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Document of The World Bank

Report No: ICR2208

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-37540 IDA-37541 IDA-3754A)

ON A

CREDIT

IN THE AMOUNT OF SDR 23.2 MILLION (US$ 32 MILLION EQUIVALENT)

AND AN

ADDITIONAL FINANCING CREDIT

IN THE AMOUNT OF SDR 5.3 MILLION (US$ 8 MILLION EQUIVALENT)

TO THE

REPUBLIC OF MADAGASCAR

FOR A

MINERAL RESOURCES GOVERNANCE PROJECT

December 21, 2012

Sustainable Energy, Oil, Gas, and Mining Unit Sustainable Development Network AFCS4 Africa Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective September 30, 2012)

Currency Unit = Madagascar Ariary (MGA) MGA 2,209.02 = US$1 US$ 1.00 = SDR 0.64935

FISCAL YEAR ` January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AAA Analytical and advisory activity AF Additional Financing AFD French Development Agency APSM Private Sector Promotion Agency ASM Artisanal and Small-scale Mining BAM Mining Administration Bureau BCMM Madagascar Mining Cadastre Bureau BGN National Geological Survey BPGRM Mineral Resources Governance Data Bank CAS Country Assistance Strategy CEM Mining Environmental Units CNM National Committee on Mines CSR Corporate Social Responsibility DCPE Document Cadre de Politique Economique DCA Development Credit Agreement DG General Director of Mines DGEM General Directorate of Energy and Mines DMG Mines and Geology Directorate DIR Regional Directorate EA Environmental Assessment EIA Environmental Impact Assessment EIS Environmental Impact Statement EITI Extractives Industry Transparency Initiative EMP Environmental Management Plan FA Financing Agreement FDI Foreign Direct Investment GIS Geographical Information System IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Agency IGM Madagascar Gemology Institute ISN Interim Strategy Note ISR Implementation Status Reports LIL Learning and Innovation Loan M&E Monitoring and Evaluation MAP Madagascar Action Plan

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MEM Ministry of Energy and Mines MRGP Mineral Resources Governance Project MSRP Mining Sector Reform Project NCB National competitive Bidding NGO Non Governmental Organization OP Operational Policy OMNIS National Office for Mines and the Strategic Industries ONE Office National de l’Environnement PAD Project Appraisal Document PDO Project Development Objective PPF Project Preparation Facility PIU Project Implementation Unit PP Project Paper PRSP Poverty Reduction Strategy Paper SAC Structural Adjustment Credit SAFTE Sub-Saharan African Energy, Transport, and Extractive Industries SEA Sector Environmental Assessment SESA Sector Environmental and Social Assessment SME Small and Medium Enterprise TA Technical Assistance UPCM Mining Project Implementation Unit USAID United States Agency for International Development WWF World Wildlife Fund

Vice President: Makhtar Diop

Country Director: Haleh Bridi Sector Manager: Christopher Sheldon

Project Team Leader: Remi Pelon ICR Team Leader: Remi Pelon

ICR Primary Authors: Dorian Vasse/Sabine Cornelius

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MADAGASCAR

Madagascar Mineral Resources Governance Project

Data Sheets

A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph Content

1. Project Context, Development Objectives and Design ................................................. 12. Key Factors Affecting Implementation and Outcomes ................................................ 83. Assessment of Outcomes ............................................................................................ 144. Assessment of Risk to Development Outcome ........................................................... 295. Assessment of Bank and Borrower Performance ....................................................... 306. Lessons Learned .......................................................................................................... 327. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ............. 32 Annexes

Annex 1. Project Costs and Financing .............................................................................. 33Annex 2. Outputs by Component...................................................................................... 34Annex 3. Economic and Financial Analysis ..................................................................... 40Annex 4. Bank Lending and Implementation Support/Supervision Processes ................. 41Annex 5. Beneficiary Survey Results ............................................................................... 42Annex 6. Stakeholder Workshop Report and Results ....................................................... 43Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ......................... 44Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ........................... 46Annex 9. List of Supporting Documents .......................................................................... 47 MAP

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A. Basic Information

Country: Madagascar Project Name:

MINERAL RESOURCES GOVERNANCE PROJECT

Project ID: P076245 L/C/TF Number(s): IDA-37540,IDA-37541,IDA-3754A

ICR Date: 12/23/2012 ICR Type: Core ICR

Lending Instrument: SIL Borrower: REPUBLIC OF MADAGASCAR

Original Total Commitment:

XDR 23.20M Disbursed Amount: XDR 28.30M

Revised Amount: XDR 28.47M Environmental Category: B Implementing Agencies: Ministry of Mines Cofinanciers and Other External Partners: French Development Agency (AFD) The United States Agency for International Development (USAID) B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 10/24/2001 Effectiveness: 09/22/2003 09/22/2003 Appraisal: 11/25/2002 Restructuring(s): Approval: 05/13/2003 Mid-term Review: Closing: 12/31/2008 06/30/2012 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory Risk to Development Outcome: High Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory

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C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Moderately Satisfactory Government: Moderately Unsatisfactory

Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Satisfactory

Overall Bank Performance: Moderately Satisfactory Overall Borrower

Performance:Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance

Indicators QAG Assessments

(if any) Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Moderately Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing) Central government administration 40 40 Mining and other extractive 60 60

Theme Code (as % of total Bank financing) Decentralization 29 29 Environmental policies and institutions 14 14 Micro, Small and Medium Enterprise support 14 14 Participation and civic engagement 14 14 State-owned enterprise restructuring and privatization 29 29 E. Bank Staff

Positions At ICR At Approval

Vice President: Makhtar Diop Callisto E. Madavo Country Director: Haleh Z. Bridi Hafez M. H. Ghanem Sector Manager: Christopher Gilbert Sheldon Peter A. van der Veen Project Team Leader: Remi Pelon Paulo De Sa ICR Team Leader: Remi Pelon ICR Primary Author: Dorian Vasse

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Sabine Cornelius F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) 1. Strengthen transparency and governance in mining. 2. Promote key institutional reforms for the decentralized management of mineral resources 3. Promote private investments and value-added in the sector. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Four Mining Administration Bureaux (BAM) Value quantitative or Qualitative)

0 4 2

Date achieved 05/13/2003 12/31/2008 06/29/2012 Comments (incl. % achievement)

50% achieved. 2 mining administration centers were created in the Ilakaka and Vatomandry areas, which had experienced frequent rushes of thousands of sapphire and ruby miners, respectively, prior to the Project.

Indicator 2 : Creation of a one-stop shop for exports of gemstones. Value quantitative or Qualitative)

No Yes Yes


100% achieved. The one-stop shop is in place and jointly run by Mining and Customs administration staff.

Indicator 3 : Collection rate of mining royalty increases as a result of the decentralized tax collection procedure

Value quantitative or Qualitative)

10% 80% 97%


100% achieved. 97% increase in collection rate throughout the Project thanks to measures like the one-stop shop, but also due to the effect of industrial mining coming on stream

Indicator 4 : Number of Community development plans that include management of mineral resource

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0 10 19


100% achieved. Project supported the integration of mineral resources and gold and gemstone revenues into 16 local development plan and budgets; and participatory budgeting in 3 communes affected by industrial mining.

Indicator 5 : Decentralization of mining administration increases fiscal revenues from mining for provinces and communes


N/A 50% N/A

Date achieved 04/17/2003 12/31/2008 06/29/2012

Comments (incl. % achievement)

100% achieved. National statistics not available, but sample artisanal and industrial mining communes show a range of increases. Budget of the commune of Ampasy Nahampoana near the QMM ilmenite mine multiplied by 22 between 2006 and 2009.

Indicator 6 : Annual declared exports of gold and gemstones from small scale mining increaseValue quantitative or Qualitative)

21 50 30


30% achieved. Value of exports rose from US$18 million in 2003 to US$40 million in 2006. Exports decreased following the 2008 ban on rough stones exports and increased after ban was lifted in 2010.

Indicator 7 : Average annual investments in mining increase Value quantitative or Qualitative)

US$10 Million US$85 Million US$ 2.9 b


100% achieved. Last official figure available is the 2.9 billion investment in 2009 (Central Bank), but cumulative investments from QMM & Ambatovy from 2006 to 2012 have reached more than US$ 6.5 billion (companies' sources).

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Special regime for gemstones Value (quantitative or Qualitative)

no yes yes


100% achieved. New regime constituted by: i) smaller mining squares size; ii) artisanal miners associations; iii) one-stop-shop; v) steps taken to transfer mining title allocation for small entrepreneurs to local authorities.

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Indicator 2 : BAM created in four target areas. Value (quantitative or Qualitative)

0 4 2


50% achieved. 2 BAM created, 3,000 artisans trained, 100 cooperatives formed, local authorities and communities trained in 30 communes. Pilots fulfilled their role and informed formulation of ASM regulations.

Indicator 3 : Creation of small exchanges and quality control of gemstones and one-stop shop for the export of gemstones.

Value (quantitative or Qualitative)

Most is informal no Fully Achieved


100% achieved. Gemology Institute created with international certification. 260 exchange market days. Quality control, certification and export control capacity created. One-stop-shop and streamlined export procedures.

Indicator 4 : Collection of mining taxes rising from an average of 10 % in 2000 to 80% by 2008


No Yes yes


100% achieved. 97% of expected royalties based on number of "laissez passer" issued (for formal artisanal mining) and on projected production (industrial mining) are collected.

Indicator 5 : Training and certification of small scale miners in modern gem processing techniques. At least 20 individuals certified each year of project implementation.


No yes yes


100% achieved. 195 miners trained by Gemology Institute. Capacity built of local authorities and communities in 55 communes, and 409 administration staff involved in mining; 12 Masters and 8 PhDs at French universities.

Indicator 6 : - Six Environmental Units established in the Provinces. - SESA completed by the mid-term review. - Four studies completed in the pilot regions by project end.


10.00 Fully Achieved

Date achieved 12/31/2008 12/31/2008 Comments (incl. % achievement)

100% achieved. 1 central and 6 decentralized Units created. SESA at inception and updated 2012. Project Environmental and Social Management Plan updated in 2006. 4 studies conducted in pilots regions

Indicator 7 : Declared exports of Gold and gemstones at US$ 50 million by 2008 Value (quantitative N/A n/a 60% Achievement

(80% achievement

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or Qualitative) before the crisis) Date achieved 04/17/2003 12/31/2008 05/30/2008 Comments (incl. % achievement)

US$40 million in 2006 (80% achieved). Decrease after 2008 ban on rough stones exports (US$ 12 million). Recovery started after lifting of ban in 2010. US$ 30 million expected in 2012 (60% achievement)

Indicator 8 : Percentage of Value added to gemstones in the country. Value (quantitative or Qualitative)

N/A +50% Possibly 100%


Possibly 100%. No data available. Informal observations only: the increasing number of jewelry and gemstones shops in Antanarivo, when there was very few before. 100 new businesses were created by Gemmology Institute's graduates.

Indicator 9 : Backlog of overdue application not exceeding 5% of all permits. Value (quantitative or Qualitative)

N/A 5% 30% achieved.


30% backlog in April 2012. If Madagascar mining cadastre was a model in Africa until the political crisis and permits allocated relatively efficiently, it currently suffers from a de facto moratorium imposed on permit allocations.

Indicator 10 : Territorial conservation practices in small scale mining areas. Restitution of previous environmental conditions after the end of mining exploration period.


No Yes Partially achieved


70% achieved. Substantial progress: i) legal provisions make rehabilitation plans a mandatory environmental requirement of permit allocation, and ii) improvement of practices in pilots areas (3,000 artisanal miners trained).

Indicator 11 :

Added at Additional Financing approval. No later than 18 months after date of effectiveness, updated hydrocarbons law and regulations, addressing environmental concerns prepared in line with international practice and a draft law submitted to Parliament


no yes Not applicable


Not applicable. Indicator pertains to Govt. of Norway's parallel financed Oil for Development project. IDA successfully facilitated policy dialogue before 2009, which led to widely discussed and advanced draft hydrocarbon law.

Indicator 12 : Added at Additional Financing approval No later than 18 months after date of effectiveness, the fiscal framework for mining, including large scale investments, has been reviewed to include adjustments to optimize fiscal revenues.


no yes Partially achieved

Date achieved 08/31/2007 02/28/2009 06/29/2012

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Comments (incl. % achievement)

50% achieved. Comprehensive assessment of fiscal framework for mining conducted. Political crisis prevented passage of act and adoption of reforms but detailed legal and fiscal analysis provides valuable guidance to Government.

Indicator 13 :

Added at Additional Financing approval. No later than 18 months after date of effectiveness, methodologies to control ASM rushes and to manage conflicts between ASM activities and protected areas have been developed and ready for implementation.


no yes yes


100% achieved. ASM policy recommendations and toolkit for rush management produced in 2012 with strong focus on mining in or near protected areas. Recommendations are practical and implementable at relatively low cost.

Indicator 14 : Added at Additional Financing approval. Within 24 months from the date of effectiveness, the National Geological Survey and the integrated sector data bank and information systems have been established and are operative.




50% achieved. Mineral Resources Governance Database, the core element of National Geological Survey was set up. Survey was not formally institutionalized, but comprehensive feasibility study undertaken in 2011-2012.

Indicator 15 : Added at Additional Financing approval. No later than by December 2009, financial mechanisms for long term sustainability of mining institutions have been established and are operative.




50% achieved. Sustainability studies for National Geological Survey, Mining Inspectorate, Madagascar Gemology Institute completed and recommendations produced. No immediate decisions taken because of Transition Government.

G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 11/20/2003 Satisfactory Satisfactory 1.74 2 03/09/2004 Satisfactory Satisfactory 2.37 3 07/14/2004 Satisfactory Satisfactory 3.30 4 09/02/2004 Satisfactory Satisfactory 4.50 5 03/19/2005 Satisfactory Satisfactory 8.73 6 01/26/2006 Satisfactory Satisfactory 16.42 7 12/20/2006 Satisfactory Satisfactory 24.10

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8 07/31/2007 Satisfactory Satisfactory 27.94 9 04/18/2008 Satisfactory Satisfactory 33.08

10 12/15/2008 Satisfactory Satisfactory 36.14 11 05/29/2009 Satisfactory Satisfactory 36.56

12 11/29/2009 Moderately Satisfactory Moderately Unsatisfactory 36.56

13 05/28/2010 Moderately Unsatisfactory

Moderately Unsatisfactory 36.56

14 12/22/2010 Moderately Unsatisfactory

Moderately Unsatisfactory 38.20

15 09/26/2011 Moderately Satisfactory Moderately Satisfactory 39.32 16 06/12/2012 Moderately Satisfactory Moderately Satisfactory 41.30

