Senegal - Petite Cote Tourism Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 9341 PROJECT COMPLETION REPORT SENEGAL PETITE COTE TOURISM PROJECT (LOAN 1412T-SE AND 1413-SE) FEBRUARY 8, 1991 Infrastructure Operations Division Sahelian Department Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.  COUNTRY EXCHANGE RATES Currency CFAF At Appraisal - US$1 = CFAF 245 1978 - 226 1979 - 213 1980 - 211 1981 - 272 1982 - 329 1983 - 381 1984 - 437 1985 - 449 1986 - 346 1987 - 301 1988 - 298 1989 - 319 ABBREVIATIONS AND ACRONYMS BAMH Bureau de l'Architecture et des Monuments Historiques DGT Deligation Generale au Tourisme DUH Direction de l'Urbanisme et de l'Habitat EAPU Economic Analysis and Planning Unit HTC Hotel Training Center MOT Ministere du Tourisme MPC Ministere du Plan et de la Cooperation MTPUT Ministere des Travaux Publics, de l'Urbanisme et des Transports OPT Office des Postes et Tklicommunications SAPCO Societe d'Am.nagement de la Petite Cote SENELEC Societe Senegalaise de Distribution d'Energie Electrique SOFISEDIT Socite Financiere Senegalaise pour le Developpement de l'Industrie et du Tourisme SONEES Societe Nationale d'Exploitation des Eaux dui Senegal UNDP United Nations Development Programme UNESCO United Nations Educational, Scientific and Cultural Organization  FOR OMCIAL USE ONLY THE WORLD BANK Washington, DC. 20.433 U.S A. Olie of 01exoqCt.WaI~& Operataois EvakaItUiN February 8, 1991 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report - Senegal Petite C8te Tourism Project (Loans 1412T-SE and 1413-SE) Attached, for information, is a copy of a report entitled "Project Completion Report - Senegal Petite C8te Tcurism Projrct (Loans 1412T-SE and 1413-SE)", prepared by the Africa Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. 9>2> Attachment This document has a restricted distributioo and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT SENEGAL PETITE COTE TOURISM PROJECT LOANS 1412T & 1413-SE) TABLE OF CONTENTS Page No. Preface ............................................... i Basic Data Sheet ................................... . .. iii Evaluation Summary . . . . ............ . v I. INTRODUCTION ........................................ 1 II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL ... 2 Identification ...................................... 2 Preparation ......... ................................ 3 Appraisal .......................................... . 4 III. THE PROJECT IMPLEMENTATION AND COSTS ............. ... 9 Project Startup 1977/78 ...... ....................... 9 Project Renegotiation 1979/80 ....................... 11 Project Completion 1980-87 ..... ..................... 14 IV. INSTITUTIONAL PERFORMANCE ........................... 18 V. PROJECT REEVALUATION ................................ 18 VI. ROLE OF THE BANK .................................... 20 VII. CONCLUSIONS AND RECOMMENDATIONS . .................... 21 ATTACHMENTS 1. Comments from Ministry of Economy and Finance 2. Comments from Ministry of Internal Affairs This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - 1 - PROJECT COMPLETION REPORT SENEGAL PETITE _OTE TOURISM PROJECT (LOANS 1412T & 1413-SE) PREFACE 1. This is the Project Completion Report (PCR) for the Petite C8te Tourism Project in Senegal, for which a Loan in the amount of US$5.6 million and a third window loan of US$8.0 million were approved on June 7, 1977. The Loan Agreements were substantially amended on May 12, 1980, as explained in the text. US$.3 million was cancelled from Loan 1412T and US$.4 million was cancelled from Loan 1413-SE on October 12, 1989. The loans were closed on June 30, 1987, two years behind the amended schedule. They were fully disbursed and the last disbursement took place on February 25, 1988. 2. The PCR was prepared by the Infrastructure Operations Division of the Sahel Department, Africa Regional Office. It is based on the Staff Appraisal Report, supervision reports, Bank correspondence files, and interviews with staff associated with the Project. 3. The PCR was read by the Operations Evaluation Department (OED). The draft PCR was sent to the Borrower for comments and they are attached (Attachments 1 and 2).  -iii - SENEGAL PET!! COMT TOU SiU PROJECT (Go)n wa. L412 4 PROJECT COMPLETION REPORT se si Data Sheet Kev Prolect Data Appraisal Amndedl Actual or ite_ Exmeatation Expectation Current Estimate Total project coat (USE million) sJ 17.4 17.4 16.5 Cost over/unde.run (3) IBMR Loae *smunt (USE eIII on) 5.6 5.6 6.3 tURD third sindoe (US1 million) 6.9 6.0 7.6 Disbursed 13.1 Cancl led10. Repaid ca of 1/i1/96 (5.2) J Outatonding as of 1/31/96 (6.7) Dote pheylci compenent completed ci0/36/6 12/31/64 12/31/67 ProPortIo*. completed by above date (6) IN 1IN 95.6 dJ ProportIon of time overrun (S) --9 Economi rate of return (S) 11 pars. 6.06) Institutional performance - usatisfactory Cumulative Estimte and Actual Olabureoments item FY73 FY79 FT"6 FMY3 FYM2 FT33 FY34 FY6O FY36 FY37 FYB6 Appr. Estimate 1.5 7.9 12.0 13.6 Actual 6.5 1.6 4.9 7.5 6.8 9.5 ll.4 .11. U11.6 12.3 13.1 Actual as 3 of estimate U 28 41 35 61 79 70 67 9g 96 Other Prolect ODat Itm Oriolnel Plan R gelene / Actual F!rst mention In fllre 6,1371?2 Negotiations $1/76 37 Board approval of the Ioan 11/70 04/26/7 Loan AgrsntwS date 6/7/7? Effectiveness date 91/63/76 *,695/76 Closing Dotes 66/3/61 9"/"6/Is eorroee Reewublic of Seme/al Executing Ageele- D616atien mrale l- so Tourim S ec4h dl'Am6nagsmst de Is Petite Clte (SAPCO) Follow-on project None Fiscal year of 8orroeer Janury 1 to cember 11, a/ Net of taxs. / US530,1C0 9 was cancelled from Loam 1412 and US3396,111M.93 s* cancel led frm Loan 1413 on October 12, 196. I Total of US3S3.9 aillion differet frm amount dlbursd becuam of *xchan adjustments. V/ One project compoent remIne incomplete S/ The project a*e renegotlated In 1979-61  SENEGAL PETITE COTE TOURISM PROJECT (Loan Nos. 1412- and 1413 SE) PROJECT COMPLET.ON REPORT Eve uation Sunm-ary Background 1. By the early 1970s, Senegal had begun to realize the possibilities for growth in the tourism sector. However, tourism potential remained largely untapped. By 1975, the Governuent had taken a number of measures to expand tourism, and as a result, development had been rapid but haphazard. A coordinated effort was envisioned undar the Project to ntrengthen and promote the sector and to develop an integra..ad tourist resort in the Petite Cate. The Project also included the restoration of Goree, an important historic site (paras. 102, 105 and 106). 2. On the basis of a feasibility study, a resort site was selected at Sali Portugal. This component comprised the provision of infrastructure and common facilities for a resort of about 2,500 beds on about 12 lots. A second phase was to be developed later but only after the first phase had proven the market. An implementing organization (SAPCO) was to be established to develop and manage the site (paras. 2.03 and 2.04). 3. The Project also included technical assistance to provide better coordination and plar-ning in the tourism sector, to establish an Economic Analysis and Planning Unit in the Government Tourist agency, and to help prepare and implement a marketing program for the entire country (para. 2.12). Obiectives 4. The Project had two main objectives: (a) to develop an integrated tourist resort as a guide to future development so as to reduce the cost of providing infrastructure and avoid environmental deterioration which would be inevitable if development was haphazard; and (b) to strengthen the management of the tourism sector with appropriate technical assistance. An additional objective was to develop Goree Island, which was of historic importance as a tourist site (para. 2.17) Results 5. The original project concept was that SAPCO would build a pilot hotel on the site which would attract promoters to build additional hotels. This concept was changed in 1979/80 when the project was renegotiated to reallocate the funds for the pilot hotel and other unused items, to provide  - vi - lines of credit to developers wishing to build hotels on the site (para. 3.16). 6. Implementation of the project took several years longer than originally foreseen, because of indecisiveness on the part of the Government. The infrastructure at Sali was completed and eight hotels were built, providing about 1762 beds which is about 30% below the number originally foreseen. The Goree component was successfully completed except for the renovation of an existing hotel which is still unfinished. The institutional accomplishments were mixed; SAPCO was successfully established but coordination and development of sector institutions was less than originally expected (paras. 4.01 and 4.03). Bank Performance 7. Project supervision was thorough at the beginning of the project but with the closure of the Bank's Tourism Department in 1980, responsibility for the project was shifted to various Bank entities, which were not able to provide the frequent and thorough coverage which the project needed (para. 7.05). Borrower Performance 8. The performance of the Borrower was mixe4. Ten years after loan effectiveness, the development of the Sali resort was slow and the Gorse Hotel still remains incomplete. SAPCO's performance was generally satisfactory (paras. 