Niger - Privatization and Regulatory Reform Technical Assistance Project

Document of The World Bank Report No. 18362-UNI PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF SDR 14.0 MILLION TO THE REPUBLIC OF NIGER FOR A PRIVATIZATION AND REGULATORY REFORM TECHNICAL ASSISTANCE PROJECT August 14, 1998 Division: PSDP'S / AFTPI Country Department: CD 13 Region AFRICA  CURRENCY EQUIVALENTS (Exchange Rate Effective 1US$ = 600 CFAF) Currency Unit = CFA Franc (CFAF) US$1.00 = CFAF 600 (June 1998) FISCAL YEAR OF THE BORROWER January 01 - December 31 ABBREVIATIONS AND ACRONYMS Abattoir - Abattoir Frigorifique de Niamey (Slaughterhouse) CAS - Country Assistance Strategy CCPP - Cellule de Coordination du Programme de Privatisation (Privatization Agency) DCF - Discounted Cash-Flow EA - Economic Analysis ERR - Economic Rate of Return GDP - Gross Domestic Product GON - Government of Niger IBRD - International Bank for Reconstruction and Development ICB - International Competitive Bidding IDA - International Development Agency IMF - International Monetary Fund IRR - Internal Rate of Return MOF - Ministry of Finance, Economic Reforms and Privatization NCB - National Competitive Bidding NIGELEC - Societe Nigerienne d'Electricite (Power Utility) NPV - Net Present Value OFEDES - Office des Eaux du Sous-Sol (Well Drilling Agency) OLANI - Office du Lait du Niger (Dairy Products Company) PE - Public Enterpnrse PPI - Private Participation in Infrastructure PSAC - Public Sector Adjustment Credit RINI - Socidte Le Riz du Niger (Rice Marketing Company) SMEs - Small- and Medium Size Enterprises SNC - Societe Nigerienne de Cimenterie (Cement Company) SNE - Socidtd Nationale des Eaux (Water Utility) SOE - Statement of Expenses SOEs - State-Owned Enterprises SONIDEP - Socidte Nigerienne de Produits Petroliers (Petroleum Distribution Company) SONITEL - Societe Nigdrienne de Telecommunications (Telecommunications Utility)) SONITEXTIL - Socidtd Nigdrienne de Textiles (Textile Company) SPEHG - Societe Exploitante de l'Hotel Gaweye (Gaweye Hotel) Vice President: Jean-Louis Sarbib Country Director: Theodore Ahlers Sector Manager: Thomas Allen Task Team Leader: Heidi Mattila  Niger Privatization and Regulatory Reform Technical Assistance Project CONTENTS A. Project Development Objective 2 1. Project development objective and key performance indicators 2 B. Strategic Context 2 1. Sector-reliated CAS goal supported by the project 2 2. Main sector issues and Government strategy 2 3. Sector issues to be addressed by the project and strategic choices 5 C. Project Description Summary 7 1. Project components 7 2. Key policy and institutional reforms supported by the project 7 3. Benefits and target population 8 4. Institutional and implementation arrangements 8 D. Project Rationale 8 1. Project alternatives considered and reasons for rejection 8 2. Major related projects financed by the Bank and/or other development agencies 9 3. Lessons learned and reflected in proposed project design 9 4. Indications of borrower commitment and ownership 10 5. Value added of Bank support in this project 10 E. Summary of Project Analyses 10 1. Economic 10 2. Financial 10 3. Technical 11 4. Institutional 11 5. Social 11 6. Enviromnental assessment 11 7. Participatory approach 11 F. Sustainability and Risks 11 1. Sustainability 11 2. Critical risks 12 3. Possible controversial aspects 12  G. Main Credit Conditions 12 1. Effectiveness conditions 12 2. Other 13 H. Readiness for Implementation 13 L. Compliance with Bank Policies 13 Annexes Annex 1. Project Design Summary Annex 2. Summary of Issues in the Utilities Sectors and Government Strategy Annex 3. Fact Sheets: SONITEL, SNE and NIGELEC Annex 4. Detailed Project Description Annex 5. Project Implementation Plan as Prepared by the Governnent of Niger Annex 6. Estimated Project Costs Annex 7. Summary of Potential Costs and Benefits of Large Enterprise Privatizations Annex 8. Economic Analysis of the Overall Project 8A. Cost-Benefit Analysis Summary Annex 9. Financial Summary Annex 10. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table Al. Consultant Selection Arrangements Table B. Thresholds for Procurement Methods and Prior Review Table C. Allocation of Credit Proceeds Annex 11. Project Processing Budget and Schedule Annex 12. Documents in Project File Annex 13. Statement of Loans and Credits Annex 14. Country at a Glance Annex 15. Declaration de Politique G&n6rale sur le Programme de Privatisation  Niger Privatization and Regulatory Reform Technical Assistance Project Project Appraisal Document Africa Regional Office Country Departnent 13 Date: 08/14/98 Task Team Leader: Heidi Mattila Country Manager/Director: Theodore Ahlers Sector Manager/Director: Thomas Allen Project ID: Sector: Program Objective Category: NE-51272 Public Enterprise Lending Instrument: IDA, Program of Targeted [ ] Yes [] No Intervention: Project Financing Data [ Loan [X] Credit [ Guarantee [] Other [Specify] For Loans/Credits/Others: Amount (US$m/SDRm): [US$18.6 Million / SDR14.0 Million] Proposed termns: [X] Multicurrency [ Single currency, specify: Grace period (years): 10 years [ Standard [ Fixed [ LIBOR-based Variable Years to maturity: 40 years Commitment fee: N/A Service charge: 0.75% Financing plan (US$m): Source Local Foreign Total Government: 2.0 0.0 2.0 Cofinanciers 0.0 0.0 0.0 IDA 6.8 11.8 18.6 Total 8.8 11.8 20.6 Borrower: Government of Niger (GON) Guarantor: NA Responsible agency: Ministry of Finances, Economic Reform and Privatization (MOF) Estimated disbursements 1998 1999 2000 2001 (Bank CY/US$M): Annual 4.25 6.94 5.27 2.14 Cumulative 4.25 11.19 16.46 18.60 Project implemrrentation period: 1998-2001 Expected effectiveness date: October 1998 Expected closing date: December 2001  Page 2 A: PROJECT DEVELOPMENT OBJECTIVE 1. Project development objective and key performance indicators (see Annex 1): The project seeks to increase the operational and financial performance of the public enterprise sector and selected utilities through privatization of assets and private sector participation in infrastructure. Achieving this objective will help Niger to improve access to and quality of services in telecommunications, water and electricity through the development of an effective policy and regulatory framework. B: STRATEGIC CONTEXT 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 17114- NER Date of latest CAS discussion: November 11, 1997 As confirmed in the most recent CAS, the overriding development objective for all Bank-financed projects in Niger is to reduce the number of poor people in Niger. The project will directly contribute to meeting the CAS objective of broad private-sector led recovery of the economy. Fiscal headroom will be increased, so that scarce public resources can be channeled to the provision of essential social services. Privatization will increase investment, help reduce operating costs and improve productivity. The greater market openness and flexibility of the Nigerien economy will increase its competitiveness. 2. Issues in the Nigerien PE Sector and the Government's Strategy and Privatization Program Main Issues in the Public Enterprise Sector and Government Strategy. a) Background: General Issues in the Nigerien PE Sector Status of the PE Sector. State control of a broad range activities (e.g., cement production, textiles, hotels, transportation, petroleum distribution, agro-industries, and utilities) has undermined private sector development and imposed significant economic and social costs on the country. With few exceptions, state- owned enterprises in Niger are characterized by low competitiveness because of overstaffing, lack of adequate access to investment capital and management weakness. As a result of these conditions, most of Niger's public enterprises exhibit some of the lowest profitability and efficiency indicators in the region. Moreover, some enterprises have been repeatedly used as a source of funds for extra-budgetary expenditure. The PE sector also suffers from significant and chronic payments arrears from the Government and cross-arrears among the enterprises. The poor financial situation of the public utilities is particularly worrisome, as the backlog in maintenance and repairs now threatens the asset base while the existing network covers only a fraction of the population. The Government's Strategy. To address the poor operational performance of the public enterprises, the Government of Niger (GON) is committed to divest the state from the productive sectors. The Government's strategy for public enterprise reform, as expressed in the Policy Framework Paper of July 1997, calls for privatization and the introduction of private participation in key infrastructure sectors that were previously closed to private investors (i.e., telecommunications, water and electricity) within an adequate regulatory framework. The program also includes the settlement of cross-debts and payment arrears between enterprises and the Government, and the institution of a payment structure that avoids the accumulation of future arrears. A comprehensive plan to clear Government arrears to PEs is currently being implemented with Bank assistance under a program where debt, arrears and liabilities of the entire public and parapublic sectors to the Government are being eliminated, and concrete measures be instituted  Page 3 to avoid the accumulation of future payment arrears by the state sector (e.g. pre-payment, delegation of budget responsibility etc.). The payment arrears vis-a-vis the GON and the long-term liabilities of the three largest public enterprises are summarized in the Economic Analysis section. The regulatory functions are currently carried out by the line ministries and to some degree by the public utilities. With privatizatiDn and the changing industry structure (more autonomy of infrastructure providers and private investment), the nature of the regulatory task will change. The Government is committed to revise sectoral policies for the telecommunications, water and electricity sectors, and reform the regulatory framework in parallel with privatization and the introduction of private investment. This will also enhance private sector interest in the investment opportunities in Niger and will increase the likelihood of the success of the privatization program. b) Government of Nigers Privatization Program and Progress to Date Scope of the Government's Program. Based on the lessons learnt from the privatization program of the 1980s where privatization did not deliver the desired results, the GON is now committed to implement its privatization program in a professional and transparent fashion. The Government's privatization program is aimed at privatizing and introducing private sector participation in the three utilities SONITEL (telecommunications), NIGELEC (electricity) and SNE (water) - that are also the largest PEs, and the following commercial enterprises SONIDEP (petroleum distribution), OLANI (diary), SNC (cement), SONITEXTIL (textiles), SPEHG (hotels), ABATTOIR (slaughtering), RINI (rice milling) and OFEDES (well digging) by year 2000. The greatest economic impact is expected to occur as a result of private sector participation in the infrastructure sectors through increased investment and improved financial condition of the utilities, as well as following the transfer to private sector management of the petroleum storage facilities (SONIDEP). This Project will assist the Government of Niger in all the aspects of the implementation of its privatization program, with a particular emphasis on the more complex utilities sectors. The components comprising the Government's privatization program are listed in the Project Implementation Plan prepared by the GON (Annex 5). Institutional Framework for Privatization. A law enacted in 1996 established the legal framework for privatization and the Privatization Agency (Cellule de Coordination du Programme de Privatisation - CCPP). The Inter-Ministerial Committee for privatization acts as the decision making body taking the strategic decisions and approving the transaction design in each case. Today the privatization agency is a sound and competent agency staffed with results-oriented technical staff including a Coordinator, an experienced Nigerien IResident Privatization Advisor, a communications professional, and transaction managers for each enterprise in the pipeline. The Government has also recently completed a Declaration on the Privatization Program in which the objectives, time table, sequencing, methods and principles concerning the privatization program are explained to the general public. Progress to Date. By achieving several concrete milestones during the past year, the Government has demonstrated its commitment to the program, and the agency shown its mettle and competence: (i) Commercial Enterprises. In spring 1998 the privatization transactions of OLANI and SNC have been carried to a successful closure, and the new investors have by now taken over the ownership of the enterprises. Professional external advisors were hired and financed by the Government to assist in the transaction execution. The consultants to assist the CCPP in the privatization of the SPEHG-hotel company are expected to be recruited in Autumn 1998. Preparation of the privatization of Abattoir is well- advanced and expected to be completed by December 1998. RINI and OFEDES are scheduled to be privatized by end-1999.  Page 4 (ii) Utilities Sectors. The privatization modalities to be adopted for private sector participation in the infrastructure sector where decided upon in 1997: (a) Telecommunications - sale of majority shares of the SONITEL; (b) Electricity - concession for NIGELEC; and (c) Water - a lease contract with some investment obligations for SNE. The privatization transactions in the infrastructure sectors have been initiated and significant progress have been made in 1998: The Tenns of References (TORs) for both the Financial Advisors' and Regulatory Advisors2 respectively where finalized with Bank assistance in spring 1998 for all three transactions. The Requests for Proposals (RFPs) have been issued for all the advisory assignments on the large transactions, and the advisory firms selected. Currently the advisory teams are being mobilized. Detailed sector studies have already taken. The Government is committed to move rapidly to design and establish the new regulatory framework for the utility sector including a multi-sectoral regulatory agency by year 2000. (iii) Petroleum Sector. The Govermnent of Niger has reached an agreement on the liberalization of imports and on new regulatory framework for the import, storage and distribution of petroleum products with Bank assistance in 1997. The GON has decided that SONIDEP will be transformed into a marketing company, and that the management of storage facilities will be transferred to a private sector management company. The key elements of the Memorandum of Understanding between the Government and the private oil companies have been negotiated including open-access and non-discriminatory pricing. Technical studies have been undertaken and the next step will be to finalize the establishment of the private company with management responsibility for the petroleum storage facilities, and the adoption of the new regulatory framework. (iv) Social Plan. In June 1998, the Government prepared a Social Plan that defines the measures to be taken across sectors to assist redundant workers (financial package, training program and assistance in job search). The principles of the Social Plan are summarized in the Economic Analysis section of this document. (v) Public Information Campaign. In spring 1998 the privatization agency finalized the design of the overall communications campaign for disseminating information about the privatization program to different groups of stakeholders. The TORs for the communications firm were prepared with Bank assistance, and the consultants are currently being recruited. Successful seminars were held in 1997 regarding private sector participation in the water sector in Niamey, and a series of seminars in the other utilities sectors are being prepared for Autumn 1998. A comprehensive description of the status of the Government of Niger's privatization program and agreed next steps with a time schedule is in Annex 5. (Government of Niger's Inplementation Plan for the Privatization and Regulatory Reform Program). c) Main Sub-Sector Issues and Government Strategy The telecommunications, water and electricity sectors suffer from: (i) Limited provision of services, in particular in rural areas - even by sub-Saharan African standards, and poor and uneven quality of services offered; (ii) Low productivity and lack of operational autonomy; (iii) Precarious financial situation caused by substantial payment arrears by the public state and resulting lack of working capital; and (iv) Inadequate funds for maintenance and expansion of network. A more specific analysis of the issues in each sector are given in Annex 1. The Fact Sheets in Annex 2 X Typically a consortium that includes sector specialists, accountants, financial analysts and led by an investment bank 2 Typically a consortium of regulatory, sector and legal specialists  Page 5 summarize the operational, financial and sector data for SONITEL, SNE and NIGELEC. 