment of people to increase their employability and better targeting of the needy. The

prior actions in the series were: (i) drafting of national education strategy to increase primary,

19

secondary and tertiary levels and raise quality, (ii) preparation and submission to Cabinet of a

draft Education and Human Resources Strategy Plan and implementation of a targeted and

temporary policy action in the form of a work and training scheme, and (iii) production of a

poverty map with the objective of improving the capacity for geographical targeting.

1.5. Revised Policy Areas:

21. Policy areas were not revised.

1.6. Other significant changes:

22. During the crisis in 2008, the Bank responded quickly to meet the needs of the country.

The initial plan was a programmatic series of three operations of USD 30 million each.

However, during the global financial crisis when the economic outlook was uncertain, the

country has serious concerns over declining revenues and the authorities needed to insure against

the negative impact of the crisis. The Bank responded and provided an increase of US$70 million

equivalent for the third operation as a self-insurance to adapt and protect against disruption to the

reform program. To allow for greater flexibility in responding to mounting uncertainties, the

operation was converted into a DDO operation and the credit was approved on a more favorable

term which included the elimination of the commitment fee. Although the request from the

authorities was higher than USD 100 million for DPL3, the Bank determined that given the

exposure limits for Mauritius and the then existing volume of loans outstanding, the DDO would

have to be limited to US$100 million.

23. A fourth operation (DPL4) was added to the program. During the preparation of DPL3,

the Government requested for a new series of DPOs to support in the continuation of reforms.

However, to keep in step with the electoral cycle it was agreed to add one operation, DPL4, to

the series and to begin a new programmatic series in FY11. The Bank provided a further US$50

million in funding through DPL4, and this was well coordinated with other development partners

to close potential sizeable funding gap if the crisis continued to worsen. This amount was

matched by Euros 40 million of funding from AFD directed at support for projects meeting the

criterion of environmental sustainability. African Development Bank (AfDB), which was also

preparing a DPO series decided to make US$700 million available to Mauritius in three tranches

and the EU also scaled up its assistance through additional grants. DPL4 included joint missions

with all the development partners and development of common results framework with the

African Development Bank.

2. Key Factors Affecting Implementation and Outcomes

2.1 Program Performance:

24. The DPL series aligned with the priorities of the Government’s reform agenda. (The

four pillars are mentioned in section 1.2). The subsequent operations build on the previous ones

and the prior actions followed an incremental sequencing path to push the reforms deeper. Since

the program based budgeting (PBB) was formally introduced in 2008/09, this series made use of

some of the country‟s own indicators and targets to measure success and achievements.

20

Table 1: Prior Actions for DPL1 – 4 Components

Prior Actions: All Successfully Met

DPL1 DPL2 DPL3 DPL4

Consolidating

fiscal

performance

and improving

public sector

efficiency

Reduce primary

spending by 0.5

percent of GDP

relative to 2005/06

Implementation of

a MTEF budget and

preparation of an

indicative PBB for

2007/08 budget

Enactment and proclamation of the Public

Debt Management Act 2008, which limits

the Borrower‟s public sector debt to a

maximum of 60-percent of gross

domestic product and provides for public

sector debt reduction to 50-percent by the

end of 2013.

Preparation of at least

four line ministries

strategies for the

Borrower‟s Fiscal

Year 2010 budget in

line with program-

based budget

requirements.

Reduce tax

expenditures by 0.5

percent of GDP

relative to 2005/06

Reduction of

primary spending

by 1.0 percent of

GDP in 2007/08

compared to

2005/06.

Implementation of performance

management pilots in the Borrower‟s

civil service by individual line ministries

and the Ministry of Civil Service and

Administrative Reforms.

Pass legislation to

abolish ministerial

discretion over tax and

duty exemptions

Enactment and

proclamation of the

Public Procurement

Act 2006, including

the appointment of

senior officials for

the Procurement

Policy Office, the

Central

Procurement Board

and the

Independent

Review Panel, as

prescribed under

the Act

Alignment of the chart of accounts of the

Treasury accounting system with the

Government Finance Statistics Manual

2001 and upgrading of the Borrower‟s

financial management information system

to enable budget implementation and

reporting of financial and non-financial

data, under the efforts of the MOFED, in

coordination with the department of the

Accountant General

Use fiscal rules to set

budget envelope and

strengthen monitoring

to ensure allocations

to line ministries

accord with preset

ceilings

Submission of

paper to cabinet

establishing

Parastatal Reform

Steering

Committee.

Evaluation of state

of health of selected

parastatals (SPMP,

Central Electricity

Board (CEB),

CWA, Wastewater

Management

Authority (WMA)

and establishment

of remedial action

plans to address the

problems

Begin implementation of the respective

parastatal reform action plans, by the

Central Water Authority, Wastewater

Management Authority, Central

Electricity Board, and Sugar Planters

Mechanical Pool Corporation, to improve

operational efficiency and service

delivery by: (a) introducing a

performance management system,

promoting staff proficiency in multiple

areas of expertise, reducing overtime and

eliminating unfilled posts; (b) increasing

capacity utilization of capital equipment

(i.e., vehicles, tractors), and reducing fuel

and lubricating oil costs; (c) outsourcing

transport and security services, cutting

delivery time and cost, and reducing

pilferage; and (d) improving inventory

management by reducing the number and

volumes of items carried.

Operationalize MRA

to strengthen tax

administration

21

Improving

trade

competitiveness

Implement first year

of phased tariff

reduction toward

eventual duty free

island by cutting top

ad valorem rate from

65 to 30 percent and

reduce average tariffs

by 2 percent

(i) Acquisition of

additional capacity

on the SAFE cable

by Mauritius

Telecom; (ii)

Issuing of decision

by ICTA on

Mauritius

Telecom‟s

application for 20

percent price

reduction on ADSL

charges; (iii)

Initiation of

regulatory review

of ICTA

Continue implementation of the

Borrower‟s duty free island policy by

significantly reducing average tariff rate

and number of top rated tariff lines by the

MOFEE.

Revision of the legal

and regulatory

framework of the

Information and

Communications

Technology (ICT)

sector in line with the

international best

practices and changes

resulting from

technological

convergence for

modern competitive

ICT markets, as shall

be evidenced by: (i)

reduction of the prices

of International

Private Leased

Circuits (IPLCs) from

Mauritius to Paris; (ii)

preparation and

approval by the Board

of ICTA of draft

proposals for

amendment to the

Information and

Communication and

Technologies Act;

and (iii) appointment

of the Data Protection

Commissioner

pursuant to the Data

Protection Act.

Unify tax and

regulatory regimes for

EPZ and non-EPZ

firms, with the

exception of labor

regulation

Establishment of a

joint Public-Private

Sector Standing

Committee to review

the design and

implementation of

regulatory measures

relative to import and

export licenses with a

view to eliminate

unwarranted barriers

to trade.

Reduce cost of IPLCs

by 20-35 percent

Improving the

investment

climate

Facilitate doing

business by

streamlining

registration

procedures

Establishment and

operationalization

of new, NPC during

2007 pay round.

Introduction of a flexi-security scheme, as

reflected in the workfare program

provisions contained in section IX of the

Employment Rights Act 2008.

Enactment of the

insolvency legislation

(Insolvency Act No 3

of 2009).

Designate the

Registrar of

Companies as a one-

stop center for

business registration

Appointment of the

Competition

Commission of

Mauritius

22

Ease entry of foreign

professional and

skilled workers by

issuing single

residency and

occupation permits

within three working

days

Democratizing

the economy

through

participation,

social inclusion

and

sustainability

Set up machinery for

Empowerment

Program to spend Rs5

billion over 5 years on

social protection,

retraining and SME

support

Drafting of national

education strategy

to increase primary,

secondary and

tertiary output and

raise quality,

including through:

increasing

enrollment at

tertiary level;

reducing the failure

and marginal pass

rate of the CPE, in

particular in Zones

d‟Education

Prioritaires;

offering a

vocational stream

to those who fail or

barely pass the

CPE; upgrading

teacher training;

implementing a

new curriculum

with a greater

emphasis on

languages, science,

math and ICT.

Preparation and submission by the

Ministry of Education, Culture and

Human Resources to Cabinet of a draft

Education and Human Resources Strategy

Plan that diagnoses education sector

needs, identifies objectives and priorities,

and outlines options, which will be costed

and, together with human resources

requirements, incorporated into a medium

term action plan and a fully financed,

program based budget submission.

Implementation of a

targeted and

temporary policy

action in the form of a

work and training

scheme by the

National

Empowerment

Foundation (NEF) to

mitigate the risks of

widespread layoffs in

the context of the

economic slowdown.

Design measures to

facilitate growth of

formal SME sector

through access to

finance, technical

assistance and

capacity building and

consultancy services

Production of a final

poverty map by the

Central Statistic

Office of Mauritius

(CSO) combining the

Borrower‟s FY

2001/02 Household

Budget Survey and

2000 Population

Census data with the

objective of

improving the

capacity for

geographical

targeting.

Replace consumer

subsidies with targeted

cash transfers, with

additional measures to

increase support and

opportunities to the

poorest

25. Flexibility was instilled in the series to increase effectiveness. The third operation in the

series was prepared with DDO and with an increase in the amount of the operation to respond to

23

the Government needs in light of the financial crisis and its associated uncertain outlook at that

time (sees section 1.6). Even during the global crisis in 2008, momentum for reforms remained

high. The reforms implemented in the first two operations of the series provided the fiscal space

to surmount the fiscal challenges that the crisis created. The authorities realized the benefits of

the reforms implemented and therefore continued implementation of the reform program.

26. Partnership with other development partners (DPs) was important to reduce

transaction costs by the authorities. There are a limited number of development partners that

operate in Mauritius. These are the European Commission (EC), the World Bank (WB), the

African Development Bank (AfDB) and the United Nation Development Program (UNDP).

Except the AfDB, the other three DPs have an office in Mauritius. The AfDB opened an office

after the end of this program. Donor coordination was very effective; all donors participated in

the DPO missions and were attending several meetings, especially in the areas that they were

also engaged. This was very helpful both for the donor community as well as the Government.

In fact the Government requested that mission around the DPO should be conducted jointly with

the DPs to reduce Government‟s transaction costs but also to ensure that there are no duplication.

DPs were also conducting donor meetings to share views and identify joint working areas. The

Government highly values the DPL operations as a vehicle for coordination on policy dialogue

among all stakeholders involved. During the DPL4 preparation, AfDB and the WB worked

closely in preparing their respective operations.

2.2 Major Factors Affecting Implementation:

27. A number of factors contributed to the successful implementation and outcome of the

programmatic series. These include: (i) adequacy of Government‟s commitment, (ii) soundness

of background analysis, (iii) assessment of the operation‟s design, and (iv) risks identified at

appraisal stage and effectiveness of mitigation measures.