4.01 and 4.04). Sustainability 9. The Sali component appears to be profitable given the expansion in the number of hotels over a several-year period, and the reasonable occupancy rates achieved. From the Government's point of view as a revenue earner, Sali may be deemed successful. It is unfortunate that the restoration of the Goree Hotel is still unfinished (paras. 5.06-5.08). Findinas and Lessons Learned 10. Bank files on the project are incomplete, and steps should be taken in the future to ensure that appropriate records are kept and that supervision missions submit adequate reports on their discussions and findings (para. 6.01). 11. By withdrawing from lenAing to the tourism sector, the Bank lost leverage with the Government's tourism agencies, and fell short in achieving the institution building objectives of the project (para. 7.01). 12. The practicability of the original and revised project concepts of developing a resort as a means of attracting promoters and developers of tourism hotels is questioned. Sali did not develop as envisioned. However, the resort is attractive; it is considered profitable, a good revenue corner from the point of view of taxes and it generated substantial employment (paras. 7.02 and 7.03).  SENEGAL PETITE COTE TOURISM PROJECT (Loans Nos. 1412T and 1413 SE) PROJECT COMPLETION REPORT I. INTRODUCTION 1.01 Senegal has much to offer tourists and visitors. Its tourism assets include a pleasant climate for most of the year, particularly during the European winter, attractive beaches on the Atlantic Ocean, monuments from its colonial past, an interesting cultural life in Dakar, colorful national parks and a rich folklore. It has an excellent international airport at the capital city of Dakar, which is strategically located on the crossroads of air routes service Europe, Africa, and the Americas. 1.02 By the early 1970s, the country had begun to realize the possibilities for growth in the tourism sector. However, tourism potential remained largely untapped. Hotel capacity was c3ncentrated in the Dakar area and to a lesser degree, in other urban centers. Accommodations which totalled about 1,400 beds consisted iaainly of small establishments catering almost exclusively to business traffic. Between 1973-1975, in response to vigorous Government policies to develop facilities for vacation tourism, hotel capacity tripled. Two-thirds cf the additional capacity was in large hotels in Dakar with the remaining in vacation villages on the Petite Cate and Casamance Beach areas to the south. Most of the hotels were of high standard, and luxury establishments accounted for over half of the total capacity. 1.03 The rapid growth in visitor arrivals during 1972-75 was reflected in increased gross foreign exchange receipts which more than tripled during the period. Tourism had become Senegal's third largest source of foreign exchange, aftXr groundnuts and phosphates. About 2,800 Senegalese were employed in the hotel industry and a further 5,500 jobs were indirectly attributed to the sector. Tourism was considered one of the few modern sectora in which Senegal, with few natural resources, could hope to expand in the future. The Government had, however, only recently started to give consideration to the potential benefits of tourism, and the 1973-77 Five Year Plan, for the first time, accorded high priority to the development of this sector. Manifestation of the new priority included: (a) active Government participation in financing hotel construction; (b) the creation in 1971 of a special agency, the Delegation Genirale au Tourisme (DGT) reporting directly to the Prime Minister, to be responsible for planning, promotion and training in the sector; and (c) restructuring of the Investment Code in 1972 to pro-ide a number of incentives to investors.  1.04 As regards public investment in the sector, separate corporations had been established for each of the four existing hotels and four hotel projects in which the Government had an interest. As tourism development continued, however, the number of autonomous hotel companies had diluted Government control of its investmen. and permitted indiscriminate investment whenever foreign funds were available. The Goiertment was now committed to coordinate its existing tourism holdings in the framework of a proposed general reorgenization of public sector investments. Also, it was planning to establish a single hotel holding company which would allow effective control and rational allocation of resources. The precise steps to be taken to improve Government control of its existing tourism portfolio were to be defined during preparation and appraisal of a proposed technical assistance project for restructuring and strengthen .ig of the para-public sector. 1.05 As noted above, the Government had taken a number of measures to expand tourism, and as a result, development had been rapid. However, this grewth had been somewhat haphazard and the Government had committed itself to strengthening management of the sector. Under the proposed project, a coordinated effort was envisioned to strengthen and promote the sector and to develop an integrated tourist resort on the Petite Cote. This area was selected because of its proximity to existing infrastruc.ure particularly to Dakar Airport, and to its natural attractions. 1.06 The project also included the restoration of the sn-'. island of Gorse in Dakar Harbor, which had become an important tourism attraction. From the 17th century on, Goree was one of the hubs of the slave trade from West Africa to the West Indies and the Americas. In the 19th century, it became the staging point for French colonization of Senegal. It boasts a number of architecturally interesting buildings, and had become an invaluable historic landmark and a national cultural symbol. 1.07 The DGT, which oversaw the tourism sector, was responsible for the overall execution of the project. The Societe d'Amenagement et la Petite Cote (SAPCO) was given primary responsibility for implementing the Petite Cote works, while the Direction de l'Urbanisme et de l'Habitat (DUH) within the Ministere des Travaux Publics, de l'Urbanisme et des Transports (MTPUT), was responsible for the restoration of Goree. The Societe Senegalaise de Distribution et Energie Electrique (SENELEC), Offi-e des Postes et Telecommunications (OPT) and Societo Nationale d'Exploitation des Eaux du Senegal (SONEES) were responsible for operating and maintaining the electricity, telecommunications, and water and sewerage systems, respectively. II. PROJECT IDENTIFICATION. PREPARATION AND 4PPRAISAL Identification 2.01 The tourism sector in Senegal was considered important enough by the Bank to justify including a tourism expert on its economic mission to the country in late 1968. However, it was not until 1971 that a reconna'.ssance mission was sent out to examine the sector in more detail. This led to a project 3ntification mission early in 1973 to assess the prospects of a tourism infrastructure project on the Petite Cote, about 80 km  -3- south of Dakar. A feasibility study wis then commissioned to identify a specific site. 2.02 The feasibility study of the Pet'ce CZte was carried out by U.S. consultants with financing from the Uni ed Nations Development Program (UNDP); with the Bank as executing agency. Regional mAanagement took objection to the terms of reference proposed by the Bank's Tourism Department as being too global in approach and without regard to whether any particular item was timely and necessary. It was noted that the terms of reference were "a continuing demonstration of the lack of experience in the Tourism Department staff". The region believed that there was no need, at this early stage, for doing detailed engineering design on the infrastructure elements such as water supply, power, telecommunications, etc. What was needed was the usual feasibility approach, conceptual design and cost estimates, and anything further would be "a waste of time and certainly money'. The terms of reference were subsequently revised. 2.03 The zonsultants recommended that tourism development be carried out at a site along the beach near the village of Sali Portugal, about 4 km north of the town of M'Bour. The physical characteristics of the site and its proximity to M'Bour and existing infrastructure made it a logical first phase for the long term development program of tl'e Petite Cote. TIle development plan proposed two hotel zones, of about 2,500 beds each, on either side of the village of Sali Portugal. The hotels were to be constructed on a landscaped area where administration, commercial, recreational and sports facilities would be located. An area was reserved for extension of the village where some hotel employees were to live. The project was to provide the infr%structure for the development of the first hotel zone and for the village extension. The decision to develop the second zone was to be taker. only after the development of the first zone had proved the market. Preparation 2.04 Ei a result of the feasibility study, a master plan for the Petite Cate was :umpletei in 1974. It identified five areas suitable for internatio.al tourism development and proposed a land use plan on the basis of which the project was prepared. In August 1974, the Government established SAPCO, a mixed company (owned 90% by the Government and 10% by the Societe Financilre Senegalaise pour le Developpement de l'Industrie et du Tourisme (SOFISEDIT) ), for the purpose of preparing and implementing tourism projects on the Petite Cote. 2.05 The Sali land was to be made available by the Government to SAPCO uncier a "convention g;n;rale". The proclamation of a decree initiating procedures for registration of the Sali Portugal land and signing of the "convention gin;rale' with provisions satisfactory to the Bank were conditions of effectiveness. The land was to be leased to SAPCO on a long term basis. Thus SAPCO had the use of the land for developing and leasing purposes under the project. 