Niger - Public Enterprise Institutional Development Project

Document of The World Bank FOR OFFICIAL USE ONLY C 17lc , g-fi \ Report No. P-4523-NIR MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 4.3 MILLION TO THE REPUBLIC OF NIGER FOR A PUBLIC ENTERPRISE INSTITUTIONAL DEVELOPMENT PROJECT June 3, 1987 This document has a restricted distribmIlon and may be used by recipients only in the performance of their offiel duties. Its eontents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALEkiTS Currency Unit = CFA Franc (CFAF) US$1.0G = CFAF 314 1/ FISCAL YEAR October 1 - September 30 ABBREVIATIONS BDRN Banque de Developpement de la Republique du Niger CNPG Centre National de Perfectionnement et de Gestion ILO International Labor Organization MIS Management Information System MSE Ministry of State Enterprises OPVN Office des Produits Vivriers du Niger ORTN Office de Radiodiffusion-Television du Niger PE Public Enterprise PERU Public Enterprise Reform Unit PESAP Public Enterprise Sector Adjustment Program SNC Societe Nigerienne de Cimenterie 1/ The CFA Franc (CFAF) is tied to the French Franc (FF) in the ratio of FF1 to CFAF 50. The French Franc is currently floating.  FOR OMCIAL USE ONLY NIGER PUBLIC ENTERPRISE INSTITUTIONAL DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Government of the Republic of Niger Beneficiaries: Ministry of State Enterprises office of the Presidency Amount: SDR 4.3 million (US$5.5 million equivalent) Terms: Standard Onlending Terms: Not applicable Financinx Plan: Local Foreign Total (US$ million) Government 0.2 0.0 0.2 IDA 0.5 5.0 5.5 0.7 5.0 5.7 Economic Rate of Return: Not applicable Staff Appraisal Report: Not applicable Map: IBRD 19400 Ihis document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Oank nuihi,astion.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF NIGER FOR A PUBLIC ENTERPRISE INSTITUTIONAL DEVELOPMENT PROJECT 1. The following report on a proposed development credit to Niger for SDR 4.3 million (US$5.5 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms and help finance a project of institutional support for implementation of Niger's public enterprise secter adjustment program (PESAP). 2. Background. Niger's public enterprise (PE) sector grew rapidly durir.g the 1970s. Excluding the two majority foreign owned uranium mining companies, the PE sector now accounts for 7 percent of GDP and employs some 11,500 workers. However, this sector has performed poorly and imposed a serious drain on the economy and public finance, because of: original investment mistakes; unclear and conflicting objectives of PEs; Government's inappropriate policy and regulations; deficiencies in the legal and institutional framework; and poor PE management. To redress the situatior. the Government adopted, in 1985, a comprehensive reform program as part of its structural adjustment effort. A detailed action plan was prepared in consultation with IDA and its initial major steps became part of the Structural Adjustment Credit (SAL) approved in February 1986. Implementation of the reform program, including those aspects linked to the SAL, is progressing well: measures have been taken to establish a new broad PE sector policy framework and make the first round of institutional and legal changes needed to increase PE efficiency, improve the general policy environment and incentive systems, start a program of divestiture (privatizations and liquidations), and encourage private sector development. A second phase of these reforms has now been prepared in consultation with IDA and forms the basis for Government's Public Enterprise Sector Adjustment Program (PESAP) for 1987-90. 3. The Ministry of State Enterprises (MSE), created in 1984, has led the design and execution of the reform program. The MSE is responsible for the oversight of all PEs, and for supervision of 26 selected PEs which are deemed to require speedy action for divestiture or rehabilitation. Through assistance provided under a PPF for the proposed project, the MSE has established itself as the focal point for coordinating and implementing the first phase of the PE reform program and developing the next round of reforms. To do this effectively, the MSE requires additional skills in the areas of divestiture, performance contracts, management information systems and legal expertise. It also requires further development of its general institutional capacity to manage the PE sector in concert with other ministries. Finally, the management base within enterprises is still weak, and efforts must be directed to strengthen the comprehension and appreciation by PE managers of the reform process. 4. Proiect Obiectives. The objective of the proposed project is to provide the institutional support needed by the Government in order to extend and deepen its PE reform efforts, which would be supported through a  - 2 - proposed PE Sector Adjustment Operation. More specifically, the project is to address the long-term question of the strengthening of the Government's ability to devise and implement PE reforms as well as to monitor the sector's progress and manage its development in the future. This also entails strengthening the capabilities of PE management to respond to the changed policy environment, with direct assistance to ORTN (Radio and Television) to implement its restructuring program. 