28. Adequacy of Government’s commitment: Commitment to economic reform was

expressed at the highest level by the President of the Republic during his address to the nation in

July 2005 (President‟s address: Government Programme 2005-2010), by the Finance Minister‟s

statement to Parliament, Setting the Stage for Robust Growth in August 2005), and the budget

speech of FY 2006/07 in June 2006. The reform program was strongly owned by the

Government and the Ministry of Finance was the champion leading the reform process. The

areas for reform were set out by the Government and it was highly committed to attain its

objective. The reform agenda had the political backing at the highest level, and consultations

with stakeholders were quite thorough. The private sector and the public sector were both

formally and informally meeting to discuss relevance of policy changes. Government‟s

ownership throughout this series grew as the Government officials gained more capacity and

build confidence to discuss on policy changes with the Bank and understood the necessity for

these reforms.

29. Operations based on sound analytical work: The DPL series was designed on the basis

of the analytical work undertaken prior to the preparation of the first operation and other

Analytic and Advisory Activities (AAAs) undertaken during the implementation of subsequent

operations. The program largely benefitted from the Bank‟s technical assistance in parallel with

24

analytical work. The main underpinning analytical study which informed the reform program is

the Aid for Trade piece that the Bank completed in 2006. Throughout the series, the operations

benefitted from the Investment Climate Assessment in 2009, a study on the social protection

system of the country, a Public Expenditure and Financial Accountability Review in 2007 and

work on private sector development by the annual Doing Business Surveys. In addition, the

operations benefited from other works undertaken by other DPs and the IMF, in particular the

various Article IV documents, and the African Economic Outlook. During the last operation, the

Bank conducted an ESW on trade and labor4 to gather more knowledge which has been used to

inform policy reforms in the area of competitiveness for a subsequent programmatic series of

new DPLs. These knowledge products, in addition to those done by others provided analytical

background for the design of the different operations.

30. Assessment of the operation’s design: The program aligned to the priorities of the

Government, and covered a wide range of reform areas. The implementation of the reform

program required buy-in from a number of actors, several agencies/ institutions/ ministries, some

of which had weak implementation capacity. During the design phase, areas where

implementation capacity was limited were identified and technical assistance was provided either

by the Bank or through partnerships with other development partners. Based on past experience

(see section 5.1) the first operation of the series was designed in such a way that the actions were

in themselves of standalone strategic importance but were concurrently connected to the

remaining operations. These areas were mainly debt management, Public Financial Management

(PFM) and trade competitiveness. The DPs ensured effectiveness of their engagements, avoided

duplication, and limited transaction costs to the authorities. The DPO programmatic series

provided a platform for DPs to coordinate their support to the Government. Joint missions

(identification, preparation and appraisal) carried out with other DPs have been instrumental in

harmonizing the donor community around the Government‟s program. The Government highly

values the DPL operations as a vehicle for coordination on policy dialogue among all

stakeholders involved. The DPL and parallel financing from other DPs have supplied around a

quarter of the public sector borrowing requirement over the period.

31. Risks identified at appraisal stage and effectiveness of mitigation measures: Three risks

were identified during the appraisal stage of the operations and mitigating measures were

proposed. These were related to the ability of the Government to keep up the momentum of the

reforms, maintaining of the macroeconomic stability and capacity constraints. Because the

reform agenda included some policy changes that would affect and be unpopular with some

segments of the population, and given the knowledge that eliminating subsidies and targeting of

pension payments to only the needy have proved unacceptable in the past, the team identified

that the authorities may slip off track for some of the politically sensitive reforms. However, this

risk would be mitigated since the Government‟s priority pillars included the democratizing of the

economy and adopted an Empowerment Program to enhance opportunities and protect the

vulnerable groups who are at risks from changes taking place. The mitigating factors worked.

32. Maintaining macro stability was identified as a risk as poor debt management policy

was a concern. For the last two operations, the risk of instability of the macroeconomic situation

4 Although the ESW was completed after DPL4 declared effectiveness, yet the recommendations were adopted

during the preparation of the operation.

25

was higher due to the fiscal and balance of payments effects of the financial crisis. However, this

risk of macroeconomic instability was mitigated by the Government‟s continuing commitment

and leadership to a sound medium term economic framework, capacity building in debt

management, Government‟s cognizance of the importance of a sustainable and good quality

fiscal response as demonstrated by its fiscal measures and the operation of an exchange rate

policy conducive to external adjustment. The Bank, as well as other DPs, scaled up their

operations. Despite the effects of the global financial crisis, macroeconomic stability was

maintained.

33. Capacity constraints were identified as major risk in all the operations. This included

both lack of high technical skills in some areas and lack of human resource in some other areas

to implement the reform program. To mitigate this risk, initiatives such as Service to Mauritius,

Capacity Building program or redeployment from public enterprises were also being undertaken

by the authorities. The donor community supported substantially with technical assistance. For

example, the UNDP and IMF provided technical assistance to modernize the budget process

through adoption of a MTEF and PBB. A key PBB requirement was the development of sector

strategic plans, and this was supported by the Bank. To improve the capacity for geographic

targeting of the poor, as part of the support in the „democratizing the economy‟ pillar, there was

a need for a poverty map to be developed by the Central Statistical Office. Since the statistical

office had limited capacity to undertake such an activity, the UNDP provided support for the

construction of a Social Registry containing information on beneficiaries of social programs in

Mauritius. The EC has supported the setting up of a poverty observatory in Mauritius to monitor

the effectiveness of poverty alleviation policies and to produce high frequency information for

policy makers through the use of qualitative methodologies. This technical assistance was timely

and well coordinated with the Bank which helped to providing advice towards rationalization of

social programs and identifies short/medium-run actions that could generate efficiency and

financial gains.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization:

The PDO were clear since the beginning of the program and this helped in the designing process

of the M&E parameters to follow up on the achievements of the objectives.

34. M&E Design: The results matrix highlighted the linkages between policy actions and

expected outcomes for each of the four main priority area of the Government. This matrix was

prepared jointly by the Government (involving sector ministries), the Bank and to some extent

other DPs. The results matrix of the first operation included target values for some of the

monitoring indicator and in DPL2, the results framework was updated to assigned target values

to all the indicators. At the time of the crisis, the program document reflected well the potential

economic impact and highlighted that the impact may negatively affect some of the targets set in

the monitoring indicators. There were four indicators mentioned in the program document but

which were not linked to any policy actions and were not mapped to any of the four different

pillars of the series. These indicators are: GDP growth, unemployment rate, total number

employed (000) and FDI as a percentage of GDP. Since these indicators were not linked to the

policy changes supported by this series, they have not been assessed.

26

35. M&E Implementation: The data used for M&E purposes were all official data collected

from the Central Statistical Office, sector ministries of the Government, principally MOFED and

the central bank. Data from these institutions are highly reliable and very up to date and

disseminate data on a timely basis – monthly, quarterly and yearly. For the pillar on widening the

circle of opportunities, there was a need to gather data to measure low frequency event of

absolute poverty and in this context the UNDP provided technical assistance to the statistical

office to conduct a Survey of Living Conditions (SLC). To better monitor poverty parameters,

the statistical office lacked capacity. The Bank provided assistance to building capacity at the

CSO for production of poverty maps so that the institution can develop necessary tools to

monitor poverty. The assistance from the Bank and UNDP further improved capacity for the

local institutions to produce reliable and frequent data on important factors.

36. M&E Utilization: During the design stage of subsequent operations, the Bank and

Government teams would go through the monitoring indicators to assess progress made and

whether the results show large deviations from expected and targeted outcomes. During the

preparation of this ICR, the team did not have any difficulty in gathering data required to fill out

the indicators table, except for one indicator for which data is no longer kept – percentage of

mentored SME firms that shows increase in profitability.

2.4 Expected Next Phase/Follow-up Operation:

37. Following the successful completion of the programmatic series, the Government

requested two subsequent DPL programmatic series – one focusing on public sector

competitiveness and other focusing on private sector development. The public sector

competitiveness series builds on dialogue that the first programmatic series initiated on civil

service reforms, public enterprise reforms and trade competitiveness. This series focuses more

specifically on: (i) social protection reform, (ii) public enterprise and parastatal reform, (iii) civil

service reform, (iv) raising competitiveness (trade), (v) improve social sector delivery (education

and health). The private sector development programmatic series is a sector budget support that

draws on the policy and institutional dialogue that underpinned two investment lending

operations that were cancelled. The series focus on (i) enhancing competitiveness through skills

development and technology up-gradation; (ii) access to finance and regulatory reform for SME

growth; and (iii) ICT and e-Government support for increased efficiency and transparency gains.

The first operation of both series were presented to the Board in March 2012.

3. Assessment of Outcomes

Overall rating: Highly Satisfactory

3.1 Relevance of Objectives, Design and Implementation:

Rating for relevance of Objective: Highly Satisfactory

Rating for relevance of Design: Satisfactory

Rating for relevance of Implementation: Highly Satisfactory

27

38. This relevance of the program is rated highly satisfactory. It reflects proper diagnosis of

development priorities that remains relevant at the time of the ICR. The program was flexible

and responded quickly to the needs of the client during the global crisis.

39. Objectives: The program‟s objectives (as set out in section 1.2) have been broadly

achieved and remain relevant in the current country context. The objectives set in this series are

still consistent with the objectives of the Mauritius‟s reform program, as set out in the

Presidential Address to the Nation (2010-2015) in 2010. The four pillars of the program were

highly relevant at the time of appraisal and still relevant in the current context. This is reflected

by the CPS progress report (2011). The objective of the CPS (2006) was to help Government

deal with short-term trade shocks and the transition to a more competitive and sophisticated

economy and was centered on the four pillars of the Government‟s strategy. The CPS progress

report notes that “the objectives of the CPS remain relevant and aligned to the country’s

development agenda.” The two current DPO series that was approved by the Board in March

2012 recognize the importance of transitioning to knowledge and skill based services economy,

while consolidating the base. The emphasis on public sector efficiency, competitiveness, and

social safety nets is very strong. While business environment has substantially improved during

the program implementation, yet there are challenges ahead. There is a need for further

streamlining of regulations, remove unnecessary hurdles and improve institutions at the customs

for more transparency. Improving public sector efficiency continues to be of high relevance for

Mauritius in the current context, despite improvements have been achieved so far and as

reflected by two indicators in the World Governance Indicators 2011 – Government

effectiveness and regulatory quality. As highlighted in section 1, the ICT sector has gained

substantially more importance in terms of value added, exports and employment. Greater use of

IT system for transactions and modernizing the civil service are key areas.

40. Design: The project design was consistent with the project objectives and such a design

remains relevant in the current context. The program, overall, included reforms that were

strongly owned by the authorities, underpinned by strong analytical foundation and

complemented by financial and technical assistance by the donor community. The program was

developed in close coordination with other development partners to ensure that it reflected the

expertise of the institutions engaged and build synergy for the benefit of the country.

Partnerships with donors and local stakeholders will remain crucial, going forward. Mauritius

wants to make a leap to become a developed economy in the next ten years or so. There is a

knowledge gap in terms of key policy changes that are required to make this leap, and robust

analytical work in required to lay out the foundations.