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

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1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Country context. At the time of Project appraisal, Madagascar was one of the poorest countries in the world with an annual per capita income of US$260 in 2002, nearly 70 percent of the population in poverty and nearly half of the children malnourished (Project Appraisal Document, World Bank, 2003e, henceforth cited as PAD). Between 1997 and 2001, following decades of economic stagnation and downturn the country had sustained four years of positive real growth and low inflation, and the public deficit was under control. However, following the contested first-round of elections in December 2001, Madagascar plunged into a deep political crisis at the beginning of 2002, which had a significant negative impact on national income for 2002, in the form of foregone direct investments, physical destruction, and losses resulting from the cessation of tourism, transport, export processing industries, and mining activities (PAD). At the time of appraisal, Madagascar showed signs of a promising new beginning under the newly elected Government of President Ravalomanana, which embarked on unprecedented public sector and governance reforms in order to gain the confidence of private investors. 2. Sector background. Madagascar is richly endowed with minerals and precious stones, such as sapphire and rubies. At the time of appraisal, 2,300 mining operators were active in the sector, generating employment for about 100,000 miners and seasonal employment for an additional 500,000 workers (PAD, p. 3). Between 1996 and 2000, the value of official mining exports, mostly of precious stones, had more than doubled from US$16 million to US$37 million. However, poor governance and corruption discouraged formal investments and led to the smuggling of precious stones out of Madagascar with very little value added created in the country (PAD, p. 3). The value of illegally trafficked precious stones was estimated to be in the US$200-500 million range, at the time equivalent to 10 percent of GDP per year. In addition to most of the artisanal and small-scale mining being conducted outside the formal channels, a series of mining rushes in gemstone mining exacerbated social conflicts, environmental damage, and the substantial loss of fiscal revenues. At the time of appraisal, the Government thus considered formalizing mining operations a key step towards improving internal revenue generation in Madagascar, which, in turn, was considered a key prerequisite to financing anti-poverty and service provision programs (PAD, p. 4). 3. Rationale for Bank assistance. At the time of Project approval, the World Bank had been: (i) the leading provider of technical assistance in mining countries in Africa and Latin America and a contributor to the significant expansion of mineral activities on both continents; and (ii) the prime supporter of mineral sector reforms in Madagascar through the Bank-funded Mining Sector Reform Project (MSRP). This Learning and Innovation Loan (LIL), implemented between January 1999 and December 2002, succeeded in establishing an investor-friendly legal and regulatory framework, including mining-related environmental regulations; and a Mining Cadastre, which was a major milestone as it awarded and managed mining rights in a transparent and non-discretionary way. As a result of these successful sector reforms, along with its involvement in other related operations, the World Bank was uniquely positioned to support the Government in addressing persisting institutional constraints, such as: (i) the lack of capacity to enforce the new mining code, considered a prerequisite to integrating artisanal and small-scale mining into the formal economy; (ii) serious governance issues in the management of mineral resources, notably the mining of gold and gemstones, at the sub-national level; and (iii) limited availability of geological information which hindered private investments in the sector. The Bank’s involvement was further expected to play a catalytic role in attracting additional support from bilateral Development Partners. The Mineral Resources Governance Project (henceforth

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referred to as “the Project”), which built on the achievements and lessons learned from the LIL (see Section 2.1), represented one of the priority instruments in the Government’s post-crisis recovery strategy.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 4. The Project Development Objective (PDO) as stated in the main body of the Project Appraisal Document (PAD) and the Development Credit Agreement (DCA)1 was: “to assist the Government of Madagascar in implementing its strategy to accelerate sustainable development and reduce poverty in Madagascar through the strengthening of governance and transparency in the management of mineral resources, with special emphasis on small-scale and artisanal mining” (PAD, p. 2). The wording of the development objectives in the Project Design Summary in Annex 1 of the PAD differs substantially from that in the main text of the PAD: 1) Strengthening transparency and governance in mining; 2) Key institutional reforms for the decentralized management of mineral resources; and 3) Promote private investments and value-added in the sector. The development objectives in the Additional Financing (AF) Project Paper (PP) (World Bank, 2007b, henceforth cited as AF PP) were the same three PDOs as the ones stated in Annex 1 of the PAD. The assessment of the Project’s performance in this ICR will be based on the three PDOs and Key Performance Indicators listed in Annex 1 of the PAD, given that: (i) the Project Design Summary in Annex 1 was an integral part of the Board-approved PAD; (ii) the Board-approved Additional Financing Project Paper cited them as the original Project objectives that “would remain unchanged” under the Additional Financing (AF PP, p. 2); (iii) and they are more focused on outcomes for which the Project could reasonably be held accountable, compared to the higher level objectives of accelerating sustainable development and reducing poverty stated in the main text of the PAD, DCA and Financing Agreement for the Additional Financing. Table 1 below shows the PDOs and related Outcome/Impact indicators as defined in Annex 1 of the PAD. Table 1: Original PDOs and Outcome Indicators (PAD, p. 28f.) Project Development Objectives

Outcome/Impact indicators

PDO 1: Strengthening transparency and governance in mining

1. Four BAM (Mining Administration Bureaus) created. 2. Creation of a one-stop shop for exports of gemstones.

PDO 2: Key institutional reforms for the decentralized management of mineral resources

3. Collection rate of mining royalty increases from 10% today and 80% at the end of the project, as a result of the decentralized tax collection procedure.

4. Number of Community development plans that include management of mineral resource (minimum of 10);

5. Decentralization of mining administration increases fiscal revenues from mining for provinces and communes by 50%

PDO 3: Promote private investments and value-added in the sector

6. Annual declared exports of gold and gemstones from small scale mining increase from about US$ 21 million today to US$ 50 million at the end of the project.

7. Average annual investments in mining increase from about US$ 10 million today to US$ 85 million at the end of the project.

1 The exact wording in the DCA was: “to assist the Borrower in the implementation of a strategy designed to accelerate sustainable development and reduce poverty in Madagascar through the strengthening of governance and transparency in the management of mineral resources, with special emphasis on small-scale and artisanal mining (DCA, Schedule 2, p. 15). The wording of the first part of the PDO in the Financing Agreement (FA) for Additional Financing (AF) was: “to assist the Recipient in the further definition and implementation of a strategy” (FA for AF, Schedule 1, p. 6).

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1.3 Revised PDO and Key Indicators, and reasons/justification 5. The PDOs were not revised. At the time of approval of the Additional Financing Credit (IDA Credit 3754-1) in 2007, 13 new indicators, comprised of nine mining-related, and four petroleum-related indicators, were proposed in the Additional Financing Project Paper to measure the Project’s performance in relation to its expanded scope of expected outcomes (AF PP, p. 13). The Financing Agreement (FA) for the Additional Financing contained five of these as “performance indicators” (FA, p. 10), which were primarily output indicators. Given that the Financing Agreement was the legally binding of the two documents, the assessment of the Project’s performance will include the five (intermediate results) indicators listed in the Financing Agreement. The purpose of the Additional Financing was to finance additional activities, within the existing Project components, in order to respond to the surge of large-scale mining projects and oil exploration in Madagascar at the time (PP for AF, p. 4). 6. The additional performance indicators, comprised of four mining-related and one petroleum-related indicator were (FA, Schedule 2, p. 10):

(i) No later than 18 months after the date of effectiveness, updated hydrocarbons law and regulations, also addressing environmental concerns have been prepared in line with of international practice, and a draft law has been submitted to the Parliament.

(ii) No later than 18 months after the date of effectiveness, the fiscal framework for mining, including large scale investments, has been reviewed to include adjustments to optimize fiscal revenues, while maintaining a competitive edge to investments, and a draft law has been submitted to the Parliament.

(iii) No later than 18 months after the date of effectiveness, methodologies to control ASM rushes and to manage conflicts between ASM activities and protected areas have been developed and are ready for implementation at central and decentralized level;

(iv) Within 24 months from the date of effectiveness, the National Geological Survey and the integrated sector data bank and information systems have been established and are operative;

(v) No later than by December 2009, financial mechanisms for long term sustainability of mining institutions have been established and are operative.

1.4 Main Beneficiaries 7. The Project’s main beneficiaries included:

Government agencies, who were to benefit from activities aimed at strengthening their capacity to implement the new mining-related legal and regulatory framework;

Public mining agencies at provincial, municipal and communal levels, who were to benefit from training aimed at making the administration of mining rights more efficient and the enforcement of mining-related regulations more effective;

Private foreign and domestic mining investors, who were to benefit from the non-discretionary award of mining rights, security of tenure, and the accurate geological location of concessions;

Gemstones cutters and polishers, who were to benefit from an enhanced capacity to add value to Gemstones locally and from improved access to markets’;

Gemstone buyers and exporters, whose businesses were to benefit from improved export, certification and control procedures;

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Artisanal miners, who were to benefit from improved awareness of mining regulations, environmentally more benign technologies, and occupational health and safety precautions, as well as from enhanced access to mining titles and markets;

Local Mining Communities, who were to benefit from improved access to health and education services as well as basic infrastructure as a result of a better regional distribution and local generation and use of mining-related revenues.

Madagascar’s population in general, which was to benefit from improved protection from mining-related environmental damage and the enhanced provision of basic infrastructure and social services as a result of increased mineral sector tax/royalty revenues.

1.5 Original Components (as approved) 8. The Project comprised the following four components (PAD, pp. 8ff.):

Component 1: Strengthening transparency and governance in mining (US$ 6.22 million, about 16 percent of total Project cost at appraisal) was to support measures to improve governance in the management of mineral resources, with particular focus on curbing gemstone smuggling in the artisanal and small-scale mining sub-sector. Activities under Component 1 included reforming the mining sector's legal and regulatory framework; supporting the establishment of decentralized mining administration offices close to exploitation sites; and creating a program for the certification and quality control program of gemstones, including a one-stop shop for gemstone exports and gemstones exchanges with specific focus on strengthening private sector associations.

Component 2: Key institutional reforms for the decentralized management of mineral resources (US$ 8.63 million, about 22 percent of total Project cost at appraisal) were to advance the decentralized management of mineral resources through re-organizing and strengthening public mining agencies at the provincial and communal levels, and by empowering communities to play an active role in the management of mineral resources. The Project was to create six provincial-level offices aimed to oversee the environmental management of mining titles at the provincial level, extend access to cadastre information to the municipal level, and pilot decentralized tax collection in ten communes.

Component 3: Promoting private investments and value-added in the sector (US$ 20.18 million, about 52 percent of total Project cost at appraisal) was to entail the creation of a Mining Sector Promotion Agency (Agence de Promotion du Secteur Minier) and the strengthening of geo-scientific information though airborne geophysical surveys, geological and geochemical mapping and associated Data Bank to attract private sector investment. Furthermore, this Component was to improve the Government’s capacity to coordinate interventions related to artisanal and small-scale mining, including certification procedures, administration of a small grants program, dissemination of information, environmental management, and extension services.

Component 4: Project coordination and management (US$ 2.67 million, about 7 percent of total Project cost at appraisal) was to support the existing Project Implementation Unit (PIU) responsible for the day-to-day management of Project implementation, including procurement, financial management, reporting, monitoring and evaluation, coordination of Project activities with the Steering Committee and other public entities.

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Figure 1: Original IDA-funding by Project component

1.6 Revised Components 9. The Components were not revised. 1.7 Other significant changes 10. Changes in Implementation Schedule. The Project was approved by the World Bank’s Board of Directors on May 13, 2003 and became effective on September 22, 2003. Its closing date was extended twice, by a total of 42 months (3.5 years): (i) from its original December 31, 2008 closing date to December 31, 2010 in conjunction with the approval of an Additional Financing credit on April 23, 2007 (without restructuring) by the World Bank’s Board of Directors to “assist the Government of Madagascar in [the] continued sustainable management and good governance of the mineral resources” (PP for AF, p. 3), and to coincide with the Additional Financing credit’s closing date; and (ii) through June 30, 2012 (without restructuring) per approval by the Vice President of the World Bank’s Africa Region in October 2010. 11. Changes in funding allocation. The project was financed by an IDA credit in the amount of US$32 million equivalent, and an Additional Financing IDA credit in the amount of US$8.0 million equivalent was approved in April 2007. The Government was to provide a counterpart contribution in the amount of US$4.45 million to the original IDA credit, and in the amount of US$0.8 million to the additional IDA credit. The purpose of the latter was to finance: (i) additional/scaled up activities to be carried out within the realm of the original components (see paragraphs 12 and 13 and activities highlighted in italics in Table 2 below) in order to increase Project impact and to meet the Government’s expanded focus to include large scale mining and broader objectives for the extractive industries (PP for AF, p. 3); and (ii) cost overruns. 12. Under Component 3, the actual contract value for the airborne survey exceeded the budget estimate by US$1.63 million (see Section 3.3), mostly due to increases in fuel prices as well as commodity prices as a result of risen demand for services associated with the exploration boom in the industry globally (Reallocation Memo, December 7, 2007). Furthermore, additional geological and geochemical analyses had to be conducted to harmonize the work and interpretations provided by the three main geological survey contractors covering the country. Under Component 4, operational expenses exceeded original forecasts mainly because of the three and a half year extension of the Project duration (see Section 3.3) as well as the internalization of the set up and operational costs of key institutions, such as the Gemology Institute of Madagascar, the Mineral Resources Governance Data Bank and the Large-Scale Mining Investment Commission whose attainment of autonomy and financial independence took longer than expected.

Component 1Component 2Component 3Component 4PPF

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Figure 2: Summary of estimated Component costs for Original and Additional Financing

13. Changes in the scope and scale of planned activities. The originally identified Project activities addressed overall mineral sector issues, with a clear focus on support to the artisanal and small-scale mining (ASM) sub-sector, in accordance with Government priorities at the time of Project approval. However, in order to respond to the new development of large-scale mining projects in Madagascar, the sector strategy was adjusted in 2005, which necessitated an adjustment of Project activities. The additional activities added a different yet complementary layer to the original Project scope in pursuit of the same PDOs as under the original credit. In addition, in response to increasing oil prices, oil exploration in Madagascar had increased sharply. The extractive industry’s institutional structure thus faced more pressure overall and, in spite of earlier successful reforms, required more comprehensive integration, in line with the Madagascar Action Plan (MAP), which represented the Government’s development strategy for 2007-2012.

14. As shown in Table 2 below, the following activities were added to the original scope of activities under the existing components under the Additional Financing:

Component 1 was expanded to include further reforms of the policy, legal and regulatory framework, including adjustments to the mining code, fiscal reforms, and the introduction of the Extractives Industry Transparency Initiative (EITI).

Component 2 was expanded to support additional institutional reforms needed to improve the public mining agencies’ governance and management capacity, including environmental management skills related to large and small-scale mining.

Component 3 was to be reinforced through activities aimed at strengthening mining entities and agencies that fell under the responsibility of the Ministry of Mines. A National Geological Survey entity and a Mineral Resources Governance Data Bank were to be set up, and the Geological and Mining Information System was to be enhanced.

0

5

10

15

20

25

Additional Financing

Initial Credit

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Table 2: Original and Additional Financing: Estimated total cost by Project Component

Project Components and Sub-Components

To be funded under Original

Credit* (US$ million)

To be funded under

Additional Financing

Component 1: Strengthening Transparency and Governance in mining 6.22 0.42

1.1 Adjustment of the sector's legal and regulatory framework 0.57 1.2 Support to decentralized management of mineral resources 1.66 1.3 Program for the certification and quality control of Gemstones 3.74 1.4 Strengthening of private sector associations. 0.25 1.5 Policy, Legal and Regulatory framework reforms 0.42

Component 2: Key institutional reforms for the decentralized management of mineral resources

8.63 5.48

2.1 Institutional adjustment and capacity building of the decentralized public mining institutions 7.06

2.2 Training program 0.72 2.3 Communication campaign 0.30 2.4 Set-up of an Intranet and Internet network within the mining administration 0.55

2.5 Support to integration of large-scale mining projects into regional development

5.48 2.6 Management of potential conflict between environmental protection and large /small-scale mining 2.7 Improved governance and management capacity of small-scale mining activities

Component 3: Promoting private investments and value-added in the sector.

20.18 1.30

3.1 Assistance to the creation of a Mining Sector Promotion Agency (APSM) 3.30

3.2 Strengthening of Geo-scientific Information Infrastructure 16.87 3.3 Institutional restructuring and strengthening of the extractive industries public sector under the Ministry of Mines

1.30

Component 4: Project Coordination and Management 2.67 0.6

Allocation under original Credit 2.67

Allocation under Additional Financing Credit 0.6

PPF(Project Preparation Facility) 0.95

Contingencies 1

Total Baseline Cost 38.65 8.80

47.45

* Estimated Project cost comprised IDA financing, Government counterpart funding and parallel financing from USAID and the French Agency for Development (PAD, p. 1).

15. Parallel financing and partnership arrangements. According to the PAD (p. 1), parallel financing was anticipated from the French Agency for Development (US$1.2 million) to support the geological mapping of one of the initially defined blocks, and from the US Agency for International Development (USAID) (US$1 million) to support the provision of equipment and capacity building for the Gemology Institute of Madagascar. In addition, the Government of South Africa provided US$0.5 million in parallel financing to support the expansion of the scope of the geological mapping to additional blocks. The latter was not foreseen at the time of appraisal and thus not included in the PAD.

