Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-81900) ON A SERIES OF LOANS IN THE AMOUNT OF $21.

Transcription

1 Public Disclosure Authorized Document of The World Bank Report No: ICR Public Disclosure Authorized IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-81900) ON A SERIES OF LOANS IN THE AMOUNT OF $21.0 MILLION Public Disclosure Authorized TO THE REPUBLIC OF SEYCHELLES FOR SUSTAINABILITY AND COMPETITIVENESS DEVELOPMENT POLICY LOANS I-III May 26, 2017 Public Disclosure Authorized Global Practice for Macroeconomics & Fiscal Management (GMFDR) AFCS2 Country Management Unit Africa Region

2 CURRENCY EQUIVALENTS Exchange Rate Effective: May 18, 2017 Currency Unit = Seychellois Rupee (SCR) US$1 = SR13.49 SR1.00 = US$0.074 FISCAL YEAR JANUARY 1 DECEMBER 31 ABBREVIATIONS AND ACRONYMS AfDB ASP BAS CBS CoA CPS DBS DICT DPL EEZ EFF EITI EU FDI FY GDP GST GoS HFC IBRD IFC IFRS IMF IT M&E MIS African Development Bank Agency for Social Protection Business Activity Statement Central Bank of Seychelles Chart of Accounts Country Partnership Strategy Development Bank of Seychelles Department of Information and Communications Technology Development Policy Loan Exclusive Economic Zone Extended Fund Facility Extractive Industries Transparency Initiative European Union Foreign Direct Investment Fiscal year Gross Domestic Product Goods and Services Tax Government of Seychelles Housing Finance Company International Bank for Reconstruction and Development International Finance Corporation International Financial Reporting Standards International Monetary Fund Information technology Monitoring and evaluation Management Information System MoE Ministry of Education MOFTEP Ministry of Finance, Trade, and Economic Planning MoH Ministry of Health MSG Multi-Stakeholder Group OCR Office of the Company Registrar ORG Office of the Registrar General PEFA Public Expenditure and Financial Accountability PEMC Public Enterprise Monitoring Commission PEMD Public Enterprise Monitoring Department PER Public Expenditure Review PFM Public Financial Management PIM Public Investment Management PISA Program for International Student Assessment PPP Public Private Partnership PPBB Program Performance Based Budgeting PSIP Public Sector Investment Plan PUC Public Utilities Corporation RAS Reimbursable Advisory Service SADC Southern African Development Community SEYPEC Seychelles Petroleum Company SFA Seychelles Fishing Authority SLA Seychelles Licensing Authority SOE State Owned Enterprises SPF Seychelles Pension Fund ii

3 SCR SRC SSI STC SWA Seychellois Rupee Seychelles Revenue Commission Société Seychelloise d Investissement Seychelles Trading Company Social Welfare Assistance UNDP US$ VAT United Nations Development Program United States Dollar Value added tax Regional Vice President: Makhtar Diop Country Director: Mark Lundell Sr. Practice Director: Carlos Felipe Jaramillo Practice Manager: Ivailo Izvorski Project Team Leader: Alex Sienaert ICR Team Leader: Alex Sienaert iii

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5 SEYCHELLES SUSTAINABILITY AND COMPETITIVENESS DEVELOPMENT POLICY LOANS I-III IMPLEMENTATION COMPLETION AND RESULTS REPORT TABLE OF CONTENTS A. Basic Information... v B. Key Dates... v C. Ratings Summary... vi D. Sector and Theme Codes... vii E. Bank Staff... viii F. Results Framework Analysis... ix G. Ratings of Program Performance in ISRs... xii H. Restructuring (if any)... xii 1. Program Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Borrower Performance Lessons Learned (both operation-specific and of wide general application) Comments on Issues Raised by Borrower/Implementing Agencies/Partners 21 Annex 1: Bank Lending and Implementation Support/Supervision Processes Annex 2: Development Outcome Indicators Annex 3: Stakeholder Workshop Report and Results Annex 4: Summary of Borrower s ICR and/or Comments on Draft ICR Annex 5: Comments of Co-financiers and Other Partners/Stakeholders Annex 6: List of Supporting Documents iv

