Burkina Faso - Private Sector Assistance Project

Doaiut of lhe World Bank FOR OMCIAAL USE ONLY Repwt No. P-5994-BUR IDEKORAJDUM AND NECONKENDATION OF THE PRESIDENT OF THE INTEMATIONAL DEOPENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN THE ADONT EQUIVALENT TO US$7 MILLION BURKINA PASO FOR A PRIVATE SECTOR ASSISTANC PROJECT FEBRUARY 23, 1993 HI 191QF ICH E' CJPl'Y el:,t- tr . r ,t.> FTIi Tvi>t- (P1)i ='>i t,. I PII VATE "SECTY- [;5J :Jj!(D5; ,--7 At *}SirAiXiI, {)hERR 1F Ext. -:r0,4 F'-om:,T 9uI1 Dept AFz,P TIlE r CHA'3C:E AT t;FTEE'Nd F .S V E .-'t A!;E bis docment has a restried dtribution and may be used by recipients only in the performance of ther officl duties. Its contents may not otberwise be disdosed without World Bank authorization  CENC1~Y EALENT Currency Unit CFA Fac (CFAF) US $1.0 - 276.62S CFAF 1 malion . US $3,615 SDR 1.0 US $1.371 ABBRMATIONS ADM CAOYM AGSECAL Agricultural Sector Adjustment Loan BCEAO Banque Centale des Etats de r'Afrique de 1tOuest BFCI Banque pour 10 Financement du Commerce et de l'ndustrie BIB Banque Intemationale du Bukidna BICIA Banque Internaonale pour le Commerce, Ilndustrio et P'Agriculture BND-N Banque Nat!onale de Ddveloppement du Burkina _RCB Bureau de Recouvrement des craces du Burkina CARFO Caisse d'Autonme de Retraite des Foncdonnares CB Commission Bancaire de l'UMOA C3C Conseil BurknabE de Changes CCA Chambre de Commerce de l'Industre et de l'Artsa CCP Compte Cheques Postax CNCA Caisse National. de Credit Agricole CNE Caisse Nationale d'Epargne CNSS Caisse Nadonale de SecuritE Social. EPIC Etabissement Public a Caractre Ilstidel et Commercial EPA Etablissement Public I Caractere Admisratif GOBF Goverment of Burkna Fmo MFP emister des Fmances at fu Pla MICM Ministere de l'Industrio, du Commerce et des Mines ONAC Office Nationa du Commerce Extdrleur PC Pdvatization Commission PID Projet Insitonnel de Ddveloppme SAL Stuctural Adjustment Loan SE Societe dtM SEM Socit d'Economie Mbae SGS SociEtE Gdndrale de Surveillance TSAIP Tranmsport Sector Adjustment and Investmet Program UMOA Union Mondtaire Ouest Africaine MCAL IAR January 1 - Decber 31  FOR OMCIAL USE ONLY IBENAFASO PRFV^ ATE Il= SRAM PltJC himt and aroJec amua IozcRs!fl. Government of Burkina Faso BenefidareE: Government agencies, support institutions and private entepreneurs, banks and financial institutions. Amount. SDR 5.1 million (US$ 7 million equivalent) TA Standard IDA terms, with 40 years maturity OIklt TNot applicable F ngaf Pbn: cmn US$ million) Local Foreign Total IDA 2.170 4.830 7.000 Government 12Q 380 LQ Total 3.790 5.210 9.000 Economic Rate of RetuMn: Not applicable Staff Anpralsal Report: No. 11567-BUR This document has a restricted distribution and may be used by nicipients only in the performance of their offlcial duties. Its contents may not otherwise be dis:losed without World Bank authorizaton.  MEMORANDUM AND RPECOMMENDATION OF THE PRE;IDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO TH EXECUTIVES DIRECTORS ON A PROPOSED CREDIT TO BURKINA FASO FOR A PRIVATE SECTOR ASSMITANCE PROJECT 1. I submit for your approval the following memorandum and recommendaion on a proposed credit to the Goverment of Burkina Faso (GOBF) for SDR 5.1 million (US$ 7 million equivalent), to help finance a technical assistance project in support of the development of the private sector. The country strategy was discussed during by IDA's Board on February 4, 1992. The credit would be on standard IDA terms, with a maturity of 40 years. 