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16. In light of the Government’s broadened focus on the extractive industries agenda, as documented in the 2007 Additional Financing Project Paper, the Bank coordinated with the Government of Norway, which was to provide US$5 million (NOK36.1 million) in parallel financing to improve the legal and regulatory framework and strengthen institutional capacity pertaining to Madagascar’s petroleum resources (Aide Memoire (AM), July 2008 mission). The Norwegian parallel financing became effective in 2007. However, following the unconstitutional regime change in March 2009, the Government of Norway suspended its operations in Madagascar, which it did not resume. 17. Changes in implementation arrangements. Given that the implementation arrangements under the original credit proved to be effective, as evidenced by the fact that implementation had been progressing well and that the Project was in compliance with all fiduciary requirements, they remained the same under the Additional Financing credit. The Project Implementation Manual was updated to reflect the additional activities to be funded from the Additional Financing credit; a separate procurement plan was prepared and approved by the Bank; and the Project’s chart of accounts was reviewed to reflect the new activities outlined in the Project Paper to satisfy reporting requirements under the Additional Financing (PP for AF, p.11).

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry 18. Project Preparation. For the most part, the PAD correctly identified the prevailing conditions in Madagascar’s mining sector. As consistently stated in the PAD, the key sector issues were persistent governance problems and the lack of capacity to effectively manage “the dynamism and complexity of informal small scale mining” at the provincial and commune level, notably the rushes in the gemstone area and the smuggling of gemstones out of the country (PAD, pp. 3ff.). Given the second PDO’s focus on the decentralized management of mineral resources, particularly the tax collection at the provincial level (PAD, p. 9) the PAD could have contained a more detailed analysis of the state of decentralization at the time of appraisal. An Environmental Management Plan, which was prepared and disclosed in 2002, contained an appropriate analysis of the judicial, institutional, operational and financial constraints to the effective environmental management of the mining sector (GLW, 2002). 19. Incorporation of lessons learned. Project design incorporated lessons learned from the Bank-supported Mining Sector Reform Project, which closed in 2002, such as: (i) new sector regulations can only be enforced if governance issues and institutional shortcomings are addressed concurrently; (ii) pilot operations are crucial to identifying viable ways of improving governance when baseline data and institutional capacity are lacking; and (iii) beneficiary participation in all phases of the Project cycle is critical for timely and effective implementation (PAD, p. 16). Furthermore, lessons learned from the Bank’s experience with capacity building in the mining sector in other parts of Africa (including Algeria, Burkina Faso, Ghana, Guinea, Mali, Mozambique and Tanzania) and in Latin America were incorporated into Project design. Experiences in these countries have shown that enacting the necessary legal, fiscal and environmental policies and establishing strong mining institutions to enforce them are key prerequisites for a country to attract and retain significant private investment (PAD, p. 16). 20. Assessment of Project objectives, design and components. The Project’s PDOs, components and proposed activities were highly relevant at the time of appraisal. The Project represented one of the priority instruments in the Government’s post- (2002) crisis recovery strategy. With its focus on the promotion of private sector growth as well as on curbing illegal mining activities the

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Project was to avert a crisis-induced withdrawal of private investment and preempt delays in the establishment of good governance in the mining sector (World Bank, 2002, p. 7). The Project’s development objectives directly targeted two of the three axes of the Government’s 2003 Poverty Reduction Strategy Paper (PRSP): (i) the creation of an institutional framework of good governance to foster fast, sustainable and inclusive development; and (ii) the revitalization of the private sector and promotion of the development of high potential growth sectors (World Bank, 2003d).

21. The Project also featured prominently in the Bank’s 2002-2003 Interim Country Assistance Strategy (I-CAS) as a new lending instrument (World Bank, 2002, p. 12) aiming to support the Government’s efforts to improve governance and reduce corruption in the high growth potential mining industry. Furthermore, the Project’s development objectives were fully aligned with the objective of the Bank’s subsequent 2004-2006 CAS, which was to support the Government’s PRSP efforts of improving governance - considered the best way to support poverty reduction in Madagascar (PAD, p. 3). The PDOs’ continued relevance was confirmed during the Project’s Midterm Review. While the PDOs could have been defined more concisely, it was laudable that, unlike many Projects of its generation, the PDOs stated in the Results framework were clearly distinguished from higher-level objectives beyond the purview of the Project, such as poverty reduction. 22. The Project’s design was relevant to its objectives, as the components and activities were consistent with what was internationally considered a good practice approach at the time of appraisal. While the PAD did not specify a particular theory of change upon which Project design was based, it was noted that it implicitly anticipated the World Bank’s value chain approach for supporting extractive industries, which since then has marked the evolution from the emphasis on “merely” increasing investment to promoting environmentally and socially sustainable development (McMahon, 2010). A minor shortcoming of the otherwise sound Project design was the fact that the “Support to Decentralized Management of Mineral Resources” sub-component of Component 1 could have been more clearly delineated from and linked with related activities under Component 2, which also aimed to strengthen the decentralized management of mineral resources. Project design would have benefited from a more prominent gender-sensitive approach to small-scale mining, given that the PAD only vaguely mentioned that the Project “will also address gender and infant labor issues in artisanal mining” without specifying how (PAD, p. 14). 23. Innovative Project design. Project design was innovative and inspirational for similar operations in other sub-Saharan countries. Whereas traditionally most technical assistance projects tended to approach the mining sector from a national and central point of view, the Project put a lot of emphasis on the decentralized management of mineral resources, which turned out to be a successful strategy in Madagascar and other countries with similar projects. The piloting of a range of approaches to address challenges associated with artisanal mining, including formalization and value addition in the supply chain, which may now be regarded as almost common was very creative at the time of project preparation. 24. Implementation arrangements. Implementation arrangements were appropriately designed. The Project was housed in the Ministry of Energy and Mines (MEM), and the existing Project Implementation Unit (PIU), which had successfully managed the implementation of the Project’s predecessor operation, was to be responsible for the procurement of all goods, services, and works under the Project (PAD, p. 14). In addition, a Mining Sector Promotion Agency was to be established within the Ministry of Mines to promote private investment and mainstream pilot activities in the artisanal and small-scale mining (ASM) sector (including operating the small grants program). The Promotion Agency was ultimately intended to provide business

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development services to entrepreneurs, as well as social intermediation services to build social capital and basic skills in Project-supported communities (PAD, p. 13).

25. Adequacy of Government commitment. Borrower commitment was evidenced by the fact that the mining sector was considered a priority instrument in the Government’s Interim-PRSP (PAD, p. 18) – and by the successful implementation of the Project’s predecessor operation, the Mining Sector Reform Project. The Government demonstrated commitment to sector reforms throughout this Project’s implementation period and also reacted promptly to mitigate the negative impact of the rushes on gemstones (MSRP ICR, p. 12). Furthermore, the Government’s ability to meet all of the mining related conditions of the Second Structural Adjustment Credit, and the seriousness of its participation in the preparation of the Project are indications of Government commitment (PAD, p. 18). 26. Stakeholder involvement and participatory process. Recognizing the importance of beneficiary participation for timely and effective Project implementation was one of the key lessons learned from the Project’s predecessor operation. Multiple stakeholder groups, which had been involved in the implementation of the previous Project, also participated in the preparation of this Project. These included the National Council of Mines, small-scale and artisanal miners and mining associations which were to be directly associated with Project preparation through the creation of a Consultative Committee. NGOs and private firms who had participated in the predecessor project were to be involved in the discussion of environmental and social issues. It was noted that consultation on environmental and social issues, which was mandatory under the 2002 mining law, was to be a permanent feature of the Project (PAD, p. 23). Formal consultations began with the disclosure of the Environmental Management Plan in October 2002. Associations of small-scale miners, civil society, private mining companies and representatives of the central, provincial and municipal administration, and consultations with local NGOs took place during Project appraisal (PAD, p. 23). 27. Assessment of Risks. Overall, the list of identified risks was comprehensive and the risk ratings, including the Significant overall risk rating, were appropriate. However, the country risk, especially in a post-crisis time, was probably underestimated.

2.2 Implementation 28. Mid-term review. During the time period between Project effectiveness in September 2003 and the Midterm Review, which was conducted in February 2006, implementation progress and progress towards achievement of the development objectives had consistently been rated Satisfactory in supervision reports. The Project had achieved particularly good results with regard to the establishment of the Gemology Institute of Madagascar and in strengthening geological information (MEM, p. 7). At the time, 44 percent of IDA funds had been disbursed and 90 percent had already been committed. Therefore, no changes were made to the Project’s development objectives. The Midterm Review did, however, prepare the way for the Additional Financing in that it emphasized the promotion of large-scale mining as a priority in addition to improving governance in artisanal and small-scale mining. This was motivated by the decision made by Rio Tinto/QMM in August 2005 to invest US$800 million2 (AM, September 2005 mission), and the global increase in commodity prices. The Midterm Review also identified the need for financing to support the Government’s efforts in reforming and promoting the petroleum sector, in addition to the ongoing mining sector reforms. 2 As it turned out, one billon US$ was eventually needed.

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29. Impact of the 2009-2012 political crisis. Madagascar’s political crisis, triggered by an unconstitutional regime change in March 2009, had a profound effect on the Bank’s assistance strategy. Disbursements under all projects were suspended from March 2009 until the gradual resumption of existing projects in mid-2011, followed by a broad portfolio restructuring exercise to ensure the operations’ consistency with the new 2011 Interim Strategy Note (ISN) as well as the constraints associated with the Bank’s Operational Policy (OP) 7.30 (dealing with de facto governments). The latter recommended throughout the portfolio to: (i) work at arms’ length from the Government; (ii) target social impacts as much as possible; (iii) favor partnerships in particular with the private sector; and (iv) strengthen coordination among Bank operations. As of the time of writing of this ICR, Madagascar continued to operate under the Bank’s Operational Policy 7.30. 30. Even though the political crisis had major implications for Madagascar, it did not drastically change the course of the project. The main reason is that the crisis occurred in 2009 when 95 percent of the credit proceeds had been disbursed during a six-year period of successful implementation - implementation progress and progress towards achievement of development objectives had consistently been rated Satisfactory. When disbursements of this Project resumed in July 2011, with only five percent of the credit proceeds remaining, restructuring or adopting a radically different approach were not considered feasible. The 2011 review mission concluded that, for the most part, it was possible to complete the remaining Project activities within the limitations of the new Interim Strategy Note (ISN) (ISR September 2011). Project activities pertaining to legal and institutional reforms were most affected by the crisis since these could not reach a decision point at a time when no major legal act could be legitimately passed, approved and signed by the transitional Government. However, all the background work preceding legal decision was undertaken. 31. In addition, the Project deliberately decided to stay focused on its longer-term objectives rather than changing direction on the basis of unstable and volatile policy declarations. Indeed, with the commodity boom and new developments in artisanal and industrial mining in 2006-2008, notably the development of large-scale mining, the political economy of mining was changing. According to a 2010 analysis of the World Bank’s development effectiveness, the transition was associated with a new distribution of powers and rent-seeking strategies. The new authorities’ attention focused to a large extent on the immediate returns that the mining sector could generate. The Project was thus faced with the need to safeguard the long-term interest of the sector. This is best illustrated by the Project-supported acquisition of geo-scientific information, which represents a major public investment that will, over time, gradually generate benefits in mining as well as other sectors. 32. In this context, the Project’s last annual work plan, which targeted the achievement of key results, focused on the following four areas of intervention: (i) professionalization of artisanal mining; (ii) integration of industrial mining into local and regional development; 3 (iii) environmental and social management in the mining sector under PDO 2/Component 2; and (iv) the completion of the geological mapping, the Project’s largest investment, under PDO3/Component 3. 33. Implementation arrangements. The Project Implementation Unit remained effective throughout the Project’s lifetime, including the two-year "freeze" imposed by the Bank. This was

3 The Project cooperated closely with the Second Governance and Institutional Development Project in the area of participatory budgeting in mining communities as well as with the Growth Pole Project.

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key to the successful resumption of Project activities, and in particular the completion of the geological mapping in June 2012. 34. Project Risk status. Throughout its lifetime, the Project carried a country record flag.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 35. M&E framework design. The design of the Project’s Monitoring and Evaluation (M&E) framework presents the typical challenges of this generation of pre-results framework projects. Some indicators are not easily attributable or measurable. Also, outcome indicators could have been defined - and distinguished from output indicators - more clearly. On the positive side, five out of the seven outcome indicators contained numeric end of Project target values, and three outcome indicators included a baseline value. It is worth noting that the Project was prepared in the aftermath of the 2002 crisis when reliable national data and statistics at sector administration level were scarce and difficult to access. Overall, despite its shortcomings, the M&E framework was sufficiently robust to allow for a meaningful assessment of the Project’s achievement of its development objectives. 36. M&E framework implementation and Utilization. While Project supervision was rather strong on technical aspects, as evidenced by the significant achievements the Project was able to accomplish despite its two-year hiatus, according to the Implementation Status Reports (ISRs) only three out of seven outcome indicators and five out of thirteen output indicators were tracked during the Project’s lifetime. (One additional indicator – creation of a Mining Sector Promotion activity - was monitored in the supervision reports but was not part of the PAD Results Framework.) However, the monitoring data collected during implementation and an external evaluation undertaken at Project closing allowed for a meaningful assessment of Project results.

2.4. Safeguard and Fiduciary Compliance 37. Environmental and Social Safeguard Compliance. The Project was categorized as an Environmental Category B Project; it triggered Operational Policy (OP) 4.01 (Environmental Assessment). Throughout Project implementation, environmental safeguard policies were complied with and rated Satisfactory in supervision reports. A Sector Environmental and Social Assessment (SESA) was prepared and disclosed in 2003; the SESA was updated and re-disclosed in 2007. No significant safeguard issues were identified during implementation. An update of the SESA was conducted during the Project’s last year of operation and was available by Project closure. The Project contributed to enhancing the environmental management capacity in the country, notably by supporting the creation of Environmental Units at decentralized levels, strengthening the coordination with the National Environment Office (Office National de l’Environnment), and by supporting a framework for dialogue with civil society, which played an important role in resolving conflicts between mining activities and the environment. 38. Covenants. All covenants associated with the original and Additional Financing were complied with, except for one, which lost its relevance as a result of the 2009 crisis. The Additional Financing Project Paper included the following covenant: “No later than December 31, 2008 the Borrower shall have adopted a plan with specific time based measures for the restructuring of OMNIS [National Office for Mines and the Strategic Industries].” However, this covenant did not directly pertain to the Project as it related to an activity, which was to be led by the Government of Norway on a parallel financing basis, as documented in the Additional Financing Project Paper and Financing Agreement.

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39. Financial Management. The financial management system in place was adequate and performed well. The quarterly Financial Monitoring Reports were submitted in time by the PIU, and the external audit reports were unqualified. 40. Procurement. There were no problems associated with the procurement activities under the Project. No misprocurement occurred - all contracts were procured in accordance with the provisions of the Development Credit and Financing Agreements. The post-crisis resumption after the two-year suspension of disbursement was smooth; issues such as settling arrears and resolving contractual situations were handled effectively by the PIU; and an updated procurement plan was prepared for the last year of operation. 2.5 Post-completion Operation/Next Phase 41. Need for additional technical assistance. At the time of Project closure, it was clear that additional technical assistance was needed to sustain reforms and institutional capacity built under the Project in the mining sector. The recent rapid growth of industrial mining, which was partly a result of the improvements that the Project helped put in place, has generated new institutional capacity needs. The Additional Financing attempted to address these by supporting efforts to integrate mining operations into their local and regional socio-economic contexts. However, at the end of the Project’s life, with two world-class mining projects and the biggest investments in green-field mining in Sub-Saharan Africa, those needs clearly exceeded the Project’s reach. Concerned about the Ministry of Mines’ ability to monitor Ambatovy’s large mining and processing operation and to effectively carry out its mining inspectorate functions, in mid-2012 the transition authorities commissioned an audit of the Ambatovy project, which in turn could add risk to the biggest operation in the country. Strengthening mining inspectorate functions is therefore a priority area for future technical assistance. Similarly, in line with the Project having devoted great efforts to attracting investments through its ambitious geology program, future assistance should build on the renewed understanding of the island’s subsoil and finalize the institutional structure to ensure that geo-data is consistently updated and made available to the public. 42. Continued Bank engagement. Despite the country’s political crisis remaining unresolved, the Bank decided to stay engaged in the mining sector as much as possible, within the limits delineated by the ISN. At time of Project closure, mining was of greater strategic importance than ever, posing tradeoffs between immediate returns and long-term impacts. Both at the central and local levels, questions have been raised as to what extent mining development is generating benefits for the country. High expectations for benefits in some regions have led to disappointment and protests. Stakeholders from the private sector, the civil society and also the Administration requested that the World Bank, the main historic partner in mining, stay engaged and provide a platform for more quantitative information and constructive dialogue on issues like fiscal revenues, employment, infrastructure and local content. An analytical and advisory activity (AAA) on mining benefits, to be supported by the South African Trust Fund for Sub-Saharan African Energy, Transport, and Extractive Industries (SAFETE), was therefore proposed as an opportunity for donors and the Bank to stay engaged in the mining sector and to contribute to its sustainable development at a critical time for Madagascar. This type of engagement is in line with the ISN (see Section 2.2), according to which the Bank would: (i) remain focused on the most pressing short term issues affecting the country, while keeping a medium term view on key strategic pillars of governance, employment and vulnerability to prepare for re-engagement; and (ii) pursue analytical work that would raise public awareness and update the knowledge base in priority areas.

