Grenada - Tac

 ICRR 14112 Report Number : ICRR14112 IEG ICR Review Independent Evaluation Group 1. Project Data: Date Posted : 05/15/2013 Country : Grenada Project ID : P101322 Appraisal Actual Project Name : Gd Tac US$M ): Project Costs (US$M): 2.82 2.48 L/C Number : C4400 Loan/ US$M ): Loan /Credit (US$M): 1.86 1.81 Sector Board : Economic Policy US$M): Cofinancing (US$M ): .67 .65 Cofinanciers : European Commission Board Approval Date : 03/13/2008 Closing Date : 10/31/2011 06/30/2012 Sector (s): Central government administration (100%) Theme (s): Trade facilitation and market access (33% - P); Tax policy and administration (33% - P); Export development and competitiveness (17% - S); Other financial and private sector development (17% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Robert Keyfitz Clay Wescott Ismail Arslan IEGPS2 2. Project Objectives and Components: a. Objectives: According to the Project Appraisal Document (PAD): "...the primary objective of the technical assistance operation is to support the Government of Grenada in improving the environment for private sector led growth . This will be achieved, first, through supporting the modernization of key public sector institutions and second, through supporting the implementation of an export strategy ." Specifically, "...the project's development objectives are to: (i) improve the efficiency and effectiveness of Customs, (ii) improve the efficiency of tax administration and decrease transaction costs of paying taxes and consequently increase tax compliance, (iii) modernize investment promotion, and, (iv) enhance the Government's support to the export sector through improving access to trade information and the [sic] strengthening the capacity of the Bureau of Standards to provide conformity assessment and quality assurance ." (PAD, p. 4) Other statements of objectives are consistent with the above . Schedule 1 in the Financing Agreement identifies modernization of public sector institutions and implementation of an export strategy as objectives (i.e. the second sentence of the first paragraph above ). Both the project summary at the front of the PAD and the Results Framework (Annex 3) give the objectives as the four components of the specific objectives : i.e. customs, tax administration, investment promotion and support for the export sector . In all cases, the wording is identical or very similar. For this review, the PAD version will be used . b.Were the project objectives/key associated outcome targets revised during implementation? No c. Components: The project comprised five components, the first four aligned with the four sub -objectives and the fifth related to  project implementation: 1. Customs modernization : modernizing customs administration and improving efficiency and effectiveness through: (a) improving systems and procedures, and strengthening enforcement and risk management in order to reduce time required for clearance and minimize leakage of revenue; (b) upgrading information technology, specifically replacing the current outdated Automated SYstem for CUstoms DAta (ASYCUDA) version with ASYCUDA World; and (c) providing training for management and staff to operate and maintain the new systems and procedures. 2. Tax administration modernization : modernizing tax administration to increase efficiency and effectiveness, reduce transaction costs and increase compliance through : (a) improving the registration process and cleaning up the registry, better detecting noncompliance and improving taxpayer services; (b) strengthening enforcement and control through upgrading information systems, clearing arrears, and improving the audit function; (c) establishing a tax policy planning and monitoring unit; and (d) upgrading information techology (IT) in the Inland Revenue Department (IRD). 3. Modernization of investment promotion : preparing and implementing an investment promotion strategy to be managed by the Grenada Industrial Development Corporation (GIDC), upgrading IT systems including developing a web site, and providing training in new investment promotion procedures . 4. Implementation of an export strategy : establishing a trade information network to provide timely information on market opportunities in priority areas, and building capacity in the Bureau of Standards for certification and testing. 5. Project management : setting up a central Project Coordination Unit (PCU) to provide financial management and procurement support, ensure ownership of the reforms, and promote wider acceptance through public information and outreach to the user community . Restructuring : A type II restructuring in late 2011 shifted resources into customs modernization and dropped or consolidated other activities . The tax administration component was significantly reduced and refocused on (a) improving the organization and management of the IRD, and (b) upgrading the IRD's IT systems. The closing date was also extended from October 2011 to June 2012 and several results indicators were modified . Two, in particular, pertaining to administrative efficiency were dropped and there were minor changes to others.(Restructuring Paper, p. 5) d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The Board approved the project on 3/13/2008, but effectiveness did not occur until ten months later on 1/29/2009. A type II restructuring compensated for the delayed launch by extending the closing date eight months from 10/31/2011 to 6/30/2012. The initial planned cost was US $ 2.82 million -- US$1.86 million from the International Development Association (IDA), US$0.67 million in European Commission co-financing, and the remainder from the Government. However, when the project ran short of funds the Government purchased computer hardware for the customs modernization component outside the project, at a cost of US $ 0.287 million, and then offset this by withholding most of its share of the project financing . Actual expenditure on the project was US$ 2.48 million, $1.81 million from IDA, US$0.65 million from the European Commission, and US$0.02 million from the Government. 3. Relevance of Objectives & Design: a. Relevance of Objectives: The project supported national policy priorities at a time when severe macroeconomic shocks had created a fertile ground for reform, but also imposed tight budget constraints . The main policy areas -- improving the investment climate, and promoting private sector investment and exports -- targeted key structural weaknesses of the Grenadian economy and were central to the Government's economic reform strategy . Further, they were aligned with the Bank’s Country Partnership Strategy (CPS) for the Organization of Eastern Caribbean States (OECS) and meshed with other elements of the Bank's regional portfolio . The CPS at closing (2010-14) continued to support PFM reform, including in the specific areas of improving tax and customs administration, and promoting investment and exports .  Relevance of Objectives: high b. Relevance of Design: The areas of focus -- public sector modernization, investment and export promotion, and private sector development -- were strategic and well chosen . In each case, the design identified key constraints and proposed logical solutions to overcome them through a combination of technology upgrades, process improvements, capacity building and development of new staff competencies . While the design was thoughtful and well targeted on the objectives, two critical flaws undermined the project ’s effectiveness. First, technical requirements were significantly underestimated in two of the components -- the customs modernization component required additional network servers and other hardware for internet connectivity; while tax administration modernization needed more powerful computers to run the new audit module. Since the budget had not allowed for these expenditures and funding was constrained by the IDA envelope, the project could not incur additional expenses and had to be restructured to achieve whatever was possible. Second, after lengthy delays in launching the project followed by delays in procurement, there was not enough time to complete some of the training . In brief, had everything gone as planned the project might have succeeded brilliantly, but there was no margin for error . Results framework: The project laid out a detailed and comprehensive results framework that clearly and insightfully linked actions to objectives . Targets were appropriately ambitious . When the project was restructured, the results framework was changed : “...to better align with project activities and reflect what can realistically be observed and measured at exit .