2.06 The proposed project included the restoration of the island of Goree and its development as a tourist site. A study of the restoration was sponsored by UNESCO in 1975. The study identified a program of works to  -4- preserve its buildings and enhance the island's unique atmosphere. The proposed project also included studies for the building of a museum of black civilization, which the President of Senegal had asked the Bank to finance. Appraisal 2.07 The project was appraised in November 1975 by a five/man team. The Issues Paper was distributed on January 8, 1976; unfortunately there is no copy in the files. The Decision Meeting was held on January 20, 1976. The main components of the project were accepted with the exception of studies for the museum. Due to uncertainty about the scope of the museum and the failure of the Governrient to provide the promised preliminary feasibility study, it was decided not to include the museum studies in the project. Total project costs were estimated at US$18.0 millior, net of taxes. A loan of US$14.3 million was recommended by the Tourism Department, which would finance 100% of foreign costs and 25% of local costs. 2.08 The meeting agreed that the appraisal report should go into detail on the social impact of the project and measures the Government would take to ensure that this impact would be positive. There were three areas of immediate concern. The village of Sali Portugal with 300 to 400 inhabitants would be extended and provided with site and setvice facilities under the project, while the second village of 60 people would be mo%ed only if there was a second stage project. A number of beach bungalows, mostly owned by expatriates, would have to be moved. They had been built with the permission of local authorities on the understanding that they would have to be removed at the owne:'s expense if and when the Government needed the land. Lastly, the project would occupy some agricultural land but this was expected to be compensated for by provision of irrigation on about 20 ha. The irrigated land would be used to supply the reaort with fruit and vegetables and would provide employment for some -f the villagers. 2.09 The mission identified four key issues in tne sector: inadequate planning capability in the DGT; lack of coordination and supervision by the Government of its hotel investments; & tendency by the Government to approve new tourism investments without adequate attention to their need and economic merit; and a possible shortage of long-term capital in the sector. The Government had agreed to set up a working party to look into sector coordination. A Bank post-appraisal mission was to visit Senegal to investigate this sector issue further and to make recotmendations to be discussed with the Government before negotiations, so that a program of sector coordination could be discussed at negotiations. The meeting agreed to recomnend retroactive financing of up to US$300,000 so that final engineering and design and some high priority infrastructure could be started at Sa.i Partugal immediately. It was also agreed that the project would include technical assistance for tourism sector planning and coordination. 2.10 Regiona' management had two comments on the Decision Memorandum. First, it suggested that the Bank should stay clear of the museum, even if the Government did provide the Bank with the requested information, or applied pressure to get it involved. Secondly, it opposed including part of the local costs of the project in the proposed loan. Attempts were made by the Bank to interest co-lenders in the projec- but with no success. The Government "was disappointed but resigned to the decision by the Bank not to  finance 252 of local costs", as at the time it was experiencing some economic difficulties. 2.11 During the appraisal, the Bank staff became aware of restrictions on charter flights to Senegal from France, which was probably the greatest potential source of tourists. These restrictions were apparently agreed to by Senegal in connection with its involvement in Air Afrique and UTA. The SAR stated that the commercial success of the Sali Portugal Project would be enhanced if tour operators from all originating countries could use charter flights to bring tourists to Senegal. At the time, only charter flights from Switzerland and Germany were allowed on a regular basis. At negotiations, the government was asked to broaden the use of charter flights. 2.12 The post-appraisal mission of May 1976 was primarily for the purpose of agreeing with the DGT and Ministries of Planning and Cooperation (MPC), and Finance and Economic Affairs on a program for improving sectorial coordination (para. 2.09). In its analysis of the tourism sector, the appraisal mission concluded that the weakness of the sector stemmed from: (a) DGT's inadeque.te capacity to plan, carry out appraisals of tourism projects and define sectorial policies; (b) lack of coordination between DGT and SOFISEDIT, the main source of long-term credit to hotels; and (c) proliferation of autonomous Government owned hotel companies. The mission discussed the creation of an Economic Analysis and Planning Unit (EAPU) in DGT, the setting up of a working party on tourism and an outline for reorganizing Government investment in the sector with representatives oL DGT and the Ministries of Planning and Finances. 2.13 About 15 months were needed following appraisal to complete preparation of the project and for the Government to meet the conditions of negotiations which required it to take action on a large number of issues to improve coordination in the sector. Also, specific legal steps had to be taken to ensure that the Government owned land at Sali would be made available on suitable terms and that the various infrastructure services would be provided by the respective Government agencies involved. All this required considerable effort on the part of both the Bank and ihe Government. 2.14 Negotiations were held in Washington early in March 1977. The Senegalese delegation consisted of nine officials who repiesented most of the many agencies involved in the project. There is no record on files of the negotiations, but judging by the invitation to negotiation and the SAR, the following were the principal matters agreed on: (a) to complete registration of Sali Portugal's land before November 1, 1977, and to lease it to SAPCO before January 1, 1978; (b) to prepare a critical path network of all project works before April 1, 1978, and to review it every six months with the Bank;  -6- (c) to suspend authorization of any hotel investment in sites on the Petite Cate other than Sali Portugal until completion of the accommodations buildup under the program, not to grant hotel investors more favorable incentives than those granted to Sali Portugal and to set lease rents for hotel sites elsewhere in Senegal at levels comparable to those of Sali Portugal; (d) to take steps to ensure that a minimum of 1,500 beds be in operation by 1985; (e) to use its best efforts to permit before June 30, 1980, air charter traffic to Dakar to the extent needed by full scale operations at Sali Portugal (para. 2.11); and (f) not to grant incentives to any new hotel development which would jeopardize the financial viability of the Sali component. 2.15 The Board approved two loans for the project total US$13.6 million on April 26, 1977. The first was a Bank loan for US$5.6 million and the second was a "third window' loan for US$8.0 million. The loans financed the foreign exchange cost of the project (US$12.3 million) as well as the estimated interest during construction (US$1.3 million). Regional management made an effort to persuade senior management to include the financing of some local costs but the request was turned down. The loans included US$300,000 in retroactive financing to cover foreign costs of SAPCO's expatriate staff after February 1, 1975, as well as of detailed pl'anning and engineering studies and some preliminary infrastructure (e.g., a borehole and landscaping) expected to be undertaken before signing. 