2. Aud . In the late 1980s, when Burkina Fass situan worsened as a result of lagging fiscal revenues, growing budgetary constrits and macr-economic imftalances, the Government realized the limits of its past interventionist approach and decided to prepare, with the Bank and IMF assistance, an important economic adjustment program which it started to implement in 1990. This program included far-reaching policy and regulatory reforms paving the way to the development of private initiative in the economic arena. In addition to restoring sound public finance management and macro-economic equilibria, this program aimed at (i) removing the constraints to, and establishing an enabling environment for a rapid and efficient expansion of the private sector; and, (ii) transfering to the private sector financial, commercial and productive enterpd of the public sector. To support the implementation of this policy famework, the Bank approved in June 1991 a first Strcturca Adjustment Loan (SAL). Ihe GOBF has, in addition, sought the Bank assistance to help it, through a recendy approved Public Insttional Development project (PID), strengthen the budgetary and civil service manaement, revise the legal framework relating to activities of the private sector and develop the skils of the civil servans in preparing and implementing appropriate economic policies. Two other projects, in agriculture (Agricultural Sector Adjustment Loan - AGSECAL) and in transport CIransport Sector Adjustment and Investment Program - ISAIP), also recendy approved by the Bank are expected to tackle the specific issues of these sectors. 3. Despite the obstaces that it faced during the last decade, the private sector has proved its vitality: very active in the formal as well as in the informal sector, it has made a significant cotribution to Burkena's economy. Opporunies for fiuther development of private and foreig investment exist, in particular in the areas of mining, agro-industries and services. In the context of the SAL, major policy impediments to the development of the private sector are being addressed: in addition to reforms of trade and pricing policies, improvements have begun to materialize wit respect to the regulatory and legal environment of private enterprises. However, to be in a position to fully take advantage of this reformed environment, private entrepreneurs need assistance to strengthen their technical and managerial capacities and access to term- financing to develop their operations and investments. Recent consultan reviews have shown that neither the existing instittional support nor financial system can provide these services. The Chambre de Commerce. de l'Industrie et de ;'Artisanat - CCIA), the Office National du Commerce Ext_ieur - ONAC and the Caomk Buridnabe des Chargum - CBC, all Government agencies, are the main isi ons in charge of providing assistance to private entrepreneurs in the areas of management, production, marketing and ransportriion. They have been found to be ineffective, occasionally redundant and burdened with tasks of a civil service nature which are usualy carried out by the Government. In the financial system, the resucturn and privatization of the five commercial banks Initiated under the SAL has yet to be completed and overall financial intermediation strengtened through the development of financial instumen  -2- capable of promoting investment financing. 'he GOBF has, therefore, prepared a stuae to strengthen the f cial nd support institions spelled out in a Policy Letter agreed on with IDA (Annex ) aiming at reorganizing, privatizing and strengthening the institonal support framework while pursuing its process of divesdwre from public enterprises and financial instiutions. 4. Ioect Obleclyn. The main objective of this technical assistance project is to help create, as a complement to the GOBF's far-reaching policy and regulatory reform program, institutional and staff capacities capable of providing the support required for a sustainable growth of the private sector. To this end, the project would assist the GOBP in: C') puruing the implementtion of the measures initiated under the SAL, namely, the improvement of the administrative services that it ought to provide to the private sector and the privtzaton of public entprises and financial Institutions; (ii) rgzing the institutional support system to private entrepreneurs by sfrring the activities of civil service natr presSady performed by the existing support institions to the Government and allocating all extension services to the CCIA which would, then, be restructured, privatzed and strengthened; and, (Mii) initiating meaures to strengthen overall fancial intmediation. S. ftWec