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7 A. Basic Information Program 1 Country Seychelles Program Name First Sustainability and Competitiveness DPL Program ID P Loan Number IBRD ICR Date 05/04/2016 ICR Type Core ICR Lending Instrument DPL Borrower Government of Seychelles Original Total Commitment USD 7.00M Disbursed Amount USD 7.00M Implementing Agencies Co-financiers and Other External Partners Program 2 Country Seychelles Program Name Second Sustainability and Competitiveness DPL Program ID P Loan Number IBRD-81900, IBRD ICR Date 05/04/2016 ICR Type Core ICR Lending Instrument DPL Borrower Government of Seychelles Original Total Commitment USD 7.00M Disbursed Amount USD 7.00M Implementing Agencies Co-financiers and Other External Partners Program 3 Country Seychelles Program Name Third Sustainability and Competitiveness DPL Program ID P Loan Number IBRD-81900, IBRD ICR Date 05/04/2016 ICR Type Core ICR Lending Instrument DPL Borrower Government of Seychelles Original Total Commitment USD 7.00M Disbursed Amount USD 7.00M Implementing Agencies Ministry of Finance, Trade and Economic Planning Co-financiers and Other External Partners B. Key Dates First Sustainability and Competitiveness DPL - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 05/16/2012 Effectiveness: Appraisal: 07/23/2012 Restructuring(s): Approval: 09/20/2012 Mid-term Review: Closing: 06/30/ /30/2013 v

8 Second Sustainability and Competitiveness DPL - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 02/19/2013 Effectiveness: Appraisal: 07/17/2013 Restructuring(s): Approval: 09/26/2013 Mid-term Review: Closing: 06/30/ /30/2014 Third Sustainability and Competitiveness DPL - P Process Date Process Original Date Revised / Actual Date(s) Concept Review: 01/08/2014 Effectiveness: 12/31/2014 Appraisal: 06/26/2014 Restructuring(s): Approval: 09/26/2014 Mid-term Review: Closing: 12/31/ /31/2015 C. Ratings Summary C.1 Performance Rating by ICR Overall Program Rating Outcomes Moderately Satisfactory Risk to Development Outcome Moderate Bank Performance Satisfactory Borrower Performance Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) First Sustainability and Competitiveness DPL (P125202) Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency: Satisfactory Overall Bank Overall Borrower Satisfactory Performance Performance Satisfactory Second Sustainability and Competitiveness DPL (P132425) Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency: Satisfactory Overall Bank Overall Borrower Satisfactory Performance Performance Satisfactory Third Sustainability and Competitiveness DPL (P146567) Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency: Satisfactory Overall Bank Performance Satisfactory Overall Borrower Performance Satisfactory vi

9 C.3 Quality at Entry and Implementation Performance Indicators First Sustainability and Competitiveness DPL (P125202) Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Program No Quality at Entry (QEA) None at any time (Yes/No): Problem Program at any Quality of Supervision No None time (Yes/No): (QSA) DO rating before Closing/Inactive status Second Sustainability and Competitiveness DPL (P132425) Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Program No Quality at Entry (QEA) None at any time (Yes/No): Problem Program at any Quality of Supervision No None time (Yes/No): (QSA) DO rating before Closing/Inactive status Third Sustainability and Competitiveness DPL (P146567) Implementation QAG Assessments (if Indicators Rating: Performance any) Potential Problem Program No Quality at Entry (QEA) None at any time (Yes/No): Problem Program at any Quality of Supervision No None time (Yes/No): (QSA) DO rating before Closing/Inactive status D. Sector and Theme Codes First Sustainability and Competitiveness DPL (P125202) Original Actual Sector Code (as % of total Bank financing) Other Public Administration Law and Justice Central Government (Central Agencies) Theme Code (as % of total Bank financing) Access to law and justice Other public sector governance Public expenditure, financial management and procurement Regulation and competition policy Social Safety Nets/Social Assistance & Social Care Services vii