5. Project Description. The proposed project aims at assisting the Government in acquiring the necessary technical and administrative capacity to formulate and implement the reform measures incorporated in the PE Sector Adjustment Program through: (a) a program of general support (resident PE advisor) plus vehicles, equipment and logistical assistance for MSE; (b) the implementation and monitoring of specific reforms (divestiture, legal statutes, financial restructuring, impact studies, etc); (c) studies leading to the development of additional reforms (financial controls, auditing norms, role of supervisory ministries, etc.); (d) assistance to develop and implement tools to improve PE management (performance evaluation system, performance contracts, audits, etc.); (e) support for the improvement of procurement procedures for the public sector, including PEs; (f) a comprehensive training program for the personnel of both Government and PEs; (g) advisory services to restructure ORTN; and (h) provision for other reform related tasks as subprojects. Annual work plans would be established in agreement with IDA. The project, to be carried out over three years, is estimated to cost US$5.7 million equivalent, with a foreign exchange component of US$5.0 million (88 percent). A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and disbursement are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Niger are given in Schedules C and D respectively. A map is also attached. Since there is no separate staff appraisal report, more detailed information on the proposed project is provided in Annex I. The President's Report for the accompanying PE Sector Adjustment Credit is No. P-4522 NIR, dated June 3, 1987. 6. Rationale for IDA Involvement. This project is essential to IDA's strategy to help Niger carry out an economic adjustment program, with a particular focus on the public enterprise sector. At the request of the Government, IDA took a leading role early in the process of developing a comprehensive PE reform strategy, which was supported through the first SAL. These efforts will now be deepened and extended through the PESAP with this proposed project concurrently focussing on the overall institutional framework of the PE sector and one key enterprise. IDA support of this operation will help ensure the successful implementation of the adjustment program while concomitantly developing the institutional base for sound management of the PE sector. IDA's continued involvement is also needed to coordinate the rehabilitation of selected PEs under various development projects. '. Agreed Actions. The Government has agreed to the following actions: (a) establishment and staffing of a project unit in the MSE as a  -3- condition of effectiveness; (b) preparation of a detailed training program for Government officials and the PE personnel to be agreed with as a condition of effectiveness; (c) a review of PE legal framework by September 30, 1989; (d) a review, in consultation with IDA, of the possibility of integrating the project unit into MSE's structure by June 30, 1991; (e, Government financing of the project unit each year, on an increasing basis, starting FY87188 as a condition of effectiveness; (e) the preparation of annual work plans for the unit by December 31, of each year; preparation of the first of these for FY87/88 would be a condition of effectiveness; (f) the preparation of a specific action program to be carried out by ORTN by December 31, 1987, agreement of which would be condition of disbursement; (g) ann.al audits and project monitoring procedures; (h) submission of any subproject for IDA approval as a condition of disbursement. Effectiveness of the Credit supporting the PESAP would also be a condition of effectiveness. 8. Justification. The reforms being pursued under the PE sector adjustment program are comprehensive and wide ranging, involving several key ministries and numerous public enterprises. Through the project, these reforms are to be institutionalized, and a lasting basis for better management of the PE sector established. The main benefits expected from the project are: (a) enhanced Government and PE capabilities for timely and effective implementation of PE reform measures; (b) a solid institutional framework for sustainable PE reforms in the long run; (c) improved efficiency in PE management and government supervision of the PE sector; and (d) technical basis and accompanying analysis for continuing the reform process and designing the next generation of PE adjustment measures. 9. Risks. Following the major gains made already by Niger in carrying out its adjustment program, the project should not entail any inordinate risks. However, there is the potential for a slowing down of the pace of reform, which could occur as the process of reform under the PESAP becomes more demanding on bureaucratic interests and as the reform affects the institutional relationships and relative powers among ministries and public enterprises. The project is designed to minimize these risks by adopting a deliberate approach with firm leadership from the MSE, combined with solid technical analysis and assistance provided under the project to overcome potential resistance and reinforce MSE's leadership position. Moreover, MSE has effectively used similar assistance provided thus far under the PPF. 10. Recommendations. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, DC June 3, 1987  -4- Schedule A NICER PUBLIC ENTERPRISE INSTITUTIONAL DEVELOPMENT PROJECT Estimated Costs Local Foreign Total -------- (USI million) ------ General Support to the USE 0.19 0.98 1.17 Support for Implementation and 6.O1 0.18 9.19 Monitoring of Reforms Support for Development of Additional Measupes 0.00 0.60 9.60 Support for Development of Management Tools 0902 0.27 0.29 Improvement in procurement 0,01 0.09 0.19 Training 9.38 1.50 1.88 Advisory Services for ORTN 0.9W 0.70 0.70 Sub-projects 0.00 0.25 09.2 Base Cost 0.60 4.58 6.18 Physical Contingencies 0.03 0.14 0.17 Price Contingencies 0908 0.23 0.31 Total Project Costs 0.72 4.95 6.67 Financing Plan Local Foroign Total