2.16 The Loan Agreements were signed on June 7, 1977, but they did not become effectivo until January 5, 1978, because of the time required by the Government to meet some conditions, including: (a) enactment of Sali Portugal's development plan; (b) the transfer of the resort site to SAPCO; (c) selection of suitable management for the pilot hotel and this condition was later dropped when it became evident serious discussions with a potential manager were underway; (d) signing of inter-agency agreements; (e) an increase in SAPCO's subscribed equity and the payout of the first tranche; (f) signing of a subsidiary loan agreement between SAPCO and the Government; and (g) approval of a lease arrangement acceptable to the Bank for the Sali site. Conditions of disbursement were:  -7- (11 Bank approval of a marketing program for the Government- owned hotel on Goree and appointment of an architect in charge of the Gorie works; and (ii) conclusion of a subsidiary loan agreement between OPT and the Government for telephone service to the resort site. 2.17 The project had two main objectives: (a) to develop an integrated touriFt resort as a guide to future development, so as to reduce the cost of providing infrastructure and avoid onvironmental deterioration which would be inevitable if development was haphazard; and (b) to strengthen the management of the tourism sector with appropriate technical assistance. An additional objective was to develop Goree Island, which was of historic importance as a tourist site. 2.18 The project consisted of three major components: (a) infrastructure and common facilities for development of the first hotel zone at Sali Portugal; (b) renovation of Goree Island; and (c) project administration, technical assistance and studies. 2.19 The Sali Portugal component included: (a) an access road linking the project site to the Dakar H'Bour highway, plus secondary roads and streets in the project areas, parking facilities and public street lighting; (b) a sewerage system to service the resort and the village extension, consisting of a collection system, pumping station and stabilization ponds, as well as a stormwater drainage system; (c) a water supply network to pump water from two boreholes to the resort and four villages nearby; (d) a power system linked to M'Bour to supply the resort and the village of Sali Portugal, a standby power system to provide emergency service; (e) a telecommunications system in the resort linked to the telephone exchange in M'Bour; (f) extensive landscaping and reforestation; (g) a sanitary landfill for collecting and treating solid waste; (h) provision of common facilities including commercial, sports and recreational facilities and buildings for maintenance,  - 8 - administration (including post office, police and first aid services) and for the use of SAPCO staff and equipment; (1) construction of a 250 bed, three-star category pilot hotel, intended to demonstrate to the private sector the potential for hotel development and to set architectural and design standards for other hotels in the Petite Cote development; (j) an irrigated area of 20 ha which will use the effluent of the stabilization ponds to grow fruit and vegetables for the resort and will provide employment for about 40 families; and (k) a new 500 line telephone exchange at M'Bour. 2.20 The Goree component included: (a) upgrading the street system and public aress; (b) rehabilitation of the harbor to accommodate 10 to 15 pleasure boats fitted for deep sea fishing; and (c) extension and renovation of the Government-owned Hotel Relais de 1*Espadon. 2.21 The technical assistance component included: (a) project administration to cover the foreign exchange cost of personnel, equipment and materials required for SAPCO's operations during project implementationi; and to help SAPCO finance a campaign for promotion of hotel investments; (b) technical assistance to support DGT in establishment of the proposed EAPU, including funds for four fellowships to allow overseas training of counterpart staff; to help preparation and implementation of a marketing program for the entire country, including proposals for prumoting the Hotel Relais de l'Espadon; and to design and develop appropriate training programs for the Hotel Training Center (HTC) at Dakar, including nine fellowships for overseas training of counterpart staff; and (c) consulting services to monitor the socio-economic impact of tourism development on the Petite Cote and to prepare a Second Tourism Project. 2.22 The project was expected to be completed by June 30, 1980. This date was subsequently revised to December 31, 1984 when the project was amended (para. 3.20).  - 9 - '11. THE PROJECT IMPLEMENTATION AND COSTS Prolect Startup 1977/78 3.01 Bank supervision missions visited Senegal in May, July, September, and November 1977, to review progress made by SAPCO and the Government in fulfilling the conditions of effectiveness and in implementing the project. Satisfactory progress was noted in fulfilling these conditions, although some delay in paying a quarter of SAPCO's equity (CFRF 87.5 million) was anticipated "because of the Governme-t's tight fiscal situation" 3.02 The consulting firm, which had conducted the feasibility study of the Sali component (para. 2.02), was selected to do the final design of the resort site and mobilized early in 1977. Local contractors for landscaping the Sali site and drilling a borehole had been selected. Preliminary drawings of the common facilities were submitted by SAPCO at the end of September 1977. The design of the roads and the water and sewerage system had been completed and by the end of November 1977, all bidding documents for the infrastructure facilities were ready for review by SAPCO and the public utility companies. The only problem to emerge was that OPT indicated that it could not install the new telephone exchange at M'Bour until 1980. It proposed to make a temporary connection to Thies where a cable already existed to connect 70 to 80 new lines for the Sali site. 3.03 SAPCO had started to negotiate a contract for the management of the common facilities at Sali with Club Mediterranee (Club Med) which was already operating a beach village at Casamance. SAPCO and Club Med's technical staff had already held discussions on the program and layout of the common facilities. Also, since February 1977, SAPCO had been discussing the management of the - t hotel with Club Med. By September, the two parties had reached an -eement that: (a) Club Med would finance a 600 bed village at Sali Portugal with its own banks and perhaps IFC and would not ask for financing of the pilot hotel from SAPCO; (b) Club Med would be associatk I with the planning and management of the common facilities, and since successful operations of the comon facilities would require the operation of about 1,200 beds, SAPCO would step up its investmen promotion efforts. To increase the interest of investors in tlh Petite Cote, SAPCO started to explore the possibility of using loan funds allocated for the construction of the pilot hotel (US$4.0 million) instead of subloans to promoters to assist in 'tnancing several hotel projects. 3.04 Concerning the Goree component, the Government agreed to hire an architect/renovator recommended by UNESCO for the positicn within DUH. He was to be supervised by an expert from the French Monuments Historiques. In the fall of 1977, the Government changed the arrangements for the Gorse component. It would no longer be implemented by DUH, but by a new Bureau de l'Architecture et des Monuments Historiques (BAMH) reporting directly to the Minister of Public Works. The advantage of the new arrangement was that the new unit would report directly to the Minister and devoted only to the Gor;e  - 10 - renovation. The disadvantage was that the new directorate had little experience in project work. On balance, since the new work would be supervised by UNESCO, the Bank agreed to the Government's proposal. 3.05 As regards the technical assistance component, the Bank had earlier reviewed the proposed terms of reference for the EAPU which included the services of three expatriate consultants an economist, a financial analyst and a marketing specialist who would be ised for training counterparts. Originally, the EAPU was to have included a plannerlarchitect but a marketing specialist was substituted in order to combine the planning and marketing function under the aegis of the EAPU. Three proposals were received by DGT for this work, one was considered technically acceptable but DGT considered it too costly, and proposed instead to hire individual oxperts. The Bank concurred but urged the DGT to avoid further delays in setting up EAPU. 3.06 The loans were made effective on January 5, 1978, three months after the date originally scheduled. The Bank sent out three supervision missions during 1978. As regards the Sali component, design of the Portugal infrastructure facilities proceeded satisfactorily and SAPCO called for bids in May for this work. The final design and cost estimate of the common facilities was 701 higher than originally estimated. The consultants were requested to review the design, correct certain deficiencies and reduce investment costs. 3.07 The Government presented the May 1978 mission with a formal proposal to reallocate the funds for the pilot hotel. It suggested that this would enable SAPCO to provide equity participation in several hotel projects, thereby stimulating hotel investments and expediting tourism development at Sali. SAPCO's investment promotion campaign in Europe has aroused the interest of several well known groups. SAPCO expected that by the end of 1978, two companies would formAlly commit themselves of invest; both were interested in SAPCO equity participation. At about this time, negotiations with Club Med apparently were broken off. The supervision reports give no explanation for this development although negotiations had proceeded to the stage of discussing the terms of a contract. The files do indicate, however, that Club Med linked any discussion of its proposed 600 bed vacation village to its participation in the 'launching' of the resort, and in particular, in the management of the common facilities. In fact, Club Med made it clear that it would go ahead with the village only if it could participate in the planning and management of the common facilities. Club Med also insisted that about 1,200 beds should be in operation in Sali Portugal to make the common facilities financially viable. 