Restructuring Restructuring Type: Level one ( 'ls1 modifIed 'm f"!,' . 06/23/201 i) , .-f{."_'¥ '<._ _k ,te: . \.<'

Or anization Agence National Chargee de la Promotion de l'Investissement et des Grands Travaux

DATA SHEET

Status: Final

Senegal

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Does the restructured project trigger any new safeguard policies? If yes, please select from N the checklist below and u date ISDS accordingly before submitting the acka e.

7a. Project Development Objectives/Outcomes Original/Current Pro.ject Development Objectives/Outcomes The objective of the Project is to help create the conditions to stimulate a sustained increase in private investment in Senegal through an improved investment climate, greater private participation in economical activities, and policy and sector reform. The project is thus expected to make important incremental contribution towards Senegal attaining the 8 percent GDP growth called for in the Government's poverty alleviation program.

7b. Revised Project Development Objectives/Outcomes

The Project development objective is to create the conditions to increase private investment. This will be accomplished through an improved investment climate, greater private participation in economic activities, and policy and sector reforms.

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Document of

The World Bank FOR OFFICIAL USE ONLY

RESTRUCTURING PAPER

ONA

PROPOSED PROJECT RESTRUCTURING

OF THE

PRIV ATE INVESTMENT PROMOTION PROJECT

(CREDIT NO. 3762-SE)

MAY 20, 2003

TO THE

REPUBLIC OF SENEGAL

July 1,2010

Finance and Private Sector Development Country Department AFCF 1 Africa Region

Report No: 55029-SN

AAA APIX

ARMP

ARTP

CAS CDSMT

CEDAF

CF CPAR DCMP DDI FDI GDP GPN HIPC ICA IDA IFC IFR ISO IT MD METR MIGA MIS MTEF NCB NPS OECD OHADA

PCN PMU PDO PEM PIC PIPP PPA PREM

ABBREVIATIONS AND ACRONYMS

Analytic and Advisory Activities Agence Nationale Chargee de la Promotion de l'Investissement et des Grands Travaux (Investment Promotion Agency) Autorite de Regulation des Marches Publics (Procurement Regulatory Agency) Autorite de Regulation des Telecommunications et de la Poste (Telecommunications Regulatory Authority) Country Assistance Strategy Cadre de Depenses Sectorielles it Moyen Terme (Medium-Term Expenditure Framework) Cellule d'Execution Administrative et Financiere (Implementing Unit of the PSJ) Counterpart Funding Country Procurement Assessment Review Direction Centrale des Marches Publics (Public Procurement Control Unit) Direction de la Dette et de l'Investissement (Debt and Investment Office)

. Foreign Direct Investment Gross Domestic Product General Procurement Notice Heavily Indebted Poor Countries Initiative Investment Climate Assessment International Development Association International Finance Corporation Interim Financial Report International Organization for Standardization Information Technology Managing Director Marginal Effective Tax Rate Multilateral Investment Guarantee Agency Management Information System Medium Term Expenditures Framework National Competition Bidding National Procurement System Organization for Economic Co-operation and Development Organisation pour I 'Harmonisation en Afrique du Droit des Affaires (Organisation for the Harmonization of Business Law in Africa) Project Concept Note Project Management Unit Project Development Objective Public Expenditure Management Presidential Investment Council Private Investment Promotion Project Project Preparation Advance Poverty Reduction and Economic Management

PRSC PRSP PSAC PSD PSJ RFP SBD SME SPN SSA UEMOA

USAID WBI WTO

Poverty Reduction Strategy Credit Poverty Reduction Strategy Paper Private Sector Adjustment Program Private Sector Development Programme Sectoriel Justice (Justice Sector Reform Program) Standard Request for Proposals Standard Bidding Document Small and Medium-size Enterprise Specific Procurement Notices Sub-Saharan Africa Union Economique et Monetaire des Etats de l'Afrique de ['Ouest (West Africa Economic and Monetary Union) United States Agency for InternationalDevelopment World Bank Institute World Trade Organization

Regional Vice President: Country Director:

Sector Director: Acting Sector Manager:

Task Team Leader:

Obiageli Katryn Ezekwesili Habib F etini Marilou Uy Peter Mousley Gilberto de Barros

REPUBLIC OF SENEGAL

Private Investment Promotion Project

CONTENTS

Page

A.~ SUMMARy ................................................................................................................ 1

B. PROJECT STATUS .................................................................................................... 2

C. PROPOSED CHANGES ............................................................................................ 2

D. APPRAISAL SUMMARY ....................................................................................... 13

ANNEX 1: RESULTS FRAMEWORK AND MONITORING ....................................... 16

A. SUMMARY

1. This Restructuring Paper seeks the approval of the Executive Directors to introduce the changes outlined in the Development Credit Agreement (DCA), and Extension of the Closing Date from August 31, 2010 to December 31, 2011. This restructuring is a Level I restructuring due to changes in the development objective and in all of the project's four components which are being refocused to meet the revised development objective.

2. While some progress has been achieved in terms of meeting the project development objectives (PDO), the review of the performance indicators shows that only half of the indicators have been met, and others partially met, making it unlikely that the PD~ would be met by the current closing date. Progress towards meeting the Development Objective is rated moderately unsatisfactory; and an implementation of the agreed actions prepared for the restructured project should bring it to a satisfactory performance within the next ten to twelve months.

3. The major modifications being proposed are as follows:

(i) Increase the importance of Component 1. Improving the Investment Climate while focusing it on the most needed reform areas in light of changes noted since the Project's effectiveness and the increased Government clarity and commitment to investment climate reform;

(ii) Re-Iaunch the matching grant subcomponent of Component 2. Facilitating Private Participation and Enhancing Competitiveness, so that it operates, as originally envisaged, and fully complements the investment promotion facilitation that has been supported under the Project and contributes meaningfully to skills development in small and medium enterprises.

(iii) Focus the activities financed under the Project Component 3. Stimulating Sector Investment and Implementing Policy Reforms - by terminating Project's assistance to the following sub-components which have been completed or will not be completed in light of an absence of consensus: (a) telecommunication reform and development of Information Technology sector; (b) postal reforms; and (c) edible oil sector reform;

(iv) Formalize the closing of the stand-alone Project Implementation Unit supported under Component 4. Supporting Implementation and Capacity Building and mainstream the Project coordination and fiduciary functions through a small management team to be set up within an existing governmental institution: APIX;

(v) Revise PD~ and restructure, simplify, and update the results framework to target and better measure the outcomes delivered by each component and subcomponent;

(vi) Restate the legal covenant to finance a joint IDAJIFC risk-sharing facility. This covenant would enable financing the T A and providing partial guarantee for a portfolio of loans to participating commercial banks, which meet the eligibility criteria specified in the Risk­Sharing Framework Agreement.

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(vii) Extend the closing date so as to enable sufficient time for implementation, and

(viii) Reallocate funds across the Project categories to accomplish the proposed changes.

4. Restructuring the Project implementation arrangements mentioned above in relation to Component 4 will be fully formalized during this restructuring, since it has been agreed and partially implemented by the Borrower to meet the conditions to lift the Project disbursement suspension which occurred last year. The measures adopted by the Borrower to lift the suspension of the disbursement also created the conditions for the Project to be implemented in adherence with Bank fiduciary and monitoring and evaluation (M&E) guidelines.

5. Furthermore, this restructuring will help address the project deficiencies. These key implementation deficiencies were, by and large, related to inadequate Project coordination and a disregard for procurement, financial management guidelines and procedures, and the M&E functions. These deficiencies have been partially addressed by closing the PIU, and ensuring closer involvement of a significantly revamped Steering Committee. These changes were critical. However, more changes are needed to meet the project's development objectives by ensuring a closer attention to providing timely and qualitY implement~tion support to project beneficiaries.