10 Second Sustainability and Competitiveness DPL (P132425) Original Actual Sector Code (as % of total Bank financing) Animal production 9 9 Central Government (Central Agencies) Other social services Other Energy and Extractives Trade Theme Code (as % of total Bank financing) Macroeconomic management 9 9 Public expenditure, financial management and procurement Regulation and competition policy Social Safety Nets/Social Assistance & Social Care Services Third Sustainability and Competitiveness DPL (P146567) Original Actual Sector Code (as % of total Bank financing) Animal production Central Government (Central Agencies) Other social services Other Energy and Extractives Other Industry, Trade and Services Theme Code (as % of total Bank financing) Legal institutions for a market economy Other trade and integration Public expenditure, financial management and procurement Social Safety Nets/Social Assistance & Social Care Services e-government E. Bank Staff First Sustainability and Competitiveness DPL (P125202) Positions At ICR At Approval Vice President: Makhtar Diop Makhtar Diop Country Director: Mark R. Lundell Haleh Z. Bridi Practice Manager/Manager: Mark Roland Thomas John Panzer Task Team Leader: Sawkut Rojid Sawkut Rojid ICR Team Leader: Alexis Sienaert ICR Primary Author: Sati Achath viii

11 Second Sustainability and Competitiveness DPL (P132425) Positions At ICR At Approval Vice President: Makhtar Diop Makhtar Diop Country Director: Mark R. Lundell Haleh Z. Bridi Practice Manager/Manager: Mark Roland Thomas John Panzer Task Team Leader: Rafael Munoz Moreno Sawkut Rojid ICR Team Leader: Alexis Sienaert ICR Primary Author: Sati Achath Third Sustainability and Competitiveness DPL (P146567) Positions At ICR At Approval Vice President: Makhtar Diop Makhtar Diop Country Director: Mark R. Lundell Mark R. Lundell Practice Manager/Manager: Mark Roland Thomas Bernard G. Funck Task Team Leader: Alexis Sienaert Rafael Munoz Moreno ICR Team Leader: Alexis Sienaert ICR Primary Author: Sati Achath F. Results Framework Analysis Program Development Objectives (from Program Document) The objectives of the DPL program were to improve fiscal sustainability and enhance private sector competitiveness for the Republic of Seychelles through: (i) improvement of private sector business environment; (ii) improvement of transparency in key economic sectors; (iii) improvement of expenditure efficiency; (iv) improvement of targeting, automation and monitoring and evaluation in the social protection system; and (v) ensuring cost recovery and long-term financial sustainability of utilities. ix

12 PDO Indicator(s) 1 Sustainability and Competitiveness DPLs 1 to 3 Pillar 1: Enhance Competitiveness Indicator Baseline Value Original Target Values (from approval document) Actual Value Achieved at Completion or Target Years 1. Reduction in number of days required to register business. 39 days 3 days 32 days Date achieved December 31, 2015 December 31, 2016 Comments/Status: Not met. Source: World Bank Doing Business indicators 2017 (Jun-16 cut-off date, midway between target date (Dec-15) and completion date (Dec-16). 2. Increase in the percentage of businesses filing their taxes online Less than 1% More than 5% Increased to 3.7% in 2015 and 3.5% in 2016, compared to less than 1% in Date achieved December 31, 2015 December 31, 2016 Comments/Status: 3. Increase in the number of commercial cases resolved at the commercial court within 12 months as a share of all cases lodged. Substantially met (equivalent to 74% completion). This indicator (#2) was introduced during DPL 3. No case solved within 12 months by December % by December % 3 Date achieved December 31, 2016 Comments/Status: Partly met. Since the Commercial List was first introduced in April 2012, 188 commercial cases were filed from April 2012 to December As of December 2015, 97 cases were completed, with 91 cases pending (i.e. 52% completion). 4. Increase in the number of approved housing loans using the new subsidy policy / Date achieved December 31, 2015 December 31, 2016 Comments/Status: Exceeded. Original indicator removed: Increase in private sector participation in mortgage loan market. This previous indicator measured private sector participation in the mortgage market, which was not directly affected by the reforms supported by the DPL series. These reforms were focused on introducing a new subsidy housing policy and therefore a new indicator was needed to keep track of how this new policy translated into new loans. 5. More public disclosure of key information in the petroleum and fisheries sectors No comprehensive report exists. EITI report submitted to EITI Secretariat for evaluation (2015) and quarterly information bulletins prepared by the SFA and disclosed on its website (2015). Seychelles 2015 Annual Progress Report was submitted to EITI. SFA quarterly bulletins are not regularly posted on the website. 1 The assessment scale used to assess progress against the results indicators is as follows: Not met : <50% completion vs. target, Partly met : >50% but < 75%, Substantially met : approximately 75%+, Fully met : approximately 100%; Exceeded : >100%. 2 Source: Seychelles Revenue Commission 3 Source: Judiciary of Seychelles 4 Source: Housing Finance Company x