3.08 BAHR was preparing final design and bidding documents for the Gorse component with the assistance of the UNESCO architect restorer. A contract for the renovation of the Relais de l'Espadon, as well as upgrading of Goree's public spaces and harbor, was to be awarded by the end of 1979. Construction was expected to take about eight to ten months. The Bank and DGT agreed that the selection of a management company to operate the hotel was not urgent, in order to allow the latter to participate in designing the physical facilities and in preparing specifications for hotel furniture and equipment.  - 11 - 3.09 During project appraisal, it was proposed that the HTC in Dakar would be financed under a credit for the Second Educhtion Project. Construction of the center was expected to be completed and operations started during 1979. Since the UNDP was unable to finance the required technical assistance as had been expected, the Government agreed that the loan for the project should include 120 man-months of technical assistance for training in the major departments of the HTC, as well as nine fellowships for overseas training of counterpart staff. Late in 1978, it was learned that delays within the Government in resolving the problem of the architect's contract for the HTC had continued for well over two years and that final drawings would not be completed until mid-1979. Because of these delays and other reasons, estimated construction costs had increased from US$1.0 million at appraisal to almost US$3.0 million. Government was not able to finance the overrun, nor could the Association. Furthermore, as training funds in the education project credit were urgently needed for other works now underway, the Education Department proposed to drop the HTC from its project and had suggested that the government seek other external financing for the HTC. Various options were considered as to how Senegal should proceed to assure an adequate flow of trained hotel staff, but no further action on this matter was ever taken under the project. Prolect Renegotiation 1979180 3.10 According to the April 1979 supervision report, the Sali Portugal component was progressing satisfactorily. Most infrastructure was under construction and construction of the common facilities was to start in the fall after receipt of the ongoing call for bids. As regards the change in the concept of hotel financing, the mission recommended that the Bank should 'begin the procedure to effect appropriate amendment to the Loan Agr- ment". This amendment should also provide for the reallocation of: (a) the funds for the construction of the new telephone exchange at M'Bour which was no longer needed because of the establishment of long line telephone connections serving Sali Portugal via the city of Thies; and (b) the funds earmarked for the preparation of a Second Tourism Project and for technical assistance for hotel training which, due to the cancellation of these subcomponents, would otherwise go unused. These funds, which totalled approximately US$1.3 million, could also be redirected to the financing of private hotels on the Petite Cote. As a result of SAPCO's extensive investment promotion campaign, several hotel investors showed interest in developing accommodations in the Sali Area. Thus far, two investors had made firm commitments, each for the construction of a 100-room hotel. Both investors were interested in obtaining equity and loan financing from SAPCO. 3.11 As regards the Goree component, progress was also considered satisfactory. Architectural design for the Relais de l'Espadon was completed and the engineering studies and bidding documents for all construction works were expected to be finished later in the year.  - 12 - 3.12 Concerning technical assistance, EAPU had been established in the DGT within its directorate of planning and studies. EAPU was in charge of processing hotel investment projects and defining the country's tourism development policies. It was also assisting DGT in selecting the management company for the Relais de l'Espadon and in carrying out the study on tourism marketing for the hotel. 3.13 In a Back-to-Office Report dated June 6, 1979, the supervision mission elaborated on its earlier proposal to modify the Loan Agreement to permit SAPCO to use the funds from the pilot hotel for several hotel projects in Sali Portugal, as discussed in para. 3.10. Objections were raised by the IDF Division to the arrangement proposed by the Tourism Department allowing SAPCO to make loans, in addition to equity participation. It believed that it was unlikely that the proposed advance on current account would be repaid until all other loans had been totally repaid. Either type of financing (equity or loans) would "inevitably result in turning SAPCO into a financial institution. This was opposed for the following reasons: (a) Senegal was already served by a large number of financial institutions and there was no justification for creating a new one; (b) as a financial institution, SAPCO's project appraisal and supervision capabilities would have to be substantially strengthened; and (c) SAPCO would be competing directly with SOFISEDIT." The September 1979 mission, the first from Urban Projects following the abolition of the Bank's Tourism Department, was instructed to study the issue. It included a representative of the IDF Division. 3.14 The mission reported that for the Sali component, major infrastructure works were nearing completion and areas designated for hotel construction should be ready early in 1980. For the common areas, bids had been evaluated, but the mission requested SAPCO to eliminate from the bids all decorations and furniture, leaving these elements to the discretion (and cost) of individuals renting space. For Goree, renovation bids would be called shortly for the management of the hotel and bidding documents were completed for the port works. Engineering studies and bidding documents for all remaining civil works were being completed. 3.15 The mission noted that by letter of August 19, 1979, MPC had requested that about US$4.8 million originally set aside for the construction of a pilot hotel be used to participate in the financing of hotels constructed by private investors on the Petite Cote. The mission recommended that the Bank initiate procedures to amend the Loan Agreements. It also noted that the Minister of Tourism requested a reallocation in the use of funds for technical assistance and studies to permit short term consultant assignments. These studies would be carried out by the EAPU. These remaining funds would be used to extend technical assistance to SAPCO and strengthen SOFISEDIT to improve the financial appraisal of hotel projects. In view of the above, the mission recommended that the amendment to the Loan Agreement should also provide for the reallocation of funds, as noted in  - 13 - para. 3.10, which could also be redirected to the financing of private hotels on the Petite Cote. 3.16 The IDF Division representative on the mission pointed out that SAPCO would never be in a position to repay the loans it obtained from the Bank and the Government since moa. of its activities, land development and promotion were .lot cash generating. Thus, the project could claim a positive economic contribution for Senegal only if hotels were developed on the site. He noted that it was essential to provide adequate incentives to hotel promoters. He concluded that the provision of equity and long-term loans would be more attractive than the original pilot hotel provided for under the project. Any required assistance to SOFISEDIT would be included in the Bank's proposed third line of credit to SOFISEDIT which was to be appraised shortly. 3.17 Amendments to the project, plus some minor changes, were approved by the Bank in January 1980 and renegotiated in Washington from January 25 to February 1. At negotiations, the DFC Division again raised the problem of SAPCO taking equity participation in the hotel projects with loan funds. The Senegalese claimed that SAPCO's shares would be bought back by the hotel investors. But the DFC Division still believed that this was not feasible and that it was "almost certain that the Government loan to SAPCO will have to be converted into a grant further down the road". DFC noted that "the patchup work done at the negotiations should ease somewhat the administration of this complex project. Our division's contribution will remain marginal but our responsibility will be essential in the proper appraisal of the hotel subprojects since SOFISEDIT' role in the financing plan of these hotels will be important, both under our regular lines of credit and this new facility". 