41. Implementation: Flexibility was instilled in the program and the program‟s focus was on the

development objectives. Whenever there were changes in indicative triggers to firm up prior

actions, it was ensured that these changes do not altered the thematic content of the DPL and

were fully consistent with its development objectives. The program was aligned to government

medium term priorities but supported the country to address short term challenges. For example,

such that during the time of the global crisis, the program was adjusted to respond to the

immediate needs of the client, by scaling up the amount of the operation and also adding the

DDO facility to it. On capacity, it should be noted that the authorities have upgraded their skills

to a large extent in some areas, for example on fiscal management. The same model of

28

engagement is relevant in the current context. The technical capacity for implementation of some

specialized reforms is still limited. Therefore the combination of knowledge, technical assistance

and financing will continue to be relevant.

3.2 Achievement of PDO:

42. Achievement of the PDO is highly satisfactory. Momentum for reforms was high

throughout the program. Despite external shocks in 2008/09 and 2010 due to the financial and

Euro zone crisis, the Government maintained macroeconomic stability and stayed the course of

reforms. The economy defied the negative consequences and observed overall positive growth

throughout the crisis period, although lower than forecasted at the beginning of the DPO

program. Economic activity slowed down during the crisis period but Government was able to

weather the negative consequences thanks to the fiscal space created due to the reform program.

The policy actions supported by the program were critical in achieving the objective of the PDO.

As reflected in section 1 (using examples from the ICT sector), Mauritius indeed transitioned

from a low wage, low skill economy to an innovative and skill based economy.

Objective 1: Consolidating fiscal performance and improving public sector efficiency-

Consolidating fiscal performance rating: highly satisfactory

Improving public sector efficiency rating: satisfactory

Overall rating: satisfactory

43. The program supported reforms to improve fiscal and debt conditions. Fiscal discipline

was therefore critical. The aim in this area was to undertake measures to stabilize fiscal

performance at a sustainable level. Measures implemented were twofold: (i) stabilizing revenue

and (ii) reducing expenditure. On the revenue side, a number of policy changes in the tax system

were introduced to stabilize revenue above 19% of GDP. Discretionary power to grant

preferential import duty rates at ministerial level were abolished, tax administration were

strengthened through the operationalization of the MRA and personal income tax was simplified

by consolidating allowances and exemptions on emoluments, retirement pensions, pension

contributions, secure loan interest and more into a single general exemption set according to

household income. Passing legislation to abolish ministerial discretion over tax and duty

exemptions, and operationalization of the MRA to strengthen tax administration were prior

actions supported by this program. Revenue as a percentage of GDP indeed stabilized above 19

percent during the course of the program, but also beyond. In 2011, this ratio was at 21.3

percent.

44. On the expenditure side, the objective was to contain recurrent expenditure. This was

to be achieved by annual cuts in primary spending by an additional 0.5% each year. The aim

was to reduce debt to GDP ratio below the 68.8 percent (the 2005/06 level). In 2006/2007 the

Government took a decisive step to cut primary spending by 2 percent of GDP, far exceeding the

target of 0.5 percent envisaged. Primary spending as a percentage of GDP by end 2007 was 20

percent. Greater fiscal responsibility in the form of lower government spending along with strong

GDP performance led to a reduction of debt-to-GDP ratio from 69.2 percent of GDP in 2006 to

57.5 percent of GDP in 2011. The Government showed firm intentions to reduce the debt burden

in Mauritius, demonstrated by the establishment of a Debt Management Unit, preparation of a

29

debt management strategy and enacting of the Debt Management Act 2008. The reforms

implemented helped the Government build resilience and weather the impact of the financial

crisis by creating fiscal space with permitted the authorities to unveil a stimulus package of Rs

10.4 billion. Reduction in primary spending and enactment and proclamation of the Public Debt

Management Act were prior actions supported by this program. Although primary spending did

not reach the targeted value by the end of the operation, there is a move in that direction. The

target was not met by December 2010 due to injection of public funds to stimulate the economy

during the crisis period.

45. Progress on public sector efficiency has been satisfactory. To improve public sector

efficiency, this program supported the preparation of sector strategies, implementation (on a pilot

basis) of performance management system, and preparation and implementation of reform plan

for 5 parastatals. Progress in this area has not been very strong. When the program was initiated,

it was expected that by DPL3, all sector ministries would have produced sector strategies to feed

into the national budget of 2008/09. The logic of this choice is that effective budgeting demands

a clear vision of sector objectives and a menu of strategically relevant, costed programs from

which policymakers can choose as they make tradeoffs within and across sectors. However, the

authorities postponed the preparation of the strategies to DPL4, but at the same time reduced the

number of sector strategies to only four. The implementation of performance management

system was indeed piloted within the Ministry of civil service, and is expected to be extended to

all ministries and parastatals. Implementation of the action plans produced to address the

challenges that 5 parastatals face is slow. Reforms in this area are politically sensitive and

progress in this area might take quite long. The DPO series that went to Board in March 2012,

has one pillar on parastatals reforms.

Table 2: Indicators for pillar 1, and baseline, target and actual values

Monitoring Indicators

Baseline

Value

6/1/2006

Target

Values

12/31/2

010

Actual

values

12/31/2

010

Actual

values

12/31/2

011

Consolidating fiscal

performance and

improving public sector

efficiency

Stabilize Revenue as a % of GDP

above 19.0 20.1 >19 21.2 21.3

Public sector debt as a % of GDP 68.8 <68.8 60.7 57.5

Primary Spending as % of GDP 21.6 <21.6 22.3 21.9

Objective 2: Enhancing trade competitiveness – Highly satisfactory

46. The Government’s objective is to transform Mauritius in an open, globally connected,

low tax, business friendly environment. Towards this end, the reform agenda aimed at

enhancing trade competitiveness by (i) reducing anti-export bias which impedes private

investment in internationally competitive activities; (ii) revitalizing existing sectors to raise

productivity and release resources for higher productivity sectors and (iii) facilitating

development of export sectors through reducing costs and making selected public investments.

47. The authorities continue to work towards making of Mauritius a “duty free island”. In

this context, one prominent reform area was the substantial reduction of custom tariff. The

30

number of tariff lines with zero rated tariffs increased from 74 percent in 2005/06 to 87 percent

in 2010. The Government continues in this direction. In 2012 the Government abolished duties

on further 80 tariff lines (0.64% percent of total tariff lines). It should be noted that the target in

this area was too ambitious. The authorities planned to eliminate tariffs on 95 percent of tariff

lines. But, this was unrealistic to achieve. Analyses were not undertaken to assess the possible

negative consequences that accelerated tariff reductions may have on domestic producers. In

fact, substantial reduction in tariffs resulted in unanticipated effects on domestic producers.

There were no accompanying policies to mitigate this impact, nor was producers given enough

lead time to accommodate the policy changes. To counteract these effects, the Government

provided for funds in the budget of 2007/08 to support the local firms to strengthen their capacity

in product innovation, marketing and export promotion. Besides elimination of tariffs for 88

percent of tariff lines, the highest tariff band was also reduced from 60 percent to 30 percent. In

2005/06, 13 percent of tariff lines were subject to a tariff rate of 30 per cent or above and this

reduced to 1 percent in 2010. Phased tariff reduction by cutting top ad valorem rate from 65 to

30 percent, reducing number of top rated tariff lines and reducing average tariffs by 2 percent

was a prior action supported by this program

48. With reduction in tariffs, inappropriate regulations hindering trade became more

evident. A number of inappropriate regulations and implementation bottlenecks which

compromise competitiveness in Mauritius. The program supported the setting-up of a permanent

regulatory review committee (the Non-Tariff Barriers (NTB) Review Committee) with

responsibility to: (i) define the general principles of regulatory reform based on international best

practice and to ensure that these are applied consistently across line ministries and departments;

(ii) review all new and important existing regulations; (iii) oversee the introduction of regulatory

impact analysis as a key tool across the government; (iv) facilitate the intra-ministry coordination

that is essential to address a wide range of the regulatory constraints, including duplication of

requirements and (v) encourage and assist the roll out of IT solutions for trade facilitation across

ministries and agencies. This Committee effectively served as a platform for private sector to

voice out their complaints. This is an area where the Bank is providing continued assistance as

part of the new DPL series. The reforms include revamping of business regulations, streamlining

of Non-Tariff Measures (NTMs), and promoting services trade. Government actions to reduce air

transport costs by liberalizing air access has partially contributed towards the increased in

number of tourist arrivals in the country from 0.78 million in 2005/06 to close to 1 million in

2011.

49. To boost exports a common regulatory regime across all sectors of the economy were

introduced and measures to improve international connectivity were undertaken. The

distinction between EPZs and non-EPZ producers was eliminated and the incentive regimes for

EPZ and non-EPZ firms have been unified, for example by setting all corporate taxes at 15

percent. Anti-labor bias in the tax system was eliminated by removing a 25 percent investment

tax credit, and the application process for licenses and permits streamlined to emphasize more on

ex-ante approvals of business registration rather than ex-post verification of safety and health

standards. Unifying tax and regulatory regimes for EPZ and non-EPZ firms was a prior action

supported by the program. The Government implemented reduction in IPLC prices by 50 percent

between 2003 and 2008. Also, to be in line with international standards, amendments have been

made to the Information and Communication and Technologies Act. These changes, which were

31

prior actions of the program, led to substantial increase in ICT-enabled business. The share of the

ICT sector as a percentage of GDP has increased from 5.4 percent in 2007 to 6.4 percent in 2010

and met the set target. International internet bandwidth has increased from 123 Mbps in 2005/06

to 1864 Mbps in 2010. However, the target for the indicator „increase exports as a share of GDP‟

was not achieved as exports suffered considerably during the global crisis period. Exports/GDP

fell to 47 percent in 2009. However, sustained effort led to increase in export to GDP both in

2010 (50 percent) and 2011 (53.4 percent).

Table 3: Indicators for pillar 2, and baseline, target and actual values.

Pillars Monitoring Indicators

Baseline

Value

6/1/2006

Target

Values

12/31/2

010

Actual

values

12/31/2

010

Actual

values

12/31/20

11

Improving trade

competitiveness Trade tariff lines with 0 tariff rate 74 95 87 88

Raise Exports as a % of GDP 60.6 >60.6 50 53.4

Increase Tourist Arrivals (million) 0.78 >0.78 0.93 0.94

Unify regulatory regime across EPZ,

non-EPZ sectors No Yes Yes Yes

Increase international internet

bandwidth (Mbps) 123 >123 1864 1864

Increase ICT sector as a % of GDP 5.2 >6 6.4 6.7

Objective 3: improving the investment climate – Highly Satisfactory

50. The program supported the government to improve the investment environment by

revising the regulations and streamlining unnecessary processes that were unnecessarily

retarding investments. To achieve this objective, the Government initiated the following: (i)

investment facilitation, (ii) increasing labor market flexibility, and (iii) attracting skilled foreign

workers. With a rank of 20 in the Ease of Doing Business indicators, Mauritius is one of the best

ranked African countries. The Doing Business index takes into account several factors including

the following factors which were monitoring indicators in this operation: number of days to start

business, number of days it takes to enforce commercial contracts, public credit registry, and

number of days spent dealing with construction permits, and difficulty in firing index. All target

related to these indicators were achieved. Improved investment environment helped in raising

FDI from 2.8 billion rupees in 2005/06 to greater than 12 billion rupees in 2010.