B. PROJECT STATUS

6. The implementation progress is rated Moderately Unsatisfactory. While some progress was achieved,'particularly under Component 1: Improving the Investment Climate, and under

,Component 2: Facilitating Private Participation, the overall Project's performance was not satisfactory. The implementation progress of the Key Performance Indicators, as extracted from page 2 of the PAD reflects the uneven implementation progress that translates into only 6 of the 14 key performance indicators having been met and another 4 partially met.

C. PROPOSED CHANGES

Project's Development Objectives

7. The initial PDO was as follows: "The Private Investment Promotion Project development objective is to create the conditions to stimulate a sustained increase in private investment through an improved investment climate,greater private participation in economic activities, and policy and sector reform. The project is thus expected to make important incremental contributions towards attaining the 8 percent GDP growth called for in the Government poverty alleviation program."

8. The revised Project Development Objective reads as follows: "The Project's development objective is to create the conditions to increase private investment. This will be accomplished through an improved investment climate, greater private participation in economic activities, and policy and sector reforms."

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9. The PD~ was revised to simplify and clarify it while making it more realistic since Senegal is not going to achieve what was mentioned in the previous PD~ as " ... the 8 percent GDP growth called for in the Government poverty alleviation program."

Resultsllndicators

10. As a result of the reduction in the number of activities financed under the Project, the Results Framework has been revised and simplified to significantly reduce the number of indicators from 81 to 12. Additionally, the new results framework includes more relevant and up-to-date performance indicators that are better suited to evaluate and monitor the implementation progress toward achieving the PD~ under the restructured Project. Furthermore, the performance indicators for certain components have been revised to reflect that the indicators established in the original results framework have been partially achieved and that new indicators are needed to monitor the performance during the implementation of the restructuring phase. A summary of the revised Results Framework appears in annex 1.

Components

11. The changes proposed in the restructuring are as follows:

(a) Formally close the Project Management Unit, which had been receiving support through Component 4, Supporting Implementation and Capacity Building

12. The Region's "Guidance Note on Project Implementation Arrangements for Investment Lending Operations" states, "Existing government institutions (using civil servants and country systems and procedures) should be the first choice to implement Bank-financed Projects." On this basis, and in light of the existing institutional capacity of Project's beneficiaries to implement their respective activities, it has been agreed with the Government that the closing of the PIU achieved in the context of the lifting of the Project's disbursement suspension will be formalized. The PAD states that most beneficiary organizations "have the capability to manage the activities supported by the Project. Strong complementary implementation capacity [is] needed to ensure that Project objectives are met. The Credit will thus finance a team of high caliber local professionals located at the PMU and the related support staff." This assessment remains valid today since most of the Project's beneficiaries have the capacity to implement and manage their respective activities if adequately supported by a small team of local professionals located in APIX. This team of professionals would oversee the coordination, financial management, procurement, reporting, M&E, audit, and related functions.

13. These arrangements differ from the previous stand alone PIU as it. is no longer a standalone entity which ensures the project coordination and fiduciary functions, but an existing institution. Moreover, these new arrangements help build sustainability by using APIX's staff (accountant, procurement and financial specialists) which will remain even when the project closes. However, to ensure that the project completes its activities on time, a dedicated Project Coordinator would also be recruited. However, as this function will no longer be needed when the project is closed, the project coordinator would not remain at APIX.

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14. Under the restructured Project, the small team of three professional will be housed within APIX, an institution which has previously managed the project preparation advanced (PPA) and is the project's largest beneficiary. This institution was chosen since it had already positively been assessed by the Bank team in the context of the pr.eparation of the approved Dakar­Diamniadio Toll Highway Project for which it acts as a Project Unit. This team will be responsible for project coordination, as well as for fiduciary functions and M&E and under the oversight of the revamped Project Steering Committee. While the three additional staff are being hired APIX's Deputy Director is carrying out the Project Coordination functions. The project procurement support is provided by APIX's procurement specialist and its accountant and the assistant account are ensuring adherence to Bank financial management standards. The three additional local professionals would thus be hired to ensure that APIX has all the resources to carry out its expanded responsibilities effectively and ensure that the Project objectives are met. The Restructured Project will thus finance a small team of high caliber local professionals located at APIX. This small project team would be fully dedicated to implementing the Project activities to ensure that the Project makes up the disbursement lag and that all procedures and guidelines for Bank financed operations are adhered to while ensuring that the earlier dissatisfaction noted by some beneficiaries is not repeated. To mitigate the risk associated with the transition period between now and the hiring of the additional project staff, this period is shortened as much as possible while adhering to Bank procurement guidelines and the need to advertise. The full team should be in place by September 15,2010. Additionally, the task team has intensified its implementation support by holding individual meetings with every beneficiary and APIX to ensure that implementation progresses in a timely manner. The early results of this approach are quite encouraging and show that implementation progress is taking place.

15. These new implementation arrangements were partially put in place to meet the conditions to lift the Project's disbursement suspension. However, they need to be strengthened to ensure adequate project coordination and fiduciary functions. These arrangements also allow for the immediate mainstreaming of the Project's management, fiduciary, and M&E functions in an existing government institution. These new institutional arrangements also include the appointment of the already appointed new President of the Steering Committee and the replacement of half of its members.

(b) Increase the importance of Component 1: Improving the Investment Climate, while focusing it on most needed reforms in light of changes noted since the Project's effectiveness

16. The Project has quite effectively helped finance some work to improve the investment climate, resulting in Senegal's being ranked the best Sub-Saharan Africa reformer in the 2009 Doing Business report. However, the improvements envisaged for the airport have not started. Given that the Government is already building a new international airport in Dakar with private partners, the assistance to be provided to the existing airport for US$l million to update technology infrastructure, as well as to facilitate the movement of passengers and baggage, is no longer necessary. Consequently, the amount previously allocated to the airport subcomponent will be reallocated. The subcomponent on infrastructure regulation that financed capacity building for the telecommunication regulatory agency is also ended since Project assistance has contributed to make this institution self sustaining and assistance is no longer needed.

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17. In addition, the activities under Component 1 are being better aligned with the Government's own Accelerated Growth Strategy - which was designed in collaboration with the private sector -and approved after the original Project design. This strategy was developed in close collaboration with the private sector. The strategy lays out the establishment of an investment climate of international class as the only cross-cutting theme and the key requisite to fostering growth. The activities of Component 1 are now being focused to help the Government improve the investment climate in the ways envisaged in the Accelerated Growth Strategy. The restructured PIPP would provide assistance that fosters the improvement of the time and cost related to four aspects: (a) general entry and operation requirements, (b) import and export procedures for trade, (c) construction licenses procedures, and (d) tax administration and payment.

18. The project will finance the technical assistance that is required to draft the necessary texts to change and simplify the procedures in all these four areas. Additionally, to obtain input from stakeholders and build consensus .on the investment climate reforms to be implemented, and ensure follow up, the Project will continue to extend its support to the Presidential Investment Council, which is a effective mechanism for private-public sector dialogue. Moreover, the project will provide assistance for consensus building events for every one of the four areas mentioned above. The project will also finance the establishment of a management information

. system to computerize the general entry and operations, as well as· a technical assistance to digitalize the registration done in years, prior to the establishment of the management information system.

