Mauritius - Manufacturing and Services Development and Competitiveness Project

Page 1 INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE I. Basic Information Date prepared/updated: 09/11/2009 Report No.: AC4621 1. Basic Project Data Country: Mauritius Project ID: P112943 Project Name: MU-Manufacturing and Servs Dev and Compet Task Team Leader: Asya Akhlaque Estimated Appraisal Date: October 15, 2009 Estimated Board Date: November 24, 2009 Managing Unit: AFTFE Lending Instrument: Specific Investment Loan Sector: Micro- and SME finance (50%);General industry and trade sector (50%) Theme: Small and medium enterprise support (100%) IBRD Amount (US$m.): 20.00 IDA Amount (US$m.): 0.00 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: Borrower 0.00 0.00 Environmental Category: C - Not Required Simplified Processing Simple [X] Repeater [] Is this project processed under OP 8.50 (Emergency Recovery) or OP 8.00 (Rapid Response to Crises and Emergencies) Yes [ ] No [X] 2. Project Objectives The overall objective of the proposed project is to support enterprise growth, competitiveness and employment creation in manufacturing and services sectors. This will be achieved by: (i) improving access to quality Business Development Services (BDS); (ii) strengthening institutional and policy support; and (iii) increasing access to finance to credit constrained businesses. 3. Project Description The Project will be structured around the following three integrated pillars: Component One: Improving access to quality Business Development Services (BDS); Component Two: Strengthening Institutional and Policy support; and Component Three: Increasing access to finance to credit constrained businesses. Component One: Improving access to quality Business Development Services (BDS) (tentative project funds allocated - US$ 12million) Page 2 This component supports enterprise productivity and competitiveness, specifically in areas of skills and training, technology upgrading, standards and marketing constraints facing SMEs. This component shall establish a Mauritius Business Growth Scheme [MBGS], with the aim to strengthen the capacity and international competitiveness of private businesses. The Scheme will deliver two complementary products to individual firms: (a) Cost-sharing grants, to buy specialized outside expertise; (b) Mentoring, helping each firm to plan and execute a growth plan, stage by stage. typically based on quarterly firm visits. These two products will be available to any privately-controlled commercial entity, operating legally within Mauritius, and can be used to support any commercial activity contributing to the economy of Mauritius, and operating for profit, including commercial agriculture and commercial fishing. Criteria: For an individual firm to receive Scheme assistance, the key requirement is that the applicant firm must have written down a simple business growth plan, showing that management understands the firm's current situation, and plans a significant set of measures, that are likely to lead to strong sales growth. Once this growth plan is set down, then, in principle, any usage made of outside advisory services, that can reasonably be expected to contribute to the planned growth, can be supported by a grant. As for the mentoring, the aim is to assist the firm to carry out all the measures in its plan, using its own resources where appropriate, and using grant-assisted outside resources where this makes more sense. Every firm applying to the Unit would be paid an initial diagnostic visit on a strictly "first-come, first-served" basis. After that, however, the Scheme Manager would be able to allocate Unit resources as he/she sees fit, based on the agreed criteria, in order to achieve the primary objective, namely to maximize the rate of growth within assisted firms. The manager would commit to quarterly and annual activity plans, establishing detailed verifiable indicators of activity. These would be monitored closely, first by the Project Manager; then by the Steering Committee; and also by regular Bank supervision missions. In the early months of the Scheme, there would be intensive promotion of the Scheme, reaching all the different business communities, and different segments of the private sector. The intention is to use the various representative organizations of the private sector to facilitate this promotion. Applications from firms for grant support would be reviewed initially by the Scheme Manager. He/she would then forward these vetted applications to a small Grant Approvals Committee, internal to the PCU and MBGS Unit, and which would be headed by the Project Manager. It would include the MBGS Manager, and would also bring in the expertise of other PCU specialist staff, such as the Procurement Officer and/or the Financial Management Officer. Funding: The total MBGS funding to be made available, over the project period, would be $12.0m, including the cost of operating the MBGS Unit. Implementation & Management of MBGS: World Bank experience with such schemes highlights the importance of operational independence. It is vital that the Unit managing the Scheme is visibly and operationally independent from the machinery of government. The Unit would therefore be set up as an independent project entity. It would be staffed Page 3 by a Scheme Manager, internationally recruited with direct previous grant scheme experience, plus two Advisors, locally recruited with consulting or business mentoring experience. The manager of the Unit would be answerable to the Program Steering Committee. The Scheme would be directed by an MBGS Manual, to be agreed between the World Bank and the Government. Systems would be developed to ensure compliance with the terms of this manual, but with the minimum possible paperwork and complexity. Component Two: Strengthening Policy and Institutional Framework (tentative project funds allocated - US$ 4.5 million) In support of the Government's efforts to streamline SME related public sector institutions and policies to strengthen quality and sustainability of services, this component focuses on: (a) rationalization and consolidation of existing public sector SME institutions and programs; and (b) establishment of a Monitoring & Evaluation (M&E) unit to evaluate SME programs to strengthen performance and accountability. The first sub-component shall specifically support restructuring and conversion of the Development Bank of Mauritius (DBM) into a Development Agency, along with the consolidation of the Small Enterprises & Handicraft Development Authority (SEHDA), and the National Women Entrepreneur Council (NWEC). Key activities to be supported under this component may be as follow: (a) to identify and rationalize key services; (b) to minimize duplication and overlap of functions; (c) to prepare training