51. The program supported dismantling barriers that caused delays in registering

businesses. Prior to the policy changes that the program supported, unnecessarily complex

procedures created uncertainty and often required long waits for clearances and permits. One of

the key areas of policy change that this program supported through its prior action was to

facilitate doing business by streamlining registration practices. To this end, the Government

enacted the Business Facilitation (Miscellaneous Provisions) Act 2006 which included a wide

range of measures to expedite business registration, amending and abrogating several laws. This

Act made the Registrar of Companies a one-stop shop for and changed the role of the BOI from

granting discretionary approvals for investment projects to facilitation. It also relaxed restrictions

on granting work and residency permits. The number of registered companies increased from

29,330 in 2007 to 33,002 in 2011, an increase of around 12 percent.

32

52. To forge competition by domestic business, the creation of a Competition Commission

was supported by this operation. The setting up of this mechanism was crucial to prevent anti-

competitive behavior. If investigations show that firms are involved in anticompetitive

behaviors, the Commission has powers to intervene and correct the situation through fines and/or

other punitive measures. The commission has so far completed investigation on two cases and is

currently investigating on six additional cases.

53. The program supported policy changes towards easing entry of foreign skilled workers

by facilitating permit issuance and towards improving labor market efficiency by introducing a

flexi-security scheme. The problem of shortage in skilled labor was partially resolved by easing

entry of foreign workers in the labour market by creating a single occupational permit by

combining residency and work permits, and legalizing conversion of tourist to business visas.

With the promulgation of the Employment Rights Act (2008), a “flexi-security” scheme was

introduced with the aim of increasing labour market efficiency by strengthening worker

protection rather than jobs. To reduce employee resistance to necessary structural changes in the

labour market, the scheme provides for a maximum of twelve months of transitional assistance to

employees who wish to take opportunity of the scheme to seek job replacements, undergo

training and reskilling or start a small business, and these employees benefited from financial

assistance. As of December 2010, around 3000 workers (52% female and 48% male) benefited

from this scheme, of which 80 percent sought job replacement.

54. The program supported wage increase linked to productivity rather than wage being

consumer price index linked. To this end, the program used as prior action the establishment

and operationalization of a new NPC during the 2007 pay round which would replace the

tripartite wage bargaining mechanisms so as to tie wages closely to worker productivity. In 2010,

a new system for wage negotiation has been set up - the tripartite wage bargaining system. This

is a hybrid of the system supported by the program and the former system whereby wage was

negotiated based on index changes.

Table 4: Indicators for pillar 3, and baseline, target and actual values.

Pillars Monitoring Indicators

Baseline

Value

6/1/2006

Target

Values

12/31/20

10

Actual

values

12/31/20

10

Actual

values

12/31/20

11

Improving the

Investment Climate

Number of days to start a business 46 <46 6 6

Number of days it takes to

enforce commercial Contracts 750 <750 645 645

Public credit registry (% of

adults) 0 >0 49.8 49.8

Number of days spent dealing

with construction permits 162 <162 136 136

Reduce difficulty of firing index 50 <50 36.8 n/a

Increase FDI (million Rupees) 2807 >10,000 12,000 9,456

33

Objective 4: Democratizing the economy through participation, social inclusion and

sustainability – Satisfactory.

55. The programme supported reforms to shield the vulnerable from negative impacts of

the transition towards higher value added services and to provide opportunities to improve

inclusion. In this context, the program aligned with Government‟s objectives to enhancing

opportunities for education and (re)training, protecting the vulnerable by channelling social

support to the truly needy, and implementing a comprehensive strategy for poverty alleviation.

56. The programme supported strengthening the educational system. This is in line with

the Government objective to enable young Mauritians to be employable in the new sectors and

participate fully in a knowledge based economy. At the same time, education plays a key role in

increasing participation and social equity. The Government prepared an Education Strategy

Paper covering the period 2008 to 2020 with the support of the EU. This strategy covered five

main subsectors (pre-primary, primary, secondary, tertiary and TVET). The strategy also had a

costed implementation plans with specific objectives. The goal was to expand opportunities in

education, improve teacher training and supervision, modernize the curriculum to feature more

critical thinking and mathematics, science and language training, revitalize the Zones

d‟Education Prioritaires (ZEP) schools with provision of supportive services (food, health, and

remedial teachers), encourage community participation, and expand tertiary education. The plan

has been adopted by the Government and is currently being implemented. For example

curriculum has been modernized and science subjects have been introduced at primary school

level. The ZEP schools have also been provided with support services. DPL2 and DPL3 actions

have supported preparation of a national education strategy. Primary and secondary school

completion rate has increased from 64.9 and 78.4 percents in 2005/06 to 74.1 and 79.2 percent in

2011. The expected target for secondary completion rate has not yet been achieved, but the

country is moving in that direction.

57. The social safety net has been strengthened. The authorities have pursued a number of

policy actions to assure that opportunities would reach as many Mauritians as possible while

fundamental economic changes would take place. A major initiative, the Empowerment

Program, with the objectives to: (i) providing placement, training and re-skilling for the

unemployed; (ii) supporting entrepreneurship and SME competitiveness through financial and

technical assistance; (iii) advancing social housing and development amongst poor families and

(iv) support older unemployed women was launched and the establishment of the Empowerment

Program was a DPL1 prior action. The Government has scaled up the operations of the

Empowerment Program which is now called the NEF. The NEF oversees a wide range of

initiatives, but the main one is the Placement Program. It also oversees placement and training

for women displaced from textile sector. The number of trained workers under the NEF has

increased from 821 in 2006/07 to over 12,000 by end 2011. The number of displaced women

placed in jobs increased from 45 in 2008/09 to over 200 by the end of 2011. In this case the

target was 600 and was not achieved. This is mainly because the majority of the displaced

women preferred to be re-trained to join other sectors rather than be re-employed in the textile

sector.

34

58. Government has also set up an innovative scheme to promote growth of SMEs. With

the support from the Bank, the Mauritius Business Growth Scheme (MBGS) was introduced.

Under this scheme, eligible firms receive financing to support their business growth on a cost-

sharing basis. 58 SMEs have benefited from this scheme by the end of 2011.

Table 5: Indicators for pillar 4, and baseline, target and actual values

Monitoring Indicators

Baseline

Value

6/1/2006

Target

Values

12/31/2010

Actual

values

12/31/201

0

Actual

values

12/31/2011

Democratizing the

economy through

participation,

social inclusion

and sustainability

Percentage of mentored SME firms

that show increase in profitability 75 80 n/a n/a

Trained workers under

empowerment program 0 12000 8200 12200

Place women displaced from textile

sector into jobs 45 600 200 234

Number of SMEs supported through

matching grants 22 50 16 58

Raise Primary completion rate 64.9 70 68.1 74.1

Raise secondary completion rate 78.4 80 78.8 79.2

3.3 Justification of Overall Outcome Rating:

59. Based on the combined assessment of achievement and relevance, the program overall

outcome rating is highly satisfactory. A separate assessment for each of the pillars of the

program is showed in table 6. In each case achievement and relevance are rated.

Table 6: DPL 1-4: Overall ratings by policy area Heading Consolidating

fiscal

performance

and

improving

public sector

efficiency

Improving

trade

competitivene

ss

Improving

the

investment

climate

Democratizing

the economy

through

participation,

social inclusion

and

sustainability

Overall

Achievement of objectives Satisfactory Highly

Satisfactory

Highly

Satisfactory

Highly

Satisfactory Highly

Satisfactory

Relevance

Relevance of

objectives

Highly

Satisfactory

Highly

Satisfactory

Highly

Satisfactory

Highly

Satisfactory Highly

Satisfactory

Relevance of

design

Satisfactory Highly

Satisfactory Highly

Satisfactory Satisfactory Satisfactory

Relevance of

implementation

Highly

Satisfactory Highly

Satisfactory Highly

Satisfactory Highly

Satisfactory Highly

Satisfactory

Overall

Satisfactory Highly

Satisfactory Highly

Satisfactory Highly

Satisfactory Highly

Satisfactory

35

3.4 Overarching Themes, Other Outcomes and Impacts:

(a) Poverty Impacts, Gender Aspects, and Social Development

60. The DPL series supported the objective of transforming the Mauritius economy

towards a high value-added services economy. This was a process that the authorities already

started in the early 2000 to start preparing to adapt to a world without trade preferences. The

cumulative net job losses in apparel and sugar industry between 2001 and 2006 (sectors facing

the trade preference shocks) reached around 9 percent of total employment. The impact was

higher for women than men. Some measures in the reform program may have produced losers as

well as winners. For instance, tariff cuts while raise real incomes of some low income

households by reducing the cost of goods, they also contribute to job losses in vulnerable sectors.

The Government slowed the pace of tariff liberalization to minimize the negative impacts and

balancing these competing interests.

61. Since the beginning of the program supported by the Bank in 2006, the authorities

have pursued a number of policy actions to assure that the most vulnerable are and the poor

catered for. The Government has also been careful to include in the program accompanying

measures to mitigate some of the social costs. One of the main pillars of the reform program has

been the democratization of the economy. This consisted of reforms to the national economic

structure that will open the doors of economic opportunities to the majority of the population.

The main vehicle has been active labor market programs through the NEF (formerly the

Empowerment Program) with training subsidies and support to the unemployed for starting

SMEs, including special programs for women entrepreneurs. The workfare program was

introduced to cushion worker reallocation pressure as labor regulatory framework was being

revised in 2008/09. The objective of this program is to support laid off workers to reintegrate the

labor market either as employee or as small entrepreneurs through training and placement

offered by the NEF or the Small Enterprise and Handicraft Development Authority (SEHDA). A

placement and training was introduced to unemployed person with an opportunity for job

placement jointly with work-related formal training. In an attempt to address the problem of

mismatch in the labour market, arising primarily because the structure of the economy is

changing towards higher value added production and services-based economy, such programmes

support in providing the rightly trained people to the industry.

62. Preservation of jobs was at the centre of the policies. During the global crisis, in an

attempt to save jobs in the tourism and manufacturing Sectors, a mix of work and training

scheme was introduced to support enterprises facing financial difficulties of at least 15%

reduction in their turnover. Instead of firing workers, the firms were given incentives to keep

them employed but for a lesser number of days per week. On the other non-working days, the

employees followed trainings. The cost of the training and the daily salary of non-working days

are covered by the NEF. A Special Entrepreneurship Program (SEP) was also introduced with

the objective to promote entrepreneurship culture, more geared towards small and medium

enterprises. This program operates under three legs: financing support schemes, support sectors

in difficulty, and promote profession of art which are slowly disappearing. Accompanying

measures have mitigated some more egregious distributional impacts of the reforms. For

example in 2006, a means tested income support scheme was introduced to compensate for

eliminating consumer subsidies on rice and flour. The Government also remained committed to

36

Eradicating Absolute Poverty (EAP). With the support of the development community the

authorities better measured the low-frequency event of absolute poverty, improved qualitative

poverty monitoring, developed poverty maps combining household surveys and census data, and

identified pockets of extreme poverty, all of which helped to improve targeting. All these

measure jointly helped the authorities to reverse unemployment rate and better cater for the poor

and vulnerable.