(c) Re-Iaunch the matching grant subcomponent of Component 2: Facilitating Private Participation and Enhancing Competitiveness, to fully complement the investment promotion facilitation that has been supported under the Project

19. While the investment promotion assistance provided by the Project has helped attract additional private investment to Senegal, this assistance needs to be complemented by a well performing technical learning for SMEs through a matching grant to provide a broader range of support to· SMEs. The· better performance of the matching grant would help increase labor productivity and, overall, firms' performance and enhance competitiveness. To these ends, the restructured PIPP would ensure that ''the management of the matching grant will be outsourced to a team of local and international consultants," thus bringing back the Project in line with the implementation arrangements laid out in the PAD and which will be used under the restructured project.

20. This change in the implementation approach coupled with an emphasis on delivering simultaneous training for a group of firms and trainees would help increase the number of people trained, as well as the relevance of the grants approved while ensuring adequate separation of the approval and payment of the grants. Moreover, in increasing the grants awarded, the matching grant now would be expected to focus a greater part of its assistance on more suitable assistance including to the five strategic sectors indentified as offering greater potential to increase economic growth in the Accelerated Growth Strategy. These sectors are (a) agriculture and agro industry, (b) information technology and telecommunication, (c) tourism and cultural industry, (d) textiles, and ( e) fisheries and aquaculture. This increased emphasis on the key sectors will be done without excluding any sector of activity. To this end, the project will not specifically target

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the sectors mentioned above so as to allow the market to ultimately determine the sector beneficiary. Instead, a marketing campaign and voluntary pro active approach to fostering technical learning for SMEs would be used to help foster the uptake of the assistance for these strategic sectors. Additionally, in its delivery the matching grant will focus on providing training for a group of people in certain areas to simplify the approval process and maximize the number of people trained. Examples of typical training include a variety of skills mix in the hospitality industry, electricians, carpenters, plumbers, to name a few. As a result of the above arrangements, the performance of this matching grant is expected to improve in terms of number of people trained.

21. The matching grant will be implemented using the implementations arrangements already laid out in the original PAD and in adherence with the procedures established in the prepared matching grant manual setting forth eligibility criteria for Beneficiaries, as well as terms and conditions for Matching Grant Agreements, including the procurement, financial and monitoring aspects. Based on a demand for a matching from a firm or training institutions, a team of consultants will review the request for the matching grant and determine whether the matching grants should be approved based on criteria commonly used for matching grants. These criteria include additionality and selectivity of the proposed training.

22. Component 2 also will increase the assistance to institutions and private associations to help them develop and start the implementation of their business plans and to offer better services to their member firms to establish a revenue base for future self sustainability.

23. Assistance to APIX, as a project beneficiary, has been substantial and will continue under the restructured project. APIX has been by far, the beneficiary which has received the most substantial amount of assistance and financing under the PPIP, totaling 3.2 billionCF A (approximately US$ 7 million), as of December 31, 2009. This has helped establish APIX as a reputable institution in Senegal and beyond. Other key achievements which the project helped foster include: (i) the establishment of the one stop shop to start up a business at APIX, (ii) the ISO 9001 Certification of APIX's Investors Facilitation Department; (iii) the good preparation and management of the Presidential Investment Councils by APIX; (iv) the management of the Project Preparation Advance of the World Bank financed Dakar-Diamnadio Toll Highway road with the fiduciary team financed and trained under the PIPP, among others aspects.

24. The additional assistance under the restructured project will support APIX's efforts to strengthen its capacity and work towards establishing its sustainability. To that end, the project will continue to finance several technical assistance and capacity building activities for APIX staff. Moreover, the Project will fund the technical assistance for the ISO certification of APIX's Marketing and Finance Departments. The Project will also finance the development of a set of marketing and communication tools (website, brochure, sector kit, etc.). The PPIP will also provide the assistance to carry out an organizational diagnosis of APIX and to develop strategies to help ensure APIX's sustainability. To complement this action, assistance will be provided to allow APIX to exchange experience with other investment promotion agencies such as the one from Mauritius and Tunisia, including studying how Tunisia has developed medical tourism.

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25. The subcomponent on support to divestiture and oversight of public entities for US$500,000 will be discontinued in the restructured Project. The reason is that the support planned under this subcomponent has been provided and this would allow reducing the scope of the Project and focus it on activities that are critical to meeting the PD~. Likewise, the support to the Ministry of Foreign. Affairs which has not been provided for lack of demand also will be discontinued and the US$l million reallocated.

(d) Reduce·the number of subcomponents financed under Component 3: Stimulating Sector Investment and Implementing Policy Reforms :from 6 to 3 by ending Project assistance to three subcomponents: (a) telecommunication and development of information technology, (b) postal reforms, and (c) edible oil sector reform

26. Additional World Bank financial assistance is not necessary in the telecommunication sector since the performance indicators for this subcomponent have been met or exceeded. Moreover, the telecommunication regulator (ARTP) has been established, as intended in the PAD and has become a self-sustainable institution that also receives substantial revenues. These revenues are obtained from the operators' contribution to the Universal Access Fund and the use of a :frequency management. The US$3.5 million of assistance envisaged to promote rural access to telecommunications services will thus be reallocated. Moreover, the competition among the three different operators in the mobile segment of the market has fostered a reduction in the cost of calls and improved quality of service and access. Independently from assistance through this Project, these trends will be sustained thanks to the competitive pressures that the Project has helped establish. Moreover, Agence de Regulation des Telecommunications et des Postes (ARTP) has significant revenues, and could finance any external assistance that may be required to complement the in-house expertise. Additionally, the regulator could use the template documents that were developed under the Project to foster additional universal access.

27. Regarding the postal service sector, and as established in the PAD, the PPIP has financed the postal service's reforms through the "provision of advisory services, training and purchase of Management Information System (MIS) and other equipment." These reforms have helped the postal service company, La Poste, improve its performance. However, this assistance will not be sufficient to put the company on the path of financially and operationally sustainable performance. The reason is that, despite its commitments to recapitalize the firm made in the context of both this Project and the Private Sector Adjustment Credit (Cr. 38750-SN), the Government has not done so, despite numerous reminders from the World Bank team and management. It would thus be counter-productive to continue providing assistance to the firm through this Project beyond the amount envisaged until the Government commitment of recapitalizing the company is fully materialized.

28. The restructured Project contains no additional activities for the edible oil sector reform subcomponent, since the activities planned under this component have been completed. As envisaged under the PAD, the project financed the technical assistance to prepare the divestiture strategy of SONACOS, the then State-owned groundnut corporation. The divestiture took place and was one element of the sector strategy, which also included the removal of the excise tax (Taxe Conjoncturelle d'Importation) on edible oil and the harmonization of the import surcharge on processed and unprocessed edible oils (Taxe specifique.). Althoughthe application

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of the excise tax was suspended for a period, an upsurge of palm oil imports in 2005 lead the authorities to reinstate all protections against imported edible oil. This measure, however, did not comply with W AEMU and WTO provisions regarding safeguards measures and constituted, from the Bank's view, a reversal of policy commitment. In light of this situation, the financing of additional activities could prove counter-productive until legal and operational conditions are continuously in place to guarantee that no barriers to import edible oil into Senegal exist.

29. The restructured Component 3 will provide assistance to undertake the following activities.

(i) The tourism industry is one of the five key sectors that the Government and the private sector have selected as offering potential for growth in the Accelerated Growth Strategy. The Project will develop an updated strategy for the tourism se<;tor to provide the authorities with a coherent vision and plan that could be later implemented without the Project's assistance. Additionally, the Project could help the authorities develop the legal arrangements for tourism classification to foster quality service.