13 Date achieved December 31, 2016 Comments/Status: Partly met. Seychelles has been a member of the EITI since 2014 and in July 2016 submitted its 2015 Annual Progress Report, which is available on the EITI website. In fisheries, however, technical reports and tuna bulletins are not yet (as of May 2017) published regularly on the Seychelles Fishing Authority (SFA) website, and those reports which are publicly available are out of date. Pillar 2: Improve Fiscal Sustainability Indicator Baseline Target Achievement 1. Reduction in the difference between voted and executed budget 4.2% 2.5% 0.5% Date achieved December 31, 2015 December 31, 2015 Comments/Status: Exceeded. Actual total expenditures exceeded Budgeted expenditures by 0.5% in the 2015 fiscal year, according to data from the Ministry of Finance, Trade & Economic Planning. 2. Increase in the percentage of public enterprises that submit their audited financial statements to the Minister of Finance and to the PEMC by March % 60% 95% 5 Date achieved December 31, 2016 December 31, 2016 Comments/Status: Exceeded. Indicator (#2) was revised. Original indicator: Submission of the following four standard performance indicators to PEMD on an annual basis by each public enterprise: percentage increase in turnover; percentage increase in return on assets; percentage increase in Return on Capital Employed; percentage increase in profit after tax. To better enforce this deadline moving forward, the indicator of the DPO3 operation was changed, as the existing indicator did not capture well the on-going reforms at that time; it referred to the need to prepare four reports, but they were only required once every three years. The new indicator instead measured the proportion of Public Enterprises submitting their audited financial statements on time (before April 1), with the aim to increase this from 33% in 2011 to 60% in March 2016 (Source: AM, dated May 12 16, 2014). 3. Reduction in the share of ineligible beneficiaries of welfare assistance (the ineligible are those who are in the 4th and 5th quintiles - errors of inclusion) 33% (2012) 20% 12.6% Date achieved December 31, 2015 December 31, 2015 Comments/Status: Exceeded. Source: WB Seychelles SP Policy Note (2016). 4. Spending on reformed social assistance programs stabilizes. Total spending on disability (invalidity), sickness benefit, home carers program and social welfare assistance accounts for 1.1% of GDP in Total spending on disability (invalidity), sickness benefit, home carers and social welfare assistance programs accounts for 1.1% of GDP in Date achieved December 31, 2015 December 31, % 6 5 Source: PEMC. 6 Source: ASP (interview, and data provided). xi

14 Comments/Status: 5. Increase in contribution revenues to the Seychelles Pension Fund. Fully met (the increase as a percentage of GDP stabilized, edging up by a negligible 0.1ppt of GDP. This result could be sensitive to further GDP historical revisions, expected in 2017). This indicator (#4) was a newly added indicator. Before the reforms, Seychelles Pension Fund contribution revenues were expected to be 0.8% of GDP in Seychelles Pension Fund contribution revenues after the reforms are expected to be 1.1% of GDP in SPF revenue has increased to 1.8% of GDP in Date achieved December 31, 2015 December 31, 2015 Comments/Status: Exceeded. 6. Reduction in operating losses incurred by the Public Utility Company before subvention by SCR -123, the government (SCR) Date achieved December 31, 2016 December 31, 2016 Exceeded. PUC has been continuously profitable since G. Ratings of Program Performance in ISRs During implementation, monitoring was carried out and aide-memoires were prepared, which informed this ICRR. Ratings of Program performance in ISRs cannot be assessed, however, as no formal ISRs were prepared. Details about Program performance are provided below in section 5 (Assessment of Bank and Borrower Performance). H. Restructuring (if any) Not applicable. 7 Sources: PEMC (interview, and data provided). 8 Sources: PUC (interview, and data provided). xii

