Mauritius - Economic Transition (ta) Project

 ICRR 14254 Report Number : ICRR14254 IEG ICR Review Independent Evaluation Group 1. Project Data: Date Posted : 12/19/2013 Country : Mauritius Project ID : P105669 Appraisal Actual Project Name : Mauritius - Economic US$M ): Project Costs (US$M): 18 1.56 Transition (ta) Project L/C Number : L7641 Loan/ US$M ): Loan /Credit (US$M): Sector Board : US$M): Cofinancing (US$M ): Cofinanciers : Board Approval Date : 01/29/2009 Closing Date : 09/30/2014 04/22/2011 Sector (s): Public administration- Industry and trade (41%); Public administration- Energy and mining (19%); Public administration- Water sanitation and flood protection (19%); Banking (16%); Law and justice (5%) Theme (s): Regulation and competition policy (35%); Other financial and private sector development (27%); State-owned enterprise restructuring and privatization (27% - P); Legal institutions for a market economy (8%); Other public sector governance (3%) Prepared by : Reviewed by : ICR Review Group : Coordinator : Robert Keyfitz Iradj A. Alikhani Lourdes N. Pagaran IEGPS2 2. Project Objectives and Components: a. Objectives: Identical Project Development Objectives (PDOs) are given in the Project Appraisal Document (PAD) and the Loan Agreement: “The Project development objective is to improve the performance of selected public enterprises and services that contribute to an improved investment climate in Mauritius ." b.Were the project objectives/key associated outcome targets revised during implementation? No c. Components: The project addressed a subset of key activities to support and help keep up the momentum for reform, through a combination of technical assistance, training, funding of resident advisors, investment in IT systems, and advocacy and outreach . There were three components: (1) Business facilitation (US$5.9 million): (A) Simplify business licensing requirements, including by streamlining registration procedures and strengthening oversight to verify compliance with guidelines . (B) Improve access to commercial justice, including mediation services . (C) Improve land title registration, by supporting transition to new property management system already under development . (D) Extend coverage of credit reference bureau and improve collection, management, and sharing of credit information . (E) Streamline the legal framework for business, and address the legislative backlog of economic laws in need of revision . (2) Public enterprise reform (US$6.0 million): (A) Support the Public Enterprise Reform Unit (PERU) in monitoring and tracking public enterprises, and designing and implementing a comprehensive five year  parastatal reform strategy and action plan . (B) Support sector and enterprise -level reform efforts in public enterprises and line Ministries. (C) Support establishment of a Competition Commission, as specified in the 2007 Competition Act. (3) Utility regulation and public-private partnerships (US$5.0 million): (A) Strengthen the institutional framework for Public-Private Partnerships (PPPs), build capacity in the PPP Unit and identify pipeline of PPP projects . (B) Support the establishment of a Utility Regulatory Authority and develop reporting and monitoring systems . d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The Mauritius Economic Transition Technical Assistance Project (METAP) was approved 1/29/2009 with funding through an US$18 million IBRD Specific Investment Loan (SIL) and became effective on 4/8/2009. The project was intended to run through 9/30/2014, but in March 2011 the Government requested cancellation and the project closed 4/1/2011 after disbursing US$1.56 million, or 8.7% of the loan amount. Although this exceeds the cutoff (5%) for preparing a Note on Cancelled Operations (NCO) instead of an Implementation Completion and Results Report (ICR), management approved an exception to Bank policy because the operation failed to reach significant implementation. 3. Relevance of Objectives & Design: a. Relevance of Objectives: The Bank has been fully committed to supporting the Government ’s economic reform strategy and METAP was broadly in line with the Country Partnership Strategy (CPS, FY07-12) pillars of (a) improving public sector efficiency and (b) improving the investment climate. Notably though, the specific objectives were largely beyond the scope of what the CPS had envisaged -- the country program matrix makes no mention of parastatal reform, PPPs, utility regulation, competition regulation, judicial processing, or credit information . Relevance of objectives: Substantial. b. Relevance of Design: METAP addressed policy issues of central importance to the Government's economic reform program and where the Bank could plausibly provide support . Nevertheless, while the PAD clearly identified objectives and outcomes, it was vague about how to achieve them . Apparently, this was partly intentional as, "some of the Project activities [were] defined in broad terms only to allow for flexible responses to the Government's requests." (PAD, par. 36) However, the design paid inadequate attention to ensuring buy -in, assessing capacity for implementation, prioritizing and sequencing activities, and developing work plans for complex, multi -stage tasks such as parastatal reform . In the first year, the PAD (Annex 8) unrealistically anticipated initiating 39 consulting contracts (at a cost of US$11.7 million); 23 major capacity building activities (US$2.4 million); and 7 purchases of specialized IT equipment, some for organizations that did not yet exist or have needs assessments (US$1.1 million). More attention to details, not least about the Bank's prospective role and value added, might have ensured consistent expectations among stakeholders and improved prospects for successful implementation. Results Framework: The results framework comprised two PDO indicators and a relatively small set of ten intermediate indicators, one for each component of the program, which in some cases did not adequately track project activities. For instance, the single indicator proposed for component 2.A. was "Five year parastatal reform strategy prepared, being implemented and meeting targets ." More specificity about intermediate steps would have facilitated monitoring progress . Relevance of design: Substantial. 