(ii) Regarding promotion' of the music industry, the restructured Project will finance the completion of the legal reform regarding the copyright legislation. Specifically, the Project will finance the preparation and dissemination of the decrees needed to complement the Copyright Law prepared under the Project to operationalize the approved Copyright Law. This will allow legal protection against music piracy and create a legal and institutional framework conducive to the payment of royalties to musicians and artists. The Project also will finance the electronic archiving of Senegal's musical heritage, which risk being lost. While the Project originally planned to finance the rehabilitation of a building to house the national archives, this approach would be costly. Instead, the national musical archive would be archived virtually and be accessible independent of the location, thus providing an international platform from which to download Senegalese music after payment via the internet, thus helping foster sales and even better monitoring of royalties payment.

(iii)The Project will provide targeted technical assistance (TA) to support the capacity building for the pension. This assistance is being provided to finance the financial audit reports of the three key pension institutions, which are: (i) Caisse de Securite Sociale, (ii) Institut de Prevoyance Retraite du Senegal (lPRES), and (iii) Fonds National de Retraites to obtain a better understanding of the financial situation of these enterprises and ensure that they are operating with internationally established financial prudential standards.

30. The three sub components that have been maintained contain activities for which the implementation can be completed during the proposed 16 months extension since their respective implementation has started or is about to start. For example, the decrees needed to complement the already adopted Copyright Law should be completed by June 25, 2010 and then submitted for Cabinet's approval. Moreover, dropping this assistance would be counterproductive since it would result in withholding assistance for an activity which has stared and could be completed without substantial financial assistance and could have a significant impact in the revenues earned by musicians and artists.

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31. The scope of the assistance under Component 4: Supporting Implementation and Capacity Building will be reduced by mainstreaming the Project Coordination and fiduciary functions into an existing public institution. As explained above, this new implementation arrangement enables the mainstreaming of the Project coordination and fiduciary functions and has been initiated as part of lifting the Project's suspension of disbursement. Under this component, additional assistance envisaged in the PAD and that remains relevant will receive support from the Project. Support will include a public information campaign and targeted assistance to support the Unite de Politique Economique (UPE), a think tank advising the Ministry of Economy and Finances. Additionally, the successful reform of the public procurement code will receive targeted assistance to start establishing a network of likeminded institutions and to ensure that small and medium enterprises are not denied opportunities to compete for the provisions of goods and services for public contracts.

(e) A restated legal covenant to finance a joint IDAlIFC risk-sharing facility will be formally added, to be funded by proceeds from the Credit for SDR 1.4 million

32. This covenant would enable financing the TA and providing partial guarantee for a portfolio of loans to participating commercial banks, which had met the eligibility criteria already specified in the Risk-Sharing Framework Agreement. It is worth noting that the arrangements for this risk-sharing facility are modeled after those that have been previously developed and implemented jointly by the IFC and Bank including in Madagascar and Mali. The assistance is provided by the development of a partial credit guarantee program for the benefit of small and medium sized enterprises, through: (i) the provision of financing for local currency, small and medium enterprise loan portfolio partial credit guarantees to Participating Banks to be issued by IFC . on a 50/50 pari passu basis and to be partially backstopped by the Borrower on a first loss basis; and (ii) the provision of technical advisory services and training to personnel of Participating Banks. It is worth noting that the terms of this Risk-Sharing Facility have been signed by the Government and by IDA. However, given (i) the time lag between the signature by IDA and the counter-signature by the Borrower; and (ii) the fact that the Borrower countersigned a copy and not the original amendments to the DCA that introduced the Risk-Sharing Facility, the restructuring will be used to restate the amendment to the DCA related to the financing of the Risk-Sharing Facility.

33. The preparatory work of the Risk-Sharing Facility has started and will help create the conditions for its implementation during the remaining period. Among the main progress, it is worth noting the following: (i) Risk-Sharing Framework Agreement; (ii) Risk-Sharing Facility Agreement; (iii) terms of reference for the technical assistance to be provided to the commercial banks; and (iv) discussion with a commercial bank that is likely to use the Risk-Sharing Facility. The facility is meant to foster increased lending of funds to small and medium enterprises (SMEs) by commercial banks, which often seem to be too risk averse in lending to SMEs. The facility will reduce the perception of risk by guaranteeing the loans. In addition, under the restructured PPIP, this component will work closely with the matching grant component to provide the often-needed T A that an SME requires to address a technical or operational risk identified by the banker. Under this circumstance, the matching grant would be provided to the SME to address or mitigate the technical or operational risk, thus providing the commercial

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banks with the comfort level that would allow the banks to make an independent decision to approve a loan for the SME.

(f) A restated covenant reaffirming Development Credit Agreement amendments made through the letter dated May 14, 2009 and which establishes an increase in prior review thresholds for the Project, as well as the fact that:

(i) " All goods, works and services (other than consultants ' services) shall be procured in accordance with the provisions of Section I of the " Guidelines for Procurement under IBRD Loans and IDA Credits dated May 2004, as revised in October 2006 and May 2010 (the procurement guidelines), and with the provisions of this schedule thus restating the" Anti-corruption guidelines", and

(ii) "All consultants' services shall be procured in accordance with Sections I and IV of the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, as revised in October 2006 and May 2010 (the Consultant Guidelines), and with the provisions of this schedule.

(g) As a result of the decrease in the number of activities financed under the Project. the Results Framework has been revised and simplified to reduce the number of indicators.

34. Additionally, the new results framework includes more relevant and up-to-date indicators that are better suited to evaluate and monitor the implementation progress toward achieving the PD~ under the restructured Project. The key Project performance indicators, as reflected in the original DCA and the Project Appraisal Document, also have been simplified as well as updated to reflect the new performance targets and results framework. Furthermore, the performance indicators for certain components have been revised to reflect that the indicators established in the original framework have been partially achieved and that new indicators need to be adopted to monitor the performance during the implementation of the restructuring phase. A summary of the revised Results Framework, which will be used to assess and monitor progress, appears in annex 1.

(h) The Project closing date is being extended from August 30,2010 to December 31, 2011. This 16-months extension is necessary and sufficient to complete the implementation of the Project's activities and will facilitate the achievement of the PDO. The additional time is intended to help address implementation and disbursement lags for the numerous activities that arelagging in implementation. Moreover, this period would provide sufficient time for the implementation of the Risk-Sharing Facility, which is now ready for implementation and has been agreed with the authorities.

(i) Reallocate funds between components and disbursement categories to support the changes proposed in this document. The tables on page 16 of this package reflect the new and proposed allocations.

35. The main changes are to (a) increase funding to finance activities to improve the investment climate and support the procurement reform; and (b) reallocate unutilized funds from dropped activities such as updated technology infrastructure for the airport, postal and telecommunication

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activities, as well as the assistance to the Ministry of Foreign Affairs and exchange rate gains that resulted from favorable fluctuations between the SDR and the US$.

Safeguards

36. The proposed changes do not raise the environmental category of the Project nor trigger new safeguard policies. The environmental category rating for this project is C. Institutional arrangements

Formally close the Project Management Unit, which had been receIvmg support through Component 4, Supporting Implementation and Capacity Building

37. The Region's "Guidance Note on Project Implementation Arrangements for Investment Lending Operations" states, "Existing government institutions (using civil servants and country systems and procedures) should be the first choice to implement Bank-financed Projects." On this basis, and in light of the existing institutional capacity of Project's beneficiaries to implement their respective activities, it has been agreed with the Government that the closing of the PIU achieved in the context of the lifting of the Project's disbursement suspension will be formalized. The P AD states that most beneficiary organizations "have the capability to manage the activities supported by the Project. Strong complementary implementation capacity [is] needed to ensure that Project objectives are met. The Credit will thus finance a small team of high caliber local professionals located at PMU and the related support staff." Under the restructured Project, the Credit will finance the recruitment of a small team of local professionals located in APIX. This team of professionals would oversee the coordination, financial management, procurement, reporting, M&E, audit, and related functions.