3. Sector Issues to Be Addressed by the Project and Strategic Choices a) Sector Issues Addressed by the Project The project seeks to address the following sector issues identified earlier as follows: * The project aims to improve the financial and operational performance of the enterprise sector in Niger through privatization. * The project wilil address the problems of inadequate access and expansion of services in the telecommunications, water and electricity sectors by introducing private participation in infrastructure. The project will fund experienced advisors to assist the GON in the detailed financial, legal and technical preparation of these transactions. * For the utilities, the project will assist the Government in developing sector strategies and a regulatory framework that would foster new entry in service provision, enhance the entry of alternative technologies -- in particular in rural areas -- and increase the level of competition in currently monopolistic sectors. The project will support the GON in completing sector policies and revising the regulatory framework clarifying the role of the line ministry, the private operator and the regulator. The project will provide technical assistance to establish a regulatory agency that is capable of monitoring the performance of the private operators. b) Key Strategic Choices * Privatization vs. Restructuring of PEs. The first key strategic choice for the GON was whether to restructure or to privatize the enterprises in the reform program. In view of the poor performance record of past PE restructuring programs, the GON has decided to privatize enterprises operating in competitive markets. * Modalities for Private Participation in Infrastructure (PPI). The second key strategic choice made by the GON is, when possible, to pursue private rather than public provision and funding of services in the telecommunications, water and electricity sectors. However, rather than pursuing a single modality, the GON will -- after careful analysis of feasible options -- make use of various mechanisms for introducing private participation in infrastructure (sale of shares; concession and lease contract). In each case the modality chosen will be tailored to reflect on the one hand, the specific financial and operational conditions of the company and on the other hand, the level and type of risk that the private sector is willing to assume and undertake. * Sequencing of the Pipeline. Now that the first transactions of medium-size enterprises in the manufacturing sectors have been successfully executed and the initial institutional capacity developed, the GON has decided to give priority to larger enterprises based on their strategic importance to the economy and the potential incremental impact on the welfare of the population. Also, privatization of the utilities is expected to have the largest fiscal impact as the result of increased tax revenues. * Timing of Reaulatorv Reforms. Regulatory reform is a key element in the successful implementation of the transactions. The amount of private -- in particular foreign -- investment in the sectors will reflect the quality, clarity, simplicity and consistency of the tariff policies, competition clauses and other regulatory matters. In each of the utility sectors, complete transaction preparation entails the prior development of a  Page 6 practical and workable regulatory framework, including an explicitly defined sector policy, a legal framework, a framework for tariff adjustment and a basis for defining the circumstances that justify regulatory intervention. The GON has decided to start preparing the large infrastructure transactions in parallel with the regulatory reforms to avoid long lead-times in the program execution. Obviously, this will increase the need for coordination among the advisors and Nigerien officials. * Market Liberalization vs. Sale of Monopoly Service Providers. A key strategic choice to be made by the GON concerns the sequencing of the "opening" of the sector to new entrants and the privatization of existing monopoly suppliers. Liberalizing conditions for new entry may accelerate sector revitalization, but may also diminish the size of the potential proceeds to be generated from sales assets. The advisors funded by the project will assist the GON in weighing its priorities and balancing the trade-offs between revenue maximization and accelerated sector development through competition. * Financial Sector Issues. The Government of Niger is fully aware of the need to carry out further analytical work in the financial sector, and decided that, in order to maintain a sufficient focus of the project, no separate component dealing with the specific issues related to the Nigerien financial sector would be included in the Project. c) Cross-Sectoral Issues to be Addressed by the Project GON's privatization program has shown encouraging initial results in implementing the privatization program in a transparent and effective process (OLANI, SNC and Abattoir transactions). However, for the continued success of the program during the second and more complex phase the following issues need to be addressed. * The large transactions involving infrastructure require in-depth preparation and careful execution. Numerous complex issues need to be addressed including tariffs, regulatory structures, competitive framework, and deal structuring, if these transaction are to achieve the sought-after objectives. Similarly, these transactions require professional support to generate the investor response from reputed investors and miaximize sale revenues. Experienced experts will be recruited to design and execute the transactions and assist the GON in the accompanying sectoral reforms. * The implementing capacity of the Government needs to be strengthened, for these transactions to be effectively coordinated with appropriate and timely input from the government. Preparation of the transactions in the infrastructure sectors requires inputs from the line ministries, the enterprises, and other relevant authorities, as well as advice from several advisors (legal, financial and sector experts) that need to be effectively coordinated. Substantial strengthening of the professional staff of the Privatization Agency to carry out the complex task of coordinating experts and advisors. * The required international expertise and local capacity to implement the program must be put in place rapidly. Failing this, there is a risk that the key infrastructure transactions, which have received the go-ahead from the Interministerial Committee, will either stall or be carried out in a less than satisfactory manner, which in turn could jeopardize public support for the program. * There is a need to coordinate emerging regulatory measures. A strategic approach must be developed regarding the role and mandate of the regulator(s), the reporting and appointment procedures for the regulatory posts, and the funding arrangements for the regulatory activities. Also, consideration needs to be given to the type of regulatory system that the country will have -- whether a series on independent agencies for the various sectors, or a single multi-sectoral agency or some other alternative. As the project would cover the reforms of the telecommunications, water and electricity sectors, there would be an opportunity to  Page 7 review the regulatory issues from a broader perspective and to leverage the synergies across sectors to ensure that scarce regulatory capacity in Niger will be effectively utilized. C: PROJECT DESCIXPTION SUMMARY 1. Project Components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): Component Categorv Total Cost Incl. % Of Bank- % of Contingencies Total financing Bank- (US$M) (US$M) financing Capacity Building and Support to Institution 11.52 56% 10.16 88% the Implementation of the Building Privatization Program a) Local and foreign experts to assist the Privatization Agency to supervise and coordinate the overall program; training and equipment. b) Public Information Campaign targeting groups of stakeholders, workshops and consensus building on the privatization programiL. c) Staff Retrenchment Program d) Project Management: Short term consultants to ensure the quality and effectiveness of project implementation, including the establishment of proper accounting and reporting procedures. Privatization and Regulatory Policy 9.08 44% 8.44 93% Reforms in the Infrastructure Sector (Telecommunications. water and electricity) Development of detailed privatization strategy and funding of legal, financial and sector experts to draft bidding document and concession contracts and execute the telecommunications, water and electricity privatization transactions; TA to revise sector strategies and to review, revise and assist in consolidation of regulatory framework for infrastructure sector through effective regula1.ion to support private sector participation. Total 20.6 18.6 2. Key Policy and Institutional Reforms Supported by the Project * The project will support the following institutional reforms: (i) enhancement of the implementation capacity of the Privatization Agency; and (ii) establishment of an independent and effective regulatory body  Page 8 overseeing the telecommunications, water and electricity sector. * Key policy reforms supported by the project include: (i) privatization of public enterprises and private sector participation in the infrastructure sector; (ii) liberalization of the telecommunications, water and electricity sector; (iii) financial cost-recovery; and (iv) increased service coverage for telecommunications, water and electricity, in particular in rural areas. 3. Benefits and Target Population Benefits Target Population - Enhanced institutional capacity to implement program - MOF and other GON officials - Greater access to and quality of infrastructure services - Population at large, and in rural (telecommunications, water and electricity) areas in particular - Enhanced fiscal capacity for essential social - Children and the poor services - Increased private sector employment - Working age population 4. Institutional and Implementation Arrangements: Implementation Period: Project implementation is expected to be completed by the end of the year 2001. Executing Agency: The Ministry of Finance, Economic Reforms and Privatization will assure the overall project implementation and coordination. The Privatization Agency (CCPP) has been established within the Ministry, with the necessary skills and qualifications to execute all phases of the project. Monitoring and Evaluation: The Privatization Agency, in accordance with the financial reporting system established by an independent financial management specialist (see section below), will develop and submit to IDA quarterly progress reports and will serve as the primary counterpart to IDA for the purpose of evaluating, monitoring and, if necessary, redirecting project implementation. Financial Reporting and Auditing: Prior to credit effectiveness, a qualified accounting consultant will be hired to start preparing a financial management system acceptable to IDA. This would include the establishment of proper accounting, budgeting, reporting, and internal control systems and procedures for this project. An independent accounting firm, acceptable to IDA, will be hired to annually audit the project accounts according to international auditing standards. Annual audit reports will be submitted to IDA within six months of the end of each fiscal year. D: PROJECT RATIONALE 1. Project alternatives considered and reasons for rejection: Other project design alternatives which were considered and rejected include the following: * Privatization under an adjustment operation. Implementation of a privatization program under a structural adjustment operation without appropriate resources to finance the preparation and implementation of transactions has been rejected. In particular, lack of funds to finance the severance packages of redundant employees has, in other countries, resulted in major implementation difficulties which have slowed down the pace of reforms. * Separation of privatization support from regulatory reforms. Basic changes in ownership and control of public utilities can only be completed if the rules and processes for regulation are defined for investors  Page 9 before transactions are completed and subsequently implemented according to standards set and commitments made in advance of financial closure. Hence, the steps of transaction preparation and regulatory process and rules definition require close coordination and linkage. * Umbrella TA. The concept of an umbrella TA loan from the Bank which would have covered aspects of public sector modernization, tax reform, privatization and financial sector reform was rejected, as it would have been too difficult to manage and implement. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Sector issue Project Latest Supervision (Form 590)Ratings (Bank-financed projects only) Implementation Development Progress (IP) Objective (DO) Bank-financed Increase fiscal revenues, reduce the Public Sector S S wage bill and privatize major public Adjustment (PSAC) enterprises. _ Other development agencies Support to the Private Sector UNDP N/A N/A Promotion Program 1997-2000. IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons Learned and Reflected in the Project Design Lessons learned from imrplementing privatization and PPI programs in other countries have been taken into account in the following aspects: * Need for Government Ownership. Government commitment to and leadership of the privatization program at the highest level is essential to success. GON's commitment has now been demonstrated by the successful implementation of the privatization transactions in the manufacturing sector. * Need for a Strong Implementing Agencv. The process needs to be directed by a single agency staffed by qualified professionals. To leverage cross-sectoral learning there needs to be close coordination of efforts across sectors as well as streamlining of the process. The project will support primarily the enhancement of the institutional capacity of the Privatization Agency, while training will also be offered to other officials participating in the process. * Transparency of the Program. A transparent execution of the transactions will increase investor confidence in the program. The bidding procedures in the Nigerien privatization program have already been streamlined and unified. * Emphasis on the Social Dimension. Adverse short-term social impacts need to be addressed, and this is taken into account by ensuring the availability of resources to finance severance packages for redundant employees, and by increasing the public's awareness of the program through an information  Page 10 dissemination program. 4. Indications of Borrower Commitment and Ownership * Political Commitrnent by the Government. In June and December 1996 the Government adopted ordinances which established the legal framework for privatization and defined the broad objectives, guidelines and procedures for the divestiture program in Niger. An Interministerial Committee within the Cabinet has been established to address issues related to the privatization program. * Credible and Competent Privatization A Ancv Established. The CCPP has by now demonstrated its capacity to deliver by the successful closure of OLANI and SNC transactions. It has recently been strengthened with a resident advisor and a communications specialist. * Commitment to Transparency and Professionalism. To promote the principles of transparency, efficiency and competitiveness in the implementation of the program, the GON signed with the World Bank in 1997 a Protocole d'Accord with the following guiding principles for the implementation of the privatization program: (i) wide and frequent distribution of information about the program to stakeholders; (ii) level playing field for all investors (this is ensured by bidding documents in which conditions for each transaction are clearly described to all bidders); (iii) professionalism -- the GON hires domestic and intemational financial and sectoral advisors to execute the more complex transactions; and (iv) simple bidding procedures -- the award is given to the highest bidder using a single and quantifiable bidding parameter. 5. Value Added by Bank Support in this Project The World Bank is uniquely well qualified to bring an international "best practices" approach to privatization and utility regulation by virtue of its extensive project experience and deep skill base in both areas of expertise. In addition, Bank involvement should enhance the confidence of wary investors and should also enhance the marketability of the proposed transactions, particularly those involving large/complex enterprises. Without Bank involvement the benefits expected from this project will either be greatly delayed or will fail to be realized. E: SUMMARY PROJECT ANALYSIS (Detailed assessments are in the project file, see Annex 8) 1. Economic (supported by Annex 4): [ Under preparation will be completed with the economic analysis for severance packages] []Cost-Benefit Analysis: NPV=[US$24.2 million]; ERR= [28.7%] [ ] Cost Effectiveness Analysis: [ Other 2. Financial (see Annex 5): NPV=US$ million; FRR- % Individual transactions will have detailed financial assessment prepared by investment bankers and/or financial consultants. Fiscal impact: The project will have a positive impact on the GON finances for three reasons: (i) privatization proceeds from the larger transactions will be substantial in the Nigerien context; (ii) it is less likely that new payment arrears will be accumulated by the public sector once the enterprises and utilities are operated by the private sector; (iii) as a result of privatization the tax revenues to the Government will increase with the expected expansion of the activities and improved profitability of the enterprises and utilities.  Page 1 1 3. Technical: The project is technically sound -- its main components are well focused and mutually reinforcing. It should be noted that: (i) the Terms of Reference for the Financial Advisors and Regulatory Experts respectively for the privatization and private sector participation in the telecommunications, water and electricity company have already been prepared and completed by the Ministry of Finance in consultation with the World Bank; (ii) the design of the market structures and regulatory framework is being undertaken in the context of the particular circumstances of Niger, rather than by simply borrowing the models applied elsewhere without adaptation. 4. Institutional: Executing agency: A Privatization Agency has been established within the Ministry of Finance, Economic Reform and Privatization. It has been staffed with qualified professionals recruited competitively. A private accounting firm will be hired to annually audit the project accounts. A coordinator has been recruited to ensure proper project monitoring and coordination with line ministries on sector strategies. 5. Social: The project will deal with the social issues linked to privatization layoffs under the retrenchment program. An international labor expert with previous experience in designing programs for redundant workers is being hired by the Ministry of Finance, Economic Reform and Privatization to provide analysis and cost estimates for each privatized enterprise and to design social reinsertion schemes for redundant employees. 6. Environmental assessment: Environmental Category [ I A [ ]B [X] C This project will include environmental audits and evaluations of new infrastructure concessions/leases, and of existing installations to be privatized that are identified as having significant environmental impact. Audits and evaluations will include: criteria evaluation (potential liabilities and allocation of responsibilities), analysis of alternatives, mitigation and monitoring procedures. 