3.18 The revised project was presented to the Board in a President's Memorandum dated April 17, 1980, on a no objection basis. The memorandum noted that the modifications in the description of the project were "in accordance with a request from the Government to reallocate US$3.5 million originally intended for construction of a pilot hotel and to provide instead long-term financing to private investors for hotel construction on the same site'. Some 'minor changes in the project description were also agreed on to reflect the present status of project implementation and changed circumstances. None of the proposed modifications represented a departure from the original objectives of the project ... on the contrary, they would make it possible to fulfill the objectives faster and more efficiently. In particular, the provision of long-term financing for hotel construction would accelerate hotel development of the resort area at a time when infrastructure works are nearing completion, preventing any drop in the project's overall rate of return, which would otherwise result from delayed occupation of the site". 3.19 Other relatively minor modifications were made to the project description to reflect the status of project implementation at the time. They consisted essentially of the following deletions: (a) the construction, equipping and installation of a new telephone and telex exchange at M'Bour because the Government had already used its own resources to finance the extension of the existing exchange;  - 14 - (b) the construction of a sanitary landfill for treating refuse and provision of collecting trucks and trailers since refuse was collected by the Municipality of M'Bour; and (c) studies and the design of training courses and equipment for a tourism center in Dakar since these components were being handled under other arrangements. 3.20 The project description was accordingly amended. Appropriate adjustments made in the allocation of proceeds under the two Bank loans and several provisions of the Loan Agreements were also amended. The Project Agreement between the Bank, SAPCO and OPC was cancelled. All of this was reflected in a letter of amendment sent to the Borrower on May 12, 1980. The original project completion date of June 30, 1980, was extended to December 31, 1984. Prolect Completion 1980-87 3.21 The renegotiations were completed just in time to assist the promoter of the Palm Beach Hotel, the first hotel to be built at Sali, wh.ch was running into financial problems. The hotel was designed to four star standard with a capacity of 200 rooms, however, only 100 rooms were being built in the first phase. A supervision mission reported that the promoter was well experienced in the construction of hotels in Africa but "a firm reading of his financial position was not possible: as there was uncertainty over the promoters' effective contribution to the project". The hotel was scheduled to be completed in time for the 1980/81 winter season. 3.22 According to a memorandum dated July 11, 1980, discussions in Senegal by a Bank official indicated that the project faced "some severe problems requiring the immediate attention of Bank staff". This included: (a) dissatisfaction with the performance of the consultant supervising the water and sewerage systems and lack of experience of the contractor; (b) the contractor who was building the recreation center was encountering financial difficulties; (c) slow progress in resolving the financial difficulties of the Palm Beach Hotel; (d) the contract for the works at Goree included items that bore little resemblance to the project description; and (e) the arrangements for the renovation and management of the Relais de l'Espadon were proceeding very slowly. The official concluded that "it is imperative and urgent to undertake a full and thorough supervision of the project ... before the situation becomes uncontrollable". In regards to item (d), the Bank cabled the Government that it would not approve the contract until it had been examined by a forthcoming supervision mission.  - 15 - 3.23 A supervision mission was sent out in November 1980. It reported that all infrastructure work at Sali had been completed and work on the common lacilities was under way. The Palm Beach Hotel was expected to be opened in December. An extension of 100 additional rooms was envisaged by the promoter. Construction of two new hotels was expected to begin in 1981 although the mobilization of private funds could delay execution. Corrective measures concerning landscaping had been taken and arrangements were discussed for better maintenance of the grounds. The master plan for Sali made provision for ten other hotel sites. As of October 31, 1980, possible projects had been discussed with promoters for seven of these sites. A site had also been reserved for Novotel which had agreed in principle, during negotiations, to build a hotel in Dakar, and to also construct and manage a hotel at Sali. 3.24 Agreement was reached on the financing arrangements for the Gor;e renovation. Club Med had been designated as manager of the Relais de l'Espadon but no contract had been signed. The mission withheld approval of the improvement works until remodelling costs of the hotel were available. 3.25 With regard to the technical assistance, the report noted that EAPU was to be reorganized and strengthened and an expatriate technical assistant was to be in charge of economic and financial analysis until December 1981. The inputs for architecture, engineering and promotion would be provided when required by external consultants. EAPU had made considerable progress in statistical work which was essential to understanding the economic impact of the tourism sector and as a guide to policy formation. However, it had only limited impact on the evaluation of specific hotel subprojects. The Unit Chief, provided by LBI, was the only full time expatriate technical advisor. Assistance on financial analysis had been intermittently provided by the advisor to SAPCO. Architecture and planning assistance had been obtained on an ad hoc basis. No assistance had yet been received for marketing research. The counterpart positions were fully manned with four competent but inexperienced staff covering economics, financial analysis, architectureiplanning and market analysis. 3.26 As far as marketing was concerned, it was agreed that the counterpart should be transferred from DGT's Directorate of Studies and Planning in which EAPU was located, to its Directorate of Promotion and Tourism Service within the same ministry. Technical assistance for marketing studies would be sought as soon as possible. This was all the more important because the 1981 budget would include a 3% tourist tax, the yield on which was to be devoted to market promotion programs. For the effective use of such funds, informed analysis of market potential was essential. 3.27 The next supervision was in May 1981, and was sent out by the Western Africa Urban Division. At Sali, all remaining construction was expected to be completed in December 1981. This work was expected to overrun the cost estimate by US$750,000. As far as the hotels were concerned, the ground had been cleared for the extension of the Palm Beach Hotel. It was expected that construction of the Savana Komba (Bok Waar) Hotel would begin before the end of 1981 and construction of two more hotels, for which preliminary designs were complete, could also begin by early 1982.  - 16 - 3.28 Regarding the Goree component, previous difficulties concerning the design of a package which would remain within the project budget of CFAF 450 million, had been resolved. The mission approved the contract for the renovation of the port and streets. Club Med's estimate of the cost to renovate the hotel was almost double the budget and necessitated some reduction in the scope of the work, which was agreed. A contract with Club Med to manage the hotel was still under discussion (in July 1981, the Government decided to drop Club Med because of opposition from Gorse inhabitants). Agreement was also reacned on the scope of the remaining tasks to be done by EAPU, and works to be completed with the undisbursed amount allocated for Goree. 3.29 The December 1981 mission found little change. Approval of the extension of the Palm Beach Hotel at Sali had been held up pending receipt of additional information on financing. The Goree renovation work to the port and harbor had been completed but the scope of the renovation to the hotel was still under discussion. The technical assistance work of EAPU was gradually coming to an end. 3.30 By July 1982, the financing of the Novotel and Palm Beach extension at Sali was in the process of approval. Preparation of the Savana Koumba (Bok Waar) hotel scheme was nearing completion. In December 1981, the Government designated SOFITEL as manager of the Goree Hotel. The mission urged the Government to consider a phased program for renovating the hotel which would respond to the counterpart funding restraint, but at the same time provide better service to the majority of the visitors to Gorse (74,000 annually). 3.31 The March 1983 mission found that the Palm Beach Hotel extension had been completed and would begin operations in the fall. A loan for Novotel had been approved and documenta_s.ion for the Savana Koumba Hotel was under review. A contractor had been selected for the renovation of the Relais de l'Espadon. By December 1983, four hotel operations, including a second extension of the Palm Beach Hotel had besn funded under the project (totalling about 1,000 beds) and three hotels were opened. This committed about two-thirds of the line of credit. Financing for a fifth hotel was under consideration. The renovation of the Gorie Hotel had been redefined, resulting in an estimated financing gap of US$400,000. 