15 1. Program Context, Development Objectives and Design 1.1 Context at Appraisal Country Context 1. Seychelles is a small island state in the western Indian Ocean, with a high income economy, but significant inequality. It has an estimated population of about 95,000, almost of all of which live on three central islands out of a total of 115 tropical islands, with a total land area of under 500 km 2. The country has a large maritime territory, with an exclusive economic zone (EEZ) of almost 1.4 million km 2 in one of the world s major tuna fishing grounds. With a gross national income per capita of US$14,760 in 2015, it has been classified since that year as a High Income Economy (currently the only one in sub-saharan Africa). Tourism, and the fishing and seafood industries, are the pillars of the economy, with tourism generating over half of aggregate demand by some estimates, and canned tuna comprising the bulk of goods exports. Commensurate with its relatively high income level, Seychelles has achieved a high level of human development, as measured by the UN HDI (rank 63 rd /188). Poverty in Seychelles as defined for international comparison purposes is very low: 2.5% at the $3.1 per day (2011 PPP) line. Inequality, however, is significant (Gross Income Gini coefficient: 46.8). Seychelles is a multi-party democracy, and political competition has been increasing. 2. Seychelles historically had a state-led economy but has embarked on reforms to secure fiscal sustainability and expand the role of the private sector. Beginning shortly after independence in 1976, a high share of investment was channeled through state-owned enterprises, social spending rates were high, and public sector spending came to account for the bulk of GDP expenditures. This model proved unsustainable, culminating in an economic crisis and sovereign debt default in 2008, which led the country to embark on a path of macroeconomic and institutional reforms. This program was successful in stabilizing macroeconomic outcomes, and economic growth since 2010 has consistently been robust. Public sector governance has improved, measured by gains in government effectiveness and regulatory quality indicators. 3. Serious development challenges remain, however, some inherent to a small and remote island state. Limited land and human resources constrain institutional capacity, the domestic consumer market is small, and high input and international transport costs inhibit Seychelles ability to achieve economies of scale in production. The economy s vulnerability to external shocks is high given its exposure to European tourism markets (albeit diversifying in recent years), and heavy reliance on imports, including of food and fuel. In the social sectors, there is concern over youth issues including a high teen pregnancy rate and rising substance abuse, the relatively poor quality of education outcomes (particularly in science), and, in health, over rising non-communicable diseases. Seychelles is also exposed to climate change due to its location and island topography. 1

16 Macroeconomic situation 4. Seychelles gross national income per person had plunged during the economic crisis, by 20% from 2006 to By the time of appraisal of the first in the programmatic DPO series in 2012, income per person had recovered to its pre-crisis level, reflecting the success to date of macroeconomic stabilization measures and the broader reform program. The economy was also helped by buoyant conditions in the tourism sector, with arrivals continuing to grow throughout the programmatic series, including a 19% surge in GDP growth for 2012 was 3.7%, subsequently picking up to average 5.7% for Macroeconomic management was sound at appraisal and remained focused on stability, with the support of successive IMF programs (Standby Arrangements and Extended Fund Facilities), since late Policy was anchored on the monetary side by reserve money targeting by the Central Bank of Seychelles (CBS), and on the fiscal side by a target to reduce debt/gdp to 50% by 2018 (from about 83% of GDP at appraisal in 2012). Inflation pressures were significant around the time of appraisal, reaching an average annual rate of 7.1% in 2012, but then declined rapidly to average 4.3% in 2013, helped by tighter monetary policy. The introduction of a Value Added Tax (VAT) in the first quarter of 2013 and the rebalancing of utility tariffs in November 2013 caused a temporary rise in inflation. 6. Fiscal performance continued to be strong over the period of the programmatic series, supported by expenditure containment. Tax collection, at 32.4% of GDP, was lower than forecasted in the 2013 public budget (37.6% of GDP), with most tax categories underperforming in relation to budget projections. This was partially compensated for by better than projected non-tax revenues (4.5% of GDP), mostly dividends from parastatal bodies. As a result, the primary fiscal surplus for 2013 stood at a large 4.7% of GDP, on track to meet the target at that time of a 50% debt-to-gdp ratio in The government debt burden has subsequently continued to be consolidated, but it does still remain substantial at around 70% of GDP, limiting available fiscal space to cope with potential external shocks, as well as fiscal risks from the large state-owned enterprise sector. 2