Financing

(a) Project Costs

Project Costs (US$ millions) Components/Activities Currene Proposed

Improving the Investment Climate 7.000 10.200

Facilitating Private Participation and Enhancing 11.500 13.800 Competitiveness Stimulating Sector Investment and implementing 21.800 17.000 policy reform Supporting Implementation and Capacity building 5.700 10.300 Total Cost(*) 46,000 51,300

* The difference between the two amounts related to total cost in USD, is due to exchange rate due to the appreciation of the Special Drawing Rights against the US Dollar from the negotiation date until now.

1 lfthe project has had a previous restructuring, the current should reflect the latest approved costs.

11

(b) Financing Plan in (US$O,OOO)

Revised financing plan

Estimates 2004 2005 2006 2007 2008 2009 2010 2011

IDA 3,281 4,263 ..

·7,591 8,013 7,110 4,591 8,460 8,000

Cum. IDA 3.,281 7,544 15,13.5 23.,148 3.0,258 3.4,841 43,300 51,300

Government 0,037 0,206 0,335 0,308 0,254 0,158 0,350 0,350

Cum. Government 0,03.7 0,243. 0,578 0;887 1,142 1,300 1,650 2,000

Total per year 3,318 4,469 7,926 < 8,3.21 7,364 4,749 8,810 8,300

Cum. Total (IDA+Gov.) 3,318 7,787 15,713 ..24,03.4 31,398 39,590 44,950 53,300

Reallocations

Allocation of Credit Proceeds (All amounts in SDR) Category of Expenditure Allocation % of Financing

Current Revised Current Revised Current Revise l. Works l. Works 400,000 400,000 100 100 2. Goods 2. Goods

Under Part C.2 (2) of Under Part C.2 (2) of the 2,200,000 0 50 50 the project project Other Other 7,450,000 8,700,000 100 100

3. Consultant's services and 3. Consultant's services audit and audit

(c) under Part B.1 of the project (c) under Part B.1 of the 3,700,000 0 50 50 project

(d) under Part B.2 ofthe project (d) under Part B.2 of the 2,200,000 1,650,000 50 50 project

(e) Other (e) Other 11,150,000 13,540,000 100 100 4. Training &Workshop 4. Training &Workshop 2,900,000 4,700,000 5. Operating costs 5. Operating costs 1,650,000 2,200,000 90 90 6. Refund of Preparation 6.Refund of preparation 1,600,000 1,210,000 N/A N/A

Advance Advance 6. Partial Credit Guarantee 7. Partial Credit Guarantee 1,400,000 1,400,000 100 100 7. Unallocated 8. Unallocated 550,000 0 N/A N/A Total amount 33,800,000 33,800,000

12

Procurement

38. The restructuring provides an opportunity to introduce a restating covenant reaffirming Development Credit Agreement amendments made through the letter dated May 14, 2009 so that all the. amendments are contained in a single document. The changes that which had brought about are the following changes:

(a) Increase in prior review thresholds for the Project, as well as the fact that "all goods, works and services (other than consultants' services) shall be procured in accordance with the provisions of Section I· of the "Guidelines for Procurement under IBRD Loans and IDA Credits dated May 2004, as revised in October 2006 and May 2010 (the procurement guidelines); .

(b) Confirmation that "All consultants' services shall be procured in accordance with Sections I and IV of the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, as revised in October 2006 and May 2010 (the Consultant Guidelines), and with the provisions of this schedule".

39. Additionally, .the revised DCA will introduce the "Anti-corruption guidelines", which were not introduced at the time the project was originally signed.

Closing date

40. In the context, ofthe restructuring, the Project closing date will be extended from August 30, 2010 to December 31, 2011. This 16-months extension is necessary and sufficient to complete the implementation of the Project's activities and will facilitate the achievement ofthe PDO. The additional time is intended to help address implementation and disbursement lags for the activities that are lagging in implementation.

Implementation schedule

41. The Bank has reviewed the effectiveness and realism of the proposed action plan for the period of the extension in the context of the restructuring to ensure that the implementation of the activities will contribute to fully meet the Project's objectives. The 16 months extension is sufficient for the implementation of the activities several of which have already started and will be completed before the closing date.

D. APPRAISAL SUMMARY

42. The economic analysis undertaken in the original PAD remains relevant.

43. The economic analysis of this type of private sector development (PSD) project presents the limits encountered in all similar Project evaluations. The difficulty in quantifying the economic benefits results mainly from the indirect relationship between the Project's intervention and the stream of benefits; and from the lagged effects of the Project on the.performance of the different beneficiaries and sectors directly supported. Nevertheless, it is important to note that, with the reduction of the marginal cost of operating the PCU during the period of extension coupled with

13

the reduction of the less relevant activities supported under the Project, the overall Project economic rate of return (ERR) has improved slightly from the 19.8 percent. The reasons are that the base case scenario was conservative; and important positive externalities, such as the skills and technology transfers, which are difficult to measure, will be taking place, partly as a result of the Project's contribution.

44. The main assumptions underlying· this economic analysis are as follows: (i) stable macroeconomic environment, as projected in the CAS with 4 percent real GDP per annum on average; and an inflation rate under 3%; (ii) An improved investment climate - including the reduced tax rate'" helps attract increase private investment; (iii) each $1,000 spent by APIX will generate 2 jobs by end of project; and (iv) a minimum of 1000 trainees improve their skills through the matching grant.

45. Moreover, based on preliminary actual implementation results thus far, the cost-benefit analysis shows greater benefits than expected in the PAD. For example, based on data provided by APIX, the work done by APIX-. which was supported through the Project-has contributed to the creation of 28,200 jobs for the period 2004-06. Moreover, US$1.70 billion investment was made in 2006 by the firms operating with APIX - issued Special Investment Certificates. While it is not possible to attribute all of the merit of these results to APIX and/or the Project, since determining how much is actually due to the Project is subjective, it is clear that the project has been providing APIX some useful assistance. Independently of attribution, the benefits to the country are higher than envisaged in the PAD. The private investment levels are expected to continue to' increase throughout the implementation period of the restructured operation. The ongoing increase is due to the· fact that APIX has already helped the start of several important Projects. They include the Dakar Port revitalization with Dubai Port World; the mining Project in Sabodala (gold) and Kedougou; the energy Project, Kounoune, the new international airport; the toll road Dakar Diamniadio; Dakar Special Integrated Economic Zone; and the investment of the third telecommunication operator.

46. The Project's benefits and risks, as envisaged in the PAD, are not changed substantially. The Project was expected to benefit the country by providing employment, the transfer of skills and technology. Through the performance of Component 2, since 2005, and based on data provided by APIX, the Project has helped generate over 136,500 jobs, and approved total investment of over US$ 1.7 billion? Moreover, the Public Procurement agency established under the Project has helped reduced the percentage of sole sourcing award in the procurement of goods and services from 80 in 2006 to 14% in 2009, and generated US$ 115,000,000 savings for the tax payer! These good results will be complemented by the implementation of additional activities during the restructuring period. Moreover, the reduction of activities proposed under this restructuring will contribute to . an increased focus on assistance to improve the investment climate. The latter will, in tum, increase the private sector's productivity and investment, thus helping create more employment. The Project also is also expected to contribute toward opening up business opportunities for SMEs based on a transparent and competitive procureIpent system.

2 The perfonnance indicator target is considered as being met based on data provided by APIX. However, this needs to be continned through an independent evaluation.