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43. Social accountability and transparency in mining. In light of the increasing mining sector investments, future Malagasy Governments will likely be held accountable by civil society organizations for the benefits generated by the sector and their distribution among the State, investors, and local communities. Future World Bank interventions should support such demand-side governance initiatives and provide technical assistance so that policy changes are made in a consultative manner and on the basis of good international practices and realistic expectations. Typically, fiscal provisions of the legal framework may have to be reassessed in order to preserve both the competitiveness of the country and a fair sharing of the benefits in the context of rapidly changing international markets. Transparency should remain a priority so that increasing revenues and rents are administered in an open and efficient manner and to ensure that they translate into more sustainable returns. 44. Extractive Industry Transparency Initiative (EITI). In close consultation with the main stakeholders, the Bank consistently supported the EITI as a unique platform for promoting transparency in the mining sector. One of the Project’s key contributions in terms of transparency was its decisive support to the launch and the management of the EITI. The initiative, then funded under the Bank-managed EITI Multi-Donor Trust Fund, was very successful despite the political uncertainty in Madagascar, which led the EITI International Board to suspend the country’s candidacy status in 2011. The EITI Madagascar published in September 2012 a detailed and fully disaggregated report that reconciled all payments declared by mining companies in the fiscal year 2010 with all revenues declared by Governmental institutions. A new proposed Grant as well as potential additional funds from the African Development Bank were discussed in November 2012 to ensure continuous support to the initiative which, to all observers represented a unique way to promote transparency in the mining sector at a time of relatively high uncertainty and opacity. 45. In the medium run, depending on the country’s development priorities, future technical assistance support could be needed. A general outline for a 5-step EITI++ program was discussed during an EITI++ scoping mission in July 2008 (eight months prior to the crisis), and the 2010 policy note also identified areas of priority for the future. This diagnosis will have to be updated, especially in view of the improved understanding of the political economy based on recent Bank research. Much emphasis should be placed on building capacity to realize the potential benefits that mining can bring to the economy at the national and local levels. With a view to maximizing the mining sector’s contribution to the economy capacity building should target in particular local supply in mining areas, efforts to stimulate local employment, community development and synergies between mining projects and infrastructure developments. Other areas for future support should typically include: (i) mining policy (in view of new industrial mining developments); (ii) mining fiscal regime (building on the Project’s analytical work); (iii) institutional capacity building (typically to consolidate the creation of the National Geology Survey and the Inspectorate functions); (iv) further mineral resources assessments (especially of the Sedimentary basin); (v) environmental impact management related to mining; and (vi) tertiary education. As many challenges, such as transparent management systems for licenses and strengthening of institutions are similar for all extractive industries, a key question will be whether a new project should or should not include interventions pertaining to petroleum. 3. Assessment of Outcomes Relevance of Objectives, Design and Implementation Rating: High 46. The High overall Relevance rating is based on the following observations:

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Relevance of Objectives and Components. The continued High relevance of objectives and components is evidenced by the fact that the 2011 Interim Strategy Note explicitly mentions the Project as one of the operations designated to support: (i) its governance and public sector capacity pillar with PDO2 and Component 2 of the project, notably social accountability mechanisms in mining; (ii) activities related to artisanal and small scale mining; as well as (iii) integration of industrial mining into regional development. The growing importance of mining in Madagascar, the related challenges and opportunities in terms of governance, and the relevance of the Project as an instrument to address governance and capacity needs are further elaborated in the Bank’s most recent analytical work like the mining policy note (2010) and the political economy analysis of mining (2011). Mining also features prominently in the Government’s 2007-2012 Madagascar Action Plan (MAP), which “one could argue [is] by inertia or by default [still considered] the basic policy framework [and poverty reduction strategy] under which the administration works,” given that “the transition government is essentially running current affairs and in principle is refraining from committing the country to long term policies changes (World Bank, 2011). The mining sector was referenced as one of the country’s high economic growth engines besides tourism and agriculture, and the sector goals and strategies, such as “unleashing” the country’s extractive potential by helping current mining projects enter the production phase and attracting more explorers; improving the existing legal and regulatory environment; and integrating the small scale miners into the formal economy are consistent with the Project’s three development objectives (Republic of Madagascar, 2006).

Relevance of Design and Implementation. The continued High relevance of the Project’s design to its objectives is evidenced by the fact that the implementation of the Project’s complex sub-components and components was progressing well, and that the activities were contributing towards the achievement of the Project’s intended objectives until its suspension due to country factors in 2009. From the beginning, the Project was designed to advance the development of the entire mining sector, notably by promoting artisanal and small scale gemstone mining as well as the collection of geoscientific data, which primarily targeted industrial mining. In order to remain highly relevant and adapt to the changing structure of Madagascar’s mining industry prompted by two large-scale mining investments, the Project sought Additional Financing to support efforts to integrate those operations into regional development, and to continuously advance sector development notably by expanding the scope of the geology component to realize a comprehensive synthesis of the national geology at the scale of 1:1,000,000. It is a tribute to the sound Project design that, despite the difficult circumstances, the Project was able to complete some of its key activities and achieve the corresponding PDOs, such as the geoscience data information infrastructure under PDO 3/Component 3. While the ban on rough stone exports, which was in effect from February 2008 to July 2009, adversely affected some performance indicators, it did not diminish the relevance of design.4 On the contrary, this temporary ban illustrated the critical need to strengthen value addition and transparency in the supply chain. The gemstone sector has partly recovered as evidenced by the high demand for the lapidary training and the reopening of the monthly Madagascar Gem Market in Antananarivo, which indicates that Project design and envisaged promotion of value addition remain highly relevant. In addition, the Project continued to support the right activities, given that the mining sector

4 The ban was decreed by Madagascar’s President in the context of a controversy about a giant emerald, which later proved to be a green beryl.

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was identified in the 2011 ISN as one of the four key sources of growth in the country. In light of its large growth potential, renewed focus was to be placed on transparent processes and institutions that can ensure good governance in the sector, benefit sharing, and private sector development in artisanal and small-scale as well as large scale mining. In addition, Project activities were well-aligned with the priority actions cited in the MAP in relation to the mining sector, which included: (i) improving laws and regulations in mining sector; (ii) building capacity to manage oil and mining resources; (iii) eliminating existing impediments for mining production; (iii) promoting the exploration and development of mining; and (iv) educating, informing and training small-scale gemstone miners (World Bank, 2011, p. 11).

3.2 Achievement of Project Development Objectives Rating: Moderately Satisfactory (MS) 47. The Project comprised three Development Objectives (PDOs): (i) strengthening transparency and governance in mining; (ii) key institutional reforms for the decentralized management of mineral resources; and (iii) promote private investments and value-added in the sector. Together, the three PDOs were to support the environmentally and socially sustainable management and inclusive development of the solid mineral sector. In accordance with the Bank’s ICR guidelines, the three objectives will be assessed separately below. The achievements by indicator are summarized in Tables 3, 4, and 5 below. 3.2.1 PDO 1- Strengthening Transparency and Governance in mining Rating: Moderately Satisfactory 48. Activities carried out in support of the first development objective addressed key elements of the Extractive Industries value chain, i.e. the theory of change implicitly underlying Project design (see Section 2.1) to improve the legal and institutional frameworks at the central level. (i) Enhanced legal and regulatory frameworks for industrial and artisanal mining. The Project-supported legal and regulatory reforms represent one of the Project’s key accomplishments. The revision of the Mining Code in 2005 and the subsequent production of mining regulations (Mining Code Decree of 2006), as well as the revision of the Large-scale Mining Investment Act (Loi sur les Grands Investissements Miniers) enhanced the legal and regulatory framework’s effectiveness. As depicted in Figure 3 below, it further instilled confidence in mining operators to invest in Madagascar as evidenced by the fact that direct foreign investments in mining amounted to more than US$6 billion in 2012, compared to about US$23 million in 2005 (Rakotoarison, Razafindrahaga, 2012). Figure 3: Direct foreign exploration investments in the mining sector 2005-2011 (in US$ billion)

Source: Madagascar Central Bank

01234567

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While these investments may not be fully attributable to the Project, major investments in the sector, such as the $5.5 billion Ambatovy nickel-cobalt mine in 2006, the largest mining sector investment ever in Madagascar, were at least partially attributable to the investor-friendly legal and regulatory environment supported by the Project. It is worth noting that the crisis did not question the two existing large-scale investments, i.e. Ambatovy and QMM. If anything it generated delays and increased the investment value, given the increased cost of doing business in a politically risky environment. Exploration activities, however, have decreased. In addition to benefiting large-scale mining investors, the revision of the regulatory frameworks generated various benefits for artisanal and small-scale miners. New legal provisions and awareness raising campaigns made it possible for artisanal and small-scale miners to form associations, formalize their operations and access mining titles, and the size of mining squares was reduced from 2.5 kilometers to 625 meters, which drastically enhanced the capacity to access mining resources, and artisanal mining corridors were created on a pilot basis. Further reforms and adjustments of the policy, legal and regulatory framework, which were to be carried out under the Additional Financing, were adversely affected by the 2009 political crisis. However, while the latter prevented the passage of the act and adoption of reforms the comprehensive analysis of the fiscal framework for mining conducted under the Project provides valuable guidance to the transition authorities as well as a legitimate future Government.

(ii) Formalized exports of gemstones. Addressing informality and adding value to the gemstone industry was one of the main policy and institutional reforms supported by the Project. The Project-facilitated trade and exchanges, simplified export procedures, improved quality control, the development of local cutting and polishing capacity, and the creation of a certification scheme effectively contributed to a major increase in formal exports from about US$21 million in 2003 to US$40 million in 2006. These gains were partially reversed in 2008 when the Government unexpectedly declared a ban on rough stone exports, which was lifted about 1.5 years later. The declared gemstone exports are expected to recover to about US$30 million in 2012. While the temporary disruption in the gemstone industry constituted a setback, it did not compromise the underlying value addition “infrastructure” put in place by the Project for facilitating training, trade and exchanges. A one-stop shop for the export of rough gemstones as well as jewelry was set up with Project support and is jointly run by Mining and Customs administration staff. The one-stop-shop delivers export certificates in coordination with the National Mines Laboratory. It was successfully associated with a total of 260 market days held in Antananarivo between 2007 and 2012, initiated by the Gemology Institute of Madagascar and now sustained through the creation of an independent and self-financed association. Progress still remains to be made on aspects of the “Laissez-passer” system as identified during the policy dialogue facilitated by the Project in 2006 as well as in the Bank’s 2010 political economy analysis. (iii) Improved institutional capacity. The Project supported the creation of the following institutions, which resulted in significant transparency gains in the mining sector:

Gemology Institute of Madagascar. Although the sale of rough gem material is a strong income generator, adding value by transforming rough gems to polished jewels or better yet, jewelry can earn even more revenues and generate even more employment. At present, Madagascar is recognized worldwide as a quality gem producer - an accomplishment, which is attributable to the Project-supported creation of the Gemology Institute. Delegations from around the world have visited the top quality gem cutting

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equipment, the world-class gemology lab and learned from the Institute’s highly skilled staff how to increase professionalization in the sector. The Institute improved the national gemstones value chain, as evidenced, for example, by flourishing local jewelry businesses in Antananarivo, and contributing significantly to the professionalization and formalization of the gemstone industry in Madagascar. Considered one of the best gemstone training facilities in Africa, the Institute was accredited by the Gemological Association of Great Britain, the world's foremost authority in gemology. Education and training were seen as the best way to add value to the sector and gradually provide incentives for gemstones miners to formalize, and for international buyers to buy refined stones directly in Madagascar. During the Project’s lifetime, the Institute delivered 1,750 trainings and courses in cutting, polishing, jewelry and/or gemology, as well as numerous workshops in the field. As a result of the training, about 100 new independent businesses were created between 2004 and 2012. In close collaboration with the mining and customs administrations, the Institute also plays an important role in curbing the exports of controlled stones by providing independent expert identification and evaluation of gemstones. Private buyers and exporters also appreciate the Institute’s control and identification services, which help to enhance export quality and Madagascar’s recognition internationally.5

ASM Management Centers. In an effort to further support the formalization of artisanal and small-scale gemstone and gold mining and develop new intervention schemes to deal with particularly intense situations, the two first artisanal mining management centers (Bureau de l’Administration Minière) were created in Ilakaka, an area that had experienced frequent sapphire rushes, and Vatomandry, a ruby mining area. These offices provided administrative services to miners with regard to their registration, formalization and training. Around 3,000 artisans were trained, and the formation of 100 cooperatives was supported in 30 different communes. These results were promising, but due to the 2008 ban on rough stones exports (Ilakaka) and the exhaustion of the resources (Vatomandry), the efforts could not be sustained and two other planned management centers could not be set up. While none of the centers were operational at Project closing, a sector study conducted in 2012 by the Project and the World Wildlife Fund (WWF) recommended that the approach be revived.

Large-Scale Mining Investment Commission. With regard to large-scale mining, the Project facilitated the creation of a special inter-ministerial commission in charge of monitoring large-scale mining contracts, and financed the operating expenses of its permanent technical secretariat. The Commission has been the main coordination mechanism and arm of the Government to negotiate with interested large-scale mining companies and oversee their investments, in particular the Ambatovy investment. The Commission is still operational and the Secretariat was successfully integrated into the Ministry of Mines after Project closure.

(iv) Improved transparency in tax and royalties payments. As a result of Project-facilitated fiduciary, technical and financial support to the EITI, Madagascar received candidate status in 2008, and validation status in 2011. Even though Madagascar’s validation was suspended in October 2011, based on the Government’s lack of legitimacy, its involvement in the EITI 5 A post-training survey of participants of trainings conducted by the Gemology Institute showed that at least 6 percent of the respondents had started their own gemstone businesses, and 42 percent of the respondents were employed by gemstone businesses. The Institute further conducted 645 exports controls were over a period of six years, with up to 145 tons of stones controlled in 2010 alone.

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persisted and led to a significant improvement in the transparency of sector investments and revenues, as they were published in EITI reconciliation reports in 2010, 2011 and 2012.6 Those reports are regarded as a key success in transparency during the challenging times of the transition. Table 3: Project achievements under PDO 1 by Outcome Indicator

Project Development Objectives

Outcome/Impact indicators

PDO 1: Strengthening transparency and governance in mining

1. Four BAM [Mining Administration Centers] created. Baseline: 0; End Target: 4; Actual: 2

Status: 50% achieved. Two out of the four targeted mining administration centers were created in the Ilakaka and Vatomandry areas, which had experienced frequent rushes of thousands of sapphire and ruby miners, respectively, prior to the Project. The centers’ initial results, which helped to train around 3,000 artisans and facilitated the formation of 100 cooperatives, were promising. However, due to the 2008-2009 ban on rough stones exports (Ilakaka) and exhaustion of resources (Vatomandry), the efforts could not be sustained. The centers were not operational at Project closing, but their revival was recommended by a recent sector study conducted by the World Wildlife Fund.

