Algeria - Privatization Assistance (LIL)

 ICRR 11937 Report Number : ICRR11937 ICR Review Operations Evaluation Department 1. Project Data: Date Posted : 08/19/2004 PROJ ID : P070123 Appraisal Actual Project Name : Privatization Assistance Project Costs 5 2.5 (LIL) US$M ) (US$M) Country : Algeria Loan /Credit (US$M) Loan/ US$M ) 5 2.5 Sector (s): Board: PSD - Central Cofinancing government administration US$M ) (US$M) (100%) L/C Number : L7029 Board Approval 00 FY ) (FY) Partners involved : Closing Date 12/31/2003 12/31/2003 Prepared by : Reviewed by : Group Manager : Group : Elliott Hurwitz Fareed M. A. Hassan Kyle Peters OEDCR 2. Project Objectives and Components a. Objectives The project development objective was to create the basis for accelerated implementation of a credible privatization program under a new institutional arrangement . The project was to have provided capacity -building support to the Ministry of Participation and Coordination of Reforms (MPCR), under whose authority the privatization process was to have been streamlined and centralized . Transaction assistance was provided to the institution then in charge of executing transactions, the Conseil National de Privatisation . Assistance provided was intended to help elaborate a medium-term privatization strategy, complete a set of pilot transactions following a competitive and transparent process, and provide an important learning experience and demonstration effect for future scaling -up of the privatization program. b. Components Component 1: Build MPCR Capacity: Strengthen institutional capacity of the MPCR by providing financial resources and expertise and streamlining privatization procedures . The component included hiring of : (i) a high level international policy advisor to the Minister; (ii) legal advisory services from an international law firm; (iii) two resident technical advisors to MPCR's department in charge of preparing enterprises for privatization . The component also included funds for hiring short -term specialists and/or organizing study tours for MPCR staff . Component 2: Transaction Support to the Privatization Agency . Strengthen transaction capacity of the Conseil National de Privatisation by hiring : (i) resident senior transaction advisor to the Conseil; (ii) investment banks to assist in implementation of five complex transactions; (iii) advisory services to design specific outreach and information activities. c. Comments on Project Cost, Financing and Dates The project disbursed only 52% of the envisioned funds due to the lack of progress toward meeting the development objective. 3. Achievement of Relevant Objectives: No major relevant objectives were achieved . While technical advice was provided, it was not internalized, as the expert advisors were either not placed in the proper positions or there were no transactions on which to advise . 4. Significant Outcomes/Impacts: There were no significant outcomes or impacts . 5. Significant Shortcomings (including non-compliance with safeguard policies): No privatization transactions occurred under the project . No enduring privatization capacity was developed . The agency designated to conduct privatization transactions, the Conseil Nationale de Privatisation, was abolished and merged into MPCR soon after project effectiveness . Several contracts signed with investment banks were voided due to government opposition . In the privatization transaction that reached the most advanced stage, the bid was rejected by the government because they believed the offer price was too low . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Unsatisfactory Highly Unsatisfactory Institutional Dev .: Negligible Negligible Sustainability : Highly Unlikely Highly Unlikely Bank Performance : Unsatisfactory Unsatisfactory Quality at Entry was poor. Government commitment was uneven; the PIU had weak management and staffing; and the assumptions on which the project was based were overly optimistic. Supervision was unsatisfactory . There were 5 TMs during implementation, some of whom lacked the required expertise (ICR, sec. 7.2). Required Bank approvals were not always provided in a timely manner. Borrower Perf .: Unsatisfactory Unsatisfactory The government was insufficiently committed, especially during the most crucial phase, and numerous obstacles were placed in the path of the project . MPCR, which was headed by 5 Ministers during the project, failed to overcome opposition from vested interests including other government agencies as well as trade unions. Quality of ICR : Exemplary NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness. 7. Lessons of Broad Applicability: Given the country's history of inconsistent support for privatization, the project should have contained an "exit strategy" to be utilized in case support flagged . An effective communications strategy is critical to developing a successful privatization program . It would have been desirable to communicate the benefits of privatization achieved in Algeria --even that which occurred prior to project inception--to stakeholders. A "champion" can be key to an effective privatization program . Ideally, such a person should command respect from the general public as well as from the government; the Algeria program suffered from the lack of a champion (one person played this role briefly, but broad support for privatization was lacking ). 8. Assessment Recommended? Yes No 9. Comments on Quality of ICR: The ICR is very frank and insightful in describing the project . After the project had a seemingly auspicious start, the ICR provides excellent detail about the pitfalls of the privatization program in Algeria .