7. Participatory approach: Identification/Preparation Implementation Operation Government Representatives: CON/COL CON/COL CON/COL Private Sector: CON/IS IS IS Other Donors: CON/IS CON/COL COL Civil Societies: CON/IS IS IS (IS: Information sharing, CON: Consultation, COL: Collaboration) F: Sustainability and Risks 1. Sustainability: * It is expected that rnost of the PEs in the pivatization program will be transferred to the private sector and operated under private management by the end of the project. It is also expected that the telecommunications, water and electricity sector will be liberalized and managed by private operators with substantial investment obligations increasing the service coverage in these sectors, in particular in rural areas. These reforms are not easily reversible. * The factors critica]l for sustainability will be the Government's continued commitment to economic reforms and its implementation of regulatory reforms; the perceived transparency of the privatization process; and the willingness from the private sector - domestic and foreign - to invest in Nigerien enterprises and utilities.  Page 12 2. Critical Risks (reflecting assumptions in the fourth column ofAnnex 1): Risk Risk Rating Risk Minimization Measure From Outputs to Objective i) Increased macroeconomic and political Substantial i) Maintain continued Bank policy dialogue on instability. reformn program at highest political level. ii) Private investors not willing to invest in Substantial ii) Prepare each transaction thoroughly and Nigerien enterprises and utilities. completely. Engage expert financial advisors, and clarify all conditions in advance of transaction. iii) GON backtracks on regulatory reforms Substantial iii) Maintain continued and close policy on utilities. dialogue at sectoral level. iv) Regulatory authorities "captured" by Modest iv) Grant regulatory authority sufficient industry. autonomy and staff with professionals whose pay levels exceed those of the civil servants. From Components to Oututs i) Insufficient institutional capacity Substantial i) Strengthen rapidly Privatization Agency established to implement and coordinate the through TA. transactions and regulatory reforms. ii) Labor fails to accept the terms of the Substantial ii) Establish and publicly espouse equitable redundancy packages. principles for redundant workers. Project design includes funds for retrenchment program. hnplement a communication campaign and public information campaign. iii) Delays in hiring financial, legal and Modest iii) Hire procurement agent. technical consultants and advisors. Overall Risk Rating Substantial Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: A possible source of controversy could stem from the public's perception of lack of transparency in transaction execution. To mitigate such a risk, extensive discussions have been held with the Government regarding the procedures and streamlined principles to be followed to assure transparency and a level playing field for the bidders. These principles have been summarized in the Protocole d'Accord signed with the Bank in 1997. A public information campaign will be implemented in order to provide regular information on the program, aimed at building consensus as well as providing specific information on the pipeline and on each transaction. G: MAIN CREDIT CONDITIONS 1. Effectiveness Conditions: Recruitrnent of auditors and one accounting consultant, the latter to establish an accounting and financial management system.  Page 13 2. Other [classif according to covenant types used in the Legal Agreements.]: Disbursement conditions: Retrenchment Program satisfactory to IDA. H. READINESS FO]R IMPLEMENTATION [ ] The engineering design documents for the first year's activities are complete and ready for the start of project implementation. [x I Not applicable. [ ] The procurement documents for the first year's activities are complete and ready tor the start of project irnplementation. [x ] The Project Impleimentation Plan has been appraised and found to be realistic and of satisfactory quality. [ The following items are lacking and are discussed under Credit conditions (Section G): I. COMPLIANCE WITH BANK POLICIES [x I This project complies with all applicable Bank policies. [J ] [The following exceptions to Bank policies are recommended for approval: The project complies with all other applicable Bank policies.] Task Team Leader: Heidi Ma Sector Manager: Thomal<J Country Director: Theodore Agers  Page 14 Annex 1 Niger Privatization and Regulatory Reform Technical Assistance Project Project Design Summary Narrative Summary Key Performance Indicators Monitoring & Evaluation Critical Assumptions Sector-related CAS Goal: (Goal to Bank Mission) i) Promote a broad-based, GDP growth: 4.5 %. National statistics. GON continued private sector-led recovery commitment to adjustment of the economy. reform agenda. ii) Increase fiscal Increased tax revenues from Review of GON's budget. headroom so that scarce privatized enterprises. Favorable conditions for public resources can be World Bank review. private investment. targeted to the provision of essential social (health & No external shocks to the education) services. economy. Project Development (Objective to Goal) Objective: Increase operational and Privatization of three utilities Privatization progress GON commitment to financial performance of (SONITEL, NIGELEC and reports. privatization remains enterprise sector and SONITEL) and five strong. utilities through commercial enterprises privatization and private (SONIDEP, Abattoir, Economic and sectoral Transparency of the sector participation. OFEDES, RINI, and analysis and surveys privatization transactions. SPEHG) by December 31, undertaken 2-5 years after Improve access and quality 2000. project completion. Establishment and of services in selected maintenance of fair infrastructure sectors Reduced financial losses of regulatory environment. within an enhanced the enterprise sector, and no Annual surveys by the regulatory framework. transfers from GON to the regulatory agency. Investor interest adequate privatized PEs. to allow the successful divestiture of state assets. Improved average call completion rate for Baseline tariffs established telecommunications, reduced in line with commercial ratio of unaccounted for viability and cost recovery. water; and reduced hours of blackouts for electricity sector'. Substantial expansion of telecommunications, water, and electricity networks.2 'The exact performance targets for the private operator will be defined by GON as a result of the work of the Financial Advisors and Technical Consultants hired during summer-autumn, 1998. 2 The investment obligations by the private investor will be part of the bidding package to private investors.  Page 15 Narrative Sunmma y Key Performance Indicators Monitoring & Evaluation Critical Assumptions Outputs (Outputs to Objective) (i) Adequate institutional (i) Adequately staffed and (i-iv) Supervision mission Govermment follow capacity to execute the well-functioning Project every three to six months through on approving a privatization program is in Implementation Unit together with day-to-day risk/reward package in place. established. coordination with the each transaction that is (ii) Privatization and/or (ii) Bid packages completed Privatization Agency and attractive to strategic liquidation of the remaining and approved by Government the sector ministries. investors and confers PEs. for: SONITEL, SNE, substantial benefit to the (iii) Sale of majority shares NIGELEC, SONIDEP, population. of SONITEL to a strategic OFEDES, RINI, and investor. SPEHG by Dec. 1999 and Effective coordination (iv) Bidding on the lease dec. 1998 for Abattoir. within Government to package for SNE. (iii) Revised sector policies make possible timely (v) Bidding on the adopted by june 2000 for approvals and efficient concession package .for telecommunications, water decisions for each NIGELEC. and electricity sectors transaction. (vi) Sector policies defining the role of the finalized and effective private operator; minimum Government action to regulatory frameworks investments and service implement quickly agreed adopted in quality targets; and the regulatory frameworks and telecomnmunications, water network expansion program; institutional needs. and electricity. (iv) Autonomous multi- (vii) Multi-sectoral sectoral regulator established regulatory agency by Dec. 2000 with competent established, and technically qualified staff Proje t Components Outputs: Monitoring: (Components to Outputs) (i) Qualified and adequate 1. Capacity Building & staff selected for the Support to Program Privatization Agency. Implementation: (ii) Finalization of the optimal privatization l.a. Institutional l.a. Training program l.a. Annual strategy and sector policy strengthening of completed for Privatization implementation reports. recommended by the Privatization Agency to Agency staff, equipment Quarterly disbursement Interministerial Committee implement the privatization purchased, expert advisors data. on Privatization. program. (US$ 3.14 engaged (financial, legal, (iii) Approval of million) media and sectoral privatization strategy and specialists), and Abattoir, sector policies by the SONIDEP, RINI, ONAHA Cabinet and relevant and SPEHG privatized by ministries for each Dec. 1999. privatization. Approval of l.b. Public Information legal agreements by Campaign (US$0.5 1.b. Public information Interrninisterial Committee million) campaign designed and and Cabinet at the end of launched by Dec. 1999. each transaction. (iv) Formation of i.c. plemen an 1.c. Annual privatization teams,  Page 16 Narrative Summary Key Performance Indicators Monitoring & Evaluation Critical Assumptions Employee Retrenchment l.c. Severance packages for implementation reports. comprising representatives Program. (US$ 4.81 redundant workers defined Quarterly disbursement of the Ministry, the Project million.) and implemented, and unit to data. Implementation Unit and support potential representatives of the entrepreneurs established by enterprise being privatized. l.d. Project Management June 2000. l.d. Annual and ad-hoc (v) Holding of regular (US$0.7 million): Ensure financial audits reports. meetings of the above- the quality and effective- .d. Required financial audits mentioned privatization ness of project implem- completed for the overall teamns and the entation. project. Interministerial Committee. (vi) Provision of regular 2. Privatization and status reports by the Reform of Infrastructure advisors working on the Sectors: Open utilities transactions. sectors to private sector (vii) Development of the participation organizational framework (telecommunications, water of the Project and electricity) Implementation Unit, (2.a-2.c): hiring of additional qualified staff. (viii) Development of 2.a Telecommunications 2.a- 2.c. regulatory framework in sector: Supervision missions, and sectors requiring (i) Define sector strategy 2.a. (i) Required audits annual reports by the regulation. and establish regulatory completed, financial, legal Privatization framework. Implement sale and technical advisory Implementing Agency on of majority shareholding of services implemented and status of the Privatization SONITEL to a strategic SONITEL privatized. Tariffs and Regulatory Reform investor. re-balanced, service quality Program. (ii) Complete strategic and investment targets study on the postal sector defined. Interconnection and the postal savings regime defined, licenses for institution. services, auctioning of Total cost US$ 2.75 spectrum and spectrum million management completed. New regulatory framework for the sector defined and adopted. (ii) Restructuring plan for the postal sector and the postal savings institution completed by June 2000. 2.b) Water sector: Finalize sector strategy, sector investment program, 2.b Required audits and imnplement the lease- completed; consultants contract for urban services. engaged and management of Total cost US$ 2.8 million SNE transferred over to private sector. New  Page 17 Narrative Summary Key Performance Indicators Monitoring & Evaluation Critical Assumptions regulatory framework for the sector defined and adopted. 2.c) Electricity sector: Finalize sector strategy, prepare regulatory 2.c Required audits framework including tariff completed; technical studies regimes, service quality completed, advisors engaged targets and investment and concession agreement obligations for the private for NIGELEC with sector. Prepare NIGELEC investment obligations for private sector concluded. New regulatory participation. Total cost framework for the sector US$ 2.3 million defined and adopted.  Page 18 Annex 2 Niger Privatization and Regulatory Reform Technical Assistance Project Issues in the Telecommunications, Water and Electricity Sector and Government Strategy This section (1-3) analyzes the main issues and Government strategy in the telecommunications, water and electricity sector. 1. Main Issues in the Telecommunications Sector a) The telecommunications sector in Niger suffers from: (i) Poor access to services, in particular in rural areas. SONITEL, the public telecommunications company, provides inadequate coverage of services (1.6 lines per 100 inhabitants), well below the sub-Saharan African average of 11 lines per 100 inhabitants. The current network comprises 16,009 lines of which 65% are in the capital, Niamey, meaning that the vast majority of Nigeriens lack access to telephone services. (ii) Chronic lack of investment capital to expand the network and poor cashflow. The company has lost money every year since 1991 despite its monopolistic position. SONITEL's modest network expansion plan contemplated capital expenditures of CFAF 30 billion before the end of 1995. However, to date only CFAF 4 billion have been invested. Both INTELSAT and France Cables-Radio have recently threatened to terminate or reduce services under existing arrangements because of non-payment of fees by SON1TEL. Approximately one-third of the SONITEL lines in service are used by the GON, and the Government frequently fails to pay for telephone services - the receivables from the state approached CFAF 11.9 billion by end-1997. (iii) Inadequate regulatory and institutional arrangements for the sector. The Code des Telecom- munications du Niger established by Ordonnance No. 96-031 of June 11, 1996, establishes the basic legal framework for regulation of the telecommunications sector in Niger. However, in order to attract private investment in the sector and to establish a level playing field for the service providers, detailed regulations on tariffs and price adjustments, interconnection, service quality and roll-out requirements, competitive safeguards, spectrum management, numbering plan, directory and emergency services, consumer protection and universal service obligations need to be elaborated as part of the reform process. b) The Government's Strategy: To address the sectoral challenges, the GON's updated telecommunications policy of June 1997 calls for market liberalization and the introduction of private participation and investment in the sector. The policy also refers to the revision of the regulatory framework and re-balancing the tariffs. A GON decision to offer 51% SONrTEL shares to a strategic investor was made in 1997. According to the SONITEL privatization strategy, 11% of the shares would be sold to Nigerien institutional investors and 3% to SONITEL employees. The Government intends to introduce two cellular licenses and complete its strategy for rural telecommunications. The Ministry of Finance is now in the process of identifying arrears between  Page 19 PEs and the Government, and establishing mechanisms to prevent future arrears from accumulating. 2. Main Issues in the Water Sector The urban water sector in Niger is managed by SNE (Societe Nationale des Eaux), the national water utility, under a performance contract with the Ministry of Water and Environment. a) The main issues faced by the Nigerien urban water sector are the following: (i) Poor operational and financial performance. With 513 employees in 1997, the level of overstaffing at SNE is estimated to be at least 25%. Productivity is relatively low with around 90 connections per employee compared with 116 in Senegal and 207 in Ivory Coast. SNE does not have its own billing and client information system, and as a result the average collection efficiency of 60% is not satiisfactory. The current level of water tariffs (CFAF 115-330 per/m3) is too low to cover the operating costs of SNE. This has resulted in a gradual degradation of the network as the investments in maintenance and repairs have not been sufficient. The planned expansion investments in the water sector have not materialized because of lack of funds; investments in the sector have actually decreased every year since 1987. The poor financial performance of SNE has been compounded by the large arrears accumulated by the State: the arrears from the Government and state-owned enterprises were around CFAF 3.5 billion in 1997, or more than 50 percent of last year's turnover. (ii) Poor coverage of services. SNE provides water to only about 45% of the population in its service territory, reaching only about 14% of the country's population. (iii) Inadequate regulatorv framework. Currently issues related to the water sector are handled by the Ministries of Health; Interior; Water and Environment; and Equipment and Infrastructure, which has resulted in a in lack of coherent vision for sector planning. The lack of users' involvement, in particular in the rural areas, in the management of water resources has hampered the effective delivery of services. b) The Government's Strategy To address the sub-sector issues in the urban water sector the GON has declared that financial autonomy and viability, and an increase in the quality and quantity of water services, are the main policy objectives. As a first step towards reaching these objectives, the GON has decided to introduce private sector participation in the management of SNE's urban centers. The aim is to reduce the operating costs of SNE and create possibilities for the extension of the revenue through new connections. The operator will be made fully responsible for the operations through a lease contract. The Government also intends to review the financial viability of the rural water stations and to introduce a mechanism to increase users' involvement in the management of water resources. 