3.32 In mid-1984, the Bank was informed that two additional hotel projects at Sali would be submitted for financing under the line of credit component. Work on the Goree Hotel had been suspended pending resolution of disagreements between the various parties involved. These matters had still not been resolved by the time of the November 1984 mission. 3.33 By April 1985, there had been no further financial comnitments for hotels at Sali, although a new hotel had been built without Bank financing. The disagreements on the remodelling of the Relais de l'Espadon had been resolved, but work was slow in getting under way. 3.34 In early 1987, a mission carried out a detailed review of progress and costs to complete the Relais de l'Espadon. It concluded that the work could not be finished by the latest Closing Date of June 30, 1987, and that its cost under current design could not be recovered through the operation  - 17 - of tio hctel. The mission recommended that the CGovernment seek an operator who wcald rent the hotel in its present condition. It proposed that the operator would redesign the project, finance its completion and subsequently operate the hotel at his own risk. Funds remaining in the category would be used to help finance the above arrangement. In June 1987, a preliminary agreement was signed between the Government and the Savana chain whereby the latter undertook to rent the hotel, complete the remodelling works and ope-tate it at its own risk. The Bank approved this arrangement. 3.35 The mission proposed that most of the remaining funds in the line of credit for hotel construction be used to finance the recently completed Savana Saly H.. rel, a 100-room four star facility. While financing a completed hotel was not usual practice, the mission concluded it made sense in this case to use the remaining funds for this purpose. The mission noted, that financially, the Savana Saly Hotel was only marginally viable. It was "actually neither better nor worse than other similar hotel subprojects already financed under ... the project, none of which had up to now (mid- 1987) proven profitable. However, Savana Saly is already constructed and is in line with Senegal's policy in the tourism sector .*.." The mission also recommended that US$450,000 of project funds be used to help cover expenses of a donors' meeting to consider tourism projects. 3.36 According to the report of a consultant engaged to review the project finances in late 1988, four of the hotels at Sali received subloans under the project as shown below, along with the global cost of the fixed assets of three hotels. Subloans Global Disbursed Not Disbursed Cost ----------- in CFAF Million----- Palm Beach 3719 357 Novotel 1635 160 - Savana Koumba 1442 225 20 Savana Saly n.a. 90 60 As indicated above, the amount of the subloans relative to the global costs of the first three hotels was about 10% or less. 3.37 The Palm Beech, Novetel and Savana Koumba together had a total of 480 rooms. Taking the globa, and fixed asset cost of these three hotels at 5,796 CIAF million, that gives a per room cost of about CFAF 12 million or about US$43,000, assuming a rate of exchange of 276 CFAF to the US dollar, the average rate of the 1980-83 prices during the period when the hotels were 1built. While perhaps on the high side, the cost per room is not considered unreasonable for Sali. 3.38 Disbursements were oririnally to have been completed in 1981, but when the project was renegotiated, the Closing Date was extended to June 30, 1985. The Closing Date was extended twice more to June 30, 1987. Disbursements were slow throughout the executing period because of the slow progress of the work at Goree, and in finding promoters to build hotels at Sali. Funds were held back for the renovation of the Goree Hotel but as this  - 18 - work was not done, about US$0.7 million was left undisbursed and were eventually cancelled. Project finances benefitted from the strong US dollar in relation to the CFAF during much of the project period. IV. INSTITUTIONAL PERFORMANCE 4.01 The performance of the Borrower was mixed. The Government moved promptly to establish the basis of the projeet, provide the Sali site, establish SAPCO and take action necessary to ensure a reasonably prompt startup of the project. It was slow, however, in staffing the EAPU. After the project was renegotiated, the Governmen; failed to act promptly on such matters as the award of contracts for port/street renovation in Gorse, the restoration of the Relais de l'Espadon, the easing of air charter restrictions and the training of hotel staff. It is not altogether clear from the supervision reports why the Government was so indccisive on these matters. What is clear is that ten years after Loan effectiveness, the development of the Sali resort was very slow and the Gorie Hotel still remains incomplete. 4.02 Most of the consulting work for the project was carried out by one firm. The work was satisfactorily carried out for the most part; the one instance where performance was less than satisfactory is noted in para. 3.06. 4.03 The Sali resort has expanded slower than anticipated but the site is attractive and becoming increasingly popular with tourists. Only eight hotels were built with a total of 1762 beds in the first hotel zone, or only 70% of the number originally estimated to make the project viable. It is not known why 'several well known groups' (para. 3.07), which had showed interest in Sali, did not follow up that interest 4.04 SAPCO's performance was generally satisfactor'. It promptly engaged a consultant to design the infrastructure and common facilities and oversee its execution. This work, for the most part, was well done. SAPCO was less successful in attracting promoters and developers for the Sali site. Nevertheless, in about a 10-year period, eight hotels were built at Sali. SAPCO's progress reports were submitted on a regular basis, and it submitted a final report early in 1987. V. PROJECT REEVALUATION 5.A1 The 1987 supervision mission reported that the Sali component was only marginally viable. It is unclear whether this was a result of inadequacies in the concept and formulation of the project, or indicative of other problems, such a3 cost overruns in building the hotels. The original plan of financing a pilot hotel under the project was to encourage other developers to build, but that was abandoned because of concern that other developers might not be attracted. The project was then renegotiated to provide lines of s;redit to hotel promoters. The project did not seem to have attracted the big tour operators like Club Med, although it was interested in participating at one stage. Surprisingly, no specific explanation is given in the files for the withdrawal of Club Med from participation in the Sali resort.  - 19 - 5.02 One reason for Club Med's withdrawal may have been its wish to own rather than lease the land on which it would build a hotel. Given the range of policies and management styles of hotel and tour operators and types of packages offered, it seems reasonable to question the viability of the original project concept of attracting a variety of operators and promoters to a resort site, complete with infrastructure and common facilities. It is hardly surprising that they might have had reservations over the design, cost and control of a resort site in which they were not involved or consulted. In this respect, it would appear that the original project concept was not fully viable. 5.03 In as much as large operators, such as Club Med, were willing to finance their hotel facilities without calling for Government support credits, it also seems reasonable to question the renegotiated project with the line of credit concept to encourage the building of hotels. The Government's risk could have been reduced if it had left the design and financing of the hotels to foreign investors, and instead concentrated on providing the site and services, and the guidelines under i- h the resort was to be managed and operated. 5.04 The Sali site eventually attracted a number of small operators presumably because of the availability of credit. The number of hotels expanded from one in 1980 to eight in 1988, and the numbsr of guest nights increased from 19,500 in 1980 to 132,400 in 1988. This represents an annual growth rate in guest nights of about 40S be,"v.an 1981 and 1987. The occupancy rate of about 301 during the last full yea-. ;f operation (1987) appears good for a resort which would mainly attract Euri peans during the winter months. 5.05 Only eight of the ele'ven hotel lots are oecupied. The accommodation provided, as measured by the beds availab; -s about one- third below the original target of 2,500 beds for the firsc xiotel zone. No information is available as to what plans, if any, are be4 n, considered by the Government to complete occupancy of the remaining lots IL the first zone or to encourage development of the second hotel zone. 5.06 While the cost of the fixed asuets of three of the hotels is known (para. 3.36), no information is available on their revenues or cost of operation. Thus, it is not possible to assess the return on investment on the Sali resort either from the point of view of the owners or the Government. However, given the fact that private enterprise with a small amount of Government assistance built eight hotels at Sali in all, and the occupancy rates appear reasonable for resort properties, these hotels may have been somewhat more profitable than the 1987 supervision mission concluded (para. 3.35). On balance, while the project did not achieve the ERR estimated at appraisal (162), it is still believed to be satisfactory. 