14

Risk

47. The Project's benefits and risks, as envisaged in the PAD, are not changed substantially. The overall risk assessment included in the PAD was revised. The expected outcomes, which have an overall rating of "substantial," are set out in detail in annex 2. The central, underlying risk was the continued implementation of this Project, without strengthening APIX's institutional capacity for project coordination, as well as for procurement and financial management functions. This risk is addressed through the financing of the recruitment of a dedicated team of high caliber specialists to carry out the above-mentioned functions which has started. For the project to meet its development objectives, the project coordination and fiduciary functions will need to be carried out in a timely manner and with consistent quality. To mitigate any risk related to the transition arrangements while the three additional staff are being hired, APIX' s Deputy Director is carrying out the Project Coordination functions. The project procurement support is provided by APIX's procurement specialist and its accountant and the assistant account - who are all familiar with World Bank procedures - are carrying out the financial management responsibilities. World Bank implementation has recently started to be even more pro active through a daily communication to ensure timely and quality follow up, particularly during the transition period. This has shown result in the improved implementation progress.

48. Regarding risk previously identified. The risk related to the payment of counterpart fund which existed previously has been addressed since counterpart fund for 2009 were paid in full and the counterpart fund for 2010 are being paid. The portfolio data does not show any delay in the payment of counterpart funds. Regarding monitoring and evaluation, the results framework has been completed revamped and it was agreed that a monitoring and evaluation specialist would be hired every six months to help strengthen this function. The recruitment of a dedicated project staff as explained in paragraphs 12 through 15 will address the project management issue and result in an increase of disbursement level. The risk related to the matching grant is addressed by changing the implementation arrangement to reflect good practice, as informed by the Bank's implementation of matching grants as clarified on paragraphs 19, 20 and 2l. Regarding the risk sharing facility, the preparatory work to start this risk sharing facility as described on paragraph 33 will help mitigate the risk associated with this sub component. Moreover, this component will receive implementation support from an experienced IDAlIFC team which is based in Dakar making it easier to promptly provide timely assistance.

49. The risk assessment considers the risk at country and Project levels, and suggests mitigating measures for each. At the country level, the policy dialogue has been strengthened by a more active involvement of the World Bank team with all of the Project's beneficiaries. However, the main risks at the country level are the political and social tensions resulting from the combination of the worldwide increase in food prices, the world financial crisis, and inadequate electricity services. These risks will be mitigated by the World Bank and other donors by providing the authorities with both the technical and financial assistance necessary to help reduce the negative impact of the most vulnerable segment of the population. At the Project level, the measures adopted in the context of this restructuring increased the likelihood of achieving the PD~.

15

Pro

ject

Dev

elou

men

t Obj

ecti

ve (P

DO

}:

RE

PU

BL

IC O

F S

EN

EG

AL

P

riva

te I

nves

tmen

t Pro

mot

ion

Pro

ject

AN

NE

X 1

: R

esul

ts F

ram

ewo

rk a

nd

Mon

itor

ing

"The

Pri

vate

Inv

estm

ent P

rom

otio

n P

roje

ct d

evel

opm

ent o

bjec

tive

is t

o cr

eate

the

cond

itio

ns to

sti

mul

ate

a su

stai

ned

incr

ease

in

priv

ate

inve

stm

ent

thro

ugh

an im

prov

ed in

vest

men

t cli

mat

e, g

reat

er p

riva

te p

arti

cipa

tion

in

econ

omic

act

ivit

ies,

and

pol

icy

and

sect

or r

efor

m.

The

pro

ject

is t

hus

expe

cted

to

mak

e im

port

ant i

ncre

men

tal

cont

ribu

tion

s to

war

ds a

ttai

ning

the

8 p

erce

nt G

DP

gro

wth

cal

led

for

in th

e G

over

nmen

t pov

erty

all

evia

tion

pro

gram

."

Rev

ised

Pro

ject

Dev

elou

men

t Obj

ecti

ve:

The

Pro

ject

's d

evel

opm

ent o

bjec

tive

is t

o cr

eate

the

cond

itio

ns to

inc

reas

e pr

ivat

e in

vest

men

t. T

his

wil

l be

acc

ompl

ishe

d th

roug

h an

im

prov

ed

inve

stm

ent c

lim

ate,

gre

ater

pri

vate

par

tici

pati

on in

eco

nom

ic a

ctiv

itie

s, a

nd p

olic

y an

d se

ctor

ref

orm

s.

D-D

ropp

ed

Cum

ulat

ive

Tar

get V

alue

s**

.. C

=Con

tinue

U

nit o

f B

asel

ine

Dat

a So

urce

! R

espo

nsib

ilit

y fo

r P

DO

Lev

el R

esul

ts I

ndic

ator

s*

.... N

=New

F

requ

ency

0 U

R=R

evis

ed

Mea

sure

(p

rogr

ess

to d

ate)

Y

RI

YR

2

Met

hodo

logy

D

ata

Col

lect

ion

Indi

cato

r O

ne:

100

new

fIn

ns w

ith

New

N

umbe

r 75

85

10

0 Se

mi a

nnua

l A

PIX

rep

orts

A

PIX

in

vest

men

t in

cent

ives

sta

rt

0 o

f firm

s

oper

atin

g.

Indi

cato

r T

wo:

The

lev

el o

f pri

vate

N

ew

US$

2.

5 bi

llion

2.

8 bi

llion

3.

0 bi

llion

Se

mi a

nnua

l A

PIX

rep

orts

A

PIX

inve

stm

ent r

eali

zed

reac

hes

US

$ 3

0 bi

llio

n.

Indi

cato

r T

hree

: T

he

num

ber

of

Rev

ised

N

umbe

r 11

5,00

0 12

2,00

0 13

0,00

0 Se

mi

annu

al

API

X r

epor

ts

API

X

dire

ct n

ew jo

bs

crea

ted

reac

hes

of j

obs

130,

000

by

end

of P

roje

ct.

(Dir

ect

0 pr

ojec

t ben

efIc

iari

es n

umbe

r, %

of

fem

ales

).

16

INT

ER

ME

DIA

TE

RE

SUL

TS

Inte

rmed

iate

Res

ult (

Com

pone

nt O

ne):

The

pre

viou

s re

sults

fra

mew

ork

had

81 d

iffe

rent

indi

cato

rs. I

t is

not

poss

ible

to f

it th

ese

indi

cato

rs in

the

fra

mew

ork

prov

ided

in t

his

fram

ewor

k.

How

ever

, the

ori

gina

l re

sults

fra

mew

ork

was

att

ache

d as

Ann

ex 1

of a

ful

ler

draf

t ver

sion

of t

he r

estr

uctu

ring

pap

er w

hich

is a

vaila

ble

in fi

les

but t

hat

has

been

str

eam

line

d fo

r B

oard

pr

esen

tatio

n.

Rev

ised

Int

erm

edia

te R

esul

t (C

ompo

nent

One

): I

nves

tmen

t cli

mat

e in

Sen

egal

com

pare

s fa

vora

bly

wit

h th

at o

f cou

ntri

es w

ithi

n W

AE

MU

Inte

rmed

iate

Res

ult i

ndic

ator

One

: N

ew

Day

s 9

9 8

Ann

ual

DB

rep

ort

Wor

ld B

ank

The

tim

e to

reg

iste

r a

firm

is

0 re

duce

d to

8 d

ays.