3. Main Issues in the Electricity Sector a) The Nigerien electricily sector of Niger suffers from: (i) Limited access to electricity services, particularly in rural areas. In 1997, total peak demand was about 90MV and only about 5% of Niger's population could benefit from electricity services, most of it in the largest urban centers. Prospects for significant improvement are limited as both the Treasury and the company budgets are strained. The payment arrears from the Government were CFAF 3.9 billion in 1997.  Page 20 (ii) Relatively high costs and low operational performance. leading to high tariffs and a low qualitv of services. Despite relatively low import costs from Nigeria (about 85% of Niger's electricity is imported from Nigeria), retail tariffs are high (about 13 cents/kWh for medium voltage customers) reflecting poor performance, particularly in commercial operations. Yet the quality of service is poor. (iii) Political interference in the day-to-day management of the electricity sector. Being a public utility, with the State of Niger holding about 95% of the shares, NIGELEC lacks operational autonomy and is not authorized to take the necessary operational and investment decisions. (iv) A de facto monopoly grantedcto Nigelec. This situation prevents competing private and local initiatives and the introduction of new adapted and low-cost technologies (such as solar systems) to develop in Niger. b) The Government's Strategy To address these issues, GON has agreed to transfer the management of the provision of electricity services to private sector entities. According to a Government decision of 1997, the interconnected zone will be managed under a concession scheme through which the private operator will be obligated to fund the expansion of the distribution network and maintenance investments. For the diesel-based isolated centers, performance based contracts will be bid out. The sector policy calls for a more liberalized market that that will introduce competition to a maximum degree for the provision of electricity services. A new regulatory framework will be designed and implemented and private investors/operators will be selected to generate, transport and distribute electricity in Niger.  Page 21 Annex 3 - SONITEL FACT SHEET (in million of CFAF) Page 1 of 3 1. FINANCIAL DATA: 1994 1995 1996 1997 Turnover 8,917 9,454 9,921 13,832 Total Operating Costs 6,625 7,073 5,937 8,940 Total Salary Costs 1,775 2,134 2,462 2,417 Taxes Paid 523 100 150 210 Net Profit (163) 28 (58) 2,144 Total Loans 7,577 7,427 6,883 5,458 Total Investments 2,308 795 2,270 2,016 Debt/Equity Ratio 45% 44% 41% 32% 2. OPERATIONAL DATA: 1994 1995 1996 1997 Nr. of phone lines 12,453 13,743 15,200 16,009 Employees / 100 phone lines 17.8 16.1 14.5 8.8 16.0 Chart 1: Lines installed per 1000 inhabitants (1997) 16 , 12 C j 8 0 Z 4 _ t0 0.5 0.6 2_ 0.5 0.4 0.3 1.6 Niamey Diffa Zinder Maradi Agadez Tahous Dosso Tilivb&ry Niger (Capital) area aera area area area area area average Chart 2: Accounts Receivable Chart 3: Accounts Receivable Chart 4: Origin of revenues (December 1997) (December 1997) (1997) Niamey Dmsi 14% Private calls 65% Ru% (52% of RuraeTt l revenues) ~~~~. ~~~~~~areas zntoa puibliccal 21% (48% of revenues) Chart 5: Calls completion rate (1997) 100% * E~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0Complemted 60% CcL _ % 6%1 66% 6% 0% International International Dorestic Domestic (Incoming) (Outgoing) (Incomning) (Outgoing) Source: SONITEL (1): 1994-96 data is from consolidated OPT and S[TN entities, 1997 is from SONITEL data  Page 22 Annex 3 - SNE FACI SHEET (in million of CFAF) Page 2 of 3 1. FINANCUIL DATA: 1994 1995 1996 1997 Tumover 5,086 5,319 5,700 6,243 Total Operating Costs 4,840 5,119 6,433 6,633 Total Salary Costs 1,280 1,288 1,314 1,308 Operating Profits 247 200 (733) (390) Nonoperating income 327 420 1,951 662 Nonoperating expenditures 375 382 1,839 65 Taxes Paid 89 52 59 69 Net Profit 109 186 (680) 138 Total Loans 3,806 3,238 3,603 N/A Total Investments 757 413 7,594 682 2. OPERATIONAL DATA: 1994 1995 1996 1997 Nr. of employees 541 533 519 513 Nr. of customers 39,767 38,740 45,628 47,885 Technical Losses 11.30% 18.52% 17.00% 12.68% Employees / 100 customers 1.36 1.38 1.14 1.07 Chart 1: Average Water Cost per Cubic Meter, Chart 2:1996 Sales Breakdown in CFAF (1996) (in volume) 300 273 268 Businesses Administration 6% 24% U.. ~188 200 - 115 100 Public Pri,vate Funtains - ~~~cust Omers 20% 0 ~~~~~~~~~~~~~50% Private Businesses Adrrunistration Public custormrs Fountains Key Water Indicators (1996):1I Key Water Indicaton (1996): Chart 3: 1996 Sales Breakdown Nr. of business offices . 51 (in revenues) Nr. of pumping stations 8 Businesses Administration Nr. of treatment plants 3 9% 33% Nr. of operating drillings 124 Nr. of water tanks 68 Water network length 1,600 Kms Annual production 30.5 million of m3 Annual consomption 25.3 million of m4 Nominal capacity, surface water 81,300 m3/day Public Actual capacity used, surface water 51,300 m3/day 1nIsPrivate Fontn Nominal capacity, underground water 92,320 m3/day customersW _ Actual capacity used, underground water 36,093 m3/day Source: SNE  Page 23 Annex 3 - NIGELEC FACT SHEET (in million of CFAF) Page 3 of 3 1994 1995 1996 1997 1. FINANCIAL DATA: Turnover 15,679 16,365 17,413 18,276 Total Operating Costs 17,450 16,983 18,030 18,882 Total Salary Costs 2,556 2,558 2,668 2,665 Operating Profits N/A 5,711 5,741 5,139 Taxes Paid 665 638 685 710 Net Profit (1,964) 352 600 471 Total Loans 30,381 27,633 25,074 15,679 - Short Terrn Loan 10,508 8,379 9,290 10,756 - Long Term Loans 19,873 19,255 15,784 4,923 Total Investments N/A N/A 491 906 Debt/Equity Ratio 4% 4% 18% 24% 2. OPERATIONAL DATA: 1994 1995 1996 1997 Nr. of employees 1,141 1,122 1,106 1,100 Nr. of connections (customers) 59,143 52,052 58,128 64,278 Technical Losses 17% 17% 17% 18% Transmission Losses N/A 16% 18% 20% Employees / 100 connections 1.9 2.2 1.9 1.4 3. SECTORAL DATA: 1994 1995 1996 1997 Production (w/o SONICHAR) N/A 26.1 25.3 33.8 Imports N/A 195.0 199.3 209.4 Electricity Sales (in GWh) N/A 190.9 195.3 208.3 Electricity Sales (in million of FCFA) N/A 15,640 15,964 17,011 Chart 1: Revenues & Customer Trends Chart 2: Sales & Imports of Electricity 20 -;: i::- = -E: E ::iEEE A I= :: iE - 80 210 - : .--. - i,-................ -.,, :.- ,,............. c De , v -~~~~~~~60 lS E 1 . 1 9 0 . ........... ~~~ 20 ~ ~ 0 _ ! : ~~~..... ..... -1>.X 5.... i40s cE co 14 re i 20 180 1994 1995 1996 1997 1995 1996 1997 Turnover -*Nr. of customers 3Electricity Sales *lmports Source: NIGELEC  Page 24 Annex 4 Niger Privatization and Regulatory Reform Technical Assistance Project Project Description Overview The Project would assist the Government in implementing its Privatization Program and the accompanying reform of the utilities sectors covering a four-year period from 1998 to 2001. The project includes three main components, described below. Proiect Component 1 - Cavacity Buildine and Suyoort to the Implementation of the Privatization Pro2ram (US$9.8 Million) This component will support the Government policy of divestiture of productive sectors and assist GON to implement its privatization program. This component consists of the following three sub- components: a) Institutional Strengthening of the Privatization Agency (US$3.3 Million) This component will ensure that the Privatization Agency will have adequate capacity and expertise to coordinate the program and to supervise the financial and legal advisors assisting in the transaction execution. According to the Privatization Law (1996), the Privatization Agency (Cellule de Coordination du Programme de Privatisation or CCPP) coordinates the preparation of the privatization strategies and the execution of the transactions, is responsible for the recruitment and supervision of the transaction and regulatory advisors, and is in charge of the dissemination of the privatization program to various groups of stakeholders. The Project will include funding for competitively recruited local and international consultants (accounting, privatization, sectoral experts, and office manager) to staff and support the Privatization Agency. Expert legal and economic advisors will be recruited to ensure consistency among privatization approaches in various sub-sectors. Such consistency within the program relates inter alia to foreign investment regulations, rules governing concessions, tax, accounting and valuation issues, labor issues, treatment of debt restructuring and other liabilities including pension liabilities, alternative dispute resolution procedures, approaches to the design and implementation of regulatory institutions and financial regulations. The project will fund special studies and training programs for the staff at the Privatization Agency and relevant Government officials on privatization techniques, private participation in infrastructure and regulatory refonrs. In addition, the Project will fund the necessary software, hardware and related equipment to strengthen the Agency. As a result of the Technical Assistance, the strengthened Privatization Agency will be capable of managing, coordinating and implementing the Government's Privatization Program in a coherent and consolidated framework for privatization, and private sector participation will be established in Niger. b) Public Information Campaign and Consensus Building on Privatization (US$0.5 Million) Experience across Africa and elsewhere has demonstrated the centrality of good public education and consensus building for the success of privatization programs. In the case of Niger, a public information campaign will seek to improve the overall image of privatization with a public that is generally uninformed, or misinformed, about its goals and purpose; the campaign would strive to  Page 25 engage key target groups in productive dialogue that would address their concerns, strive to build consensus, and establish two-way communication between these groups and the Governnent. Bank support will help engage international consultants who will work with Nigerien counterparts to build the capacity of the Privatization Agency and the Government to conduct communications campaigns on their own, to conduct both quantitative and qualitative opinion research, and to assist with a comprehensive program of public outreach and consensus-building activities designed to educate, inform and build consensus around privatization. c) Staff Retrenchment Program (US$4.8 Million) A major issue to be addressed by the project is the social dimension of the PE reform. Most of the PEs are overstaffed and require a retrenchment program in order to become competitive and attractive to investors. The program could experience delays if there is lack of resources and solutions to facilitate the reduction in staffing resulting from privatization and private participation in infrastructure. Based on previous studies, it is estimated that the current level of overstaffing is around 1,000 employees. A study to be financed under the PPF will be carried out by the GON, to determine the exact number and to physical identify employees involved in the retrenchment program. In addition, the study will examine the extent to which voluntary departure could be used so that involuntary departures are minimized. The study will also propose the modalities for implementing a set of options to assist in the redeployment of the employees. The project will finance the severance payments conforming with the guidelines defined in the operational memorandum dated March 5, 1996. More specifically, it would finance: (i) minimum retrenchment benefits for involuntary separation, as defined in the Labor Code and Collective Bargaining Agreements, and salaries in arrears for these employees at the time of separation; and (ii) an incentive scheme for early retirement for employees at least 50 years of age. In addition, the operation will finance specific schemes to facilitate the re-absorption of laid-off workers into the economy. It will assist employees in creating their own enterprises, as well as employees seeking new jobs. All activities will be contracted to private consultants and will be supervised by the Privatization Agency within the Ministry of Finance. These activities will include: (i) support for job search, (ii) training for small and micro-entrepreneurs and (iii) assistance in business support services to facilitate financing of viable projects of laid-off employees. Implementation Arrangements. The findings of the study will be instrumental in the implementation of this component. Payrments will be made on the basis of a summary table per enterprise reviewed by the Privatization Agency to ensure that the guidelines of the retrenchment manual guidelines are adequately applied. A specific coordination unit under the agency will be set up in order to monitor the Staff Retrenchment P'rogram. Eighteen to twenty-four months after the completion of the retrenchment program, a tracer study will be launched to assess the progress and welfare of the laid-off employees. d) Project Management (US$1.2 Million) The Privatization Agency, located within the Ministry of Finance, Economy and Privatization, will ensure coordination cf the various activities under the project. The project will finance consultants and equipment. An independent accountant, recruited internationally, will set up the financial management systems and procedures required for the project that are acceptable to IDA. The accountant will specifically review the actual financial procedures in use at both the Ministry of Finance and the Privatization Agency, and implement procedures acceptable to IDA. His scope of work will include: establishing the proper accounting systems, budgeting mechanisms, reporting procedures and internal  Page 26 controls for this project. An independent accounting firm acceptable to IDA will be hired independently to carry out biannual audits of the project accounts. Proiect Comnonent 2 - Privatization and Reform of the Infrastructure Sectors: (Telecommunications. Water and Electricity) (US$7.8 million) The second component will finance privatization or private sector participation in the key utilities sectors (telecommunications, water and electricity) and will provide experts to complete the accompanying technical studies, policy revisions and regulatory reforms. a) Communications Sector (US$2.8 Million) This component will support the Government's reform of the telecommunications sector and the associated reforms of the postal sector and the postal savings institution, as well the privatization of SONITEL, the public telecommunications company. More specifically, it will provide technical assistance in three inter-related areas: (i) privatization of SONITEL; (ii) revision and development of the regulatory framework; (iii) preparation of a diagnostic study on the postal sector and the postal savings institution; and (iv) establishment of a frequency management system. (i) Privatization of SONITEL. The Project will fund the Financial and Legal Advisors to prepare and execute the sale of at least 50% of SONITEL shares to a strategic investor. The tasks of the Financial and Legal Advisors will include the following: (i) financial audit of the accounts of SONITEL and review of the corporatization process of SONITEL; (ii) initial valuation of the company using Discounted Cashflow (DCF), Net Book Value and comparisons with other similar transaction; (iii) completion of the detailed privatization strategy for SONITEL; (iv) marketing of the investment opportunity to potential investors; (v) definition of pre-qualification criteria; (vi) preparation of Information Memorandum, bidding package and other documents necessary to complete the transaction; and (vii) assistance to GON in the evaluation of bids and negotiations. (ii) Revision and Development of the Regulatory Framework. In order to accelerate the development of the telecommunications sector in Niger, the Government is committed to liberalize the market and to introduce private sector participation in the sector. The project will fund the elaboration of the sector strategy and the needed updating and revision of the regulatory framework. The Regulatory Consultants would assist the GON in: (i) completion of the mid- and long-term competition policy for the sector including a decision, if any on SONITEL's exclusivity period as monopoly provider of basic voice services; (ii) preparation of an interconnection regime and licensing documents adapted to the Nigerien environment; (iii) definition of future tariff policy, including tariff formula and tariff re- balancing; (iv) determination of the future minimum service quality targets and investment roll-out program; and (v) revision of the current institutional arrangements for telecommunications regulation separating the role of policy-making from that of monitoring the service performance of the operator which will be performed by an autonomous regulator. The regulatory consultants will also give concrete recommendations to the Government regarding measures to be taken to promote the expansion of services to rural areas. The project will fund training of Nigerien officials on regulatory issues and potential twinning arrangements. (iii) Diagnostic study of the postal sector and the postal savings institution. Historically the postal sector in Niger has been closely linked operationally to the telecommunications sector. The Project will fund diagnostic studies identifying and evaluating viable future options for the postal sector as a whole, and for the postal savings institution in particular. The diagnostic study will provide the GON the basis to make the required decisions on the required reforms of the postal sector.  