plans and conduct training programs; (d) to acquire the appropriate software and/or equipment; (e) to develop a suitable Human Resource plan. As part of the potential restructuring and rationalization efforts, the second sub- component would support the establishment of a Monitoring and Evaluation (M&E) unit. This new M&E system will help the government of Mauritius to better design future SMEs support programs by providing a meaningful evaluation of the impact of earlier programs. A good M&E system requires the creation of a dedicated and independent unit in charge of: (a) recruiting and training its staff to conduct, manage, and supervise M&E activities, (b) selecting the support schemes to be evaluated; (c) identifying specific aspects to be evaluated; (d) creating data systems and procedures; and (e) disseminating the findings to the appropriate stakeholders. This sub-component will fund an assessment of existing M&E functions and their strengths and weaknesses. The project will then support the setting up of the unit, the creation of a database of schemes for SMEs, the conduct of evaluations, and dissemination of findings. The Ministry of Business Enterprises and Cooperatives (MoBEC) has been identified as the line agency for implementing this component. Component Three: Increasing access to finance to credit constrained SMEs (tentative project funds allocated - US$ 1.5 million) Informed by technical work and discussions, this component shall address the two major impediments for SMEs' access to finance:(i) lack of capacity to present bankable proposals; and (ii) under-capitalization where local SMEs lack equity capital and depend Page 4 on borrowed capital, which constrain the further borrowing capacity and growth of these firms. Given that the binding constraints for access to finance for SMEs stem primarily from the demand side of financial markets, and would be best served by focusing on technical assistance to SMEs to present bankable proposals to lending banks. This would be addressed as part of the BDS component described in component 1. This component shall provide technical assistance in the following areas: (i) to investigate the feasibility of setting up a multi-donor equity fund; (ii) to help inform the design of innovative financial products, the goals for which were set out in the the May (2009) Budget announcements by the GoM; and (iii) to strengthen the implementation and capacity constraints issues related to the on-going MTSP workouts. The Ministry of Finance and Economic Empowerment (MOFEE) has been designated as the responsible line ministry for this component. 4. Project Location and salient physical characteristics relevant to the safeguard analysis Countrywide - Mauritius 5. Environmental and Social Safeguards Specialists Ms Noreen Beg (AFTEN) 6. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4.01) X Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Indigenous Peoples (OP/BP 4.10) X Involuntary Resettlement (OP/BP 4.12) X Safety of Dams (OP/BP 4.37) X Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts: Since there are no investment components in the project, and since the overall objective of the project is to support the manufacturing and services sectors in general (see above) i.e., there is no focus on any specific industry or industry segment) the project as such shall not have adverse environmental impacts on human populations or environmentally important areas. It is rated as a C category. Page 5 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Not applicable. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. Not applicable. 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. As evidenced in the Country System Safeguard Diagnostic Review undertaken by the Bank and currently nearing completion , the Ministry of Environment has a strong commitment to environmental protection. It is well on the way to bringing the EIA process in line with international standards, as witnessed through the issuance of the #Proponent#s Guide to Environmental Impact Assessment# (EIA Guidelines) and sectoral guidelines in areas such as #Integrated Resort Schemes# (and recent EIRs produced under the guidelines). The Environmental Protection Act (2002) EPA spells out the following as requirements for all undertakings: - An undertaking specified in Part A of the First Schedule requires preparation and approval of a Preliminary Environmental Report (PER). This PER applies to less polluting projects and does not require an outline. There are general guidelines for preparing PER projects on the MoE website. (Most of the projects under the MBGS will fall in this category.) -An undertaking specified in Part B of the First Schedule requires an EIA license. To apply for a license, a proponent must submit to the Director an EIA report. A proponent, unless applying through the Board of Investment, must provide the Director with an outline of his/her proposed undertaking, including its location, nature and scope, at least 3 months before submitting his application for an EIA license. Failure to do so may result in a rejection of an application for a license. The EIA Guidelines go even further than the Environmental Protection Act, calling for :attention to cumulative environmental impacts; consideration of #strategic/local/regional/national impacts#; #socio-economic# and #socio-cultural# impacts; and the need to comply with zoning requirements. The EIA Guideline requires that EIA Reports include a section for #Monitoring and Maintenance# including #future maintenance requirements;# and provides for consideration of #do nothing option,# e.g. impact on future land use. 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. Not applicable. Page 6 B. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Resettlement Action Plan/Framework/Policy Process: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Indigenous Peoples Plan/Planning Framework: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Pest Management Plan: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop * If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why: C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? N/A Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? N/A All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? N/A Have costs related to safeguard policy measures been included in the project N/A Page 7 cost? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? N/A Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? N/A D. Approvals Signed and submitted by: Name Date Task Team Leader: Ms Asya Akhlaque 09/11/2009 Environmental Specialist: Ms Noreen Beg 09/11/2009 Social Development Specialist Additional Environmental and/or Social Development Specialist(s): Approved by: Sector Manager: Mr Gerardo M. Corrochano 09/11/2009 Comments: