Senegal - Private Sector Adjustment and Competitiveness Project

 Private sector adjustment and competitiveness project Report No: ; Type: Report/Evaluation Memorandum ; Country: Senegal; Region: Africa; Sector: Macro/Non-Trade; Major Sector: Economic Policy; ProjectID: P002364 The Senegal Private Sector Adjustment and Competitiveness project, supported by Credit 2681-SE for US$40 million equivalent, was approved in FY95. The credit was fully disbursed in two trenches and was closed four months later than scheduled in FY97. Cofinancing was provided by Belgium for BF 100 million and was fully disbursed. The Implementation Completion Report (ICR) was prepared by the Africa Regional Office. A summary of the borrower's report is included in Annex A. No comments are included from the cofinancier. The Private Sector Adjustment and Competitiveness Credit (PSAC) was intended to support the policy reform program of the Government of Senegal to stimulate the supply response of the private sector following the January 1994 devaluation of the CFA franc. The program included measures to: (1) complete the liberalization of domestic and external trade (elimination of price controls, non-tariff barriers, and special agreements granting enterprises specific tax advantages); (2) improve the export and investment incentives regimes (including abolition of prior authorizations, rationalization of existing regimes for temporary imports of. inputs for exports, simplification of export procedures, reducing taxes on the establishment of new enterprises, and authorizing sale of public land to enterprises); (3) eliminate rigidities in the labor market; and (4) reduce maritime transportation costs (removal of monopolies, inclusion of exporters and importers in the management councils dealing with shipping, and introduction of a system of sealed containers to facilitate container traffic between ports). The PSAC achieved its major objectives. All the conditions of the second tranche release were met, except the action plan for revising temporary import regimes which was postponed until a corresponding amendment of the Customs Code was undertaken later under the succeeding Policy Framework Paper (PFP) for 1995-98. Other measures that were not tranche release conditions were also met. The macroeconomic objectives for 1995 were attained. Real GDP rose by 4.8 percent in 1995, 2.8 percentage points above the growth rate for the previous year. The annual inflation rate was 7.8 percent, much lower than the 33.2 percent rate in 1994. Both the fiscal and the external accounts improved. The fiscal deficit was 3.3 percent of GDP in 1995, compared to 5.7 percent of GDP in 1994. Major lessons from this operation include: (i) the involvement of a wide set of stakeholders during the design stage of the project, through the consultations undertaken by the competitiveness review group, helped to reinforce a satisfactory outcome; (ii) the adoption of major reforms upfront helped to strengthen the government’s commitment and ownership of the program; and (iii) formal consultations with the private sector should be ensured to further deepen structural reforms as part of a continuing dialogue. The ICR rates the project outcome as satisfactory, sustainability as likely, Bank performance as satisfactory, and institutional development impact as substantial. The Operations Evaluation Department agrees with these ratings. The ICR is of satisfactory quality, but does not include an Aide Memoire from the completion mission nor any comments from the cofinancier. No audit is planned.