2. Creation of a one-stop shop for exports of gemstones. Baseline: No; Target: Yes; Actual: Yes

Status: 100% achieved. The one-stop shop is in place and jointly run by Mining and Customs administration staff. After a period of anarchical rushes on sapphire and ruby, such measures helped to simplify export procedures, reduced the incentive to smuggle, and effectively contributed to an increase in formal exports.

3.2.2 PDO 2- Key institutional reforms for the decentralized management of mineral resources Rating: Moderately Satisfactory 49. Objective 2 of the Project aimed to build the capacity of institutions to enable them to perform their assigned roles especially at the decentralized level. The Project achieved the following key accomplishments under its second development objective: (i) Improved collection and use of mining revenues for local/regional development. Improved access to mining cadastre services at sub-national level. The Project provided

financial and technical support to strengthen the capacity of the central cadastre office (established under the Project’s predecessor operation) and created seven cadastre “antennas” (regional delegations) in the main mining provinces/regions. The successful integration of these antennas into a unique integrated licensing system was ensured through close monitoring until 2008. It led to an increased number of permits granted throughout the country and an improved application of the “first-come first-served” license processing principle. The Project also established mobile cadastre offices (cadastre ambulant) in order to reach miners in remote areas. The latter was an innovative tool, which, by making cadastre services more accessible, effectively promoted the formalization of artisanal and small-scale mining operations. The increased formalization of the hitherto informal mining sector, in turn,

6 The 2012 report (FY 2010) also includes the oil sector (see http://eiti.org/Madagascar for details and reports).

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led to an increase in the local tax base for mining-related taxes. Until the political crisis in 2009, Madagascar’s cadastre system was considered one of the best in Africa. Since 2009, this key institution has been affected by the de facto moratorium on permit allocation ordered by the Transition authorities, as well as a lack of oversight. On the positive side, the cadastre “infrastructure” is still in place, and with minimal support the mining permit allocation could resume, provided the Government is able to sign the mining licenses. The private sector is currently urging the Government to clean up the backlog and resume the permit allocation. While it is not uncommon for cadastre systems to experience this kind of “stop and go” situation, the impact of the de facto moratorium on the achievement of PDO 2 will depend on the moratorium’s duration.

Improved collection and use of revenue from artisanal and small-scale mining. The

decentralization of mining revenue collection was introduced in the legal framework accompanying Madagascar’s new decentralization policy to ensure that local governments (provinces and communes) and mining communities would benefit from mining revenues by collecting them directly. The Project supported extensive capacity building activities in 16 pilot mining municipalities (4 gemstone and 12 gold mining municipalities). A total of 54 miners’ associations were formed as a result of the Project-funded capacity building activities for local administration officials and miners.7 The formalization of gold mining operations, which had previously operated outside of the formal economy led to a significant increase in the declared gold production, as illustrated by the example of the Antimbary commune. In Antimbary alone, the declared gold production rose from zero before the Project to 83 kilograms after three and a half years of Project support (from mid-2005-2008), generating about US$30,000 in fiscal revenues for the municipality. Based on the commune’s development plan, the incremental fiscal revenues contributed to the provision of basic local health, education, and transportation infrastructure. In addition to these pilots, the Project provided support through legal and sector studies for the design and implementation of improved collection schemes at the decentralized level.

Improved management of mining revenues in industrial mining areas. In light of the large

mining investments materializing and socio-economically impacting the three municipalities of Fort-Dauphin (QMM), Moramanga (Ambatovy) and Tamatave (Ambatovy) the Project implemented a comprehensive capacity building package to ensure the transparent and effective use of tax revenues generated by those mines. This included activities to strengthen: (i) supply-side governance by enhancing local and regional authorities’ development planning competencies and setting up Local Coordination Committees as the interface between mining companies and local/regional authorities; and (ii) demand-side governance by facilitating participatory budgeting to ensure that local citizens’ priorities were taken into account in the allocation and use of mining revenues.

As a result of empowering mining communities to participate in mining revenue management, in the two municipalities affected by the Ambatovy operation, for example, US$475,000 or the equivalent of 90 percent of local taxes paid by Ambatovy for construction permits in 2011 were invested in priority infrastructure, such as health, education, transport. The participatory budgeting approach has since then been scaled up in non-mining communities throughout the country, funded under the Bank-supported Second Governance and Institutional

7 These included: (i) training of local administration officers in public sector management, including the new fiscal reform regulations, and mining regulations; and (ii) educating miners in mining legislation and how to obtain licenses, more productive mining and mineral processing methods, business skills, occupational safety and health practices, and environmental management.

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Development Project. The Project further supported studies on benefit sharing mechanisms at the regional level and a dialogue between QMM, the regional authorities, the Ministry of Mines and local communities in view of improving the management of royalties through a regional community foundation.

Dynamic Mineral Resources Management System. In the case of the expected QMM ilmenite

mining investment, in 2005-2006, the Project funded the development of a Dynamic Mineral Resources Management System to enhance planning and development activities in the Fort-Dauphin region. This innovative, GIS-based tool integrated multi-disciplinary information on mining, agriculture, tourism, fisheries as well as conservation, restoration, and social and physical infrastructure improvements. This planning tool, which is accessible to local authorities and development partners, can be adjusted as new information becomes available to refine the existing growth poles for regional development and focus investments accordingly. By the end of the Project the System was used to support an Inter-Communal Development Plan (Schéma d’Aménagement Inter-Communal) among the four communes in the Fort-Dauphin area, in coordination with development administrations and partners.

(ii) Improved environmental impact management of mining activities Central and regional Environmental Units. In order to ensure a more environmentally

sustainable use of mineral resources, the Project established and supported the creation of one central and six regional environmental units in the country’s main mining regions. These Units have now been successfully integrated into the Ministry of Mines’ institutional structure and are staffed with civil servants, thus making them more sustainable. Between 2005 and 2011, the units handled around 3,400 environmental permits (mostly for exploration or small-scale mining). However, the lack of resources of the National Environmental Agency under the Ministry of Environment has reduced the units’ effectiveness especially since the crisis. The Environmental Units, as well as other units of the Ministry of Mines and related agencies, are benefiting from improved information flow, given that an Internet/Extranet network was established with Project support.

Environmental Management Information System. The Project supported the development of

an Environmental Management and Information System (Systeme d’Information pour la Gestion Environmentale) - an innovative and cutting-edge management tool developed on the basis of existing environmental regulations and procedures - which consolidates environmental data related to both large and small-scale mining operations. This GIS-based system, which uses a Google Earth platform that supplies up-to-date satellite imagery, provides mining permit and cadastral information, environmental management plans, results of past environmental monitoring activities and infractions by large-scale mining companies. The system is operated by the Ministry of Mines’ environmental units, and by sharing its data with the National Environment Office (Office National de l’Environnement) it facilitates close cooperation between these two entities in the enforcement of environmental regulations in the mining sector.

Interministerial Committee on Mines and Forests. The Project supported the creation and

operation of an Interministerial Committee on Mines and Forests as a mechanism for addressing overlaps between mining permits and newly protected areas, in accordance with the fifth IUCN World Parks Congress in 2003 (Durban process). Overall, the Committee managed to resolve at least 85 percent of the overlap problems and reclaim more than six million hectares of newly protected areas. Notably, the Committee successfully facilitated the negotiation between Madagascar National Parks, responsible for managing protected areas,

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and the mining title holder, which resulted in the redefinition of the boundaries of the Mikea protected area in south-west Madagascar. In addition, in partnership with the World Wildlife Fund (WWF), the Project supported the preparation of a toolkit8 to prevent mining rushes, which tend to occur in or close to protected areas.

Table 4: Project achievements under PDO 2 by Outcome Indicator

PDO 2: Key institutional reforms for the decentralized management of mineral resources

3. Collection rate of mining royalty increases from 10% today and 80% at the end of the project, as a result of the decentralized tax collection procedure. Baseline: 10%, Target: 80%, Actual: 97%

The Ministry of Mines keeps statistics on expected and collected royalties based on the number of "laissez passer" (simplified export procedures for artisanal mining) and projected production (industrial mining). They show an increase in the collection rate throughout the Project period as a result of measures like the one-stop shop, but also the effect of the startup of industrial mining operations. The figures do not include informal production, for which there are no statistics.

4. Number of Community development plans that include management of mineral resource (minimum of 10); Baseline: 0, Target: 10, Actual: 19

Status: 100% achieved. The Project supported communities in 19 communes in integrating mineral resources and revenues into their local development plan and budgets. Regarding artisanal mining, pilots on gold and gemstones management were developed in 16 communes. With regard to industrial mining, the participatory budgeting process focused on 3 communes in Fort Dauphin and was going to be extended to 3 additional communes around the Ambatovy project (in partnership with another World Bank Project). In addition, 3 inter-communal development plans were developed to integrate mining developments affecting more than one commune.

5. Decentralization of mining administration increases fiscal revenues from mining for provinces and communes by 50%

Baseline: N/A, Target: +50%, Actual: N/A Status: 100% achieved. Adequate information is not available. National statistics are not available, but examples of sampled artisanal mining and industrial mining communes show a range of increases. As one example, the commune of Ampasy Nahampoana near the QMM ilmenite mine saw its budget multiplied by 22 from 2006 to 2009 thanks to the collection of construction permit taxes collected.

. 3.2.3 PDO 3- Promote private investments and value-added in the sector Rating: Moderately Satisfactory 50. Objective 3 of the Project was to promote private investments and value addition in the sector mainly through an ambitious geology program. The following results were achieved under the third development objective: (i) High quality geo-scientific data available to potential investors and other users. A wealth of geological, geophysical and geo-chemical maps and data, mineral resources interpretations and assessments and other scientific information have been collected and are available to the public through the online Mineral Resources Governance Data Bank. State of the art geophysical data 8 http://www.asm-pace.org/publications/madagascar-case-study.html

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was acquired through the successful completion of about 600,000 linear kilometers of airborne surveys (magnetometric and spectrometric), and 150 geological maps were produced at a scale of 1/100,000 and 1/500,000, covering over 65% of Madagascar territory plus a national synthesis map at a scale of 1/1,000,000. In addition, “hands on” training in modern fieldwork and data processing techniques, as well as in up-to-date geological concepts was provided to relevant Ministry of Mines staff. The geological and geochemical mapping activities resulted in a renewed understanding of Madagascar’s geology and mineral resources, including new insights on the origins of the island, which inspired the production of international publications by reputable scientific teams, both foreign and national, as well as the organization of conferences during the course of the work. (ii) Mineral Resources Governance Promotion Data Bank created. The Mineral Resources Governance Promotion Data Bank is one of the Project’s major achievements and represents the already operational core of the National Geological Survey. Collected, digitized and stored geo-scientific data is available to the public either on site at the Documentation center established under the Project or online. The Data Bank provides potential investors and the general public with a unique platform to access and acquire geological data, and its highly skilled staff, trained under the Project is responsible for managing the geological information and running a cutting-edge platform and data center.9.The Ministry of Mines has pledged to issue a formal access to information policy to guarantee that this wealth of information will remain available to the public during the Transition. (iii) Improved geological information management and private investment promotion. The Project supported the creation of two previously missing yet critical elements of a modern institutional mineral resources management framework, namely the Mining Inspectorate (Bureau d’Inspection Miniere et Environnemental) and the National Geological Survey (Bureau de Géologie National).10 While its Environmental Units, as discussed in Section 3.2.2, as well as the Large Mining Investment Commission are operational, the Mining Inspectorate is not yet completely structured as a fully operational body within the Ministry of Mines. A feasibility study and concrete action plan are in place, which would allow the Government to proceed with implementation as soon as the political context is favorable for completing institutional sector reforms. Similarly, the National Geological Survey (Bureau de Géologie National) functions were partially performed through by the Mineral Resources Governance Data Bank (Base de Promotion de la Gouvernance des Ressources Minerales), but the formal creation of the National Geological Survey has been on hold since the onset of the 2009 political crisis curtailed the creation of new institutions.

9 See BPGRM website: http://www.bddmines-mada.com/bpgrm. The platform enables on-site or internet access to maps and data. Higher resolution maps and detailed databanks are sold onsite. 10 Initially, a Mining Sector Promotion Agency (Agence de Promotion du Secteur Minier) was to be created to provide business development services as a limited liability company with private shareholders. Based on a series of institutional assessment studies, including a feasibility study for the Agency, the decision was made not to create the Agency in favor of establishing an institutional framework more in line with the functions of modern government. The Agency’s intended functions were subsumed primarily by the Mineral Resources Governance Database (Base de Promotion et Gouvernance des Ressources Minérales), which implemented programs initially assigned to the Agency, such as programs to promote the formalization of ASM operations, environmental and legal awareness campaigns, and community development,

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Table 5: Project Achievements under PDO 3 by Outcome Indicator

PDO 3: Promote private investments and value-added in the sector

6. Annual declared exports of gold and gemstones from small scale mining increase from about US$ 21 million today to US$ 50 million at the end of the project. Baseline: 21, End Target: 50, Actual: 30

Status: 30% achieved. The value of exports increased greatly from US$18 million in 2003 to US$40 million in 2006. It decreased thereafter and reached a historical low in 2009 (US$2 million), clearly showing the impact of the 2008 ban on rough stones exports (see Section 2.2). Since the ban was lifted in 2009, the value of gemstone exports has recovered, with non-official data predicting an expected export value around US$30 million in 2012. Gold exports are expected to have dramatically increased due to the increase in commodity prices. Total mineral exports boomed after 2009 with the startup of QMM’s mining production.

7. Average annual investments in mining increase from about US$ 10 million today to US$ 85 million at the end of the project. Baseline: US$ 10 million, End Target: US$ 85 million, Actual: US$2.9 billion

Status: 100% achieved. According to the most recent official figures the annual investment in 2009 amounted to US$2.9 billion (Central Bank of Madagascar), but cumulative investments by QMM and Ambatovy between 2006 and 2012 have reached more than US$6.5 billion. This does not reflect a trend but clearly demonstrates the scope of mining development in the country. Annual investment has also grown, due to increased exploration expenditures particularly before the 2009 crisis.

3.3 Efficiency Rating: Substantial 51. The Project largely exceeded the proxy economic indicators used in the original efficiency assessment in the PAD. The economic and financial assessment in Annex 4 of the PAD (p. 41) utilized “possible contributions of mining to the economy” (PAD, p. 41) as a proxy approach for measuring efficiency. This includes possible large-scale investment in ilmenite production, as well as an increase in the reported production of gold and gemstones as a result of Project interventions. 52. Projections of the mining production at the (original) end of the Project in 2008 were made for two scenarios: (i) a base case scenario of one large-scale US$500 million investment which was to result in an annual production value of US$143 million; and (ii) a best case scenario of two large scale investments totaling US$1 billion which were to result in a US$378 million mineral production value. The data suggest that the Project by far exceeded its expected results, with at least US$6.5 billion in mining investments realized by the end of the Project, and over US$140 million paid in taxes11 by mining companies in 2010 only, which suggests a much higher production value. While it is unclear to what extent the returns on investments are attributable to the Project, the Project had a role in making the large-scale mining law applicable with the corresponding comprehensive Decree and the Ambatovy investment feasible by creating a favorable business environment. 53. Another proxy measure of efficiency is the “value for money” approach. As shown in Table 6 below, while the actual costs of Components 1 and 2 were below the appraisal estimate,

11 Source: 2012 EITI report (on Fiscal Year 2010).

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Component 3 (“Promote private investments and value-added in the sector”) and Component 4 (“Operating Cost”) incurred cost overruns. The main increase in Project cost compared to appraisal estimates pertains to Component 3, which is explained by a more ambitious and costly geological program motivated by the intensified focus on industrial mining. Two additional blocks of airborne surveys were added and financed both by the Project and the Government of South Africa, which had expressed interest in parallel financing after appraisal. 54. About 40 percent of the cost overrun can be explained by the expanded coverage from 600,000 to 647,921 linear kilometers, and 60 percent or about US$ 900,000 is attributable to the underestimation of costs at appraisal. It is worth noting that these cost overruns did not adversely affect the overall efficiency of the Project, considering: (i) the significant increase in the airborne survey resulted from a sharp increase in commodity and fuel prices associated with the global mining boom; (ii) the unit cost per linear kilometer was lower in Madagascar than in the case of similar projects implemented in other sub-Saharan African countries (see paragraph 55 below), which also incurred significantly higher than anticipated airborne survey cost as a result of the global mineral boom; (iii) the expansion of the coverage by about 50,000 line kilometers; and (iv) the tremendous success of the geological program, which brought about new scientific perspectives. The synthesis of all the geological work revealed a fundamentally new understanding of Madagascar’s geological history and sub-soil, which was of great benefit to the mining sector and of general interest to the public at large. Table 6: Cost of Strengthening of Geo-Scientific information Infrastructure

Estimated

cost as in PAD

(US$ million)

Final Cost (US$ million)

Sub-components Initial Credit

Add Credit

Total

Strengthening of Geo-Scientific information Infrastructure (Total)

16.870 20,196 3,060 23,256

Airborne Survey 4.860 6.491 6.491

Geological and Geochemical mapping 10.190 11.304 2.326 13.630

BPGRM (Mineral Resources Governance Data Bank) 0.89 1.162 0.250 1.412

Technical Coordination and Supervision (including consultants, coordination committee, trainings, meetings/symposium etc.)