17 TABLE 1: SEYCHELLES SELECTED MACROECONOMIC INDICATORS e Output GDP growth (annual %) GDP per capita (US$, Atlas method) 11,060 12,200 13,540 14,120 14,760 n/a Money and Prices Inflation, consumer prices (annual %) Domestic credit to the private sector (% of GDP) n/a Nominal exchange rate (local currency per USD) Fiscal Revenue (% of GDP) Expenditure (% of GDP) Overall fiscal balance (% of GDP) General government debt (% of GDP) External Accounts Current account balance (% of GDP) Foreign direct investment, net inflows (% of GDP) Source: World Bank; IMF Rationale for Bank Assistance 7. Although Seychelles had significantly shrunk the public sector as part of its 2008/9 economic crisis response, further measures were needed to strengthen the investment climate and harness private sector growth, and to secure the sustainability of the fiscal sector. Seychelles ranked only 103rd in the World Bank s Ease of Doing Business Index for 2012, reflecting a high regulatory burden and bottlenecks in infrastructure, notably energy, while investments to reduce telecommunication costs and increase bandwidth capacity were also considered a high priority to help create a better platform for business. To address inefficiencies, the still relatively large SOE sector required policy measures and institutional reforms, including improved utility management and oversight, greater cost recovery, and better asset management. 3

18 8. The Development Policy Loans (DPLs), a series of three annual programmatic Bank operations, were provided to Seychelles in support of the government s continuing reform program. The GOS was strongly committed to undertaking the necessary reform actions to promote sustained economic growth and modernize its economy. The DPL series was the principal instrument identified in the Bank s Country Partnership Strategy (CPS) for supporting the government s reform program, which envisaged three annual DPLs over , aligned with the budget cycle, which is the government s primary vehicle for introducing new policy initiatives. The DPL series took a pragmatic approach to support the policy agenda over a threeyear period in which realistic results could be defined and achieved. The approach was to focus on those reforms that could be completed in the medium term while building the necessary foundations for broader reform over the longer term. The overarching focus was to continue to support Seychelles efforts to raise the effectiveness and ensure the sustainability of public spending, notably social transfers, and investments by SOEs, while creating a better enabling environment for inclusive, private sector-led growth. 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) 9. The original PDOs were to: (i) Enhance Private Sector Competitiveness: This programmatic area supported broad regulatory reforms to enable private sector driven growth, and help remove impediments to business and investment to ensure transparency and accountability in key economic sectors. Areas supported in this program included: (i) improving the private sector business environment and (ii) improving transparency in key economic sectors. (ii) Improve Fiscal Sustainability: This area supported regulatory reform to improve fiscal sustainability through better planning, increased discipline, and an improved monitoring framework. Areas supported in this program included: (i) improving expenditure efficiency, targeting, automation, and monitoring and evaluation framework in the social protection system and (ii) ensuring cost recovery and long-term financial sustainability of utilities. 10. Key Results Indicators (original and revised) of the Program Document are: 1 Original Key Results Indicators Reduction in number of days required to register business Final Key Results Indicators (i.e. including revisions, if any, and new indicators) PILLAR 1: ENHANCE COMPETITIVENESS Reduction in number of days required to register a business [no change] 2 n.a. Increase in the percentage of businesses filing their taxes online [new indicator] 3 Commercial cases start to be resolved within 12 months 4 Increase in the number of commercial cases resolved at the commercial court within 12 months as a share of all cases lodged [minor