63. The reversal of increasing unemployment provides evidence of a positive overall social

impact of the reform program. Most significant there has been the decline in female

unemployment rate explained by strong job creation in the services sector. Unemployment rate

among males has also been declining. The world economic crisis caused mild deterioration of

labor market outcomes. Unemployment rate is close to 8 percent, from close to 10 percent at the

start of the reform program.

Figure 1: Unemployment Rate 2000 - 2011

(b) Institutional Change/Strengthening (particularly with reference to impacts on longer-

term capacity and institutional development):

64. Institution strengthening and capacity building were supported in this programmatic

series. There has been substantial institutional development and capacity building under this

program, especially in the areas of fiscal consolidation, enhancing competitiveness and statistics.

At the Ministry of Finance the capacity to prepare more comprehensive budget documents

including forecasting in the context of PBB and linking expenditure to macroeconomic

framework, has been built. The capacity at the Ministry of Finance in monitoring budget

execution has also been improved as the ministry is constantly monitoring deviations between

allocated funds and actual expenditure for each ministry, departments and agencies on a monthly

basis. The program supported the establishment of a Debt Management Unit. The Bank‟s

Treasury assisted the Government to develop plan for improving Public Debt Management and

also conducted workshops to strengthen the relationship with key counterparts within the

Government and advancing the policy dialogue. Trainings were also delivered to improve

capacity to for debt assessment and management. Other examples include the creation of a

Competition Commission and the setting-up of a permanent regulatory review committee. These

developments were important to enable the Government ensuring that policy decisions are

0

5

10

15

20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

pe

rce

nta

ge

Male Female Both

37

indeed institutionalized and implemented. Technical assistance has been provided to the

statistical office to improve the capacity of the staffs to undertake surveys and poverty related

analysis.

(c) Other Unintended Outcomes and Impacts (positive and negative):

65. The implementation of the reform program has realized much more benefits than was

anticipated during the design of the program. For example, strengthening tax administration and

abolishing discretion over tax and duty exemptions improved the raking of Mauritius in the

global ranking of paying taxes to 9th

position (2011). Service delivery to tax payers has

substantially improved. Taxes can be paid online as well as submission of relevant documents

can be filed online.

3.4 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops:

66. There were no beneficiary survey and/or stakeholder workshops

4. Assessment of Risk to Development Outcome

67. The risks that development outcomes or expected outcomes will not be maintained or

realized are moderate. This assessment takes into account both the probability and likely impact

of threats to outcomes. It considers how these have been mitigated in the operation‟s design or

by actions taken during its initial implementation. The following individual criteria of risk has

been considered as it may affect realized/planned outcomes:

a. Technical and financial risks are low. Interviews with industry associations‟ show that a large

number of medium and big firms have moved to more capital intensive production. Changes

in innovative technology and systems helped to improve profitability and development of the

firms. At national level, the country is rated investment grade and has a sound financial

system. Therefore, there exists minimal risk that technical changes and limited availability

of finance and robustness of financial flows will affect the development outcomes.

b. Economic risk related to external shocks is moderate: The risk of external shocks associated

with the uncertainties in the global economic environment is moderate as the economy

remains vulnerable given its large dependence for its tourism industry on the European

market. The external environment may also affect aid and foreign investments in the

economy and thus impact on development outcome. The risk that changes at country and

global level will affect the development outcomes is moderate. The country is dependent on

exports of goods and services, especially to Europe (about 70 percent). Therefore the speed

and timing of recovery of European countries will affect development outcomes. The slower

than expected recovery is already affecting exports of commodities and prolonged slow

recovery may deteriorate external accounts and growth. The country is conscious of the

situation and measures have been announced to diversify products and markets towards

emerging economies like India and China. Another source of concern at macroeconomic

level is debt sustainability. The ambitious public investment program could increase public

38

debt above the legally defined threshold. An external shock and/or an increase in the fiscal

deficit would raise this ratio to levels that might lead to the downgrading of Mauritius by

international rating agencies, raising the cost of financing.

c. The risk that momentum of reform will be lost is moderate: Mauritius has a well established

tradition of political stability5, dialogue and social harmony. The political situation is stable

and the country has no history of major political instability which led to any sort of economic

or social instability in the country. Therefore political risk affecting development outcomes

is low. The Government‟s ownership and commitment to reforms continues to be high.

However, since the second generation of reforms would deal with politically risky areas, for

example improving efficiency in public enterprise reforms and civil service reforms, the

probability that these reforms will be slower than economically justified is high. Also, while

Mauritius has proved its capacity and ability to re-engineer itself and adjust to changing

conditions, second generation reforms to improve the regulatory environment will require

close cooperation with the private sector and public enterprises. There might be some

reluctance to move quickly. On macroeconomic management, the Government has shown

strong commitment to maintain economic stability and has been successful in dealing with

the global crisis in terms of absorbing the shocks as well as providing necessary cushion to

employees who lost jobs. While there is no reason to assume that the commitment and

ability of Government to maintain macroeconomic stability, the risk of delayed reforms in

key area may moderately affect development outcomes.

5. Assessment of Bank and Borrower Performance

(Relating to design, implementation and outcome issues)

5.1 Bank Performance

Rating: Highly Satisfactory

(a) Bank Performance in Ensuring Quality at Entry


68. Bank performance in ensuring quality at entry is highly satisfactory. The program

supported a comprehensive structural reform program. The policy changes in the reform program

responded to the medium term challenges that the country faced at the time of the start of the

program, as well as short term challenges at the beginning of each operation.

5 Although coalitions between political parties are made and broken quite frequently, there has never been a coup.

39

69. The Government’s bold and ambitious reform program reform program which the

DPL series supported was underpinned by strong analytical foundations. Prior to and during

the start of the preparation of this programmatic series, the Bank and other donors carried out

extensive AAA work. The two AAAs (both by the Bank) that guided the design of the

Government‟s reform agenda were the Country Economic Memorandum (CEM) and an Aid for

Trade mission (AFT) report. The CEM focused on the structural transition to a higher value

added, knowledge based economy and recommended policy reforms in three key areas: (i) role

and performance of the public sector; (ii) the labor market and human capital formation; and (iii)

science and technology in a knowledge based economy. The recommendations of this mission

quickly built up an excellent and highly influential dialog at both the technical and political

levels. It proposed measures to strengthen competitiveness, move resources out of declining and

into dynamically growing sectors, improve the quality and cost of input services such as

telecommunications, air transport and cargo handling, and strengthen transitional support for

displaced workers. The four pillars, on which the reform program was anchored (see section 1.2),

were guided mainly by these two AAAs. The Investment Climate Assessment (2005), and the

Unemployment Study (2005) have also contributed to identify crucial constraints to growth and

propose policy actions. Technical assistance in the areas of MTEF and Performance

Management dating back to 2002 have also generated important insights regarding

modernization of Public Sector. Continuous production of analytical work guided specific

reforms in the subsequent operations.

70. The DPL and the Country Partnership Strategy (CPS)6 are closely linked. The two

were prepared concurrently and jointly cross referenced to the Government‟s program which was

itself coming into focus at the same time. Both are intended to support the adjustment to the

triple trade shock and structural transition to a more competitive and higher value added

economy. They share the same overarching strategic objectives of increasing competitiveness

while protecting the vulnerable, and their matrices are built around the same four pillars of the

Government‟s reform program. The great majority of the DPL‟s actions and triggers are drawn

from the CPS. The pillars of the reform program continued to remain the priority of the

Government throughout the four operations, and beyond, as evidenced by maintaining these

pillars in the CPS progress review in 2011.

71. The design of this operation applied lessons learned from Bank’s previous Bank’s

(meager) engagement. In FY02, the Bank approved a programmatic series of Public Expenditure

Reform Loan (PERL) and this program provided two important lessons which have greatly

influenced the preparation of this series. The first lesson concerns ownership. Like the PERL,

this series supported the Government‟s own reform program to ensure commitment for reforms.

It recognizes the importance of supporting an agenda which is Government owned at the highest

level and better yet, which enjoys broad popular support. Second, the design of the operation was

mindful of the risk that the operation may not continue beyond the first year (as was the case in

PERL). In light of that, care has been taken to ensure that DPL-1 actions were in themselves of

standalone strategic importance, but at the same time actions that fitted well with the remaining

operations in this series to ensure integration within the overall framework of the program. This

was to ensure some level of developmental impact even if there were no follow on.

6 Presented to the Board in November 2006.

40

72. Assessments of relevant aspects were correct. The program correctly evaluated

institutional, fiduciary and environmental aspects. None of these evaluations was proven wrong

during the subsequent operations. In each of the operation of the program, risk assessments were

relevant and mitigating factors were envisaged. Poverty and social development aspects were

considered fully as one of the main components of the program was related to inclusion and

increased opportunities to empower the vulnerable to participate in economic activities. The

M&E framework was sound and assessment of the political economy was correct.

73. During preparation of the subsequent operations, the Bank identified actions such that

it was most likely for the country to achieve planned development outcomes. This was

important in areas where the triggers that were identified for operation „n+1‟ during preparation

of operation „n‟. In some cases, the country progresses more rapidly than anticipated where as in

some cases, progress were slower and therefore the prior actions may have had to deviate from

the identified trigger. In those cases, the actions were carefully crafted to ensure that the planned

development objectives were achievable. For example, in DPL2, one of the indicative trigger for

DPL 3 was to prepare sector strategies for budgetary purposes. However, the authorities needed

more time to prepare good strategies, and also not all ministries had the capacity to prepare a

sector strategy. To be more realistic, in the preparation of DPL3, this trigger did not

(b) Quality of Supervision (including M&E arrangements):


74. Quality of supervision is highly satisfactory. The focus of supervisions was on the

development objectives and outcomes indicators. Since this program was a programmatic series

with subsequent operations in each consecutive fiscal year, the program benefited from the

supervision of operation „n‟ being conducted side by side with preparation of operation „n+1‟.

This has permitted documenting the progress of the reform program on a yearly basis, and to

better determine the needs for technical assistance to advance the reform program. This also

allowed the Bank to understand the political economy and capacity at different ministries/

agencies and the reasons why reforms advance faster in some areas. Progress on the program was

also being tracked during the annual business planning meetings between the Government and its

development partners. Also, given the high capacity of the statistical office and the

macroeconomic unit at the Ministry of Finance to produce and disseminate online frequent and

reliable data, monitoring of outcome indicators was made easier. Cooperation between the Bank

and other DPs and the IMF was excellent. The Bank also participated in the IMF Article IV

missions which helped better understanding the debt sustainability situation and macroeconomic

conditions.

75. Continuous supervision resulted in proactive actions. The constant monitoring of the

Mauritius economy in the context of the changes in the global environment drew the attention of

the authorities of the potential impact the financial crisis of 2008 on the island‟s economy. On

the request of the authorities, the Bank jointly with the fund produced likely macroeconomic

scenarios depending on the severity of the crisis and shared with the authorities to be used for

internal discussions on the impact and policy choices for mitigating the effects of the crisis.