5.07 Indeed, the Sali component provided employment, brought visitors and foreign exchange to Senegal and broadened the tourism tax base. In addition to the direct earnings of SAPCO, the Government received sales taxes on the expenditures of tourists for accommodations, food and beverages, and souvenirs; indirect taxes and duties on items purchased by the tourism industry; as well as income taxes on firms and individuals engaged directly in the tourism sector. Also, substantial employment was generated. On this  - 20 - basis, the component is deemed successful. Whether it might have been more successful under a different concept, making use of incentives, is a more difficult question, given the present lack of data on the recent performance of the Sali project and the tourism sector in Senegal. 5.08 The civil works at Goree were satisfactorily completed and resulted in the preservation of an attractive landmark. However, as the Goree Hotel is still unfinished, it is not possible to judge its success. It would seem evident from the supervision reports that an opportunity for profitable operation of the hotel was lost by long delays in executing the restoration works and by their high costs. This is most unfortunate as C.oree has much to offer visitors. VI. ROLE OF THE BANK 6.01 Preparation, appraisal and early supervision of the project by the Bank's Tourism Department was vigorously pursued, but not always in line with Bank procedures. The criticism of the department's lack of experience (para. 2.02) was probably justified. Bank's files are incomplete as the issues paper is missing, no record is available of the first negotiations, staff did not always write reports on their return from missions, and despite active participation of Bank staff in the negotiations with Club Med, there is no indication as to why they fell through. However, what the Tourism Department lacked in experience, it made up in drive and enthusiasm. 6.02 Tourism projects involve many more disciplines than most Bank projects. The Tourism Department frequently called on other regional departments (transport, power, agriculture, finance, etc. for assistance and this seemed to have been willingly and ably given. The Bank's resident mission in Dakar was also most helpful in pursuing project matters with the Government. However, it should be recognized that the many disciplines involved must have made it more difficult to properly supervise a tourism project than say a road project involving mainly one discipline. 6.03 Given the unusually long period of 15 months from appraisal to negotiations, it would appear that more preparatory work before appraisal would have reduced the processing time somewhat and possibly permitted the Bank Loans to become effective more quickly. It should be recognized, however, that as a first project in the sector, a large amount of preparatory work was required and the early Bank appraisal probably encouraged the Government to take the many steps needed to establish the basis of the project. 6.04 Project execution started reasonably well but problems began to appear when attempts were made to interest promoters and developers in the Sali resort. This eventually led to a renegotiation of the Loans, but this did not really resolve the problem of identifying and attracting established hotel and tour operators. 6.05 It is difficult not to conclude that following the abolition of the Bank's Tourism Department, project supervision began to suffer from frequent changes in management at headquarters, high turnover of supervision staff and much longer intervals between visits. The project was supervised by four different Bank divisions involving approximately 12 staff members and  - 21 - several consultants. The project dragged on for years for lack of Government decisions concerning relatively simple matters such as the Goree port and street works, and the renovation of the Relais de l'Espadon. The same applies to other project subcomponents that were held up by Government inaction. A more forceful attitude on the part of the Bank might have persuaded the Government to promptly resolve these difficulties. In some cases, the Bank appeared too willing to approve changes in the project requested by the Government, or to accept delays without registering strong objections. 6.06 Undoubtedly, by withdrawing from the tourism sector, the Bank lost some leverage with the Government's tourism agencies. It must also have been evident to the staff that there was no future in the sector. 6.07 Recent supervision missions seem only to have focussed on the uncompleted components rather than performance of the tourism sector as a whole. Thus, there is little current statistical data available on which to judge the overall performance of the project, development of sector institutions and the benefits of the project to Senegal. 6.08 As noted in para. 2.02, the Bank acted as agent for the UNDP financial feasibility study. The UNDP press release announcing the study noted that consultants interested in being considered for the study should direct enquiries to the Bank. Unfortunately, by the time of the announcement, firms had been shortlisted, the proposals evaluated and a consultant selected. The announcement resulted in a flood of enquiries to the Bank. In some cases, it provoked unnecessary irritation when respondents learned that a consultant had already been selected prior to the announcement. VII. CONCLUSIONS AND RECOMMENDATIONS 7.01 Project execution got off to a good start, but the decision of the Bank to withdraw from further lending for tourism obviously had a serious impact on subsequent progress. Following the closure of the Bank's Tourism Department in 1980, the project was supervised by several Bank entities, none of which was able to provide the frequent or thorough attention which the project needed. Furthermore, by withdrawing from the financing of tourism projects, the Bank lost the leverage it would have had with the Government's tourism agencies by foreclosing the possibility of a follow-up project which was to be prepared under the project. 7.02 As a result, the Government seemed to lose interest in completing the project. The Goree hotel has been gutted but little or no effort was ever made to complete its renovation. While the Sali component has not worked out as originally envisioned at appraisal or at the time of the renegotiations, the first phase (para. 2) has been substantially completed and would appear to be profitable (para. 5.06). Sali is an attractive addition to the tourist facilities of Senegal; it is a good revenue producer from the point of view of taxes collected, directly and indirectly; and it generated substantial employment. Undoubtedly, Senegal's tourism institutions were strengthened by the project but perhaps not to the extent expected.  - 22 - 7.03 The viability of the original and revised project concepts of providing infrastructure and building common facilities on a multiple occupancy resort site as a means of attracting promoters and developers of tourist hotels, is questioned. The larger and well established tour operators apparently prefer to own and operate their own facilities which are designed specifically for their needs. It may have been more appropriate for Senegal to have provided sites to well established promoters, assisted them as needed with services and utilities, and established the guidelines under which they were to be operated.  - 23 - ATTACHMENT 1 Page 1 of 1 page Translation (French) DTB.mnd No. 10443/MEF/DDI REPUBLIC OF SENEGAL Dakar, November 30, 1990 MINISTRY OF ECONOMY AND FINANCE Office of The Minister Direction of Expenses and Investments SUBJECT: Tourism Project of Petite Cote (Loans 1412T-SE and 1413-SE) Reference: Your Letter of November 6, 1990 Dear Sir: I hereby acknowledge receipt of your referenced letter with which you sent me the draft version of the above project completion report. The document was reviewed by the staff of my department as well as ministries of Tourism and Ecology. I will provide you with the comments of the government as soon as possible. Sincerely yours. (Stamp) For the Minister of Economy, Finance and Planning as directed The Secretary s/Antoine Sarr ANTOINE SARR World Bank Operations Evaluation Department ATTN: Mr. Graham Donaldson 1818 H. Street, N.W., Washington D.C. 20433 USA  - 24 - ATTACHMENT 2 Page 1 of I page Translation (French) TELEX WORLD BANK ATTN: MR. GRAHAM DONALDSON DIVISION CHIEF AGRICULTURE, INFRASTRUCTURE AND HUMAN RESOURCES WASHINGTON DC SUBJECT: PETITE COTE TOURISM PROJECT PROJECT COMPLETION REPORT PLEASED TO INFORM YOU THAT WE HAVE RECEIVED THE ABOVE REPORT AND DO NOT HAVE ANY ADDITIONAL COMMENTS. CONGRATULATIONS FOR A GOOD REPORT. SINCERELY YOURS FAMARA IBRAHIM SAGNA MINISTRY OF INTERNAL AFFAIRS DAKAR, SENEGAL 28DEC90 248423 WORLDBANK 61196 MINTCAB SG END