Download Report - Independent Evaluation Group - World Bank

26the sale of SOLIMA and of its subsidiaries proved to be a long and arduous process. Thedivision of the assets into lots raised difficult issues of property rights and land tenure,and required the creation of several joint ventures. The complexity of the operation wasexacerbated by the increase in oil prices as GOM and the new owners had to agree on atimetable and a formula to align domestic and world prices. The transaction was deemedcompleted in June 2000, with the sale of the refinery and the oil terminal at Taomasina,thus clearing the way for Credit effectiveness. However, the transactions of the other lots(logistics, distribution, etc.) were concluded much later, the last one in March 2005.6.15 The privatization of TELMA was considerably delayed due to contested propertyrights, litigation over bidding procedures, and the political crisis. The transaction wasfinally closed in June 2004, with DISTACOM, a Hong Kong group, holding 68 percentof the shares (34 percent from the state and 34 percent from France Telecom for a total ofUS$25.2 million). 28 The objective of inviting a second fixed line operator was abandonedat restructuring, although GOM reserved the right to launch a bid to that effect. In airtransport, the regulatory authority was established in 1999, but the privatization of AirMadagascar was abandoned. After a bid was launched in February 1999, the processstalled due to an unsettled claim of the US Exim Bank on the airline’s largest asset, itsBoeing 747. In addition, the events of September 2001 and the crisis led to a sharpdeterioration in the financial situation of the company making its sale unattractive. Thisled GOM to revise its strategy in favor of a management contract with LufthansaConsulting, signed in May 2002 and renewed in May 2004. In this climate, the twinobjective of privatizing airport infrastructure was temporarily abandoned.6.16 To sum up, achievements were mixed and considerably delayed. The number ofissues encountered in the privatization of the large PEs, together with resistance fromsome political quarters and labor unions, absorbed an enormous amount of time andenergy for both GOM and the Bank. By project closing, none of the three majorprivatizations had been completed by the original deadline. Moreover, there were manyshortcomings, such as incomplete adherence to procedures, lack of clarity in the functionsof the PC vs. the secretariat, and lack of expertise in the latter. Finally, IEG notes that theICR is silent on the divestiture of the remaining 43 PEs, an indication of theoverwhelming attention accorded to the three major companies. After December 2002,the privatization program was carried over under PSDP-II. 29Achievements under Improvement in the Business Environment6.17 The project aimed at improving the business environment by targeting promisingsectors and promoting transparency in licensing for the exploitation of natural resources.Three sectors were targeted as initial engines of growth: mining, fisheries, and tourism.28 The state currently holds 22 percent; TELMA’s personnel holds 4 percent; and 6 percent are to be transferred by thestate to the Privatization Trust Fund.29 As of end May 2005, of the 43 remaining PEs, 24 had been sold and 5 liquidated; bidding documents were underpreparation or sent for 4 companies; consultants were being recruited to prepare the bidding documents for 6companies; and bidding was suspended for 2 companies. The Northern Railway Company was operating underconcession and a concession agreement was under preparation for the Southern Railway Company (Source: InternalBank document of August 2005).