4. Achievement of Objectives (Efficacy): Not applicable 5. Efficiency:  ERR )/Financial Rate of Return (FRR) a. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome: Not applicable a. Outcome Rating : Not Applicable 7. Rationale for Risk to Development Outcome Rating: Not applicable a. Risk to Development Outcome Rating : Not Applicable 8. Assessment of Bank Performance: a. Quality at entry: METAP responded to a client request that was substantially relevant to the Government's reform program and the Country Partnership Strategy . However, the design ignored political economy considerations, especially regarding parastatal reform and utilities regulation where the depth of commitment was uncertain and sector-wide approaches were too ambitious . The ICR reports that the Government found the Specific Investment Loan unnecessarily burdensome and difficult to reconcile with its accounting procedures . While it is unclear why this was the case more careful preparation could have ensured that implementation capacity was adequate or found a better way to deliver the Bank's knowledge services . at -Entry Rating : Quality -at- Moderately Satisfactory b. Quality of supervision: Only one aide-memoire and one ISR from the project's active phase are filed in the system, though others were apparently prepared as the NCO refers to a sequence of Moderately Satisfactory ratings . These seem inconsistent with the slow disbursement and the Government's decision not to appoint a key project advisor, but no further information is available about the thinking behind them . The NCO credits the team for proactively responding to Government requests and availing additional sector expertise when needed, though it also observes that capacity constraints in the PIU were not effectively addressed, and that there was a failure to recognize early on that the Government's priorities were changing . Quality of Supervision Rating : Not Applicable Overall Bank Performance Rating : Moderately Satisfactory 9. Assessment of Borrower Performance: a. Government Performance:  Though intimately involved in the preparation, the Government's commitment to implementing the resulting project was limited. Even before requesting cancellation, the Government undertook activities planned for METAP elsewhere outside the project's scope and without using project funds . These included setting up a competition commission, establishing mediation services, improving land titling, clearing the legislative backlog, and developing a credit information bureau . In other areas key procurement actions were delayed without apparent reason, or priorities changed and activities were not pursued at all, including setting up a Utility Regulatory Authority and reforming the parastatal sector . Government Performance Rating Moderately Unsatisfactory b. Implementing Agency Performance: Capacity constraints and a lack of familiarity with the Bank's fiduciary procedures undermined the PERU's ability to provide operational support . Despite awareness of the situation, the issues were not properly addressed. Implementing Agency Performance Rating : Moderately Unsatisfactory Overall Borrower Performance Rating : Moderately Unsatisfactory 10. M&E Design, Implementation, & Utilization: a. M&E Design: The results framework lacked specificity, with no milestones or intermediate indicators for larger and more complex tasks such as parastatal reform, making progress difficult to monitor . In some areas, e.g. establishment of a competition commission and utility regulation authority, indicators called for meeting annual targets, but no targets were specified. Finally, the NCO notes that some indicators derived from Doing Business indicators reached their five year targets in the first year of implementation, suggesting they were not well specified or insufficiently ambitious. b. M&E Implementation: c. M&E Utilization: . M&E Quality Rating : 11. Other Issues a. Safeguards: b. Fiduciary Compliance: c. Unintended Impacts (positive or negative): d. Other: 12. 12. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Not Rated Not Applicable Risk to Development Non-evaluable Not Applicable Outcome : Bank Performance : Moderately Moderately Satisfactory Satisfactory Borrower Performance : Moderately Moderately The Government participated actively Satisfactory Unsatisfactory in the preparation, but had limited commitment to the resulting project. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate. 13. Lessons: The NCO draws some familiar lessons: A strong and sustainable commitment to the reforms is essential; knowledge and lending services need to be packaged appropriately for middle income clients; political economy considerations must be factored in; and implementation arrangements and capacity building are critical. 14. Assessment Recommended? Yes No 15. Comments on Quality of ICR: The NCO is detailed and informative, though it might have analyzed better how aspects of the design and implementation arrangements may have contributed to eventual failure in addition to the inconvenience of the Bank's fiduciary requirements and the impact of electoral politics on the Government's reform priorities . a.Quality of ICR Rating : Satisfactory