Page 27 (iv) Establishment of a Frequency Management System. The electromagnetic spectrum is a scarce physical resource, wvhose efficient allocation is essential if a country is to take full advantage of new radio-based technologies in telecommunications service provision. This component will finance an initial audit of the current system, and the establishment of a national plan for spectrum management. Under the project, detailed regulations related to allocation of the use of radiospectrum will be developed, equipment purchased, the auction processes designed, and technical assistance provided for the auctioning process and the preparation of a frequency register. b) Water Sector (US$2.8 Million) The project will finance the preparation of a lease contract for private management of the urban water system in Niger, and will provide funds for experts to assist in the revision of the regulatory framework for the water sector. The project will cover required technical studies related to the privatization transaction and the revision of the sector policy. (i) Private Sector Participation in Urban Water Services. The project will fund consultants to implement the lease transaction for SNE's urban centers. The Government has decided that only by increasing the operational autonomy of the operator will the water services be improved. The consultants will prepare the bidding package and all the necessary documents to complete the transaction, pre-qualify the bidders, and assist in contract negotiations and closure of the transaction. The consultants will, in particular, assist the GON in the specific features of the lease contract to define the allocation of risks between the private operator and the state, establish detailed and explicit formulas regarding the remuneration of the operator, clarify the responsibilities of the operator, and in consultation with the GON determine the minimum performance targets and the sanctions for non- performance. The accountants will also undertake an audit of the SNE accounts, assets and real estate, and verify the inventory. The financial consultants will be hired to prepare a financial model of the estimated future cashflows of the company, in order to complete the opening balance sheet for the water company. Lawyers will be hired to finalize the revised statues of SNE. (ii) Revision of the Regulatory Framework for the Sector. The project will fund the review of and suggest revisions to the institutional arrangements in the sector. The responsibilities of the Ministry, the regulator and the operator will need to be clarified in detail. The establishment of an effective regulatory mechanism to address disputes and monitor the performance of the private operator will be required. Analytical work will be funded to propose a revision of the tariff structure and a mechanism for obtaining cost-recovery in the sector. (iii) Technical and Financial Studies. The project will fund technical and financial studies that will be required to determine the adequate and detailed performance indicators for the private operator, and to define the level of rehabilitation costs and investments to be financed by the operator. Studies detailing the future investment requirement within the sector will be included in the project, together with feasibility studies for introducing private sector participation in the rural areas. c) Electricity (US$2.2 Million) This component will support the Government's electricity sector reform, in particular the privatization of NIGELEC, the public electricity company. It will provide technical and pilot activities in four areas: (i) privatization of Nigelec; (ii) development and implementation of a new regulatory framework; (iii) pilot activities and development of the decentralized provision of electricity services; and (iv) studies and training.  Page 28 (i} Privatization of Nigelec. The project will fund the financial and technical advisors required to finalize the new institutional set-up and to select a private investor for taking over the management of the sector and the financing of rehabilitation and of new investment. The tasks of the financial and technical advisors will include: (i) preparation of investment plans and of performance improvement strategy; (ii) a proposal for the most appropriate institutional set-up for the sector; (iii) financial projections indicating the conditions for the financial viability of the sector; (iv) marketing of the investrnent opportnity to potential investors; (v) preparation of the information memorandum, the bid package and of all information required to select investors; and (vi) assistance to GON during bids evaluation and during negotiations. {ii) Development and Implementation of a New Regulatory Framework. In order to interest investors and improve performance of the sector, GON is committed to develop and implement a new regulatory framework. The project will fund the preparation, approval and implementation of such new regulatory framework. Regulatory consultants will assist GON in: (i) defining the respective functions of the private and public entities participating in the sector; (ii) preparing a new law and all the implementing documentation; (iii) delivering information to the interest parties on the new framework; and (iv) building domestic capacities to implement the new regulatory framework. (iii) Development of Access to Electricity in Rural Areas . The project will also fund pilot activities to test delivery mechanisms and financing instruments for the provision of electricity in rural areas. This component will: (i) finance an assessment of the willingness to pay for decentralized electricity services, with a view to assess market potential; and (ii) implement pilot activities to test maintenance, after-sales services and financial systems necessary for sustainable solutions. (iv) Studies and Training. This component will finance studies: (i) assessing the most appropriate generating and transmission options for Niger; (ii) assessing alternative distribution technologies, such as prepayment metering; and (iii) building public sector capacity in the areas of pricing regulations and environment.  ANNEX 5: NIGER PRIVATIZATION AND REGULATORY REFORM TECHNICAL ASSISTANCE PROJECT Page 29 Project Implementation Plan of the Government of Niger 1l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I I) Institutional Capacity for Executing the Institutional framework for privatization designed Privatization and Regulatory Reform Program in collaboration with the World Bank (WB) Establish a legal framework for the Cellule de 1996 Procurement specialists reviewed the financial Coordination du Programme de Privatisation (CCPP) systems of the agency .W...1a W: z CouriaLto, an expeCCerced IesideLLtAuvIsVi, 1997-Marcn i998 wt reviewed the TORs and qualifications of the and transaction managers ._ _ staff Train staff on privatization techniques 1997-1998 2) Public Information Campaign Hire a communications specialist to the CCPP March 1998- WB reviewed the TORs Design the overall communications strategy May 1998 Draft TORs for a communications campaign May 1998 In collaboration with the WB Issue Request for a Proposal (RFP) for a July 1998 communications firm to assist the CCPP in implementation Launch the communications campaign November 1998 Organize workshops to target groups on the privatization program --water sector reforms June-August 1997 . . --other sectoral reforms September-December 1998 3) Social Plan Define the main parameters of the Social Plan to be June 1998 Submitted to the WB in June 1998 including a adopted for redundant workers training and financial component Mobilize consultants to assist the GON in September 1998 implementation Implement the Social Plan: Training and redundancy 1998-2000 packages for retrenched workers 4) Privatization of SONITEL and Sector Reforms in the Communications Sector 4a) Privatization of SONITEL: Decide modality for private sector participation 1997 GON Decision: Sale of majority shares Complete corporatization of SONITEL February 1997 Cornplete TORs for Financial Advisors (FA) March 1998 Prepared in collaboration with the WB Issue RFPs (Request for Proposal) for recruitment of March 1998 Financial Advisors  ANNEX 5: NIGER PRIVATIZATION AND REGULATORY REFORM TECHNICAL ASSISTANCE PROJECT Page 30 Project Implementation Plan of the Government of Niger Select winning firm of FA June 1998 Mobilize Team of FA .September 1998 First draft of detailed privatization implementation plan October 1998 Issue Information Memorandum May 1999 Issue complete Bidding Documents for investors June 1999 Select winning bidder September 1999 4b) Sector Reforms in the Communications Sector: (i) Regulatory Framework for Telecommunications Sector: Complete TORs for the Regulatory Advisors February 1998 Prepared in collaboration with the WB Issue RFPs for recruitment of Regulatory Advisors April 1998 Select winning firm of Regulatory Advisors June 1998 Mobilize Team of Regulatory Advisors June 1998 Draft on mid- and long-term competition policy November 1998 Studies on interconnection, licensing and tariff regime December 1998 Final report on regulatory framework for February 1999 telecommunications sector (ii) Frequency Management System: Audit of frequency management system 1999 Establish a national plan for spectrum management 2000 (iii) Postal Sector Strategy Studies: Diagnostic study on postal sector and postal savings November 1998 institution 5) Privatization of SNE and Sector Reforms in the Water Sector 5a) Privatization of SNE and Sector Reforms: Decide modality for private sector participation 1997 GON decision: lease with some investment obligations by private operator Complete TORs for Transaction Advisors May 1998 Prepared in collaboration with the WB Issue RFPs for finns of Advisors May 1998 Select winning Advisory Firmn August 1998 Mobilize Advisory Firm Team September 1998 Detailed private sector participation implementation . November 1998  ANNEX 5: NIGER PRIVATIZATION AND REGULATORY REFORM TECHNICAL ASSISTANCE PROJECT Page 31 Project Implementation Plan of the Government of Niger plan issued __ . Determine minimum performance targets for the December 1998 operator and other contractual details Issue Information Memorandum July 1999 = _ Issue Bidding Documents September 1999 Select winning bidder November 1999 5b) Technical and Financial Studies: Technical studies on performance indicators _ November 1998 Jointly with GTZ & CFD' Review institutional arrangements for the sector October 1998 Tariff Study completed November 1998 Jointly with GTZ & CFD 6) Privatization of NIGELEC and Sector Reforms in the Electricity Sector: _ 6a) Privatization of NIGELEC: Decide privatization modality 1997 GON decision: Concession Complete TORs for Financial Advisors (FA) March 1998 Prepared in collaboration with the WB Issue RFPs for FA May 1998 Select winning firm of FA July 1998 Mobilize FA Team September 1998 Detailed privatization implementation plan November 1998 Issue Information Memorandum April 1999 Issue Bidding Documents June 1999 Select winning bidder September 1999 6b) Regulatory Reforms in the Electricity Sector: Complete TORs for Regulatory Advisors March 1998 Issue RFPs for Regulatory Advisors May 1998 Select winning firm July 1998 Mobilize Team of Regulatory Advisors September 1998 First Progress Report by Regulatory Advisors November 1998 Complete report on regulatory framework for electricity April 1999 sector issued 6c) Access to Electricity in Rural Areas: ___ Study on willingness & ability to pay for services 1999 The German and French bi-lateral development agencies respectively  ANNEX 5: NIGER PRIVATIZATION AND REGULATORY REFORM TECHNICAL ASSISTANCE PROJECT Page 32 Project Implementation Plan of the Govemment of Niger IpeetPilot Programs 2000 6d) Technical Studies: Technical studies assessing most appropriate 2000 generating and transmission options for Niger Studies on alternative distribution technologies 2000 7) Privatization of SONIDEP Petroleum distribution PE Decide privatization modality for private sector 1997 The GON committed to: (i) Liberalize imports; participation in the petroleum distribution sector and (ii) revise regulatory framework; (iii) create a for SONIDEP private-sector management company for distribution; (iv) transform SONIDEP to a marketing company. Reach an agreement between the GON and the private 1997 A Memorandum of Understanding between the oil companies on the privatization strategy parties has been signed Complete technical studies on the role of the private Initiated in January October 1998 depots, legal documentation and financial restructuring 1998 of SONIDEP Negotiations between the GON and the oil companies January 1999 -February _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 19 9 9 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Transfer management of petroleum depots to private March 1999 sector 8) Privatization of the Commercial Enterprises _ 8a) Privatization of SPEHG: Company operates a hotel Complete TOR for FA March 1998 Prepared in collaboration with WB Privatization completed 1999 8b) Privatization of Abattoir: Company active in slaughtering operations in .___ ____ ____ ____ ____ ____ ____ ____ ____ ____ _______N iam ey Complete TOR for FA August 1997 Revise privatization strategy May 1998 Earlier attempts to privatize in February 1998 through open and transparent competitive bidding did not result in sufficient response from private investors - need to revise privatization strategy Complete privatization transaction Dec. 1998 8c) Privatization of RINI and OFEDES: Small PEs operating in the agricultural water  ANNEX 5: NIGER PRIVATIZATION AND REGULATORY REFORM TECHNICAL ASSISTANCE PROJECT Page 33 Project Implementation Plan of the Government of Niger supply sector Complete privatization transaction on RINI and 1998-1999 OFEDES 8d) Privatization of OLANI and SNC: -OLAN1- diary company -SNC - cement company -Transparent and competitive bidding process. .________________ ________________________ -Investors signed contract and paid. Close privatization transaction on OLANI May 1998 Close privatization transaction on SNC July 1998  Page 34 Annex 6 Niger Privatization and Regulatory Reform Technical Assistance Project Estimated Project Costs Proiect Comnonent Local Foreign Total ------US $ million------------------- 1. Capacity Building & Support to the Program 6.11 3.68 9.79 Implementation: 1.1. Institutional Strengthening of the CCPP 1.11 2.17 3.28 1.2. Public Information Campaign 0.30 0.20 0.50 1.3. Retrenchment Program 4.60 0.21 4.81 1.4. Project Management 0.10 0.60 0.70 2. Privatization & Reform of the Infrastructure Sectors: 0.35 7.46 7.81 2.1. Telecommunications 0.14 2.62 2.76 - Privatization of SONITEL 0.05 0.95 1.00 - Revision & Development of Regulatory Framework 0.06 0.50 0.56 - Diagnostic Studies on the Postal Sector 0.03 0.17 0.20 - Establishment of a frequency management system 0.00 1.00 1.00 2.2. Water 0.16 2.64 2.80 - Privatization of SNE 0.00 1.40 1.40 - Preparation of the Water Sector Investment Program 0.06 0.84 0.90 - Revision & Development of Regulatory Framework 0.10 0.40 0.50 2.3. Electricity 0.05 2.20 2.25 - Privatization of NIGELEC 0.00 1.20 1.20 - Sectoral Studies, Pilots, and Training 0.00 0.65 0.65 - Revision & Development of Regulatory Framework 0.05 0.35 0.40 Total 6.46 11.14 17.60 Total Baseline Cost Physical & Price Contingencies 0.30 0.70 1.00 Total Project Cost 6.76 11.84 18.60  Page 35 Annex 7 Niger Privatization and Regulatory Reform Technical Assistance Project Summary of Potential Benefits and Costs of Large Enterprise Privatizations Economy:_ * incremental value adlded yes yes yes yes yes * promote investment in new yes yes yes yes yes facilities _ m assist budget through fiscal savings or increased yes yes yes yes yes revenues * promote foreign direct yes yes yes yes yes investment * contribute positively to yes no yes yes yes balance of payments * increase share of local yes no no no no private sector * raise enterprise efficiency and effectiveness yes yes yes yes yes * Consumers: * improve services yes yes yes yes yes * increase choice yes no yes no no * improve safety/environment yes yes yes yes * maintain or reduce prices yes yes yes yes yes Workers: * increase productivity yes yes yes yes yes * improve working conditions yes yes yes yes yes Investors * increase enterprise value yes yes yes yes yes  Page 36 Annex 8 Niger Privatization and Regulatory Reform Technical Assistance Project Economic Analysis of Overall Project I. Recent Macro-Economic Developments 0.1 Niger's overall macroeconomic framework environment continues to be fragile. Despite political and social tensions, the Government of Niger (GON) initiated, in 1996, a structural adjustment program, aimed at restoring sustained growth and achieving a viable external position. The results have been encouraging as real GDP grew by an average 3.6 percent per annum since 1994. The sluggish real GDP growth is mainly due to its sensitiveness to changes in weather conditions, underscoring the need for diversification. Domestic saving has recovered since 1995, essentially driven by gradual improvements in government's financial position that reflect enhanced revenue collection and tight expenditure policies. Government revenues increased to 7.8 percent of GDP in 1996, and 8 percent of GDP in 1997. The improved revenue performance is attributable to the measures implemented over the past two years to strengthen customs and tax administration, enforce existing tax laws, and reduce tax fraud. On the expenditure side, the wage bill was cut by 33 percent in 1996, and a new salary scale was adopted in February 1997 that reduces base wages and the housing allowance. Recruitment of personnel has also been kept broadly in line with the number of retirees, with the priority given for hirings in education and health sectors. Stricter control of the wage bill and reductions in transfers have allowed the reallocation of public expenditures in favor of the priority areas of primary education, basic health care and road maintenance. Moreover, the external current account deficit (excluding official transfers) has fallen from about 14.5 percent of GDP in 1994 to under 9 percent in 1996. 0.2 Structural reforms recently implemented by GON include: (i) the completion of the civil service census to create a unified civil service database (personnel and payroll) and elimination of ghost workers and irregularities in allowances; (ii) the establishment of a mechanism for taxing government procurement contracts through the issuance of special Treasury checks; (iii) the opening of new tax collection offices in Niamey, and the introduction of a single taxpayer identification number; and (iv) simplification of the property tax system. However, the constraints to growth and poverty reduction are daunting due to a harsh natural environment and poor resource base, weak human resource development, high population growth, and an unstable political situation. Private Sector Development 0.3 The private sector in Niger is rather small' and it is characterized by small traditional enterprises fully-owned by Nigeriens. There are few joint ventures with foreigners - the majority with French nationals - in the trade sector. With few exceptions the levels of investment level in the private firms is quite modest. This is mainly due to the fact that the modern sector has been in decline since the early 1980s, with a negative foreign investment created by the withdrawal of a 'It is estimated that 70 firms operate in the formal sector, of which 10 are large ones operating in Niamey.  