0.930 1.239 0.484 1.723

55. Comparing the cost of selected activities to similar ones in other projects is another way of assessing efficiency. The single most costly activity carried out under the Project was the airborne geophysical survey. While the actual contract value was substantially higher than expected (see paragraph 54 above) at US$6.49 million compared to the US$4.86 million appraisal estimate (PAD, p. 37), a comparison of unit costs of airborne surveys (expressed in nominal values), as measured in US$ per linear kilometer flown, carried out in Madagascar, Uganda, Nigeria and Tanzania shows that the unit cost in Madagascar was much lower than those in the other three African countries (see Table 7 below).

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Table 7: Unit costs of airborne surveys in Madagascar, Nigeria, Tanzania and Uganda

Country/ Contract date Activity

Line12 Spacing

(m)

Total line km (lkm)

Contract Cost (US$)

Rate US$/lkm

Madagascar February 2004

Fixed Wing Airborne Magnetic and Gamma-Spectrometry Survey

500 643,189 6,491,141 10.09

Uganda April 2007

Fixed Wing Airborne Magnetic Survey 200 348,311 5,249,047 15.07

Nigeria January 2010


Tanzania May 2012


56. Overall, overruns on operating costs, i.e. Component 4 of the Project, were modest and mostly attributable to the extension of the Project’s lifetime from initially five years to a total of 8.5 years. The delay and cost overrun related to the extension of the closing date were directly linked to the two-year “implementation freeze” associated with the 2009 crisis. Operating costs exceeded the appraisal estimate of US$2.67 million by 177%; the actual Component 4 cost amounted to US$4.73 million (final disbursements under the category). According to appraisal figures, the annual operating costs were estimated at US$534,000 per year over a period of five years, totaling US$2.67 million. Actual disbursements on operational expenses amounted to US$588,000 per year over 8.5 years, totaling US$4.73 million). The cumulated overruns not attributable to the Project’s extended implementation period were therefore rather modest at US$189,000 over the project life – or US$22,000 per year on average.

3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 57. The Overall Outcome is rated Moderately Satisfactory, in light of:

the High Relevance rating, given that the Project’s objectives and components were considered of high importance by the 2011 ISN in addressing governance and capacity needs in the mining sector, and that Project design remained highly relevant during implementation by adapting to the significant changes in the mining industry, notably the development of large-scale mining;

the Moderately Satisfactory Efficacy rating, i.e. Moderately Satisfactory ratings for all three development objectives, given that despite a two-year hiatus following the 2009 political crisis the Project succeeded in completing most of its intended objectives, such as: (i) improved transparency and governance as a result of enhanced legal and regulatory frameworks; formalization of gemstone production and trading; and improved transparency in tax and royalty payments (PDO 1); (ii) improved decentralized collection and use of mining revenues for local and regional development; and improved environmental management of mining activities; and (iii) the creation of a Mineral Resources Governance Promotion Data Bank and improved availability and management of geological information (PDO 3);

12 Surfaces to be mapped are covered by parallel lines, with space in-between the lines to be defined in the contract. Typically, a space of 250 m in-between lines implies that the plane flies twice the distance compared to covering the same surface with 500 m line spacing. The costs are therefore compared by line kilometer (and not by surface).

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and the Substantial Efficiency rating, given: (i) that the Project contributed to the creation of a favorable environment that attracted at least US$6.5 billion in mining investments during the Project’s life time, and over US$140 million paid in taxes by mining companies in 2010 only; (ii) the lower unit cost per linear kilometer of airborne survey compared to those in other sub-Saharan mining countries; (iii) that delays and cost overruns were mainly associated with the extension of the closing date to accommodate the crisis-induced two-year “implementation freeze; ” and (iv) that no misprocurement occurred.

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 58. The Project contributed to improving the livelihoods of artisanal miners in the gold and gemstones mining communes where it facilitated formalization, awareness raising and value addition. The Project also had a direct social development impact in industrial mining communes in the form of enhanced social accountability and technical assistance in community development planning. Social accountability, based on civic engagement to demand transparency and responsiveness in public policy making and implementation, is increasingly regarded as vital for good governance. With regard to industrial mining, in partnership with the Bank-supported Governance and Institutional Development Project and Integrated Growth Poles Project, participatory budgeting of local tax and royalty revenues was piloted under the Project in six mining communes. Although civil society capacity in social accountability is still weak, the approach yielded positive results in terms of increased budget transparency, sound management and improved service delivery. Following the piloting phase and many collaborative exchanges between the different parties involved, the Second Governance and Institutional Development Project is now rolling-out participatory budgeting to 69 communes throughout the country. 59. As a result of the Project-supported participatory budgeting of local tax revenues (carrier tax, construction permits and mining taxes) collected from QMM between 2006-2009 in the Anosy region about Ariary 700 million or about US$430,000 were utilized to fund local development sub-projects in three rural beneficiary communes (Soanierana, Ampasy Nahampoana and Mandromondromotra).13 In addition, in 2008, the QMM investment created 3,600 new formal mining and ancillary services jobs (World Bank, 2008b, p. 15). The Ambatovy investment also contributed directly to local economic development, mainly through buying and hiring locally. Ambatovy is presently entering into its production phase, and has so far created around 15,000 mining and ancillary services jobs, which supported about 65,000 to 75,000 family members.14 The mining company also started a Corporate Social Responsibility (CSR) program, which funds educational, health and vocational training programs. Local populations are also benefitting from improved access to markets as a result of the transport infrastructure constructed by Ambatovy.15 Lastly, communes have benefited from increased tax revenues collected from the Ambatovy investment.

13 The local development sub-projects included investments in schools, water supply and sanitation, communal market, rural roads, bridges, maternity care facility, rural hospital, canal drainage, dam for rice culture, electrification extension, and a vaccination facility. 14According to the Ambatovy Sustainability Report (2010), the company paid about $19.8 million in local employee wages and benefits in 2010. 15 Transport infrastructure investments include 100 km of roads, 12 km of rail, and the rehabilitation and upgrade of the Toamasina port.

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(b) Institutional Change/Strengthening N/A (c) Other Unintended Outcomes and Impacts (positive or negative) N/A

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 60. A workshop on governance of mining revenues at the local level and an international symposium on Madagascar’s new geological map were held in Antananarivo around the time of Project closure to disseminate key results and explore the way forward. Key findings and recommendations can be summarized as follows:

Workshop on governance of mining revenues at the local level. With QMM in production since the beginning of the 2009 political crisis and Ambatovy about to start, much of the attention regarding good governance of mining resources focused on royalties – which represent the bulk of the revenues generated by mining (sometimes long after production starts). The Project produced a comprehensive analysis of the challenges involved in distributing and managing royalties, especially at the local level, in an equitable way. The workshop, attended by about 50 key representatives from the Government (Ministries of Mines, Finance and Decentralization), the Chamber of Mines, civil society members and development partners, was a great opportunity to identify possible solutions in a situation where no legal reforms were possible because of the transitory nature of the regime. The Project’s contribution was acknowledged both in terms of effort to offer a consensual approach to the identification of beneficiary communes and a working model to benefit sharing through a community foundation mechanism. A working group was proposed to urgently find a workable solution applicable to the case of royalties generated by Ambatovy.

Symposium on the new geological map of Madagascar. Following years of acquisition and interpretation of geological information (airborne geophysical survey, geological mapping on various blocks, and a national synthesis map at 1:1,00,0000 scale), the Project successfully delivered the new geological map of Madagascar right at project closure. The objective of the international symposium, attended by more than 200 participants mainly from Government, academia and the private sector, was to show the importance of geological knowledge and illustrate the Project’s contribution to the development of the mining sector as well as demonstrate the progress made in the understanding of Madagascar’s geological and metallogenic potential. It was a unique occasion to discuss the renewed interpretation of the Precambrian shield in terms of six geodynamic building blocks (from southwest to northeast, the Vohibory, Androyen-Anosyen, Ikalamavony, Antananarivo, Antongil-Masora, and Bemarivo domains). A strong case was also made for keeping this reliable scientific information available to the public to improve the management of mineral resources.

61. Furthermore, feedback on the Project’s experience was solicited and received from a limited number of key partners and stakeholders. Private sector respondents considered the Project’s support to the mineral licensing system and the availability of high-quality reliable geo-data information its main contributions to improving transparency and mineral resources governance. Furthermore, the Project’s instrumental role in setting up the Chamber of Mines of Madagascar was acknowledged, which was of great importance in structuring the sector (www.chambredesminesdemadagascar.com). Civil society respondents expressed concern about the rise in corruption in the sector following the 2009 crisis and underscored the need for strengthened social accountability and other governance tools. Development partners commented

29

on the Project’s role in facilitating the recognition that extractive projects play a critical role in the country's sustainable development, and the fight against poverty. The EITI is deemed essential to advancing transparency in Madagascar even though the persistent crisis makes it difficult to implement the principles of good governance. 4. Assessment of Risk to Development Outcome Rating: Significant 62. The following significant risks to the sustainability of Project investments were identified at the time of Project closing:

Financial sustainability of Project-supported institutions. As pointed out in the Project’s

last ISR, some of the Project-supported institutions have been successfully integrated into Government institutions. Most notably, the decentralized environmental units, designed, set up and initially funded under the Project, were successfully integrated into the organizational chart of the Ministry of Mines. Civil servant positions were created and the relevant staff was recruited following the Ministry of Mines’ request. Similarly, the Bank noted during the closing mission that key staff at the Large Scale Mining and Investment Commission and the Mineral Resources Governance Data Bank – originally financed under the Project as consultants – had been offered positions at the Ministry. However, the Gemology Institute’s financial sustainability was still uncertain. Subsidizing this institution had been shown to be necessary for it to provide high-standard gemological training to the local population at reasonable cost. The Project and the Bank had repeatedly called for the enforcement of the existing legal provision (Article 294 of the 2005 Mining Decree), which earmarked a portion of the surface fees to the Institute. Given the visibility of this institution in the sector, it appeared likely but not confirmed that the Ministry was going to initiate such a budgetary transfer to ensure full continuation of the Gemology Institute.

Uncertainty of institutional reforms. Due to the political crisis, and the Transition authorities’ inability to carry out legal reforms, the institutional component (Component 1) did not lead to the creation of a Geological Survey and a new Inspectorate, but rather to a large number of tools, studies and recommendations, i.e. prerequisites for concrete next steps. Admittedly, few countries have fully outsourced mining inspectorate functions outside the Ministry of Mines, and sound management of geological data and efficient promotion of mineral resources can be achieved directly by a Directorate of Geology. However, international experience suggests that a degree of autonomy is needed for geological surveys to perform their role in a sustainable and efficient way. In addition, the Project strengthened the capacity of the Mining Cadastre designed and created under its predecessor operation. Considered a “best practice” model in Africa until 2008, the Mining Cadastre greatly suffered from the political crisis, which provoked a de facto moratorium on mining permits. The Mining Cadastre’s return to full functioning will be critical for the sector’s continuous development. More generally, the appetite for reform of future Governments and their ability to follow up on the institutional assessments and feasibility studies funded under the Project will partly determine their development outcome.

63. While Project achievements on the institutional side bear a significant level of risk, other results, such as the contribution to the legal and regulatory frameworks, the data produced by the geophysical airborne survey, the geological mapping, the pilots on artisanal and small scale mining operators, and the innovative approaches to better integrate industrial mining into regional and local developments, which brought about a culture change in the sector, are likely to have a lasting positive impact on the development of the sector.

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5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 64. The Project’s conceptual approach was, overall, appropriate and consistent with the Bank’s and Government’s 2003 and 2007 strategies. It was in line with international good practice experience at the time and in many aspects similar to other technical assistance projects of that generation. However, the results framework could have been better structured. Some of the targets were overly ambitious or not fully attributable to the Project, such as an increase in export earnings.

(b) Quality of Supervision Rating: Moderately Satisfactory 65. Overall, the Bank’s supervision efforts were key to keeping most of the Project’s activities reasonably on track until the political crisis, despite frequent changes at the top in the Ministry of Mines. Bank teams conducted missions three to four timers per year and local staff (mainly on procurement, financial management and safeguards) maintained a day-to-day dialogue. The main shortcoming relating to Bank supervision was the lack of tracking of key performance indicators. 66. The Bank developed an exceptionally proactive implementation support tool when the project was allowed to resume in 2011 after a two-years “freeze.” In order to catch up on the delays and help the PIU to achieve a maximum of results in the limited remaining time, the Bank undertook a comprehensive review of the Project in July 2011 and designed a dedicated integrated monitoring tool, which reinforced the Project management and accounting system by ensuring a week-by-week follow-up and facilitating supervision of Project activities and credit proceeds. This tool, an Excel-based system called by the teams the “dashboard,” allowed to precisely monitor procurement, contractual steps and payments, disbursement and overall budget planning and monitoring. In the context of Project closure, the tool proved particularly useful as it was able to instantly capture the Project’s financial situation and accurately forecast the final expenditures at Project closure, based on existing contractual engagements, budget planning, the Project’s local account balances and the Bank’s disbursement data. This function is often time-consuming in the supervision of Bank projects, where the Task Team Leader (TTL) needs to reconcile data coming from dedicated Project management and accounting systems with those of the Bank’s internal disbursement system, which can easily lead to overspending of funds available under IDA credits. The supervision of financial management and procurement aspects of the Project appears to have been carried out in a timely, diligent and thorough manner.

(c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 67. Overall, Bank Performance is rated Moderately Satisfactory, despite the above-mentioned design and M&E shortcomings, given that, for the most part, the Project’s ambitious program was accomplished, utilizing international best practice, despite the very challenging political context of its three last years.

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5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 68. The Borrower performance has to be assessed differently prior and after the political crisis because its legitimacy and therefore its political and legal means to monitor the mining sector changed:

Throughout inception, preparation, and implementation until early 2009, the Project benefitted from strong commitment from the Ministry of Mines, other relevant agencies, and up to the MAP Secretary at the Presidency. Government support led to the quick implementation of Project activities and timely resolution of implementations issues.

Starting with the political crisis, the MAP was still considered, by default, the main strategy of the new authorities. However, in the absence of a recognized Government, numerous Government changes, and a dramatic lack of resources following the reduction in international aid, planning and strategizing became challenging. Without any updated blueprint, the sectoral administration continued along the previous lines as much as possible. The most negative effect of the crisis on sector management was the de facto moratorium on mining permit allocations, which disrupted the functions of the Mining Cadastre and the Ministry of Mines. However, despite frequent rumors about the renegotiation of contracts or the mining "ordonnance" (questioning the mining code and/or the law on large-scale mining), no radical policy reversals took place. The Ministry of Mines remained supportive of the Project and of other transparency objectives throughout (it renewed for instance its adhesion to the EITI in 2011). However, in the current political instability, concern was expressed about the Ministry of Mines’ ability to ensure the sustainability of project results.

69. Counterpart funding was continued throughout the Project life, even during the political Transition, albeit occasionally with delays. At the time of Project closure the Government still had arrears towards local consultants.