In

term

edia

te R

esul

t in

dica

tor

Two:

N

ew

% ra

te

28%

28

%

28%

S

emi-

annu

al

Aid

e m

emo

ire

Wor

ld B

ank

The

cor

pora

te m

argi

nal t

ax r

ate

is

0 re

duce

d to

28%

by

2011

. In

term

edia

te R

esul

t in

dica

tor

Thre

e:

0 N

ew

Num

ber

of

8,50

0 9,

200

10,0

00

Sem

i an

nual

A

PIX

rep

ort

AP

IX

The

num

ber

of n

ew f

irm

s fir

ms

regi

ster

ed e

xcee

ds 1

0,00

0 In

term

edia

te R

esul

t in

dica

tor

Fou

r:

0 N

ew

Day

s 10

(ex

port

) 9

8 A

nnua

l D

B r

epor

t W

orld

Ban

k T

ime

to c

lear

goo

ds f

or

10 (

impo

rt)

expo

rt/i

mpo

rts

redu

ced

to 8

day

s.

8 8

Rev

ised

Int

erm

edia

te R

esul

t (C

ompo

nent

Tw

o):

AP

IX e

ffec

tive

ly p

lays

its

rol

e as

pro

mot

er o

f inv

estm

ents

, and

is i

ncre

asin

gly

able

to

cove

r a

port

ion

of i

ts o

pera

ting

cos

ts f

rom

its

re

venu

es o

r th

ose

of t

he B

udge

t. In

term

edia

te R

esul

t in

dica

tor

One

: N

ew

%o

f 50

%

60%

70

%

Ann

ual

AP

IX r

epor

t A

PIX

A

PIX

ope

rati

ng c

osts

are

cov

ered

0

oper

atin

g at

leas

t by

70%

by

its r

even

ues

and

cost

th

e S

tate

bud

get b

y en

d o

f Pro

ject

. In

term

edia

te R

esul

t ind

icat

or T

wo:

N

ew

Num

ber

of

0 10

25

S

emi

annu

al

Aid

e m

emoi

re

Wor

ld B

ank

The

num

ber

of l

oans

mad

e us

ing

loan

s th

e P

arti

al C

redi

t Gua

rant

ee

0 re

ache

s 25

by

end

of p

roje

ct a

nd

the

amou

nt l

ent U

S$

10 m

illi

on.

--------_

.. -

'--

'--

-----------------

---

--

17

Rev

ised

In

term

edia

te R

esu

lt (

Co

mp

on

ent

Th

ree)

: A

ctio

ns a

re u

nder

take

n to

im

prov

e th

e qu

alit

y o

fth

e to

uris

m p

rodu

ct a

nd p

rom

ote

the

deve

lopm

ent o

f the

mus

ic i

ndus

try.

Inte

rmed

iate

Res

ult i

ndic

ator

One

: 0

New

N

/A

No

stra

tegy

D

raft

St

rate

gy

Sem

i an

nual

A t

ouri

sm s

trat

egy

is a

dopt

ed b

y st

rate

gy

end

of p

roje

ct.

A d

ecre

e is

ado

pted

to e

stab

lish

a

new

col

lect

ing

soci

ety

or s

ocie

te d

e ge

stio

n co

llec

tive

to e

nsur

e pa

ymen

t of r

oyal

ties

In

term

edia

te R

esul

t ind

icat

or tw

o:

0 N

ew

N/A

N

o de

cree

D

ecre

e Pa

ymen

t of

Sem

i ann

ual

A d

ecre

e is

ado

pted

to e

stab

lish

a

roya

lties

new

col

lect

ing

soci

ety

or s

ocie

te d

e ge

stio

n co

llec

tive

to e

nsur

e pa

ymen

t of r

oyal

ties

Rev

ised

In

term

edia

te R

esu

lt (

Co

mp

on

ent

Fo

ur)

: P

roje

ct c

ompo

nent

s ar

e co

ordi

nate

d an

d ar

e ef

fect

ivel

y im

plem

ente

d

Inte

rmed

iate

Res

ult i

ndic

ator

One

: A

RM

P is

ful

ly o

pera

tion

al a

nd

cove

rs a

ll o

f its

ope

rati

onal

cos

t fr

om i

ts r

even

ues

to e

nsur

e su

stai

nabi

lity

by

end

of P

roie

ct.

Inte

rmed

iate

Res

ult i

ndic

ator

Tw

o: %

o

f an

nual

ope

rati

ng c

ost

cov

ered

Inte

rmed

iate

Res

ult i

ndic

ator

Thr

ee:

% o

f pro

cure

men

t com

plai

nts

prop

erly

inve

stig

ated

and

dec

ided

,-

on.

0 N

ew

N/A

A

RM

Pis

A

RM

Pis

A

RM

Pis

Se

mi a

nnua

l pa

rtia

lly

part

ially

fu

lly

oper

atio

nal

oper

atio

nal

oper

atio

nal

0 N

ew

60%

80

%

100%

Se

mi a

nnua

l

0 N

ew

%o

f 70

%

80%

90

%

Sem

i ann

ual

com

plai

nts

inve

stig

ated

---

--

-_

.. _------

*P

leas

e in

dic

ate

wh

eth

er t

he

ind

icat

or

is a

Co

re S

ecto

r In

dic

ato

r (s

ee f

urt

her

htt

p:/

/co

rein

dic

ato

rs)

**

Tar

get

val

ues

sh

ou

ld b

e en

tere

d .f

or t

he

yea

rs d

ata

wil

l b

e av

aila

ble

, n

ot

nec

essa

rily

an

nu

ally

18

Aid

e m

emo i

re

Wor

ld B

ank

Aid

e m

emo

ire

Wor

ld B

ank

- Aid

e m

emoi

re

Wor

ld B

ank

Fina

ncia

l Mgt

A

RM

P re

port

Aid

e m

emo i

re

Wor

ld B

ank

AR

MP

AR

MP

Aid

e m

emo i

re

Wor

ld B

ank

AR

MP

AR

MP

Mac

ro-e

cono

mic

F

ram

ewor

k

Inte

rnat

iona

l fi

nanc

ial

and

econ

omic

cri

sis,

an

d fo

od a

nd f

uel

pric

e st

abil

ity.

Ann

ex 2

: R

isk

Ass

essm

ent

The

re is

a c

erta

in r

isk

to m

aint

aini

ng

mac

roec

onom

ic d

isci

plin

e,

part

icul

arly

thro

ugh

off

bud

get

expe

ndit

ures

and

pot

enti

ally

ex

cess

ive

borr

owin

g.

One

ext

erna

l ris

k th

at h

as t

o be

m

onit

ored

in th

e m

ediu

m-t

erm

is

the

fisc

al a

nd e

cono

mic

impa

ct o

f the

in

tern

atio

nal

fina

ncia

l cr

isis

and

foo

d an

d fu

el p

rice

sta

bili

ty.

So f

ar,

this

imp~ct h

as b

een

rela

tive

ly l

imit

ed, b

ut

ther

e is

a r

isk

that

the

situ

atio

n co

uld

sign

ific

antl

y de

teri

orat

e de

pend

ing

on

futu

re d

evel

opm

ents

of t

he g

loba

l ec

onom

y, w

hich

cou

ld l

ead

to f

isca

l pr

essu

res

on th

e go

vern

men

t bud

get.

A p

rolo

nged

glo

bal e

cono

mic

cri

sis

coul

d co

nstr

ict i

nves

tmen

t flo

ws,

ex

port

s an

d re

duce

d th

e le

vel o

f re

mit

tanc

es.

The

im

port

ant d

ownt

urn

in t

ouri

sm a

rriv

als

due

to th

e su

spen

sion

of A

ir S

eneg

al's

op

erat

ions

cou

ld b

e ex

acer

bate

d.