Page 37 few international comipanies from the country. Further difficulties are produced by the long border with Nigeria in the south, which is permeable to illicit trading. The formal private sector tends to employ a low number of permanent employees even by African standards' (average number of employees is around 27 employees per firm). The formal private sector employs around 8,400 people of which 20 percent are women. Due to the cultural tradition and the nature of the production system, the employment of women in the formal sector is very low. As a result, the informal sector has been playing a crucial role for the economically active labor force in various trading activities and in the production of goods and services (e.g. metal cooking stoves and other products). Employment in the informal sector has increased significantly with an estimated 300,000 employees of'which two-thirds are in the capital city, Niamey. The annual growth rate of the informal sector employment between 1988 and 1995 has been estimated at 5 percent. 0.4 As stated in the Country Assistance Strategy (CAS) of 1997 for Niger, the Bank would support private sectoir growth through non-lending services, pilot operations, and infrastructure investment designed to reduce the obstacles to private investment. Increased analytical work and related non-lending services would focus on regional economic linkages, increased public-private consultation, potential growth in the mining and petroleum sectors, and actions to improve the business climate, including judicial reform. Lending would include pilot operations to help entrepreneurs such as the recent Private Irrigation Project and continued support for privatization. Infrastructure investment lending would support state divestiture in the transport and utilities sectors while providing and maintaining basic infrastructure, particularly in the road sector, where private financing is not available. II. Cost-Benefit Analysis of the Overall Project 0.5 Methodology. Undertaking the project is a resource allocation decision which would not only create economic benefits but also deprive other socially desirable programs of resources. It creates opportunity costs in terms of foregone social and economic services. The economic cost- benefit analysis approach provides a rational framework for analyzing the potential net benefits. Alternative analytical tools, such as Cost-Effectiveness analysis or Cost-Utility analysis have their limitations in elucidating the net socio-economic benefits of a project of this nature. The cost- benefit analysis concentrates on identification and measurement problems that are encountered in all project evaluations. Therefore, to address the identification issue for the project costs and benefits, only direct amd indirect incremental impacts on the Government and society of Niger were considered. The welfare gains and losses were estimated by using net change in average economic output price. Where explicit prices were not available, and or non-indicative of true socioeconomic cost and benefits, indicative proxies have been applied. The evaluation was done in terms of economic cash flow analysis which was developed from the financial cash flow of the project. Recognition was given to the fact that not all economic costs and benefits are measurable in monetary terms. l The average number of employees per firm in the formal sector across Africa is 50. In Senegal, the average is 44 while in Niger it is 27.  Page 38 0.6 Most of the expected benefits would occur in the medium term since the project is expected to facilitate essentially institutional development in both public and private sectors. The identified indirect benefits were quantified to obtain their monetary values because no direct cost recovery mechanisms have been built into the project. Monetary values inputted to the indirect benefits represents measurable gains from additional income generated from newly created jobs, economic efficiency from reduction in factor costs and consumer surplus'. Furthermore, expected non-monetized benefits from the project include improved management, changes in quality and quantity of services, conducive business environment, changes in poverty alleviation and social distress. Non cash flow financial values such as amortization charges, sunk costs for physical requirements, and the debt service obligations were considered only in relation to fiscal impact of the project. 0.7 Cost-benefit analysis was done for the overall project.2 The evaluation was done in a cost- benefit analysis framework that determined the economic rate of return and net present value.3 The distributive aspect of the benefits have been analyzed by identifying the project beneficiaries. It should be noted that it has been difficult to deal with inter-firm linkages and inter-industry dependencies within the PE sector. The utilities have accrued benefits from monopoly charges to other PEs and indirectly provided short term financing in form of large receivable accounts (arrears). It would be difficult to include such costs in the economic analysis. 0.8 Assumptions: The assumptions made for the EA are as follows: (1) that GON is genuinely and continuously committed to PE sector reform. To prove this GON has already established an appropriate institutional framework, privatized OLANI and SNC, and built capacity for implementation of the reforms required by the project; (2) that GON will continue with its prudent macroeconomics policies to stabilize its economic environment; (i) that the private sector - both local and foreign investors - will respond positively to the reforns for the benefits to materialize. GON has instituted an open and on-going dialogue with interested and affected parties and the private sector to ensure that this participation is maximized; (ii) that the project would develop a market friendly and competitive environment because of the new regulatory framework which would help to attract foreign capital, technology, and managerial expertise required to improve the efficiency of the sectors and their value added contributions to the country's GDP. (iii) that the existing prices in the economy are market determined. Therefore, it has been assumed that the shadow wage rate is zero because of the high unemployment levels in the labor market. 'See Appendix: 4A which illustrate quantification of the benefits. 2In addition, a separate economic analysis was conducted for the retrenchment program and the results have been incorporated in the Overall Project analysis. 3 See Table 4A -1. Economic Analysis for the Overall Project. Base case Scenario.  Page 39 0.9 Project Costs. Total project costs have been estimated at US$ 20 million. They include transaction costs for restructuring and privatization, retrenchment costs, regulatory agency establishment costs and operating costs. GON's contribution is estimated at 10 percent of total project costs. To accommodate unforeseen expenses and in-built flexibility in the use or allocation of funds, a 5 percent contingency fund has been included. Table 1. Project Costs by Component (US $ million) Project Component Total' 1. Capacity Building & Support to the 11.52 Implementation Program 2. Privaitization and Reform of the 9.08 Infrastructure Sectors Total Project Cost 20.60 2 0.10 Project Benefits. The economic effects of privatization are normally estimated using ex ante version of partial equilibrium analysis developed by Jones, Tandon and Vogelsang which is emerging as the leacding analytical approach in the analysis of divestitures since 1980s3. The method comprises the development of projections for the flows generated by a firm in the case of continued public ownership within public sector which serves as a project alternative to the estimated flows from private operation following privatization. The present value of the difference between the two cases provides an estimate of the change in benefits accruing to the society as the result of privatization. This method is applicable only if the historical data on the performance and other institutional changes of the firm are available. In addition, the post privatization projections would also require some form of creativity in adaptations to simplify the evaluation. In this case, the economic analysis did not evaluate the increased value of the privatized enterprises to the Nigerien society as a benefit. Instead, four other major economic benefits were identified and quantified as follows: a) Benefits from Newly Created Employment Opportunities in the private sector. The GON as the largest employer represents 66 percent of formal sector employment. The PE sector employs 17.9 percent of the fornnal sector employment (1996). With privatization, the private sector employment share is expected to increase from 18 percent of the formal sector to about 35 percent in five years. With the newly created jobs, incremental income will be generated and has been estimated on the basis of expected additional job creation due to new investment and increased demand for services. b) Benefits in Productivity and Output: Gains are expected from higher total factor productivity, resulting from expected changes in work ethics, training, better management, better equipment and new 'These figures are not d,iscounted and include GON contributions. 2Discounted costs amount to $18.4 million 3 See for further details: Jones, Leroy, Pankaj Tandon and Ingo Vogelsang. 1990. Selling Public Enterprises: A Cost Benefit Methodology. Cambridge MA: MIT Press.  Page 40 technology, as well as job-loss savings generated by PE restructuring. c) Consumer Surplus (Gains in Price and Tarifl): Benefits to the consumer are expected in the form of adjusted price/tariffs and improved service quality, wider coverage due to competition and private sector involvement. Only benefits from estimated reduced prices have been quantified for the analysis. d) Benefits from the Retrenchment Program include the additional contribution to the economy that the workers will be able to make (a) by working where there is an effective demand for their services, and or (b) by developing their own economic activities, and (c) through cost savings from the PE restructuring program referred as "loss of current wages ". (see Section IV). Table 2. Projected Economic Benefits 1998-2007 (US $ million) Economic Benefits Total Overall Project' A. Benefits from newly created Employment 3.0 Opportunities B. Benefits from Productivity & Output 27.2 C. Consumer Surplus (Gains in Price/Tariff) 4.0 D. Benefits from Retrenchment Program 8.3 TOTAL 42.5 0.11 Target groups. Key target groups have been identified and include: a) Consumers would gain about US $ 10.0 million . The sources of benefits (consumer surplus) include expected adjustments in tariffs, expected increases in access to utilities services, expected elimination of waste, expedited accounts receivable collection and productivity gains. b) Retrenched employees would substantially benefit from the project's financial resources resulting in reduced social distress, anxiety and discomfort during the transition period. Through active support, the project would also generate more sustainable employment for the individuals who have opted to be self-employed. The severance packages would ensure family cohesiveness and eliminate the risk of family income falling below the poverty line. c) Employees remaining in the privatized enterprises and the restructured public enterprises would gain through increased welfare. This would be achieved either through employee share purchase plans and through new labor contracts, that normnally takes place after privatization. There could also be some increases in the average wage bill and welfare due to private enterprise productivity perforrnance, 'Discounted Benefits.  Page 41 training and additional employment opportunities. d) The private sector, including both local and foreign investors, whose investment opportunities have been restrained due to unfavorable business environment resulting from public enterprise monopoly power would benefit from removal of entry barriers and reduction in factor costs of production specifically in telecomnmunications, water and energy. This is shown on the economic benefit values on estimated increases in productivity and output. e) Small, Medium and Micro Enterprises would benefit from the project in the forn of conducive business environment. New businesses into the informal sector as small and micro enterprises would be assisted with support services, thus, freeing them from constraints encountered in the form of high factor costs of procluction and financial market distortions. Growth in the private sector is thus, expected to generate employment opportunities to further alleviate the social costs of unemployment. These economic benefits are reflected in the estimated benefits from increased employment, productivity and outlput. f) The Government of Niger would benefit from the project through savings made through elimination of transfers to the PE sector of equivalent to US$ 6.6 million per annum'. At the end of the project, the extensive privatization program - including utilities in electricity, water and telephone sectors - will result in a reduced size of the public enterprise sector by 30 percent. Thus, reflecting a dramatic decline in the role of the state. 0.12 Base Case Results. The net present value of the project is estimated at about US $24.2 million for a 12 percent discount rate, and its internal economic rate of return is estimated at 28.7 percent. The net present value of the project varies from about US$ 30.3 million to US$ 13.2 million for discount rates of 10 percent and 17 percent, respectively. See Table 3. Table 3. Base Case Results ERR (%) NPV ($ million) Overall Prcject at 12% 28.7 24.2 Overall Prcject at 10% 28.7 30.3 Overall Project at 17% 28.7 13.2 0.13 Sensitivity Analysis. Three sensitivity tests were carried out: (a) the first assumed that gains in productivity & output were half of the base case; (b) the second assumed that gains in productivity & output were half of the base case and zero employment growth (c) the third assumed a 0 realization on additional income from new employment opportunities, 50 percent reduction in Gains in Productivity & Output, a 50 percent reduction in consumer surplus, coupled with a 50 percent reduction on retrenchment benefits. The results are shown in Table 4. Table 4. Sensitivity Analysis 'Data from GON. The present value of the savings in transfers amounts to US$ 50.3 million.  Page 42 Benefits Base Sensitivity Sensitivity Sensitivity Case Analysis 1 Analysis 2 Analysis 2 Additional Income as estimated as estimated 0 growth 0 growth Gains in productivity as estimated -50% -50% -50% & Output Consumer Surplus as estimated as estimated as estimated -50% Retrenchment Benefits as estimated as estimated as estimated -50% ERR NPV ERR NPV ERR NPV ERR NPV (%) (Sm) (%) (Sm) (%) (Sm) (%) (Sm) Overall Project 28.7 24.2 20.1 10.6 18.2 7.5 13.2 1.9 They show an ERR at 20.1 percent and a NPV at $ 10.6 million, an ERR at 18.2 percent and a NPV at $ 7.5 million, and an ERR at 13.2 percent and a NPV at $ 1.9 million respectively. This table demonstrates that this project produces robust results. The payback period is 7 years and the NPV is zero when the ERR is at 8 percent. 0.14 In addition, the project will generate over a $ 57.2 million of savings in public finance in the form of resource allocation efficiency. These savings are expected to come from significant reduction in transfers and capital investments to public enterprises (US$ 50.3 million), and increase in corporate and other tax gains from privatized and new firms (US$ 6.8 million). The PE sector today is characterized by poor financial management and with high level of interlocking arrears, estimated as high as CFAF 19.3 billion at the end of 1997 (see Table 5. below). The project would reduce government fiscal burden and free resources for new investment in the social sectors. Additional fiscal impact will be derived from the net sales of the public enterprises. Table 5: Financial Status of the Largest Public Enterprises (CFAF billion ) in 1997. Public Enterprise Arrears vis-a-vis the GON Long Term Debt NIGELEC 3.9 7.2 SONITEL 11.9 1.2 SNE 3.5 0.2 Total 19.3 8.6 Source: June 1998 . Ministry of Finance, Economy and Privatization. Not yet published data. 0.15 Useful performance indicators that GON could use to verify improvement in performance of privatized enterprises and realization of the expected benefits are: (a) private profitability, which measures the bottom line for private shareholders. This is influenced by prices as well as quantities, thus increases in output; (b) total factor productivity, which removes price effects to  Page 43 show what happens to productivity. This is derived by measuring the index of quantity of output to the index of the quantity of inputs, in particular labor productivity; and (c) investment, which shows the dynamic effect of privatization over a longer period of time. This is measured by fixed capitalformation in the enterprises. It is therefore crucial for GON to pay attention to what they are selling, to whom they are selling and how the sale is conducted especially in the financing of the transaction. The Privatization and Regulatory Reform TA project will assist GON to meet these challenges. m. Staff Retrenchment Program Economic Analysis Introduction 0.16 The privatization efforts in Niger in the 1980s were not successful due to: (i) lack of perceived transparency of the transactions; (ii) poor capacity to implement and manage the program, (iii) poor irnformation dissemination regarding the privatization divestitures; and (iv) insufficient resources allocated to meet severance pay to retrenched workers. During the early 1990s the PE sector employment was reduced by 20 percent, and a result the PE sector had only 8,150 employees in 1996. 