Download Report - Independent Evaluation Group - World Bank
Download Report - Independent Evaluation Group - World Bank Download Report - Independent Evaluation Group - World Bank
236.3 Thus, the second tranche would be released after one core measure and at leastfour out of eight additional measures were completed, the choice being left to GOM. Inaddition, it was subject to either completing the sale of BTM as per the April 1999protocol or, in case of unsuccessful negotiations, proceeding with divestiture. The thirdtranche would be released after the remaining core and additional measures werecompleted.6.4 The Bank’s Regional Operation Committee agreed to raise the amount of theCredit from US$75 to US$100 million to cover the social cost of the privatizationprogram. However, there was no provision, either in the DCA or in GOM's legislation,specifying such an allocation to the PASERP and no such allocation were made. Thetwo-year reform program, detailed in a LDP, was to be completed by December 31, 2001.RELEVANCE OF OBJECTIVES AND DESIGN6.5 The objective was highly relevant and consistent with Bank strategy, withemphasis rightly placed on: (i) completing the privatization of the large PEs (indeed, inhindsight, this proved to be the centerpiece of SAC-II); (ii) promoting the liberalizationof sectors with a good potential for growth; and (iii) strengthening the management ofpublic resources to widen the tax base and redirect expenditure to the social sectors.Since there had been no budget support from the Bank in 1998, the project highlightedthe need for Madagascar to obtain external support to sustain macro-economic stabilityand expenditures on basic services. The design was also relevant in that it responded tothe situation faced after the disbursement of SAC-I, when it had become clear thatreforms had lost their momentum and commitment had subsided. The “menu-based”approach was realistic and the inclusion of a program to mitigate the social impact ofprivatization was well advised.IMPLEMENTATION AND ACHIEVEMENTS6.6 Implementation was much slower than expected and was directly and negativelyaffected by two external shocks (three cyclones and the sharp increase in oil prices in2000) and by the political crisis of the first half of 2002. These led to sudden shifts inpriorities. To start, there was a delay of 13 months between approval (May 1999) andeffectiveness (June 2000) due to the complex negotiations and unforeseen complicationsin the privatization of several lots of SOLIMA (see para.6.2), that were exacerbated bythe increase in oil prices. The first tranche was disbursed in July 2000.6.7 Between February and April 2000, Madagascar was hit by three cyclones withconsiderable damages in parts of the country. The Bank approved a Supplemental Creditof US$20 million in July 2000 to provide: (i) fast-disbursing foreign exchange tocompensate partially for lower export earnings and higher import needs in 2000 and2001; and (ii) counterpart funding for the reconstruction of health and educationfacilities, roads, bridges, etc. GOM took upon itself to monitor and evaluatereconstruction and decided, despite the absence of conditions prior to disbursement, towithdraw funds from the Credit in two installments, the first upon effectiveness, and the
24second after completion of 50 percent of reconstruction in the most affected areas. 24 Thefirst installment was disbursed in September 2000. Reconstruction took much longerthan planned and the second installment was disbursed only in July 2002.6.8 The doubling of oil prices between 1998 and 2000 to more than US$30 per barrelput heavy pressure on foreign exchange and the stabilization program, with additionalfinancing requirements for 2001 estimated at US$80 million. The Bank approved asecond Supplemental Credit of US$30 million in December 2000 to cushion the impactof the oil shock and avoid disruption in program implementation. The counterpart fundswere to reduce the specific taxes on petroleum products and/or maintain existing rebatesto mitigate the impact on the poor. The balance of the financing gap was expected to befilled by extraordinary donor contributions and higher export growth. The Credit wasdisbursed in June 2001, without conditions.6.9 Although implementation continued to be slow and uneven during 2001, the Bankwas of the opinion that, overall, the program was achieving its objectives, given themaintenance of a relatively strong macro-economic performance in a stable price anddeficit environment. For second tranche release, GOM had chosen, by mid-2001, theprivatization of TELMA over Air Madagascar. 25 It had planned to send an invitation tonegotiate to the winning bidder, upon receiving the bids in December 2001. However,with the conditions relating to the regulatory framework already fulfilled and four of theeight additional conditions also met (1: mining; 3: business environment and judicialprocesses; 5: revenue policies and monitoring; and 6: expenditure monitoring in socialsectors - see para. 6.2), the Board approved in December 2001 a waiver to therequirement of a sale of 34 percent of TELMA’s voting stock to avoid undue pressure onGOM during negotiations. Instead, issuance of the invitation to negotiate was consideredas meeting the core condition. At the same time, the closing date was extended fromDecember 2001 to December 2002, and the second tranche was released in January 2002.6.10 Following the crisis of 2002, consultations between GOM and the Bank were heldin July/August 2002 to take stock of progress achieved and to review the priorities of thenew government to readjust the program accordingly. The review concluded as follows:(i) since December 2001, no progress had been made in financial sector reforms (audit ofpension and savings funds), in facilitating access to land, and no invitation had been sentto investors for the development of tourism and industrial zones; (ii) there had beenprogress in the mining sector (adoption of a law on large mining projects) and in airtransport (in May 2002, GOM had signed a two-year management contract withLufthansa Consulting to operate Air Madagascar); (iii) during the crisis, illegal licenseshad been issued in the fishery, mining, and forestry sectors by various officials; and24 GOM planned to withdraw the second installment after 350 primary schools in the 10 most heavily damaged schooldistricts and 33 out of 82 primary health centers destroyed had been rehabilitated, reequipped, and staffed.25 A tender to sell a majority stake in Air Madagascar had been launched in 1999 but had not been brought to closure.
