Togo - Private Enterprise Development Project

Document of The World Bank FOR OFFICIAL USE ONLY CA / "/63? T Report No. 6677-TO STAFF APPRAISAL kEPORT TOGO PRIVATE ENTERPRISE DEVELOPMENT PROJECT June 30, 1987 Regional Projects Department Western Africa Regional Office This docment has a restficted disibuion and may be used by redpienu only in the perfonanmce of their official dufies. Its contents may not otherwise be disclosed without Wodd Bank auth on  CURRENCY EQUIVALENTS Currency Unit CFA Franc (CFAF) US$1.0 = CFAF 300 CFAF 1.0 US$0.0033 SDR 1.0 - US$1.278 GLOSSARY OF ABBREVIATIONS APB - Togolese Bankers' Association (Association Professionnelle des Banques et Assurances au Togo) BCEAO - Central Bank of West African Monetary Union (Banque Centrale des Etats d'Afrique de l'Ouest) BIAO-TOGO - West African International Bank (Banque Internationale pour l'Afrique de l'Ouest - Togo) BTCI - Togolese Bank for Commerce and Industry (Banque Togolaise pour le Commerce et l'Industrie) BTD - Togolese Development Bank (Banque Togolaise de D4veloppement) CCAIT - Chamber of Commerce, Agriculture and Industry (Chambre de Commerce, d'Agriculture et d'Industrie du Togo) CEAO - Western Africa Econvmic Community (Communaute Economique des Etats d'Afrique de l'Ouest) CNCA - National Bank for Agriculture (Caisse Nationale de Credit Agricole) CNPPME - National SME Promotion Agency (Centre National de Promotion de la Fetite et Moyenne Entreprise) CTI - Togolese Investors Agency (Cencre Togolais des Investisseurs) DIVA - Entreprise Assistance Unit (Division d'Assistance aux Entreprises) FPPS - Studies Fund (Fonds de Participation aux Prestations de Service) GIPATO - Togolese Interprofessional Artisans Association (Groupement Interprofessionnel des Artisans Togolais) MPM - Ministry of Planning and Mines (Ministere du Plan et des Mines) MISE - Ministry of Industry and Public Enterprises (Ministere de l'Industrie et des Societes d'Etat) SNI - National Investment Company (Societe Nationale d'Investissement et Fonds Annexes) TOGOPROM - Togolese Promotion and Development Agency (Societe Togolaise de Promotion pour le D6veloppement) SOTED - Togolese Agency for Studies and Development (Societe Togolaise d'Etudes et de Developpement) UMOA - West African Monetary Union (Union Mon6taire des Etats d'Afrique de l'Ouest) UTB - Togolese Banking Union (Union Togolaise de Banques) FISCAL YEAR Government: January 1 to December 31 Banking System: October 1 to September 30  FOR OMCIAL UVS ONLY TOGO PRIVATE ENTERPRISE DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Togo Beneficiaries: Private enterprises in productive sectors other than trade, real estate, and primary agriculture. Private sector support institutions. Amounts SDR 9.0 million (US$ 11.5 million equivalent) Terms: Standard Financ.al Commercial and specialized banks Intermediaries: customarily involved in term lending Proiect The principal objective of the proposed Project Descriptions is to support the Government's policy of fostering a stronger private sector, through the introduction of appropriate policy, institutional and financial measures. It would consist of the following components: 1. Establishment of a new institutional support system to provide promotional and extension services to private enterprises, to be built arounds (a) the newly created Centre Togolais des Investisseurs (CTI), a referral-and-orientation agency, set up and operated by private sector entities including the Togolese Bankers' Association, the Chamber of Commerca, and industry groups, and (b) a separate unit within the Chamber of Commerce (DIVA) to be restructured in order to provide a range of extunsion services to private enterprises. Both entities will focus their activities on SMEs. The project will include technical assistance and limited initial office equipment to both CTI and DIVA. 2. Support to the Government's on-going program of privatization of parastatals through (a) a resident technical advisor to the Ministry of State Enterprises and ad hoc consultancy services to be provided by 3 financial institution with relevant expertise in mergers/acquisitions and enterprise restructuring, and (b) advisory This document has a restricted distribution and may be used by recipients only in the performance of their officW duties. Its contents may not otherwise be disclosed without World Bank authorizaton.  - ii - services to support the establishment of a mutual investment fund to facilitate the financial participation of Togolese investors in the privatization process. 3. A pilot scheme for microenterprise lending, in collaboration with NGOs/PVas. 4. A line of credit to finance fixed investments and working capital of existing enterprises as well as new projects. Of this, one-third would be earmarked for financing small- and medium-scale enterprises (SMEs). The line of credit will be administered by the Central Bank and made available to all sound banking institutions in Togo. This component will also include training on project economic analysis and technical assistance to support a pilot mutual guarantee scheme. Onlending Terms Funds onlent under the line of credit would be at a final rate of 10 percent p.a. (9 percent p.a. for SSEs), to be revised periodically in conjunctior with adjustment of UMOA's interest rates, and with maturities of 2 - 15 years including grace periods of 1 - 3 years. The foreign exchange risk would be borne by the Government against a fee included in the final lending rate. Proiect Benefits The Project will constitute the first and Risks: comprehensive program for the promotion and development of private enterprise in Togo. The integrated package of policy, regulatory, institutional and financial measures is expected to foster a stronger private sector, strengthen existing enterprises and help generate viable new projects. The emphasis on labor-intensive SMEs would support the Government's efforts to alleviate unemployment. The main risks relate to (a) the sustainability over time o; a private sector support system with only minimal financial assistance from the state; (b) the difficulty of generating a significant pipeline of bankable SME subprojects, taking into account the small size of Togo's industrial SME sector and the usual reluctance of the banking system to engage in SHE term financing; and (c) the uncertainties of private sector response to the Government's privatization efforts.  - iii - Estimated Costs .a Local Foreian Total -