0.17 The GON has agreed to divest its holdings in eight public enterprises under the project. Implementation of the program will be carried out as outright privatization transactions for the smaller commercial enterprises, and concerning the introduction of private participation in the utilities sectors the following modalities will be used: (i) sale of shares (SONITEL- telecommunications); (ii) lease contracts (SNE-water); and (iii) concession contracts (NIGELEC- electricity). A major issue to be addressed under the program is the social dimension of PE reform. Most of the PEs are overstaffed and require restructuring and a retrenchment program to become competitive and attractive to potential investors. It is therefore, necessary, for the GON to implement a set of social measures aimed at mitigating the impact of layoffs under the privatization and restructuring program. Labor Market and Characteristics of Laid-off Employees 0.18 A detailed study is underway to identify the likely target groups to be laid off and possible remedial measures to be implemented, aimed at facilitating their re-absorption into the productive economy. 0.19 Labor Situation in Niger. The GON as the largest employer represents 65.9 percent of formal sector employment. The PE sector employs 17.9 percent of the formal sector employment in 1996. The mining sector has the largest share by employing 30 percent of the PE sector employees. This number has declined by 20% mainly due to reforms in the sector. The private sector employs 18.3 percent of the formal sector. Most non government jobs are found in the commerce, transport, tourism, service and trade sectors. Agriculture employs two thirds of the economically active labor force while the contribution of the informal sector in commerce is equally crucial. It is assumed that the privatized enterprises would be more vigilant about unit labor costs and factor productivity. The workers in Niger are guaranteed a minimum wage of  Page 44 CFAF 18,898 (US $30.00 per month). Wages in the private sector are estimated at an average of CFAF 50,000 (US $ 90.00 per month) which are normally more than 30 percent higher than that of the public sector and 50 percent lower than that of the public enterprises sector. In 1996, the GON revised its labor code to increase wage flexibility and labor mobility. 0.20 On the other hand, employment in the informal sector has increased significantly. It is estimated that the informal sector employs over 300,000 employees, including traders, craftsmen, etc., of which at least two-thirds are in the capital city. The annual growth rate between 1988 and 1995 has been estimated at 5 percent. 0.21 Key Characteristics of Employees. The study will review all PEs with specific attention to the 9 PEs identified for privatization. The study will provide information on those employees and PEs to be affected by the retrenchment program. The number is estimated at 1,000 employees (17.2 percent of the 9 PEs employees). The characteristics of the retrenched employees will be analyzed and the proposed safety net measures will be adjusted accordingly.' Proposed Retrenchment Program 0.22 The program would cover the following costs: (i) severance payments for all employees, and (ii) assistance for re-absorption in the productive sector, including job training, re-training of skills and business support services for micro and small enterprise development. (a) Severance Payments The program will finance indemnities to be paid to the laid-off employees. In principle this will cover all legal indemnities, in line with the Labor code and the collective agreement as stipulated in the Social Plan. The GON will negotiate with the laid-off employees to reach an affordable and reasonable severance pay. It is estimated that it will represent on average, 18 months of salary, with the minimum set at 12 months and the maximum 24 months salary. The package will cover indemnities of: (i) the daily, monthly and contract paid employees who will be served with an advance notice; (ii) leave not taken; (iii) salary arrears for days worked but not paid for. The program would also finance an early retirement scheme for employees who have three years or less left before retirement and are willing to go. This would include payment of: (a) legal indemnities as per labor law or negotiated package; ((b) pension premiums until the date of retirement will be paid by the enterprise; and (c) social security contributions until the date of retirement will be paid by the enterprise. The exact numbers will be determined by the forthcoming study. In addition, social safety net measures will be applied to finance limited coverage for a period of 6 months for the retrenched staff Provision of this service would be contracted out to an insurance company. 1 The number of those employees over 50 years of age will be determined and thus the cost of their taking early retirement.  Page 45 b) Assistance to Economic Re-absorption All employees will be interviewed by a team of counselors and will prepare their assessment of their own achievements and capabilities. After the interviews and a thorough review of each case, candidates will be divided into two categories: potential entrepreneurs with a sound project and job seekers. The program will finance a scheme to assist entrepreneurs to develop their project. This would include: (i) specific training at the beginning, including assistance for the preparation of a business plan, and (ii) monitoring during the first years of implementation. It would also provide minimum training and outplacement services for employees seeking new jobs. Efforts will be made to ensure that the support provided complements other activities already existing through other donors'. Economic analysis 0.23 A cost benefit analysis has been carried out in order to assess the relevance of the program. It includes a, specific analysis of the retrenchment program and an analysis of the impact on the sectors involved. In conducting financial assessment of the program; the benefits and costs will be as follows: Financial benefits: - Financial Costs: - * Sale price of the privatized enterprises * Severance pay package * Present value of wages saved . Training costs * Present value of transfers saved * Other support services These financial benefits and costs have been taken as the starting point in analyzing the economic benefits and costs of the retrenchment program. 0.24 Methodology. The economic costs and benefits of the program are compared as follows: (a) costs cover both severance payments and redeployment costs, and (b) benefits include the additional contribution to the economy that the workers will be able to make by working where there is an effective demand for their services, or by developing their own economic activities. The sale price of the privatized enterprise and payments to the PEs saved have been considered as transfers and thus not included in the analysis. These benefits are considered in estimating fiscal impact of the project. Severance payments have been calculated on the basis of the collective bargaining agreements stipulated in the Social Plan which is to be applied to each economic sector. 0.25 Costs. The economic costs of the retrenchment program are given by the sum of the following items: 1) Severance payments (SP) 2) Early retirement payments (ER) 3) Outplacement costs to assist job seekers (OC) 4) Support to SMEs (SM) 5) Costs of administering the program (PC) UNDP and EU have programs that support on-the-job training and other forms of technical assistance.  Page 46 The marginal productivity value of privatized enterprise retrenched employees has not been included because the labor reduction does not affect remaining personnel ability to carry out current production levels. The marginal productivity value of the retrenched employees is equal to zero. The items (1) severance payments and (2) early retirement payments, have been considered as economic costs because there are budgetary constraints in Niger specifically when the GON is borrowing to finance these expenditures. Moreover, if these workers were to continue working these funds would not have had an opportunity cost. Instead they would have been considered as income-efficient transfers to the retrenched employees and thus not included in the cost-benefit analysis. The inclusion recognize the importance of the cost of public funds. The items (3), (4) and (5) have been included because they have an economic component in each of them that have altemative use of the resources. 0.26 Benefits. The benefits of redundancy reduction in each year are given by the: 1) Marginal productivity of laid-off employees elsewhere in the economy (PE) 2) Marginal revenues of laid-off employees creating their new enterprises (PSM) 3) Marginal productivity value of the forgone labor cost of privatized enterprises (LCW) The marginal productivity value of the retrenched employee (1) and (2) is the product of: (i) probability of the employee's engagement in another activity, which depends on the effectiveness of the training and assistance that the employee receives, by (ii) the net income produced by such activity. The activities could be new employment through replacement or self- employed activities. The marginal productivity value of the forgone labor cost of privatized enterprises represents (3) the opportunity cost of the outlays that will be saved by the program. These savings in labor costs can be used in investments in other sectors of Niger's economy. In the cost-benefit analysis they have been considered to be equivalent to foregone labor cost. However, a non-productivity indicator has been factored-in to reflect social factors that have reduce the levels of costs savings to society. l In the overall economic analysis of the project, the savings in labor costs have been translated in terms of reduction in the long-run marginal factor costs. This cost reduction is expected to increase the privatized enterprises competitiveness which would explain the improvement in the private sector contributions to economic growth. 0.27 Assumptions 2, The model identifies the employees that are likely to develop their own project and the ones that are likely to seek out new jobs (estimated at 85 percent and 15 percent respectively). These numbers are derived from the results of the pilot operation which analyzed the case of 300 employees in Togo where the percentages were 75 and 25 respectively, and have been adjusted to reflect the Niger labor market situation. It is assumed that the probability of finding new jobs within a period of one year is 10 percent while in Togo it is 15 percent. However, with the impact of the outplacement program, the probability of finding new jobs could go up to 38 percent. It is also assumed that the salary reduction would be about 50 percent as employees move to the private sector. This number has been obtained as an estimate from a rapid analysis of the formal private sector salary structure in Niger3. Finally, the probability of developing a privately-owned business successfully has been estimated at around 50 percent. ' See Appendix E for details. 2Based on neighboring pilot studies and experiences, in particular in Togo and Benin. 3 It is as low as 30 % in Togo, but equally high in other countries; e.g. Cape Verde 50% and Ecuador 40%.  Page 47 0.28 Results. The net present value (NPV) of the retrenchment program is estimated at US$ 3.3 million for a 12% discount rate and the internal econornic rate of return is estimated at 23.4 percent under the base case. This rate is sensitive to the revenues expected from self-owned businesses. If revenues from SMEs are assumed to be 50 percent less than expected, the estimated rate of return would be reduced to 18.4 percent. If the probability of successfully established enterprises increases to 70 percent the rate would increase to 27.3 percent. On the other hand, if the probability of finding jobs is increased to 38 percent, the estimated rate of return of the program would also increase modestly to 23.8 percent. Consequently, the program has been designed to focus prinmarily on support for the development of new entrepreneurs. 0.29 These results shows that the retrenchment program has a social value even under the most pessimistic assumptions. The social value does not come from the fact that the employees of privatized enterprises are retrenched, but rather on the fact that the retrenched employees can be better used in the other sectors of the economy where their demand has been identified, and from the specific efforts made to ensure that the quality of this labor force will be enhanced through training, on-the-job training and business support services. Moreover, it also shows that scarce public resources are b,etter utilized if the beneficiaries are targeted. 0.30 In addition, an analysis of the impact of the program for the sectors involved has been carried out and is included in the overall economic analysis of the project. Based on experience derived from the regional studies and previous privatization programs, the financial and operational information generated from the privatized, have suggested that labor productivity (i.e. revenue per employee) has increased by at least twice of that in public enterprise sector. It is, therefore, reasonable to expect that the project would have a significant impact on the sectors involved. Table 5: Niger - Cost and Benefits: NPV and ERR of the Retrenchment Program NPV ERR .... ................................................................................................................................................................................................................................................ 1. Base Case - 12% discount rate $ 3.3 million 23.4% 2. Sensitivity Analysis a. SME Revenues reduced by 50% $ 1.8 million 18.4 b. 70% chances of success for SMEs $ 4.5 million 27.3 c. Probability of finding job increases to 38% $ 3.4 million 23.8 d. Employe aes reduced by 50% $ 3.2 million 23.2  Pag 48 PUBLIC ENTERPRISE RESTRUCTURING AND PRIVATIZATION PROJECT COST- BENEFITANALYSIS Basecase Scenario (US S Thousands) COSTS BENEFITS Additional Income NET Generated from Gains In Consumer Retrenchment Cost or Employment Productivity & Gains In Program Benefit for the Year Project Costs Opportunities Output PricelTariffs Benefits vear 1 (9.787) C 2.358 - 1.223 (6,206) 2 (5.6361 a 2,931 577 1.223 (905) 3 (1,669) 1M53 3.145 795 1.223 3,646 4 (1.286) 3110 3.205 592 1.223 4,044 5 4172 3.464 536 1.223 5,695 6 480 3.751 638 1,223 6,091 7 . 653 4.066 713 1.223 6,654 8 666 4.413 846 1.223 7,148 9 686 4.704 558 1.223 7,171 10 883 5.127 614 1.223 7,847 11 . 909 5,593 676 1.223 8,401 12 937 6.107 743 1.223 9,010 13 965 6.674 818 1.223 9,679 14 994 7.298 899 1.223 10,414 15 1.024 7,987 989 1,223 _ 11.222 (18,378) 9,131 70,823 9,994 18,338 NPV (c 12% 24,214 _________________________________________ IRR 28.69% Assumptions: 1. Stable macroeconomics environment as projected in the CAS with real GDP growth averaging at 4.5%. 2. Additional capital investments from the private sector will be available for rehabilitation of equipment, new technology, training of staff that will boost capacity utilization and increase productivity. 3. Reduction in electricity, water, financial, telecommunication and postal losses will increase consumption of current output by 15%. Thus causing savings through reduction in tariffs and factor costs. 4. Capital Cost savings will be produced from reduction in intermediation costs, allocative efficiency and mobilization of additional savings from the informal financial sector. 6/29/98 18:58  Page 49 Annex 9 Niger Privatization and Regulatory Reform Technical Assistance Project Financial Summary Years Ending 2001 (In Millions of US$) Implementation Period Operational Period _ 1998 1999 2000 2001 Total Project Costs Investment Costs 3.37 5.95 4.45 1.49 15.25 Recurrent Costs (M) 0 89 0.992 082 0.6Q 3.5 Total 4.25 6.94 5.27 2.14 18.60 Financina Sources (% of total IBRD/IDA 89% 91% 91% 91% 90% Government 11% 2% 2% 2% IQ% Total 100% 100% 100% 100% 100% (*) Contingency costs of US$. 0 million included under recurrent costs.  Page 50 Annex 10 Niger Privatization and Regulatory Reform Technical Assistance Project Procurement and Disbursement Arrangements 1. Documents Procurement of consultants will be carried out according to the provisions of the "Guidelines for the Selection and Employment of Consultants by World Bank Borrowers" (January 1997 and revised September 1997), and procurement of goods and works according to the provisions of the "Guidelines for Procurement under IBRD Loans and IDA Credits" (January 1995, revised in January and August 1996). 2. Capacitv of the Implementinm Aeencv Contracts to supply goods and equipment, will be the responsibility of the implementing agency, the Cellule de Coordination du Programme de Privatisation (CCPP under supervision from the MOF. The CCPP shall use: (i) for International Competitive Bidding (ICB) the appropriate Standard Bidding Documents (SBDs) issued by the Bank, and (ii) for National Competitive Bidding (NCB), bidding documents acceptable to IDA. The CCPP shall also prepare a procurement plan for civil works, goods and consultant services/training. A member of the CCPP was selected in January 1998 and has completed a Bank-sponsored training program on procurement issues. She will be the person handling all procurement matters under World Bank guidelines, under the supervision from the Director of the CCPP. 3. Goods An amount of US$1.5 million has been allocated in this project for the purchase of computers, equipment, office supplies and a frequency management system (FMS) for the telecommunications company (SONITEL). * International Competitive Bidding procedures (ICB) shall be used for the purchase of goods that can be grouped into packages of at least US$ 100,000 each, up to an aggregate amount of US$1.4 million. * For goods that can be grouped into packages of US$100,000 or less, but that are over the equivalent of US$50,000, they shall be procured through NCB up to an aggregate amount of US$100,000. * For goods less than US$50,000 equivalent per contract, such as office supplies, consumables and spare parts, national shopping can be used to procure them up to an aggregate amount of US$40,000. 4. Consultants and trainin0workshovs Consultants services are estimated at US$10.54 million equivalent. They consist of both foreign and local technical assistance contracts, including contracts for audits, that will be procured under World Bank guidelines on the basis of established short-list of qualified firms or individuals agreed by the Bank. Consultant services will be procured under the following procedures: * For professionals to be recruited as local staff to the CCPP, Selection procedures based on Consultant's Qualifications (CQ) will be used, * For consultant services for local consulting firms and the auditing firrn, Quality- and Cost-Based Selection (QCBS) procedures will be used, * QCBS procedures will be used for recruitmnent of international firns or individuals for RINI, OFEDES, SPEHG, SONITEL, SNE, NIGELEC, as well as for the communications campaign advisors, the international advisors to the CCPP and the retrenchment specialists, and * For international consultants (individuals) to be recruited on SONIDEP (petroleum products), CQ procedures will be used.  