41

Through continuous dialogue the Bank proactively help the government to mitigate the negative

effects of the global crisis while maintaining the momentum for reforms. The Bank scaled up the

amount of the financing in DPL3 and also designed the operation into a DDO. This flexibility in

meeting the needs of the authorities just in time was important to ensure that the reform program

is not jeopardized.

(c) Justification of Rating for Overall Bank Performance:

76. Overall Bank performance was highly satisfactory. According to ICR Guidelines, the

overall ratings are dictated by the combination of ratings for Quality at Entry and Quality of

Supervision. A combination of highly satisfactory rating at quality at entry and highly

satisfactory rating for supervision implies a combined rating of highly satisfactory.

5.2 Borrower Performance

Government Performance/ Implementing Agency or Agencies Performance/ Overall

Borrower Performance


77. The Borrower’s performance is highly satisfactory. In this operation, the Government

and implementing agency cannot be distinguished separately. Therefore the rating in this section

should be considered as overall rating for the borrower. The Ministry of Finance was the driver

and coordinating body for the reform program. It was responsible for the overall management of

the reforms. The overall amount of progress made in all the pillars of the reform program is

impressive, and underscores a significant commitment to advance the reforms at the highest

level.

78. The authorities had a strong ownership of the reform program and were committed to

implement the program in a realistic timeframe. The program was very ambitious and bold.

Strong ownership, leadership, and commitment of the Government to the reform agenda were

key factors to attaining the development objectives. The authorities, given their weak capacity

for implementation of the reform program knowledge gap in some areas, partnered with several

development partners to secure technical assistance and analytical work to help in the

implementation of the program. Relationship and coordination between Government and other

partners is effective. The Government played a critical role in ensuring that the development

partners collaborate in their engagement with the Government and complement each other‟s

work for the benefit of the country. The Ministry of Finance quite often organized meetings with

development partners to take stock of on-going engagement and ensuring that there were no

duplications. The DPL missions usually worked as the platform for these meetings. Continuous

dialogue prepared the ground for bolder reforms in the current programmatic series.

79. The authorities created an institutional set up to consistently monitor progress.

Monitoring and evaluation arrangements by the Government improved and the environment

42

enabling reforms were sound. Several units under the Ministry of Finance were involved in the

reform process. The ministry set up a team of Ministry of Finance staffs, called SMSTs, to

coordinate budget preparation and progress in the reform program with sector ministries. One

SMST was responsible for one sector ministry and the SMSTs were participating in the mission

of the Bank. Their main objectives were to ensure that the reform program was on track and to

identify funding requirements for the implementation of the reforms so that these requirements

can be included in the budget. The Ministry of Finance and the statistical office put lots of

emphasis on producing reliable data and make these data publicly available on their websites,

and this allowed easy monitoring of the program‟s progress and performance. Fiduciary

arrangements in the country were already reliable when the first operation was designed.

80. Partnership between the authorities and the private sector played a critical role in the

implementation of the program. To ensure effective implementation, a few committees are co-

chaired between the public and private sectors. For example, the non-tariff barriers committee

and the committee set up during the crisis in 2008 to put together the policy measures to mitigate

the impact. The public and private sectors have a culture of working together during the budget

preparation time. This culture was intensified during the DPL series and the dialogue between

these two sectors became more often. As the implementation of the program was progressing, the

private sector was invited to more and more meetings with the authorities to contribute to the

discussions. This was mainly during discussions on the pillars of investment climate and

competitiveness.

5. Lessons Learned

81. The key lessons learned from this program pertain to: (i) Strong Government ownership

and leadership, (ii) alignment with Government priorities and incremental approach in dialogue,

(iii) strong coordination with DPs, and (iv) flexibility.

82. Strong Government ownership and capacity drives reforms. Ownership, leadership,

commitment and capacity of the authorities, at the highest level, in design and implementation of

the policy reform agenda have been the most important factor in the success of an operation.

Technical assistance in parallel to the operations which builds capacity as well as nurture

collaboration and joint work improves performance. For example, to improve competitiveness

of the country, passing of the Business Facilitation Act 2006 was instrumental in improving the

regulatory framework and making it more business friendly and implementation of new

measures did not take long to happen as the first tier cadres have a high implementation capacity.

Another example is the commitment to improve macroeconomic stability which led to the self-

imposition of a debt law with a ceiling on the debt to GDP ratio. In areas where ownership by

sector ministries was weak, especially the less consensual reforms which have political

implications, for instance in the areas of civil service and public enterprises, reforms were

implemented at a slower pace. The driving force for reforms and coordinating mechanism came

from the Ministry of Finance, and thus reforms which were to be implemented by the Ministry of

Finance were successfully implemented. However, a better understanding of the political

economy would have improved the engagement with sector ministries and possibly the

implementation of the reform agenda. Since the country now moved to second generation

43

reforms, engagement with sector ministries should be deepened to ensure ownership of the

reform plan at the ministries‟ level. The coordinating role should continue to remain with the

Ministry of Finance as this ministry has the capacity of looking at the macro perspective and

effectively plays the role of policy coordination within the Government. A key lesson for

Mauritius is that reforms are better implemented where the reform champion is strong both at

policy and technical levels.

83. Alignment with Government priorities is a necessary ingredient for rapid policy

changes. Alignment with Government priorities and incremental dialogue provides valuable

weight to immediate and short term policy exigencies while building consensus for broader and

bolder reforms. The incremental dialogue approach essentially helps the Government to identify

and articulate country priorities and as such build the ground in terms of substance and

sequencing for subsequent operations. Strong knowledge base helps to identify priority areas of

reforms as well as specific measures to be implemented. Alignment and incremental dialogue

also helps in designing pragmatic time bound prior actions and the setting realistic targets.

Agreement on the set of results and continued dialogue motivate agencies, but more importantly,

the champions to remain focus on the reform agenda. Going forward, the combination of

developing strong knowledge base to prioritise the areas of reforms and incremental dialogue in

politically-sensitive areas should be maintained. This combination ensures ownership of reforms,

especially at sector level.

84. Strong coordination with DPs avoids duplication and harmonize results framework.

There has been a positive impact from the highly harmonized policy dialogue across donors

providing budget support. Government‟s capability to take leadership in coordinating

development assistance from the donor community has been instrumental. The ability of the

team to work in close collaboration with DPs resulted in harmonizing results framework through

common policy dialogue with the Government. Close coordination has proven to be an effective

way to support budget planning and execution. Building on technical support across sectors for

capacity building and analytical work by DPs contributed to achievement of the objectives of the

program. Dissemination of ESWs helped to strengthen momentum for reforms and build allies.

For example the dissemination of the ICA 2009 and the Trade and Labor ESW in 2010 brought

together public sector, private sector and the Bank together to reinforce synergy. Going forward,

strong coordination with partners should continue. This will help to avoid duplication and build

allies to accelerate the reform agenda. The M&E framework has to be more realistically designed

and outcomes indicators should be clearly linked to the areas of support in the operation, and

should be re-adjusted in case of major changes.

85. Flexibility to adjust and respond to Government emerging needs is fundamental.

Government immediate priorities change due to several factors like (i) external shocks, (ii)

justified resistance from affected sectors (possibly due to miscalculation of potential impacts of

reforms undertaken) and (iii) as a way to mitigate political risks. The ability to adapt to such

immediate changes in circumstances and priorities is essential for achievement of the objectives

in the medium term. For instance, the rapid response of the Bank through a DDO in the third

operation, as well as an increase in the value of the loan, helped keep on track the reforms. Also,

one additional operation was added to this series to align to the electoral cycle. Correct timing of

the individual operations helped sustained reform momentum. Each operation in the

44

programmatic series was aligned to the Government‟s budget cycle and this helped in

maintaining the reform process on-going as most of the policy changes were announced in the

budget whereby adoption by cabinet was easier. The timing of one of the operations also

changed to match the change in budget timeframe which moved the financial year from July-

June to align with the calendar year. This meant that there was a six month bridging gaps (i.e. a

financial year of six months) and to sustain the reform momentum, an operation was prepared

within this time frame.

6. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/Implementing Agencies:

Program Prior Actions Ministries

Responsible

Objective Outcome achieved and/or impact

Pillar 1: Consolidate Fiscal Performance and Improve Public Sector Efficiency

DPL1 Use fiscal rules to set budget

envelope and strengthen

monitoring to ensure allocations

to line ministries accord with

preset ceilings

Ministry of Finance

and Economic

Development

To strengthen budget discipline and monitoring by

using fiscal rules to set an aggregate spending

envelope and strengthening discipline to ensure the

allocations are respected.

Put in place framework for debt management through

the Public Debt Management Act

Prior to that MOFED signal the used on rules in the

budget circulars e.g., the Golden rule followed was to

borrow only for investment purposes

PBB introduced to bring more

accountability and improve service

delivery.

Impact:

- Fiscal performance improved with

lower deficit and debt to GDP ratio - Debt to GDP ratio improved

- Created fiscal space

Reduce primary spending by

0.5% of GDP relative to 2005/06.

Ministry of Finance

and Economic

Development

Reverse the negative trend in primary spending ratio

by 2.0% of GDP in 2006/07 relative to 2005/06

Primary spending went down from

20.6% of GDP to 18.6% of GDP

Impact:

- Lower deficit and debt to GDP

ratios

- Created fiscal space

Pass legislation to abolish

ministerial discretion over tax

and duty exemptions.

Ministry of Finance

and Economic

Development

To remove the Finance Minister‟s discretionary

powers to remit excise duty, registration duty and

other land duties and taxes by amending the Customs

Tariff Act and other legislation. Under the 2006

Finance Act, the Minister‟s discretionary powers have

be remitted as from 10 January 2007.

Eliminated discretionary power to remit

tax liability.

Rule-based and transparent exemptions

Impact:

- Tax system made more transparent

and rule based.

Reduce tax expenditures by 0.5%

of 2005/2006 GDP.

Ministry of Finance

and Economic

Development

To simplify and streamline personal income taxation

by consolidating allowances and exemptions on

emoluments, retirement pensions, pension

contributions, secure loan interest and more into a

single general exemption set according to household

income.

Tax Expenditure as a share of GDP

reduced

In line with the tax reform to lower

drastically tax exemptions

Impact:

45


Responsible


- Tax system made simple, fair and

transparent - Mauritius global ranking on paying

taxes improved to 9th position by

2009 (year 2011) - revenue collection improved

- service to tax payers made more

prompt, efficient, effective -

Operationalize Mauritius

Revenue Authority to strengthen

tax administration.

Ministry of Finance

and Economic

Development / MRA

Put all revenue collection under control The MRA operational as from July 2006

Impact:

- Strengthened tax administration by

allocating more resources improving collection through

effective tax administration.

DPL2 Implementation of a MTEF

budget and preparation of an

indicative PBB for 2007/08

budget.