Sub

stan

tial

Sub

stan

tial

19

Sli

ppag

es i

n m

acro

econ

omic

po

lici

es w

ould

be

mit

igat

ed b

y cl

ose

mon

itor

ing

and

coor

dina

tion

by

ID

A,

IMF

and

oth

er d

onor

s. T

he

need

for

ext

erna

l bo

rrow

ing

wou

ld

be r

educ

ed b

y in

crea

sed

gran

t re

sour

ces.

S

usta

inin

g so

und

mac

ro p

olic

y st

ance

: T

he a

utho

riti

es a

re p

ursu

ing

corr

ecti

ve f

isca

l ac

tion

s st

arte

d ea

rlie

r, i

nclu

ding

the

sett

lem

ent o

f do

mes

tic

arre

ars,

whi

ch s

houl

d of

fset

ext

erna

l sh

ocks

. T

he g

over

nmen

t ha

s so

far

ear

ned

out r

elat

ivel

y pr

uden

t mea

sure

s in

re

spon

se to

rec

ent i

nter

nati

onal

de

velo

pmen

ts a

nd c

onti

nues

to

mai

ntai

n a

dial

ogue

wit

h th

e de

velo

pmen

t par

tner

s on

ap

prop

riat

e po

licy

res

pons

es a

nd

the

poss

ible

nee

d fo

r au

gmen

ted

conc

essi

onal

ext

erna

l ai

d in

the

fo

rm o

f gra

nts.

Sub

stan

tial

Sub

stan

tial

Cou

ntry

T

he c

olla

bora

tion

bet

wee

n th

e E

lim

inat

e ar

rear

s an

d pl

ace

enga

gem

ent w

ith

gove

rnm

ent a

nd th

e W

orld

Ban

k is

in

coun

try'

s fi

scal

sta

nce

on

the

Wor

ld B

ank

rela

tive

ly g

ood

stan

ding

. The

sec

ond

sust

aina

ble

trac

k.

and

IDA

Por

tfol

io

phas

e o

f a p

ortf

olio

rev

iew

took

pla

ce

in M

arch

201

0 to

add

ress

cro

ss

Mod

erat

e I En

sure

pay

men

t of c

ount

erpa

rt

Mod

erat

e cu

ttin

g is

sues

. fu

nds:

The

Ban

k te

am i

s w

orki

ng

clos

ely

wit

h G

over

nmen

t so

that

all

C

F a

rrea

rs a

re p

aid,

and

ade

quat

e is

sec

ured

in th

e fu

ture

.

Cro

ss s

ecto

r-R

isks

I T

he e

rrat

ic a

cces

s an

d qu

alit

y o

f T

he B

ank

prov

ides

sub

stan

tial

el

ectr

icit

y w

ill u

nder

min

e th

e as

sist

ance

to th

e en

ergy

sec

tor a

nd a

im

prov

emen

t in

inve

stm

ent c

lim

ate

Sub

stan

tial

st

rong

ene

rgy

sect

or.

I S

ubst

anti

al

and

priv

ate

firm

s' p

rodu

ctiv

ity.

Im

plem

enta

tion

pro

gres

s ha

s be

en

unev

en th

us f

ar.

Res

ista

nce

to i

nves

tmen

t cli

mat

e T

he c

onse

nsus

on

the

refo

rm i

s re

form

s co

uld

com

e fr

om

gene

rate

d th

roug

h th

e P

resi

dent

ial

stak

ehol

ders

in th

e ad

min

istr

atio

n In

vest

men

t Cou

ncil

. S

ince

this

has

w

ho a

re u

sed

to d

eal w

ith

busi

ness

es

Sub

stan

tial

al

read

y be

en d

one,

the

res

ista

nce

Mod

erat

e in

a s

low

and

inef

fici

ent m

anne

r and

co

uld

be o

verc

ome.

co

uld

thus

res

ist t

he c

hang

e br

ough

t ab

out b

v th

e re

form

.

The

Pro

ject

is c

hang

ing

the

impl

emen

tati

on a

rran

gem

ents

oft

he

Sub

stan

tial

m

atch

ing

gran

t to

ensu

re th

at it

is in

I

Sub

stan

tial

li

ne w

ith

the

PA

D o

rigi

nal d

esig

n an

d w

ith

W

'

AP

IX n

ot a

ble

to f

ulfi

ll i

ts e

xpan

ded

The

Pro

ject

is p

rovi

ding

AP

IX w

ith

man

date

due

to in

crea

sing

dem

and

in

adeq

uate

ass

ista

nce

to r

aise

its

. rol

es a

nd r

espo

nsib

ilit

ies.

pe

rfor

man

ce u

nder

the

expa

nded

S

ubst

anti

al

man

date

. M

oder

ate

The

rec

ruit

men

t of a

ful

l tim

e pr

ojec

t Coo

rdin

ator

wil

l add

ress

the

issu

e

20

Pri

vate

sec

tor

orga

niza

tion

s do

not

pa

rtic

ipat

e ad

equa

tely

to th

e P

roje

ct's

im

plem

enta

tion

.

PC

U in

not

abl

e to

ade

quat

ely

carr

y ou

t coo

rdin

atin

g fu

ncti

ons.

GO

S c

ount

erpa

rt f

unds

are

eit

her

not

avai

labl

e or

not

ava

ilab

le i

n a

tim

ely

fash

ion.

Com

plex

des

ign

hind

ers

impl

emen

tati

on.

Mon

itor

ing

and

Eva

luat

ion

is n

ot u

sed

adeq

uate

ly to

impr

ove

Pro

ject

's

perf

orm

ance

.

Subs

tant

ial-

Sub

stan

tial

Sub

stan

tial

Mod

erat

e

Mod

erat

e

addr

essi

ng th

e sl

ow d

isbu

rsem

ent.

Pri

vate

sec

tor

orga

niza

tion

s ar

e no

w b

ette

r eq

uipp

ed to

par

tici

pate

ef

fect

ivel

y to

the

Pro

ject

's

impl

emen

tati

on d

ue to

pas

t ex

peri

ence

, an

d be

tter

co

mm

unic

atio

n w

ith

both

the

stee

ring

Com

mit

tee

and

the

PC

U.

The

new

PC

U is

bei

ng r

einf

orce

d to

ad

equa

tely

man

age

the

Pro

ject

.

The

new

Pre

side

nt o

f the

Pro

ject

S

teer

ing

Com

mit

tee

is th

e D

irec

tor

of C

abin

et o

f the

Bud

get M

inis

ter

and

is k

een

to e

nsur

ing

that

the

fund

s ar

e av

aila

ble.

T

he P

roje

ct c

ompl

exit

y ha

s be

en

redu

ced

thro

ugh

a re

duct

ion

of

acti

viti

es a

nd b

enef

icia

ries

. T

he m

onit

orin

g an

d ev

alua

tion

fr

amew

ork

has

been

sim

plif

ied

in

the

cont

ext o

f the

Pro

ject

re

stru

ctur

ing.

Mor

eove

r, a

n ex

tern

al

M&

E s

peci

alis

t wil

l car

ry o

ut a

bi­

annu

al e

valu

atio

n an

d m

ake

reco

mm

enda

tion

s fo

r ad

diti

onal

o

fth

eM&

E.

Mod

erat

e

Mod

erat

e

Mod

erat

e

Mod

erat

e

Mod

erat

e

Rat

ing

of r

isks

on

a fo

ur-p

oint

sca

le-H

igh

, S

ubst

anti

al, M

oder

ate,

Lo

w-a

cco

rdin

g to

the

like

liho

od o

f occ

urre

nce

and

mag

nitu

de o

f ad

vers

e lr

r11

'\<

ll't

21