- Page 1: Document ofThe World BankReport No.
- Page 5 and 6: iiiContentsPrincipal Ratings.......
- Page 7: vSustainability....................
- Page 11: ixKey Staff ResponsibleProject Task
- Page 15 and 16: xiiiSummary1. This is the Project P
- Page 17 and 18: xvcountry conditions that had been
- Page 19 and 20: 2growth for the first time in decad
- Page 21 and 22: 4Under Economic Management:• Tech
- Page 23 and 24: 6Decentralization reform component
- Page 25 and 26: 83.15 Decentralization. Assistance
- Page 27 and 28: 10had characterized the Bank team a
- Page 29 and 30: 124.6 Inflation and credit to GOM w
- Page 31 and 32: 14Table 4.2: Budget Allocations to
- Page 33 and 34: 16OBJECTIVES AND DESIGN5.2 The obje
- Page 35 and 36: 18supervision, the Bank advised on
- Page 37 and 38: 20SUSTAINABILITY5.16 Likely. There
- Page 39: 22ownership of its non-oil operatio
- Page 43 and 44: 26the sale of SOLIMA and of its sub
- Page 45 and 46: 28identifying weaknesses in tax adm
- Page 47 and 48: 30showed commitment to pursuing ref
- Page 50 and 51: 33 Annex AAnnex A. Basic Data Sheet
- Page 52 and 53: 35 Annex APRIVATE SECTOR DEVELOPMEN
- Page 54: 37 Annex ASECOND STRUCTURAL ADJUSTM
- Page 57 and 58: 40 Annex Bbeneficiary of Malagasy a
- Page 59 and 60: 42 Annex CGENERAL CONDITIONS AND DE
- Page 61 and 62: 44 Annex CADDITIONAL MEASURESAdditi
- Page 63 and 64: 46 Annex DMr. Charles Andrianaivoja
- Page 65: 48 Annex EComments from the Governm
236.3 Thus, the second tranche would be released after one core measure and at leastfour out of eight additional measures were completed, the choice being left to GOM. Inaddition, it was subject to either completing the sale of BTM as per the April 1999protocol or, in case of unsuccessful negotiations, proceeding with divestiture. The thirdtranche would be released after the remaining core and additional measures werecompleted.6.4 The <strong>Bank</strong>’s Regional Operation Committee agreed to raise the amount of theCredit from US$75 to US$100 million to cover the social cost of the privatizationprogram. However, there was no provision, either in the DCA or in GOM's legislation,specifying such an allocation to the PASERP and no such allocation were made. Thetwo-year reform program, detailed in a LDP, was to be completed by December 31, 2001.RELEVANCE OF OBJECTIVES AND DESIGN6.5 The objective was highly relevant and consistent with <strong>Bank</strong> strategy, withemphasis rightly placed on: (i) completing the privatization of the large PEs (indeed, inhindsight, this proved to be the centerpiece of SAC-II); (ii) promoting the liberalizationof sectors with a good potential for growth; and (iii) strengthening the management ofpublic resources to widen the tax base and redirect expenditure to the social sectors.Since there had been no budget support from the <strong>Bank</strong> in 1998, the project highlightedthe need for Madagascar to obtain external support to sustain macro-economic stabilityand expenditures on basic services. The design was also relevant in that it responded tothe situation faced after the disbursement of SAC-I, when it had become clear thatreforms had lost their momentum and commitment had subsided. The “menu-based”approach was realistic and the inclusion of a program to mitigate the social impact ofprivatization was well advised.IMPLEMENTATION AND ACHIEVEMENTS6.6 Implementation was much slower than expected and was directly and negativelyaffected by two external shocks (three cyclones and the sharp increase in oil prices in2000) and by the political crisis of the first half of 2002. These led to sudden shifts inpriorities. To start, there was a delay of 13 months between approval (May 1999) andeffectiveness (June 2000) due to the complex negotiations and unforeseen complicationsin the privatization of several lots of SOLIMA (see para.6.2), that were exacerbated bythe increase in oil prices. The first tranche was disbursed in July 2000.6.7 Between February and April 2000, Madagascar was hit by three cyclones withconsiderable damages in parts of the country. The <strong>Bank</strong> approved a Supplemental Creditof US$20 million in July 2000 to provide: (i) fast-disbursing foreign exchange tocompensate partially for lower export earnings and higher import needs in 2000 and2001; and (ii) counterpart funding for the reconstruction of health and educationfacilities, roads, bridges, etc. GOM took upon itself to monitor and evaluatereconstruction and decided, despite the absence of conditions prior to disbursement, towithdraw funds from the Credit in two installments, the first upon effectiveness, and the
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