Ministry of Finance

and Economic

Development

Mainstreaming MTEF/PBB has led to the revision of

the Chart of Accounts, upgrading computer systems

and providing adequate training.

MTEF introduced in 2004 and PBB in

07/08

Impact:

- Improved budgeting from an input

based annual exercise to a

performance based multi annual exercise linking financial resources

to outputs and outcomes - Aligned expenditure with policy

priorities

- Improved quality of spending

- Rolling three year budget has

allowed more visibility on

government medium term fiscal programme.

- Increased accountability of

supervising officers

Reduction of primary spending

by 1.0% of GDP in 2007/08

compared to 2005/06.

Ministry of Finance

and Economic

Development

The setting up of Audit Committees in key ministries

has reduced unnecessary spending

Primary spending reduced by > 1% of

GDP compared to 2005/06 thus

contributing towards.

Impact:

- Contributed in improving fiscal

performance (lower deficit/GDP and Debt/GDP)

- Contributed towards building fiscal

space/buffers for future

Enactment and proclamation of

the Public Procurement Act 2006,

including the appointment of

officials for the PPO, the Central

Procurement Board and the

Independent Review Panel, as

prescribed under the Act.

Ministry of Finance

and Economic

Development/

Procurement Policy

Office

The international best practice standards have been

addressed in new procurement legislation enacted in

December 2006 which replaced the Public

Procurement Transparency and Equity Act of 2000

Act Enacted

Impact:

- More efficient procurement and

better value for money in public

expenditure

Submission of paper to cabinet

establishing Parastatal Reform

Steering Committee. Evaluation

Ministry of Finance

and Economic

Development/

This has improved service and reduced costs of

essential outputs.

Improved competition in the economy

and public services costs have reduced..

46


Responsible


of state of health of selected

parastatals (Sugar Planters‟

Mechanical Pool, CEB, CWA,

WMA) and establishment of

remedial action plans to address

the problems.

Ministry of Energy

and Public Utilities/

Ministry of Agro-

Industry and Food

Security

DPL3 Alignment of the chart of

accounts of the Treasury

accounting system with the

Government Finance Statistics

Manual 2001 and upgrading of

the Borrower‟s financial

management information system

to enable budget implementation

and reporting of financial and

non-financial data, under the

efforts of the Ministry of Finance

and Economic Development

(“MOFED”), in coordination

with the department of the

Accountant General.

Ministry of Finance

and Economic

Development

This has upgraded the Financial Management

Information System (FMIS) to enable budget

implementation and reporting on both financial and

non-financial data .

New Chart of Accounts introduced using

latest GFS 2001 methodology for

computing/accounting government

finance statistics

Impact:

- Mauritius graduated to GFS 2001 earlier than many countries in

Africa and the rest of the world –

thus improving standards of its public finance statistics

- Treasury Accounting system

improved significantly the access to real time data to policy makers and

analysts

- Efficiency gains realized through less number of man hours required

for consolidating and monitoring financial transactions of

government

Implementation of performance

management pilots in the

Borrower‟s civil service by

individual line ministries and the

Ministry of Civil Service and

Administrative Reforms.

Ministry of Civil

Service and

Administrative

Reforms

Raise efficiency and productivity in the Civil Service The PMS is being reviewed by an UN

expert. The Report is due end-May

2012.

Enactment and proclamation of

the Public Debt Management Act

2008, which limits the

Borrower‟s public sector debt to

a maximum of 60-percent of

gross domestic product and

provides for public sector debt

reduction to 50-percent by the

end of 2013.

Ministry of Finance

and Economic

Development

The Debt Law has progressively lowered total debt

to 50 percent of GDP by 2013.

Act Proclaimed in 2008

Impact:

- Enhanced fiscal responsibility on

the part of policy makers which in turn contributed towards improve

macroeconomic management

- Debt rule and target provide better visibility on government fiscal

plans for future.

- Improved investor confidence and governance

- Contributed towards improving

Mauritius credit rating

Begin implementation of the

respective parastatal reform

action plans, by the Central

Water Authority, Wastewater

Management Authority, Central

Electricity Board, and Sugar

Planters Mechanical Pool

Ministry of Finance

and Economic

Development/

Ministry of Energy

and Public Utilities/

Ministry of Agro-

Industry and Food

To improve service quality and address issues of cost

control, outsourcing and tariff setting.

This measure has improved efficiency

and reduce budgetary liabilities.

47


Responsible


Corporation, to improve

operational efficiency and service

delivery

Security

DPL4 Preparation of at least four line

ministries strategies (ICT,

environment, tourism and

industry) for 2010 budget in line

with PBB requirements.

MICT, MOESD,

MTL MICCP

Promote expenditure efficiency and linking funding

to results

Impact:

Sector strategies aligned to reform

agenda

Pillar 2: Improve Trade Competitiveness

DPL1 First year of phased tariff

reduction by cutting top ad

valorem rate from 65 to 30

percent and reducing average

tariffs by 2 percent.

Ministry of Finance

and Economic

Development/ MRA

Duty rates were reduced on some 659 tariff lines and

another 345 lines were set to zero. The dispersion in

the tariff structure has nearly halved from a standard

deviation o f 15.5 percent to 8.4 percent.

Tariff barriers reduced significantly to

support integration in the global

economy and move towards duty-free

island concept.

Unify tax and regulatory regimes

for EPZ and non-EPZ firms, with

the exception of labor regulation.

Ministry of Finance

and Economic

Development/ MRA

Eliminate the distinction between EPZ and non-EPZ

status which has imposed a variety o f costs on

exporters and effectively barred many SMEs from

competing in export markets because they lacked the

resources and sophistication to take advantage o f

EPZ status.

The regulatory environment simplified

and ease the burden of compliance eased.

In line with Doing Business Reform and

improving investment climate.

Reduce cost of International

Private Leased Circuits by 20-35

percent.

Ministry of

Information and

Communication

Technology

Encourage new investment in the BPO sector and

facilitate diversification of tourism into the Meetings,

Incentives, Conferences and Exhibitions (MICE)

market.

This has triggered a reduction in the

tariffs from Internet Service Providers

DPL2 Implementation of support

programs to raise export

competitiveness during one year

respite from duty reductions.

Ministry of Finance

and Economic

Development

Tariff reductions have reduced the level and/or

dispersion of tariffs hence eliminating distortions

Support local enterprises affected by

tariff reduction.

(i) Acquisition of additional

capacity on the South Africa Far

East cable by Mauritius

Telecom; (ii) Issuing of decision

by ICTA on Mauritius Telecom‟s

application for 20 percent price

reduction on ADSL charges; (iii)

Initiation of regulatory review of

ICTA

Ministry of

Information and

Communication

Technology

Doubled the capacity of the line and the increase has

been distributed across consortium members.

Capacity is today 15 Gbps.

Board Membership revised in

accordance with law.

DPL3 Continue implementation of the

Borrower‟s duty free island

policy by significantly reducing

average tariff rate and number of

top rated tariff lines by the

MOFED.

Ministry of Finance

and Economic

Development

To be more competitive on the international front Improved competitiveness.

88% of tariff lines already zero-rated.

48


Responsible


DPL4 Establishment of a joint Public-

Private Sector Standing

Committee to review the design

and implementation of regulatory

measures relative to import and

export licenses with a view to

eliminate unwarranted barriers to

trade.

Ministry of Finance

and Economic

Development

To put in place procedures ensuring that regulations

are designed and implemented in a way that is

consistent with: (i) public policy; and (ii)

development of the economy as an efficient global

competitor.

Reduce, rationalize and streamline

licensing requirements for export and

import. Increased exports.

Revision of the legal and

regulatory framework of the

Information and Communications

Technology (ICT) sector in line

with the international best

practices and changes resulting

from technological convergence

for modern competitive ICT

markets, as shall be evidenced

by: (i) reduction of the prices of

international private leased

circuits from Mauritius to Paris;

(ii) preparation and approval by

the Board of ICTA of draft

proposals for amendment to the

Information and Communication

and Technologies Act; and (iii)

appointment of the Data

Protection Commissioner

pursuant to the Data Protection

Act.

Ministry of

Information and

Communication

Technology

This process has improved the gaps identified in the

Data Protection legislation for Mauritius in relation to

the EU standards and to reinforce the institutional

set-up of the Data Protection Office.

This initiative has increased exports as a

percentage of GDP, particularly service

exports. Increased investment in BPO

sector

25% reduction has been achieved.

Amendments to ICTA –Sections 30 and

31 made in December 2011.

Pillar 3: Improve Investment Climate

DPL1 Facilitate doing business by

streamlining registration

practices by:

- enacting Business Facilitation

Bill to enable ex post verification

rather than ex ante approval; - designating the Registrar of

Companies as one a one-stop

center for business registration in the Business Registration Act;

- amending the Planning and

Development Act to merge development and building

permits.

- transforming the trade licensing fee into a single municipal fee to

be paid post business operation

through amendment of the Local Government 2003 Act.

Ministry of Finance

and Economic

Development/

Registrar of

Companies

This has reflected to a more transparent approach to

regulatory issues

- Significant increase in FDI flow - Rs 7,222 M (2006), 11,514 M

(2007), 11,419 M (2008), 8,793M

(2009), 13,948 M (2010), 9,456 M(2011)

- World Bank Doing Business

Ranking for Mauritius – from 49 to 23 today

- Businesses can start their operations

within a time frame of 3 days - A Building and Land Use Permit is

issued within 14 days

- Elimination of trade license. No waiting time to pay trade fee

Ease entry of foreign skilled

workers by issuing permit within

3 working days for high income

Ministry of Labour/

Board of Investment

The work and residence permits have been combined

into only Occupational Permit (OP). With the

enactment of the Business Facilitation Act in 2006, it

From Oct 2006 to 18 April 2012, the

number of OPs issued to professionals

49


Responsible


earning professionals and others. takes three days to process and obtain an occupation

permit which is issued for a maximum period of three

years.

amounted to 7,889.

Local skill shortage compensated by

having recourse to foreign expertise

DPL2 Establishment and

operationalization of new,

National Pay Council during

2007 pay round.

Ministry of Civil

Service and

Administrative

Reforms/ PRB

Introduce to labor market reform. More flexible and responsive wage

bargaining resulting in greater efficiency

and outcomes in line with productivity

trends

DPL3 Introduction of a flexi-security

scheme, as reflected in the

workfare program provisions

contained in section IX of the

Employment Rights Act 2008.

Ministry of Labour,

Industrial Relations

and Employment

Reform of the Industrial Relations Framework New legislation put in place,

Employment Relations Act and

Employment Rights Act to improve

labor market efficiency.

DPL4

Enactment of the Insolvency

legislation

Ministry of Finance

and Economic

Development

This has provided judicial supervision to ensure that

the process is not subjected to manipulation or abuse.

Process of winding up liquidation of

companies made easier.

Appointment of the Competition

Commission of Mauritius

Ministry of Business,

Enterprise,

Cooperatives and

Consumer Protection

To prevent anti-competitive behavior by domestic

business.

Promote competitive practices

domestically and increase efficiency of

firms.