(b) Implementing Agency or Agencies Performance Rating: Satisfactory

70. The Project Implementation Unit (PIU) played a pivotal role in successfully coordinating Project activities across all of the components. In general, the PIU satisfactorily met its disbursement, procurement and fiduciary obligations. Communication between the PIU and Implementing Agencies was not always fluid and resulted in some frustrations on the part of the Ministry of Mines. However, the PIU remained effective throughout the Project, including during the two-year "freeze" imposed by the Bank, and successfully resumed activity during the last year to catch up on the main deliverables. Operational expenses exceeded original forecasts mainly because of the extension of Project duration.

(c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 71. Overall borrower performance is rated Moderately Satisfactory in the light of the Government’s mixed and overall Moderately Satisfactory and the Implementation Agency’s Satisfactory performance.

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6. Lessons Learned 72. Key lessons learned from Project implementation include: High-level scientific oversight is key to ensuring the success of a complex geology program.

The Project experienced a two-layer approach to quality control: both airborne geophysical surveys and field geological mapping activities were supervised by dedicated consultancy firms; and, in turn those supervisors themselves were coordinated by a panel of experts that provided guidance throughout the Project. Different interpretations of geology settings are common and pose the risk of inefficiencies or inconsistencies when the geology program is carried out with by multiplicity of providers. The panel of experts has typically maintained a very coherent scientific vision, which helped to renew the overall understanding of the Island’s geology.

A multi-stakeholder approach is critical to promoting good governance of mineral

resources. In situations of political instability like the crisis that hit the country in 2009 and affected the project during its last three years, achieving results in sensitive sectors like mining becomes very challenging. The Project successfully remained dedicated to the Government’s commitment to good governance in mining, and to building strong relationship with the private sector, civil society and donors.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners No comments were received.

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Annex 1. Project Costs and Financing

(a) Project Cost* by Component (in USD Million equivalent)

Components

Appraisal Estimate

(USD millions)

Actual/Latest Estimate (USD

millions)

Percentage of Appraisal

Component 1: Strengthening transparency and governance in mining 6.22

4.56

73

Component 2: Key institutional reforms for the decentralized management of mineral resources; 8.63 7.26 84

Component 3: Promote private investments and value-added in the sector 20.18 31.05 153

Component 4: Project Coordination and Management 2.67 4.73 177

Total Baseline Cost 37.00 47.52 128

Physical Contingencies 0.00

0.00

Price Contingencies 0.00

0.00 Total Project Costs 37.00 47.52 128

Front-end fee PPF 0.95 0.95 100Front-end fee IBRD 0.00 0.00

Total Financing Required 38.65 48.56 125

* Project costs as of September 30, 2012, i.e. the end of the grace period. In the actual cost column, parallel financing from USAID, the French Agency for Development, and the Government of South Africa are included in Component 3. The latter was not included in the PAD or Additional Financing Project Paper.

(b) Financing

Source of Funds Type of Cofinancing

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)

Borrower 4.45 5.42 International Development Association (IDA) 32.00 41. 94

USAID Parallel 1 0.1 French Agency for Development Parallel 1.2 0.6 Government of South Africa Parallel 0 0.5 Total 38.65 48.56

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Annex 2. Outputs by Component Table 1 below depicts the results achieved by the Project as measured by the Output Indicators stated in the PAD, Annex 1 and the five Output indicators added at the time of approval of the Additional Financing (see Section 1.3 in the main text of this ICR). Table 1: Status of Intermediate Results/Output Indicators by Output, Component and Sub-component (as stated in the PAD, Annex 1) 1 - Strengthening Transparency and Governance in mining

Component 1.1: Adjustment of the Legal and Regulatory Framework

Indicator 1: Special regime for gemstones to improve access to the resource, liberalize marketing, and facilitate normalization of small-scale mining.

Status: Fully Achieved (100 %) Results: A new regime for gemstones was achieved through various provisions included in the legal framework and the subsequent regulations, in particular: (i) a change in size of mining squares (from squares of 2.5 kilometers to squares of 625 meters), which drastically improved gemstone miners’ ability to access resources (it required a review of previously allocated mining titles); (ii) artisanal miners or entrepreneurs were given legal status, which allowed them to form associations and access mining permits - an important step towards accessing the market and promoting formalization (or “normalization” as stated in the indicator); (iii) a one-stop-shop for export was created and export procedures were streamlined; (iv) the fiscal decentralization and collection of royalties strengthened local control over gemstone production; and (v) provisions to allow the transfer of the responsibility for the allocation of mining titles to smaller entrepreneurs to local authorities.

Component 1.2: Support to decentralized management of mineral resources

Indicator 2: BAM [Mining Administration Center] created in four target areas. Each BAM will possess an outreach program and will conduct communication campaigns with local communities

Status: Partially Achieved (50%)

Results: Only two of the four planned Mining Administration Centers were created but none of them was sustained as the approach was undermined by the sudden ban on export of rough stones from 2008-2009. Around 3,000 artisans were trained (including in particular on environmental and occupational safety practices), 100 cooperatives were created in over 30 communes, and local authorities and communities were trained. Communication campaigns were systematically conducted to inform and sensitize the public on the mining legislation. The pilot testing of this Mining Administration Center approach yielded important lessons for effectively addressing the informal and illegal exploitation of Gemstones in well identified geographic areas in Madagascar. The pilot experience guided policy makers in deciding on necessary adjustment to the regulations. A sector study conducted in 2012 by the Project and WWF to develop a toolkit for the management of rushes concluded that the BAM approach should be reinvigorated.

Component 1.3: Program for the certification and quality control of Gemstones

Indicator 3: Creation of small exchanges and

Status: Fully Achieved (100%) Results: (i) Gemstones exchanges achieved (260 days of gemstone market organized)16 and self-sustained; (ii) Quality Control capacity was put in place with

16 The first gemstone market was organized by the IGM on January 13, 2007. Since then, two gemstones markets have been organized per month (lasting 2 days each), in two places of Antanarivo to sell both rough stones as well as jewelry.

35

quality control of gemstones and one-stop shop for the export of gemstones. Set-up of certificates of origin for Malagasy gemstones.

the establishment of the, independent and internationally licensed Gemology Institute, which is trusted by buyers, sellers and exporters, who benefit from its stone and quality certification services (3,352 private controls were carried out). This strongly contributed to promote Madagascar’s gemstones trade, exports and international recognition as a quality gemstone producer; (iii) a One-stop shop was created, to make export formalities more user friendly. Procedures were streamlined, drastically reducing processing times, which could previously take up to several weeks or months in the (common) case of conflict between mining and customs administrations; (iv) certificates of origin (valuation of minerals and stones), a key element of the export procedures, are being issued by the strengthened Mines Laboratory (valuation of minerals and stones) and the newly established Gemology Institute (valuation of gemstones). The Institute conducted 645 export controls of up to 145 tons of stones during a six-year period, in close collaboration with mining and customs administrations.

2 - Key institutional reforms for the decentralized management of mineral resources

Component 2.1: Institutional adjustment and capacity building of the decentralized public mining institutions

Component 2.2: Training program Component 2.3: Communication campaign Component 2.4 Set-up of an Intranet and Internet network within the mining administration

Indicator 4: Collection of mining taxes rising from an average of 10 % in 2000 to 80% by 2008.

Status: Fully Achieved (100%) Results: 97% of mining taxes are collected according to calculations conducted by the Ministry of Mines. Expected and collected royalties are based on number of "laissez passer" (simplified export procedures for artisanal mining) and projected production (industrial mining). As depicted in Figure 1 below, the collection rate increased throughout the project period as a result of measures like the one-stop shop, but also due to the effect of the start up of industrial mining, and of EITI reporting. These figures do not include informal production, for which there are no statistics.. Figure 1: Collection rate of mining taxes by year (2000-2010) – US$ million

Source: Ministry of Mines, Mines Directorate, 2012

The Gemology Institute provides services to identify the nature and quality of stones. The one-stop-shop for export also plays an important role in facilitating export procedures.

12

42

3 3

73 7087

5870

97 97

0

20

40

60

80

100

120

36

Indicator 5: Training and certification of small scale miners in modern gem processing techniques. At least 20 individuals certified each year of project implementation.

Status: Fully Achieved (100%) Results: 195 individuals were trained per year, on average, by the Gemology Institute (1,750 trainings and courses in cutting, polishing, jewelry and/or gemology since its inception, plus numerous workshops conducted in the field). Additional trainings targeted broader capacity building of human resources in the mining sector. These included (PAD, p. 36): (i) Local Authorities and communities. As part of the Mining Administration Center approach, local authorities and communities in 30 communes were systematically trained in the local management of mineral resources and revenues. The pilot interventions aimed to formalize ASM operations and activities related to the integration of large scale mining into regional development covered a total of 19 communes and local authorities were trained in the local management of mineral resources, including participatory budgeting; (ii) Staff from mining related administrative entities. Between 2003-200 the Project financed the training of 409 staff, including the training of 86 staff abroad. In addition, 167 staff was sponsored to participate in international conferences and seminars; (iii) Mining sector specialists. 12 students and researchers from Malagasy universities completed Masters degrees, and doctoral level research staff were supported through partnerships with 3 French university laboratories and the organization of a support team of international consultants.

Indicator 6: - Six Environmental Units established in the Provinces. - SESA completed by the mid-term review. - Four studies completed in the pilot regions by project end.

Status: Fully Achieved (100%) Results:

- Environmental Units: One central and 6 decentralized Environmental Units were established within the main mining regions (pilot regions), successfully integrated within the Ministry of Mines’ organization, and staff hired as civil servants. Between 2005-2011, the units handled around 3,400 environmental permits (mostly for exploration or small-scale mining).

- SESA: A Sector Environmental and Social Assessment was carried out at the inception of the project and updated in 2012. In 2006, a comprehensive study was conducted to update the Project Environmental and Social Management Plan (GLW, 2006), which.helped to formulate an expanded strategy for Project support to the decentralized management of mineral resources (more attention was given to large-scale mining and to an integrated approach to regional development).

- Studies: At least four studies were conducted in line with the PAD (p. 35,) to build mining sector capacity for the decentralized management of mineral resources and to define a sector strategy. Study topics included: (i) a household baseline survey (SAGETEC, May 2005); (ii) an Environmental Impact Assessment (EIA) conducted in the 6 gemstones pilot mining areas (SINGATA, April 2008); (iii) 2 studies on the gold sub-sector value chain (CSA, 2004 and ECOEX, 2003 ); and (iv) a study on the QMM investment’s regional development plan and mining fees (SAGTEC, June 2006).

3 - Promoting private investments and value-added in the sector.

Component 3.1: Assistance to the creation of a Mining Sector Promotion Agency (APSM) Component 3.2 Strengthening of Geo-scientific Information Infrastructure

Indicator 7: Declared exports of Gold and gemstones at

Status: 60% achieved at end of Project; 80% achieved before the crisis Results: Exports greatly appreciated from US$18 million in 2003 to US$40 million in 2006 but decreased thereafter, reaching a historical low in 2009 (US$12 million) reflecting the impact of the 2008-2009 ban on rough stones exports (see Section 2.2

37

US$ 50 million by 2008.

in the main text of the ICR). Exports have been recovering since the ban was lifted in 2009, with non-official data predicting an expected export value of around US$30 million in 2012 (see Figure 2 below). Figure 2: Gold and Gemstones export value (2003-2010)

Source: Ministry of Mines, Mines Directorate, 2012

Indicator 8: Percentage of Value added to gemstones in the country.

Status: N/A Results: N/A. While no reliable data is available, the emergence of an increasing number of jewelry and gemstones shops has been observed in Antananarivo since 2003.. The Gemology Institute’s post-training survey supports this observation, as it shows at least 6% of the respondents who had been training in cutting and polishing started an independent business after the training, resulting in more than 100 new businesses.

Indicator 9: Backlog of overdue application not exceeding 5% of all permits.

Status: Partially achieved. (30% achieved prior to the crisis) Results: Madagascar’s mining Cadastre was until the political crisis considered a best practice model in Africa. Since the political crisis a de facto moratorium on permit allocations has been imposed in light of the Transition authorities’ inability to make legally binding decisions. In April 2012, there was a backlog of 2,904 pending application requests (see Table 1 below), representing 30% of the total number of mining titles (9,452) allocated since the start up of the mining cadastre in 2000.

Table 1: Pending applications (April 2012)

Application type PE PRE

PR Total

Allocation 91 57 1,477 1,625 Full renunciation 36 7 795 838 Renewal 5 31 131 167 Transformation 4 10 14 Partial Transformation 11 11 Cession 15 125 140 Cession/Transformation 78 5 83 Cession/Partial Renunciation/Renewal 3 3

Partial Cession/Extension of substance(s) 8 1 9

Donation 1 1 12 14 Total 156 181 2,567 2,904

Source: Mining Cadastre, April 2012

18 2026

40

27 30

12 16

01020304050

38

Indicator 10: Territorial conservation practices in small scale mining areas. Restitution of previous environmental conditions after the end of mining exploration period.

Status: Partially achieved (70%) Results: The Project led to substantial progress in environmental conservation as a result of Project-supported legal provisions, as well as the significant contribution the pilot activities made to environmental protection in mining areas. The modified Mining Code made mandatory the inclusion of provisions and budgeted rehabilitation plans into environmental documentation, which are required to obtain mining titles. In the framework of decentralized Project interventions about 3,000 artisanal miners were trained in territorial conservation, occupational safety and environmentally friendlier mining techniques.

The following additional performance indicators, comprised of four mining-related and one petroleum-related indicator were added at the time of approval of the Additional Financing (FA, Schedule 2, p. 10): (i) No later than 18 months after the date of effectiveness, updated hydrocarbons law and regulations,

also addressing environmental concerns have been prepared in line with of international practice, and a draft law has been submitted to the Parliament.

Status: Not applicable. This indicator refers to activities not funded by the Project. Indicator was added at Additional Financing approval, as part of the coordination agreement with the Government of Norway when the Government insisted on having an integrated approach to extractive industry in accordance with the Madagascar Action Plan (MAP, 2007). The Government of Norway launched the Oil for Development project on hydrocarbon aspects in parallel to the Project and kept it active until February 2009. The work on the new hydrocarbon law was well advanced; a draft was prepared and discussed widely among stakeholders to integrate good international practices. However, the Oil for Development project was put on hold after the political crisis and before the draft law could be submitted to the Parliament for passage.

(ii) No later than 18 months after the date of effectiveness, the fiscal framework for mining, including large scale investments, has been reviewed to include adjustments to optimize fiscal revenues, while maintaining a competitive edge to investments, and a draft law has been submitted to the Parliament.

Status: 50% achieved. A comprehensive assessment of the mining fiscal framework was conducted under the Project and recommendations formulated in early 2009. However, the political crisis prevented adoption of the draft and implementation of reforms. However, the detailed legal and fiscal analysis provides valuable guidance to the Government in charting the future course of the fiscal framework for mining.

(iii) No later than 18 months after the date of effectiveness, methodologies to control ASM rushes and to manage conflicts between ASM activities and protected areas have been developed and are ready for implementation at central and decentralized level;

Status: 100% achieved. The project supported the production of the 'ASM Rush Management Policy Recommendations and Toolkit' in 2012 with a strong focus on mining in or near protected areas. Recommended next steps are designed to be practical and readily implementable today, at relatively low cost.

(iv) Within 24 months from the date of effectiveness, the National Geological Survey and the integrated sector data bank and information systems have been established and are operative;

Status: 50% achieved. The Project financed the setting up of the Mineral Resources Governance Data Bank, which is the core of the National Geological Survey (BGN). The BGN could not be formally institutionalized in the context of the Transition, but a comprehensive feasibility study on its sustainability

39

and its possible externalization out of the Directorate of Geology was undertaken during the last year of Project.

(v) No later than by December 2009, financial mechanisms for long term sustainability of mining institutions have been established and are operative.