Page 51 * Technical assistance contracts for training will be procured following Bank procedures on the basis of the establishment of shortlists of qualified firms or individuals agreed by the Bank. For seminars and trainings intended to ministries officials involved in the Project and CCPP staff, training institutions and programs shall be agreed by the B3ank. Complex time-based assignments and contracts will be based on the standard form of contract for consultants' services issued by the Bank. Where no relevant standard contract documents have been issued by the Bank, other standard forms acceptable to the Bank shall be used. The following Table A shows the procurement arrangements applicable to each expenditure category for this project. 5. Prior Review Prior review is required for: a) all terms of reference fDr consultants, studies, and contracts with consulting firms of an equivalent value of US$100,000 or more, b) contracts with individuals of an equivalent value of US$50,000 or more, c) terms of reference on contracts below US$100,000 for firms and below US$50,000 for individuals, d) all contracts for goods above US$50,000; e) all single source selection of individual consultants and firms. Requirements of prior review of all contracts for consulting services and goods are summarized in Table B. Table A: Project Costs by Procurement Arrangements (in US$ million equivalent) Expenditure Category Procurement Method Total Cost (incl. contingencies) ICB NCB Other N.B.F 1. Goods 1.400 0.100 0.040a' 0.000 1.540 (1.400) (0.100) (0.040) 0.000 (1.540) 2. Consultants 0.000 0.000 10.966b' 0.000 10.966 0.000 0.000 (10.966) 0.000 (10.966) 3. Retrenchment Benefits 0.000 0.000 4.600 c/ 0.000 4.600 0.000 0.000 (4.600) 0.000 (4.600) 4. Trainings/Workshops 0.000 0.000 1.330 0.000 1.330 0.000 0.000 (0.650) 0.000 (0.650) 5. Operating Costs 0.0 0.0 2.164 d 0.0 2.164 0.0 0.0 (0.844) 0.0 (0.844) Total Base Cost 1.400 0.100 18.500 0.0 20.60 (1.400) (0.100) (16.500) 0.0 (18.60) Note: a' Shopping procedures for office supplies, consumables and spare parts. b'Firms and individuals to be recruited on competitive bidding, based on Quality- and Cost-Based Selection,  Page 52 Quality-Based-Selection procedures or Selection Based on Consultants' Qualifications. Cl Retrenchment Benefits to be paid to laid-off employees from the State-Owned-Enterprises. dv Operating Costs include incremental operating cost incurred on account of project implementation, management and supervision, including office supplies, communication costs, travel allowance of project staff, but excluding salaries of the Borrower's civil service. Figures in parenthesis are the amounts to be financed by the Bank Credit/IDA credit. Table B: Thresholds for Procurement Methods and Prior Review (in US$ equivalent) Expenditure Category ICB NCB Other Prior Review by IDA 1. Goods US$100,000 US$50,000 and less than US$50,000 or more or more <USS100,000 USS50,000 First 2 NCB contracts, and all contracts above US$100,000 2. Consultants >US$200,000 US$100,000 -200,000 <US$100,000 All TORs, LOIs, short-lists, (firms) and (firms) and for firms and selection and draft contracts. >US$100,000 US$50,000-100,000 <US$50,000 (individuals) (individuals) for individuals All contracts for individuals. QCBS CQ QCBS T.Training, Seminars --Selection of candidates, training' 3.________________ Training,__ Seminars____ institutions and programs. 4. Retrenchment Costs. Summary Cost Table per entenprise 6. Monitorine and filin2 The CCPP is responsible for setting up monitoring and filing procedures in compliance with the DCA. 7. Post- Review All contracts not subject to the above thresholds will be subject to a post review. 8. Disbursement The Government through the CCPP wili request an initial disbursement to be deposited in the special account. The financial staff in the CCPP will make payments in local currency directly to the consultants and suppliers. All disbursement will be made for goods and services that are eligible for IDA financing. (a) Use of Statement of Expenses (SOEs): - Contracts of less than US$ 100,000 equivalent for goods, consulting firrns and retrenchment, - Contracts of less than US$50,000 equivalent for individuals, training, workshops, seminars, and operating costs, - SOEs supporting documentation will be retained by the CCPP for review by periodic Bank supervision tnissions and external auditors. (b) Special Account: - Authorized allocation of CFAF 150 million. - Initial deposit of CFAF 75 million in a comrnercial bank after effectiveness.  Page 53 - Replenishments will be submitted on a monthly basis. - Direct payment: minimum application amount above or equivalent to 20 percent of Account deposit. Disbursement Categories and the percentage financed are shown in Table C. Table C: Allocation of Credit Proceeds Expenditure Category Amount (US$ million) Financing Percentage 1. Equipment and goods 1.5 100% of foreign expenditures 85% of local expenditures 2. Consultants, studies, se:minars, audits & 9.9 100% of expenditures training 3. Retrenchment Costs 4.6 100% of expenditures 4. Incremental Operating Costs 0.6 90% of expenditures 5. PPF 2.0 Total 18.6  Page 54 Annex 11 Niger Privatization and Regulatory Reform Technical Assistance Project Project Processing Budget and Schedule A. Project Budget (US$) Planned Actual (At final PCD stage) US$250,000 US$280,000 B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) First Bank mission (identification) 08/30/1997 08/30/1997 Appraisal mission departure 04/18/1998 07/29/1998 Negotiations 04/22/1998 08/06/1998 Planned Date of Effectiveness 10/30/1998 Prepared by: Ministry of Finance, Economic Reform and Privatization Preparation assistance: PPF (US$2,000,000) Bank staff who worked on the project included: Name Specialty Heidi Mattila Task Team Leader (PSDPS) Jean-Christophe Ngo Privatization (PSDPS) Michel Layoc Power & Petroleum Sector (AFTGl) Mark Segal Power Sector (CPW) David Satola Telecommunications (LEGPS) Geoffiey Bergen Communications Strategy(EXTRO) Jan Janssens Water Sector (AFTU2) Penelope Brook-Cowen Water Sector (PSDPP) Paul Dossou-Yovo Communications Strategy(AFMNE) Ronald Kopicki Privatization Strategy (PSDPS) Gisele Magnon Operations (AFC13) Antonella Bassani Macroeconomics (AFTM4) Edward Brown Macroeconomics (AFMNE) Lucy Fye Economic Analysis (AFTP1) Ibrahim Amadou Privatization (AFMNE)  Page 55 Annex 12 Niger Privatization and Regulatory Reform Technical Assistance Project Documents in the Project File* A. Terms of References for Consultancy/Financial Advisory Services: -For Financial Advisors recruited for NIGELEC, SONITEL, SNE, SPEHG, Abattoir, SNC, OLANI privatization transactions -For Regulatory Advisors for NIGELEC, SONITEL and SNE transactions -For technical and privatization studies on SONIDEP B. Bank Staff Assessments - Aide-Memoire: 'Niger Privatization Mission, Jan. 22-Feb. 05, 1997 - Aide-Memoire: Niger Privatization Mission, July 22-30, 1997 - Project Concept Document, July 11, 1997 - Note technique: Niger Privatization Mission, June 01-06, 1998 -Aide-Memoire: Niger Appraisal Mission, June 26, 1998 C. Other - Proposed Privatization Law, November 1996 - Protocole d'Accord between the World Bank and the Government of Niger, January 1998 - Declaration de Politique Gn&rale (Draft) June 1998 *Including electronic files.  Pap 56 Annex 13 Statement of Loans and Credits Status of Bank Group Operations in Niger IBRD Credits and IDA Credits in the Operations Portfolio D,ffaucce Between expected Original Amount in USS Millions and actual Loan or Fiscal _ diburseme a/ Project ID Credit No. Year Borrower Purpose IBRD IDA Cancellations Undisbursed Orig Frm Rev'd Number of Closed Loans/credits: 41 Active Loans NE.PE-35608 IDA30260 1998 GOVERNMENT OF NIGER TRANSP. INFRA REHAB 0.00 28.00 0.00 27.42 0.00 0.00 NE-PE-1999 IDA29150 1997 GOVERNMENT OF NIGER HEALTHII 0.00 40.00 0.00 35.22 -.21 0.00 NE-PE-49691 IDA29570 1997 GOVERNMENT OF NIGER URBAN INFRAS. REHAB. 0.00 20.00 0.00 19.58 .36 0.00 NE.PE-1967 IDA27960 1996 GOVERNMENT OF NIGER NATURAL RES. MGMT 0.00 26.70 0.00 19.73 3.31 .13 NE-PE-1994 IDA27070 1995 GOVERNMENT OF NIGER PILOT PRIVATE IRRIG 0.00 6.S0 0.00 4.44 3.76 3.14 NE-PE-1980 IDA26180 1994 GOVERNMENT OF NIGER EDUCATION III - SECA 0.00 41.40 0.00 18.07 3.62 0.00 NE.PE-1995 IDA23550 1992 GOVERNMENT OF NIGER AG. SERVICES 0.00 18.00 0.00 2.85 3.41 -1.70 NE-PE-1968 IDA21220 1990 GOVERNMENT OF NIGER AGRIC. RESEARCH 0.00 19.90 0.00 7.17 5.79 3.65 NE-PE-1963 IDA18900 1988 GOVERNMENT OF NIGER SMALL RURAL OPERATIO 0.00 9.30 0.00 .66 .16 .08 Total 0.00 210.10 0.00 135.14 20.20 5.30 Active Loans Closed Loans Total Total Disbursed (IBRD and IDA): 70.46 572.17 642.63 of whbich has ben repaid: 0.00 31.19 31.19 Total now held by IBRD and IDA: 210.10 514.36 724.46 Amount sold : 0.00 3.15 3.15 Of which repaid : 0.00 3.15 3.15 Total Undisbursed : 135.14 7.23 142.37 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. b. Rating of 1-4: see OD 13.05. Annex D2. Preparation of Implemnentation Sunumnmy (Form 590). Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system will be used (HS = highly Satisfactory, S = satisfactory, U = unsatisfactory, HU = highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994. Note: Disbursement data is updated at the end of the first week of the month.  Page 57 Annexe 14: Niger at a glance Sub- POVERTY and SOCIAL Saharan Low- Niger Aftica Income Development dbamond Population mkd-1996 (mXons) 9.3 600 3,229 GNP per capita 1996 (USS) 200 490 500 Life expectancy GNP 1996 (bilt/ons USS) 1.9 294 1,601 Average annual growth, 1990-96 Population (X) 3.3 2.7 1.7 GNP Gosa Labor force (%J 2.9 2.6 1 Per primary Most recent estimate (latest yearavailable since 1989) capita "A enrollment Poverty: headcount index ({ ofpopuatIon) 63 Urban population ({ of total population) 23 31 29 Life expectancy at birth (years) 47 52 63 Infant mortality (per 1,000 live births) 119 92 89 Access to safe water Child malnutriion (X of children under 5) Access to safe water (% otpopulation) 57 47 53 lliteracy (% of population age 15+) 86 43 34 Gross primary enrollment (% otschool-age population) 30 72 105 Nwer Male 78 112 Low-Income group Femal .. 65 98 KEY ECONOMIC RATIOS and LONO-TERM TRENDS 1975 1985 1995 1996 Economic ratios GDP (billions USS) 1.0 1.4 1.8 2.0 Gross domestic investment/GDP 14.3 15.3 7.2 9.4 Exports of goods and servicesIGOP 19.2 21.0 17.1 16.0 Openness of economy Gross domestic savings/GDP 2.6 6.1 1.5 3.8 Gross national savings/GDP 7.7 9.7 4.3 7.2 Current account balance/GDP -1.7 -8.5 -3.3 -2.4 Interest payments/GDP 0.2 2.9 2.4 1.6 Savings Investment Total debWGDP 10.6 83.9 90.7 63.0 Total debt service/exports 4.6 33.8 32.9 26.2 Present value of debt/GOP .. .. 52.6 40.3 Present value of debt/exports .. .. 308.5 255.5 Indebtedness 1975-85 1986-96 1995 1996 1997-05 (average annual growth) -Nier GDP 2.2 0.8 2.6 3.3 4.5 in GNP per capita 0.5 -0.2 -1.0 1.0 1.2 Low-income group Exports of goods and services -3.7 -2.8 3.0 .. .. STRUCTURE of the ECONOMY (X of GDP) 1975 1985 1995 1996 Growth rtes of output and Investment C%) Agriculture 50.3 36.7 40.9 40.0 100 . Industry 11.0 20.9 17.6 18.2 s Manufacturing 5.6 7.1 6.5 6.6 Services 38.7 42.3 41.5 41.9 o 9 9 93 94 95 91 Private consumption 86.6 78.8 84.5 84.9 *s0 - . General government consumption 10.8 15.0 14.1 11.3 Imports of goods and services 31.0 30.1 22.8 21.6 G01 O-G P 1975-85 19864S6 1996 1996 (average annual growth) Growth rates of exports and Imports (% Agriculture 2.6 .. 1.1 0.8 10 Industry 6.3 .. 2.5 6.6 Manufacturing . . 4.2 4.4 011 Services 0.0 .. 3.4 4.0 9 95 95 Private consumption 7.2 0.1 .. -.1 General government consumption 0.4 1.7 Gors domestic investment -8.6 -2.7 .. .. 2 Imports of goods and services 3.7 -5.2 Exports Imports Gross national product 1.6 0.8 3.2 4.4 xpor.s Import _ Note: 1996 data are preliminary estimates. Figures in dalics are for years other than those specified. The diamonds show four key indicators in the country (in bold) compared wih its income-group average. If data are missing, the diamond will be incomplete.  Page 58 Annex 14 (Continued) Niger PRICES and GOVERNMENT FINANCE 1976 1986 1991 1996 DomesUc prices Infltion (X change) 40 Consumer prices 9.1 t 0.9 10.0 5.3 ImpHkil GDP deflator -2.2 -1.9 5.4 4.8 20 Government finance 0 (% of GDP) -93 94 9 96 Current revenue 10.8 8.6 9.9 -20 Current budget balance 0.0 -3.8 -1.3 GDP dof. CPI Ovenrl surplus/deficit -8.3 -8.8 -5.4 TRADE 1971 1986 1996 199i (mElons US$) Export and Import levels (miD. USS) Total exports (fob) 139 251 280 281 450 Uranium _ 214 145 137 400 Livestock products 25 43 47 350 Manufactures .. 0 0 0 3200 Export price index (1987.100) 9.. . .0 91 92 93 94 95 Import prioe Index (1987.100) .. oExports mrimports Terms of trade (1987.100) .. .._.._., BALANCE ot PAYMENTS 1976 1986 1996 1996 Current account balance (mElons USS) to GDP ratio (%) Exports of goods and services 162 298 317 314 0 Imports of goods and services 235 473 431 430 90 91 92 94 95 96 Resource balance -73 -175 -114 -116 * .1 Net Income -9 -42 -40 -29 .2 Net curenttransfers 63 94 94 96 *3 Current account balance, -4 before official capital transfers -18 -123 -60 -49 .5 Financing items (nt) 24 126 58 33 Changes In net reserves -6 -3 2 16 .8 memo: Reserves including gold (ml USS) 50 140 99 102 Conversion rate locaUSS) 214.3 449.3 499.2 511.6 EXTERNAL DEBT and RESOURCE FLOWS 1975 1986 1996 1996 Composition of total dobt, 1995 (millons US$) (mill. Us$) Total debt outstanding and disbursed 112 1.208 1,633 1,252 G IBRD 0 0 0 0 F 72 IDA 18 147 598 609 133 Total debt service 8 107 58 .. B IBRO 0 0 0 0 601 IDA 0 1 8 9 Composition of net resource flows Offical grants 87 178 165 98 E Official creditors 24 60 18 31 507 Private creditors -1 -7 -24 -4 c Foreign direct investment 23 -9 1 0 C Portfoli equity 0 0 0 0 0 52 267 World Bank program Commilments 0 17 7 67 A- IBRD E Bilateral Disbursements 2 22 24 34 B. IDA 0 . Other multilateral F . Private PrincIpal repayments 0 0 3 5 C - IMF G Short-term Net flows 2 22 21 29 Interest payments 0 1 5 4 Net transfenr 2 20 16 24 Development Economics  15-08-1998 10:59 DE MF/P NIGER NIGRMEY R 0012024735454 P.03 ANNEX 15 DECLATION LE'PROGRAMME DE ',PRlVATISATION,,, -,  15-08-1998 10:59 DE MF/P NIGER NIRMEY R 0012024735454 P.04 PREANIBULE Le present document de Politique Gen6rale sur le programme de privatisation. ne sc substitue pas aux textes reglerrentant la privatisation, 11 a pour objectif principal de definir la strategie globale du programme de privatisation. La reussite de la privatisation ayant pour corrolaire la reduction citi r6le de I'Etat dans l'economie afin d'accroitre l'c-fficacitd de I'appareil productif et de creer ainsi les conditions necessaires a la reprise de 1' investissement privd. 11 a pour but ultime d'orienter l'economie sur le chemin de la croissance et du d6veloppement durable en retablissant progressivement les equilibres economiques et financiers, internes et externes, pour ameliorer ainsi durablement Ics conditions de vie de nos populations. I  15-08-1998 10:59 DE MF/P NIGER NIRMEY R 0012024735454 P.05 SOMMAIRE 1. UN TISSU ECONOMIQUE ET SOCIAL TRES Dl;GRADE 1.1. Des indicateurs macro-economiques preoccupants 1.2. Des performances du secteur prive dccevantes 1.3. Des rentabilites des Entreprises Publiques qui presagent d'un etat virtuel de faillite 2. UNE VOLONTE AFFIFRME DE CONDUIRE UNE POLFIQUIE DE RELANCE ECONOMIQUE SOUTENUE 3. LA PRJVATISATION, UN FACTEUR CLE DE SLlCCES DE LA RELANCE ECONOMIQUE 3.1. Liste des societes concemees par la premi6re dtape 3.2. Les textes regissant le programme de privatisation 4. LES OBJECTIFS POUJRSUIVIS ET LES OPTIONS RETENIUES 4.1. Les objectirs 4.2. Les options 3. LA MISE EN OEUVRE DU PROGRAMME DE PRI!VATISATION 5.1. Les organes charges de la mise en oeuvre du programme 5.2. Le pilotage des entreprises k privatiser par des administrateurs delegues 5.3. La transparence du processus et la politique de communication 5.4. L-a predominance de la preservation de 1'emploi 6. LA PROMOTION D'UN ACTIONNARTAT NATIONAL 6.1. Les facilites d'acces aux titrcs ou aux aclifs 6.2. Les avantages fiscaux consentis a I'actionnariat national 7. L'AFFECTATION DES REVENUES GENERES PAR LA PRIVATISATION  15-08-1998 11:00 DE MFF/P NIGER NIAMEY R 0012024735454 P.06 1. UN TISSUJ ECONOMIQLTE ET SOCIAl LTRES DEGRADnE La politique 6inlomique ct sociale du Niger a repose atu lendemain de son ind6pendance sur une strategic caracterisee par une importante intervention de l'Ftat. A partir des ann6es 80 avec notaniment les tendances perceptibles d'un retournement du rnarche de l'uranium, le pays a ete confronte a d'importantes difficult6s conduisant a des performances elconomiques trcs modcstcs. Ces difficult6s sont caracterisees par tine crise economiquc assez profonde associee a tine crise des finances publiques rcflktde par d'importants deficits b:id-,taires, un endetternent public croissant, une inefficacite du secteur prive, un constat de carence sur la performance des entreprises publiques. 1.1. Dels indicaleurs macroeconomiques preoccupants * Un taux de croissance demographique de 3,3% pour la p6riode de 1975 i 1994 contre un taux de croissance du PIB reel de 1,7% pour la meme p6riode. * Le Produit National brut par ttte a baisse de 2,2% en moyenne. * Le taux d'investissement prive a connu un declin sensible cntre 1988 et 1992 allant de 10,2% a 1,2%. Cette degradation dc l'investissement cst liee cn grande partie aux difficultes a mobiliser 1V6pargne dont le taux national est passe de 5% a 3% en moyenne annuelle pour la periode 1985-1993. * Le ratio de la dette exterieure sur le total des exportations est passe entre 1987 et 1994 de 359,2% a 671,4%, ce qui est nettement au dessus du seuil critique (220%), au delA duquel un pays est consid&e comme severement endette a De meme le ratio de la dette cxt6rieure sur le PNB a augment6 au cours de la meme ptriode de 77,9% a 104,2%, ce chiffre etant superieur au niveau critique de 80%/o. Cet endcttemerit du pays constitue a l'evidence un facteur bloquant de financemerit des projets indispensables au processus de croissance. 1.2. Les pcrforniances du secteur prive restent decevantes Les performances du secteur prive s'en trouvent affectues et sont egalement tres modestes. . L-e chiffre d'affaires du secteur priv6 est passe de 139 Milliards de FCFA en 1986 a 115 Milliards de F.CFA en 1992.