Pillar 4: Widen the Circle of Opportunity through Participation, Social Inclusion and Sustainability

DPL1 - Set up machinery for Empowerment Programme to

spend Rs5 billion over 5 years on

social protection, retraining and SME support.

Ministry of Social

Integration and

Economic

Empowerment

Improve the democratization agenda of the

Government Programme.

Empowerment Programme has managed

to spend its allocation and improve

awareness and knowledge of its

programs. In 2011, 13,000 male and

female employment seekers who are

registered with the National

Empowerment Foundation have been

trained and placed /obtained a job/ joined

a business network/become self

employed.

- Design measures to facilitate growth of formal SME sector

Ministry of Business,

Enterprise, and

Cooperatives

Simplify registration procedures.

Help small businesses to prepare their business plan,

filing statutory returns and complying with various

health, fire and environmental regulations

Some 40 Graduate Scheme participants

trained as counselors to provide

consultancy services under SEHDA .

Development Bank of Mauritius (DBM)

opened a special window for SMEs to

50


Responsible


provide working capital and other short

term finance in the form of micro-loans

of MUR 50,000 to MUR 300,000.

- Replace consumer subsidies with

targeted cash transfers, with additional measures to increase

support and opportunities to the

poorest.

Ministry of Social

Integration and

Economic

Empowerment

This has increased cost effectiveness of social

protection.

Prices of rice and flour remain controlled, they were

allowed to rise by the amount of the previous subsidy

for an increase of around 50%.

Over time the number of recipients has

risen from around 40,000 in July to

115,000 currently.

DPL2 Drafting of national education

strategy to increase primary,

secondary and tertiary output and

raise quality, including through:

(i) increasing enrollment at

tertiary level; (ii) reducing the

failure and marginal pass rates of

the CPE, in particular in Zones

d‟Education Prioritaires; (iii)

offering a vocational stream to

those who fail or barely pass the

CPE; (iv) upgrading teacher

training; (v) implementing a new

curriculum with a greater

emphasis on languages, science,

math and ICT.

Ministry of

Education and

Human Resources

This has improved the development of problem

solving and critical thinking skills, and inadequate

tertiary capacity.

A positive impact on human capital

formation and growth

DPL3 Preparation and submission by

the Ministry of Education,

Culture and Human Resources to

Cabinet of a draft Education and

Human Resources Strategy Plan

that diagnoses education sector

needs, identifies objectives and

priorities, and outlines options,

which will be costed and,

together with human resources

requirements, incorporated into a

medium term action plan and a

fully financed, program based

budget submission.

Ministry of

Education and

Human Resources

To improve education system efficiency and service

delivery

Continuous review of actions and

policies to be implemented for a

comprehensive overall of the education

system to enable the student population

to acquire skills for smooth transition to

a high income economy.

DPL4 Implementation of a targeted and

temporary policy action in the

form of a work and training

scheme by the National

Empowerment Foundation to

mitigate the risks of widespread

layoffs in the context of the

Ministry of Social

Integration and

Economic

Empowerment

Targeted and temporary policy actions to reduce the

likelihood of massive layoffs.

Impact:

Reduced layoffs in sectors mostly

affected by the world economic crisis.

51


Responsible


economic slowdown.

Production of a final poverty map

by CSO combining 2001/02

Household Budget Survey and

2000 population census data with

the objective to improve capacity

for geographical targeting

Ministry of Social

Integration and

Economic

Empowerment

Improve policy formulation and effective

implementation of measures in the social sector.

Institutional capacity improved and

necessary tools to monitor poverty

developed.

Statistics Mauritius has built capacity on

how to produce poverty maps and can

now carry out the exercise independently

in the future.

(b) Co financiers:

[to be inserted]

(c) Other partners and stakeholders

(e.g. NGOs/private sector/civil society):

52

Annex 1 Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

P101570 - Mauritius Development Policy Loan

Names Title Unit Responsibility/

Specialty

Lending

Supervision

Robert Keyfitz TTL MNSED

Richard S. Newfarmer Special Representative to the EXTGE

Julia Nielson Asst. to the President EXC

Ganesh Rasagam Sr Private Sector Development AFTFE

P106650 - Mauritius Second Development Policy Loan (FY08)


Specialty

Lending

Supervision


Lisa Lui Lead Counsel LEGIP

Suzanne F. Morris Senior Finance Officer CTRFC

P112369 - Mauritius Third Development Policy Loan


Specialty

Lending

Supervision

Maria Teresa Benito-Spinetto Research Analyst AFTP1


Fabiano Bastos TTL AFTP1

Lisa Lui Lead Counsel LEGIP

Saraswathi Sundaram Program Assistant AFTP1

P116608 - Mauritius Fourth Development Policy Loan


Specialty

Lending

Fabiano Bastos TTL AFTP1

Constantine Chikosi Senior Operations Officer AFTFE

Suzanne F. Morris Senior Finance Officer CTRFC

Edith Ruguru Mwenda Sr Counsel LEGAF

Saraswathi Sundaram Program Assistant AFTP1

Supervision

Maria Teresa Benito-Spinetto Research Analyst AFTP1

53

Constantine Chikosi Senior Operations Officer AFTFE

Lars Jessen Lead Financial Officer/Soverei BDM

Jacques Morisset Lead Economist AFTP1

Edith Ruguru Mwenda Sr Counsel LEGAF

Sawkut Rojid E T Consultant AFTP1

Sudharsan Sundaram Program Assistant ISGIS

Mark D. J. Williams Senior Economist CITPO

(b) Staff Time and Cost

P101570 - Mauritius Development Policy Loan

Stage

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel

and consultant costs)

Lending

FY07 31 237.32

FY08 0.00

Total: 31 237.32

Supervision

FY07 22 96.12

FY08 18 82.70

Total: 40 178.82

P106650 - Mauritius Second Development Policy Loan (FY08)

Stage

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel

and consultant costs)

Lending

FY07 9.64

FY08 30 191.82

FY09 0.00

Total: 30 201.46

Supervision

Total: 0.00

54

Annex 2. Beneficiary Survey Results

Not Undertaken

Annex 3. Stakeholder Workshop Report and Results

None

Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR

[to be included]

Annex 5. Comments of Co financiers and Other Partners/Stakeholders

Comments from the European Commission:

The DPL series catalyzed strong donor coordination and harmonization. All the budget support

donors participated in joint reviews of the economic reform program of Mauritius, which

allowed a very fruitful policy dialogue with the Government of Mauritius. The EU started its

budget support operations in 2007. Two of these EU budget support operations, representing a

total of around 100 million Euros, had three common priority areas with the DPL 1-4

programmatic series namely fiscal consolidation, education and socio-economic empowerment.

Annex 6. List of Supporting Documents

1. First Trade and Competitiveness DPL Program Document, Report No. 37947- MU,

November 2006

2. Second Trade and Competitiveness DPL Program Document, Report No. 42150- MU,

January 2008

3. Third Trade and Competitiveness DPL Program Document, Report No. 46219- MU,

March 2009

4. Fourth Trade and Competitiveness DPL Program Document, Report No. 50181- MU,

October 2009

5. Country Partnership Strategy Program Document, Report No. 37703- MU, October 2006

6. IMF Staff Reports 2007-2010

R I V IR I V I ÉÉ R ER ED UD U

R E M PR E M PA RA R TT

F L A C QF L A C QM O K AM O K A

G R A N DG R A N DP O RP O R TT

B L A C KB L A C KR I V E RR I V E R

S AS AVVA N N EA N N E

P L A I N E SP L A I N E SW I L H E M SW I L H E M S

P O RP O R TTL O U I SL O U I S

PPAMPLEMOUSSESAMPLEMOUSSES

Mont PitonMont Piton(828 m)(828 m)

Mt. CocotieMt. Cocotie(771m) (771m)

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Piton de MilieuPiton de MilieuReserReservoirvoir

RRiivviiéérree TTaammaarriinn

MareMareauxauxVVacoasacoas

TTrioletriolet

BonBonAccueilAccueil

TTerreerreRougeRouge

GoodlandsGoodlands

GrandGrandGaubeGaubeGrandGrand

BaieBaie

RiviRiviéére dure duRemparRempartt

Bel AirBel Air

VVieuxieuxGrandGrandPorPortt

MontagneMontagneBlancheBlanche

PhoenixPhoenix

CurepipeCurepipe

VVacoasacoas

NouvelleNouvelleFranceFrance

Grand BoisGrand Bois

Baie du CapBaie du Cap

SurinamSurinam

L'EscalierL'Escalier

Rose BelleRose Belle

RiviRiviéére desre desAnguillesAnguilles

CheminCheminGrenierGrenier

BambousBambous

QuarQuartiertierMilitaireMilitaire

PamplemoussesPamplemousses

CentreCentrede Flacqde Flacq

SouillacSouillac

MokaMoka

Rose HillRose Hill

R I V I É R ED U

R E M PA R T

F L A C QM O K A

G R A N DP O R T

B L A C KR I V E R

S AVA N N E

P L A I N E SW I L H E M S

P O R TL O U I S

PAMPLEMOUSSES

Triolet

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GrandGaubeGrand

Baie

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Bel Air

VieuxGrandPort

MontagneBlanche

Phoenix

Curepipe

Vacoas

NouvelleFrance

Grand Bois

Baie du Cap

Surinam

L'Escalier

Rose Belle

Riviére desAnguilles

CheminGrenier

Bambous

QuartierMilitaire

Poudre d'Or

Pamplemousses

Centrede Flacq

Mahebourg

Souillac

Moka

Rose Hill

Tamarin

PORT LOUIS

FlatIsland

Gunner'sQuoin

Ile D'Ambre

CannoniersPoint

PointeQuatre Cocos

PointPetite Riviére

PointeSud

Ouest

Pointedu Diable

Ile aux Cerfs

Ile auxBénitiers

Riviére Citrons

Riviér

e Rempart

Riviér

edu Poste

du Flacq

Grand River South East

Riviére LaCha ux

River du Poste

Grand

Ri viére

Noire

Baie

du Cap

River desGalets

Riviér e du Rempart

LaNicoliére

Piton de MilieuReservoir

Riviére Tamarin

MareauxVacoas

I N D I A NO C E A N

I N D I A NO C E A N

SavaneM

ts

Grande

Savanne

Vaco

as

Quar t ier M

i l i t a i r e

Découver te

Nouvel le

Bambou M t s

Mont Piton(828 m)

Mt. Cocotie(771m)

20°00'S 20°00'S

20°15'S20°15'S

20°30'S

57°30'E

57°30'E

57°45'E

63°20'E

19°40'S

19°45'S

63°25'E 63°30'E

Port Mathurin

La Femme

GrandMontagne

PetitGabriel

Rodrigues Island

CrabIsland

0 1 2 3 Kilometers

0 1 2 3 Miles

INDIANOCEAN

MAURITIUS

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 1 2 3 4

0 1 2 3 4 5 Miles

5 Kilometers

IBRD 33446

DECEMBER 2004

MAURIT IUSSELECTED CITIES AND TOWNS

DISTRICT CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

DISTRICT BOUNDARIES

INTERNATIONAL BOUNDARIES