Status: 50% achieved. Preparation of sustainability studies for the National Geological Survey (BGN), the Mining Inspectorate (BIME) and the Madagascar Gemology Institute (IGM) started before 2009. During the last year of the Project, those studies were successfully completed and produced recommendations for the short and medium term. However, they could not lead to immediate decisions because of the inability of the Transition Government to launch institutional reforms.

40

Annex 3. Economic and Financial Analysis The assessment of the Project’s efficiency was fully covered in Section 3.3. in the main body of this ICR.

41

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty Lending

Supervision/ICR Joseph Byamugisha E T Consultant AFTFM Paulo De Sa Sector Manager SEGOM Veronika Kohler Consultant SEGOM Remi Pelon Mining Spec. SEGOM Alexandra Pugachevsky Senior Country Officer MNCA4 Francois Marie Maurice Rakotoarimanana Sr Financial Management Specia AFTFM

Patrice Joachim Nirina Rakotoniaina Municipal Engineer AFTUW

Sylvain Auguste Rambeloson Senior Procurement Specialist AFTPC Michael C. Stanley Lead Mining Specialist SEGOM Silvana Tordo Lead Energy Economist SEGOM Gotthard Walser Consultant SEGOM Dorian Vasse Consultant SEGOM

(b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending FY02 0.71 FY03 81.28 FY04 93.15 FY05 0.00 FY06 0.00 FY07 0.00 FY08 0.00

Total: 175.14 Supervision/ICR

FY02 0.00 FY03 0.00 FY04 0.00 FY05 105.53 FY06 114.96 FY07 142.98 FY08 193.04

Total: 556.51

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Annex 5. Beneficiary Survey Results The discussion of beneficiary survey results was fully covered in the main text of this ICR.

43

Annex 6. Stakeholder Workshop Report and Results Two stakeholder workshops were held at the end of the Project. The summaries of these workshops were fully discussed in the main text of this ICR.

44

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 1. The Mineral Resources Governance Project (PRGM) was developed to meet the priorities of the Government of Madagascar laid out in the declaration of mining policy of 2003and the Madagascar Action Plan (MAP) of 2007. The project began during the second half of 2003, with funding from the Government of Madagascar, the World Bank (Credit - 3754 MAG), plus some parallel financing from USAID and AFD for a total budget of US$ 38,6 million. An additional $US 8.8 million was granted by the Malagasy Government and the World Bank in June 2007, without changing the initial objectives of the project. 2. The objectives of the project focused on three key points: (i) improving transparency and strengthening governance in the mining sector, (ii) promoting institutional reforms for the decentralized management of mineral resources; and (iii) promoting private investment and value added in the mining sector. 3. The project was designed out of the crisis in 2003, and closed during another crisis. In line with the measures taken by the entire international community against the unconstitutional change of regime in March 2009, the funding for the project was suspended for two years. Implementation of the project suffered from this decision because many activities had to be suspended. When financing resumed in 2011, the project had merely a year before closure with less than US$ 3 million of funds remaining uncommitted. At that time, given the Bank interim strategy, the project had also to focus on interventions with direct effect on the population and employment as well as those relating to private sector development. 4. Despite some indicators that could not reach target, partly because of this political context prevailing after 2009, the Project achievements are tangible and are expected to produce significant effects on the development of the sector over the long term. Major achievements of the Project include the following:

The development of geological knowledge is the most important achievement of the

Project. The new geological map integrates the results of years of research based on detailed multidisciplinary technologies, fieldwork by teams of international and Malagasy scientists, covering about 70% of the territory. It marks a complete evolution of knowledge compared to the previous version developed in 60-70 years because of the entirely different conceptual perspective and interpretation. This wealth of data, maps and documents - stored in a state of the art GIS – will be of use to the development of the mining sector, but also to many applications such as land-use planning and conflict resolution on the use of natural resources.

At the level of legal and regulatory frameworks, several legal texts were produced and / or revised including the Large-Scale Mining Investment Law and the Mining Code. These texts have contributed to the establishment of a more favorable mining environment, and helped to establish the confidence of major mining operators to invest in Madagascar. To date, more than $US 6 billion of FDI are engaged in research and mining, compared to about $US 23 million in 2005.

Regarding institutional reforms, the Gemological Institute of Madagascar (IGM), the

Promotion and Governance of Mineral Resources Data Bank (BPGRM), and the mining Environmental Units (CEM) have been developed and are currently functional. For its part, the Office of the Mining Cadastre (BCMM) was supported in its work to promote investment and was able to play its full role in the management of mining permits until

45

the advent of the political crisis of 2009. Before that date, it was recognized as a model among similar organizations in Africa. Those institutions represent key pillars in the institutional sector management and contribute to the objectives of strengthening governance, improving transparency and promotion of private investment and added value.

However, some institutions were only partially established or designed. Typically, the

Mining Management Centers (BAM) for artisanal mining ceased to be relevant following the Government's decision to ban the export raw gemstone in 2008. Similarly a feasibility study of the Private Sector Promotion Agency (APSM) revealed it could not be viable, and an alternative model was put forward with two other agencies: the Geological Survey and the Mining Inspectorate.

Artisans and small-scale miners have benefited from awareness campaigns on mining

policy and the mining code. Divided into 24 zones, over 2900 people attended. The small grants program was however discontinued after 10 small mining projects because it generated significant administrative costs and cumbersome procedures.

In terms of capacity building, more than 400 people from the Ministry of Mines received training on governance and management of mineral resources.

The various mining institutions at the central level are currently interconnected to facilitate communication and exchange of information through intranet and extranet implemented in the project.

The project supported the municipalities affected by large-scale mining, so they can actually enjoy their economic impact. Indeed, the contribution of mining projects on the socio-economic development has been integrated into the local and regional development plans of their areas.

5. The project has helped put in place legal and regulatory frameworks and institutions, which strongly favored the development of a mining industry as well as the development of value addition in the artisanal mining sector. These reforms have helped to establish better and more decentralized management, and governance and transparency in the sector. The current situation demonstrates some of the building blocks remain fragile, but some of the most decisive contributions, like the improved geological knowledge, have laid the foundation for the development of research and mining for decades to come. 6. A weakness of the project was communication on objectives and achievements at beneficiary level (artisans, small and large miners). Despite many workshops and communication tools like its website, the Project lacked visibility in the activities it was undertaking. The symposium on geology at project closure helped reveal the massive amount of work it had achieved, but relevant communication around the BPGRM and the definition of transparent, non-discriminatory and incentives for public access to its resources still require special attention. In order to capitalize on the Project contribution and ensure sustainable outcomes, the Ministry of Mines should ensure the continuation of efforts. Some of the material that the Project produced should be used in the near future like draft texts for the creation of the Geological Survey and the Mining Inspectorate. Capacity building of staff and senior Administration Mining remains a priority area.

46

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders No comments were received.

47

Annex 9. List of Supporting Documents Internal Documents in Project file: Aide Memoires Implementation Status Reports Published Documents: GIW Conseil (2012). Plan de Gestion Environmentale Du Project de Reforme du Secteur Miner – Phase II. Report No. E639. McMahon, G. (2010). The World Bank’s Evolutionary Approach to Mining Sector Reform. Extractive Industries for Development Series No. 19. Oil, Gas, and Mining Unit Working Paper. Washington, DC: The World Bank. Madagascar Extractives Industry Transparency Initiative (EITI), Reconciliation reports FY2007-2009 (AT Consultant, 2010), FY2007-mid 2010 (Ernst and Young, 2011), FY2010 (Ernst and Young, 2012). MEC Consulting (2012). Moramanga, Ambohibary and Morarano Inter Communal Development Scheme. Rakotoarison, T.; Razafindrahaga, F. (Eds) (2012). Republique de Madagascar. Ministere de l’Energie et des Mines. Project de Gouverance des Ressources Minerales (PGRM). IDA 3754-MAG. Evaluation Finale Du Projet de Gouvernance des Ressources Minerales (PGRM). Ambatovy mining project (2010). Sustainability Report. Accessed on December 18, 2012 at: http://www.ambatovy.com/docs/wp-content/uploads/2010Report.pdf Republic of Madagascar, Ministry of Energy and Mines (2006). Mineral Resources Governance Projet (PGRM), Mid-Term review Report. Republic of Madagascar (2006), Madagascar Action Plan 2007-2012 Republic of Madagascar (2003). Poverty Reduction Strategy Paper (PRSP). Attached to the World Bank (2003) Joint Staff Assessment of the PRSP. Report No. 27017-MAG. Washington, DC: The World Bank. World Bank (2011). Madagascar - Interim Strategy Note (IDA/R2012-0020). Washington, DC: The World Bank. World Bank (2008b). Integrated Growth Pole Project (PIC). Additional Financing Project Paper. World Bank (2007a). Country Assistance Strategy for the Republic of Madagascar for the Period 2007-2011. Report No. 38 135-MG. Washington, DC: The World Bank World Bank (2007b). Project Paper on a Proposed Additional Financing Credit in the Amount of SDR 5.3 Million (US$8 Million Equivalent) to the Republic of Madagascar for a Mineral Resources Governance Project. No.39398-MG. Washington, DC: The World Bank.

48

World Bank (2006). Implementation Completion and Results Report. Guidelines. OPCS. August 2006. World Bank (2003a). Development Credit Agreement (Mineral Resources Governance Project) between Republic of Madagascar and International Development Association. Credit number 3754-MAG. Washington, DC: The World Bank. World Bank (2003b). Financing Agreement (Additional Financing for Mineral Resources Governance Project) between Republic of Madagascar and International Development Association. Credit number 3754-1 MAG. Washington, DC: The World Bank. World Bank (2003c). Implementation Completion Report on a Credit in the Amount of US$5 Million to the Republic of Madagascar for a Mining Sector Reform Project. Report No. 26161. Washington, DC: The World Bank. World Bank (2003d). Memorandum of the President of the World Bank to the Executives Directors on a Country Assistance Strategy for the Republic of Madagascar. Report No. 27063-MAG. Washington, DC: The World Bank. World Bank (2003e). Project Appraisal Document on a Proposed Credit in the Amount of SDR 23.2 Million (US$32 Million Equivalent) to the Republic of Madagascar for a Mineral Resources Governance Project. Report No. 26777. Washington, DC: The World Bank World Bank (2002). Interim Country Assistance Strategy for the Republic of Madagascar. Report No. 25001-MAG. Washington, DC: The World Bank.

VatomandryVatomandry

MahanoroMahanoro

VarikaVarika

MananjaryMananjary

TsivoryTsivory

BeraketeBerakete

BelohaBeloha

BetrokaBetroka

ManjaManja

MandabeMandabe

MorombeMorombe

AnkazoaboAnkazoabo

BerorohaBeroroha

SakarahaSakaraha

BetiokyBetioky

AndrokaAndroka

AmpanihyAmpanihy

Midongy-Midongy-AtsimoAtsimo

AmbohimahasoaAmbohimahasoa

AntalahaAntalaha

MaroantsetraMaroantsetra

MananaraMananara

MoramangaMoramanga

AntanifotsyAntanifotsy

Ambatofinan-Ambatofinan-drahanadrahana

MiandrivazoMiandrivazo

MalaimbandyMalaimbandy

Belo TsiribihinaBelo Tsiribihina

AndilanatobyAndilanatoby

AndilamenaAndilamena Soanierana-IvongoSoanierana-Ivongo

AndriamenaAndriamena

SoalalaSoalala

BesalampyBesalampy

AntsalovaAntsalova

KandrehoKandreho

AnkazobeAnkazobe

VohimarinaVohimarina

AmbilobeAmbilobe

MandritsaraMandritsaraMampikonyMampikony

BefandrianaBefandriana

BealananaBealanana

AmbanjaAmbanja

AmboasaryAmboasary

ToamasinaToamasina

AmbatondrazakaAmbatondrazaka

AntsirananaAntsiranana

MahajangaMahajanga

ToliaraToliara

FianarantsoaFianarantsoa

ManakaraManakara

FarafanganaFarafangana

AntsirabeAntsirabe

MorondavaMorondava

MiarinarivoMiarinarivoTsiroanomandidyTsiroanomandidy

SambavaSambava

AntsohihyAntsohihy

TolanaroTolanaroAmbovombeAmbovombe

IhosyIhosy

MaevatananaMaevatanana

AmbositraAmbositra

MaintiranoMaintirano

Fenoarivo-AtsinananaFenoarivo-Atsinanana

ANTANANARIVOANTANANARIVO

DIANADIANA

SAVASAVA

SOFIASOFIA

ANALANJIROFOANALANJIROFOBOÉNYBOÉNY

BETSIBOKABETSIBOKA

ANALAMANGAANALAMANGABONGOLAVABONGOLAVA

ITASYITASY

MELAKYMELAKYALAOTRAALAOTRA

MANGOROMANGORO

ATSINANANAATSINANANA

AMORON’I MANIAAMORON’I MANIA

HAUTE-MATSIATRAHAUTE-MATSIATRA

IHOROMBEIHOROMBEATSIMO-ATSIMO-

ANDREFANAANDREFANA

ANOSYANOSY

ANDROYANDROY

ATSIMO-ATSIMO-ATSINANANAATSINANANA

MENABEMENABE

VATOVAVY-VATOVAVY-FITOVINANYFITOVINANY

VAKINANKARATRAVAKINANKARATRA

MayotteMayotte(France)(France)

Ank

arat

a

Massi fMassi fTsaratananaTsaratanana

Androy Plateau

Cli

f f o

f A

ng

av

o

Cl i

f f o

f B o n g o l a

v a

MaromokotroMaromokotro(2,876 m)(2,876 m)

Pic BobyPic Boby(2,658 m)(2,658 m)

TsiafajovonaTsiafajovona(2,642 m)(2,642 m) Vatomandry

Mahanoro

Varika

Mananjary

Tsivory

Berakete

Beloha

Betroka

Manja

Mandabe

Morombe

Ankazoabo

Beroroha

Sakaraha

Betioky

Androka

Ampanihy

Midongy-Atsimo

Ambohimahasoa

Antalaha

Maroantsetra

Mananara

Moramanga

Antanifotsy

Ambatofinan-drahana

Miandrivazo

Malaimbandy

Belo Tsiribihina

Andilanatoby

Andilamena Soanierana-Ivongo

Andriamena

Soalala

Besalampy

Antsalova

Kandreho

Ankazobe

Vohimarina

Ambilobe

MandritsaraMampikony

Befandriana

Bealanana

Ambanja

Amboasary

Toamasina

Ambatondrazaka

Antsiranana

Mahajanga

Toliara

Fianarantsoa

Manakara

Farafangana

Antsirabe

Morondava

MiarinarivoTsiroanomandidy

Sambava

Antsohihy

TolanaroAmbovombe

Ihosy

Maevatanana

Ambositra

Maintirano

Fenoarivo-Atsinanana

ANTANANARIVO

DIANA

SAVA

SOFIA

ANALANJIROFOBOÉNY

BETSIBOKA

ANALAMANGABONGOLAVA

ITASY

MELAKYALAOTRA

MANGORO

ATSINANANA

AMORON’I MANIA

HAUTE-MATSIATRA

IHOROMBEATSIMO-

ANDREFANA

ANOSY

ANDROY

ATSIMO-ATSINANANA

MENABE

VATOVAVY-FITOVINANY

VAKINANKARATRA

Mayotte(France)

Mah

avav

y

Betsiboka

Bemarivo Sofia

LakeAlaotra

Mangoro Mania

Tsiribihina

Mananara

Onilahy

Man

drav

e

Mangoky

Fihere

chana

Menarand

ra

Manambaho

Mahajamba

I N D I A N

O C E A N

Mo z a m

b i q u e C

h a n n e l

Ank

arat

a

Massi fTsaratanana

Androy Plateau

Cli

f f o

f A

ng

av

o

Cl i

f f o

f B o n g o l a

v a

Maromokotro(2,876 m)

Pic Boby(2,658 m)

Tsiafajovona(2,642 m)

45°E 50°E

50°E

45°E

25°S

20°S

15°S

20°S

15°S

MADAGASCAR

0 40 80 120 160

0 120 Miles8040

200 Kilometers

IBRD 33439R

MAY 2011

MADAGASCAR

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.

SELECTED CITIES AND TOWNS

REGION CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

REGION BOUNDARIES