19 4 5 n.a. Significant increase in private sector participation in mortgage loan market Public disclosure of key information on government contracts and production data in the fisheries sector Public disclosure of key information in the petroleum sector revision] Increase in the number of approved housing loans using the new subsidy policy [revised] More public disclosure of key information in the petroleum and fisheries sectors [revised to combine the original indicator below] [Merged to form the final results indicator 5, above] 1 PILLAR 2: IMPROVE FISCAL SUSTAINABILITY Variance between overall budgeted amounts and executed budget is reduced Reduction in the difference between voted and executed budget [minor revision] 2 3 Submission of the standard performance indicators by public enterprises to the Public Enterprise Monitoring Division The share of non-qualified beneficiaries in the social welfare system is reduced Increase in the percentage of public enterprises that submit their audited financial statements (key information) to the Minister of Finance and to the PEMC by March 31 [revised] Reduction in the share of ineligible beneficiaries on welfare assistance [minor revision] 4 n.a. 5 n.a. Spending on reformed social assistance programs stabilizes [new indicator] Increase in contribution revenues to the Seychelles Pension Fund [new indicator] 6 Reduction in losses incurred by the Public Utility Company (PUC) Reduction in operating losses incurred by the Public Utility Company before govt. subvention [revised] 1.3 Revised PDO (as approved by original approving authority) and Key Indicators 11. The PDOs were not revised. 1.4 Original Policy Areas Supported by the Program (as approved) 12. The DPL program series supported the reform program under two core Policy Areas: (i) Enhancing private sector competitiveness: This programmatic series supported broad regulatory reforms to enable private sector driven growth. The reforms helped remove 5

20 impediments to business and investment and ensured transparency and accountability in key economic sectors. These reforms were needed to accelerate growth. Areas supported in this program, as identified in the Country Partnership Strategy FY12 15 and in the Business and Value Chain Non-Lending Technical Assistance included: (i) improving the private sector business environment and (ii) improving transparency in key economic sectors. (ii) Improving fiscal transparency: This programmatic series supported regulatory reform to improve fiscal sustainability through better planning, increased discipline, and an improved monitoring framework. This program provided support to: (i) improving expenditure efficiency, targeting, automation, and the monitoring and evaluation framework in the social protection system and (ii) ensuring cost recovery and the long-term financial sustainability of utilities. 1.5 Revised Policy Areas (if applicable): 13. The Policy Areas were not revised. 1.6 Other significant changes 14. No changes were made during implementation in the overall design and scope of the DPLs, but some changes were made to the results indicators, as shown in the table above, aiming to improve their relevance in measuring progress towards meeting the (unchanged) overall development objectives, based on agreed prior actions. 15. Chronologically, the first new indicator added was: increase in contribution revenues of Seychelles Pension Fund. This addition was made to capture the impact of the agreed increase in pension contribution rates, supporting fiscal sustainability. Then, under the Third DPL, two new indicators were added and one indicator was removed. The indicators added were: (i) increase in the percentage of business filing their taxes online, added to better monitor the impact of establishing e-payment of taxes; and (ii) spending on reformed social assistance programs stabilizes, capturing the impact of measures to improve consolidate these programs and improve their efficiency. 9 One indicator was removed: public disclosure of key information in the petroleum sector. The intent of this original indicator was preserved through the revision of the related sectoral transparency indicator (from referencing only fisheries sector transparency in the original version, to including also petroleum in the revised version i.e. the two indicators were effectively merged). 9 The social protection reforms supported by this lending series covered multiple programs in social assistance including disability, sickness, home carers and social welfare assistance programs. However, at the time, there was only one results indicator identified to measure impact on reforms of these programs. While it would be possible to measure the impact of reforms of the social welfare assistance, the main poverty targeted program, with this single indicator, it was considered difficult to measure progress and impact on reforms in the other areas of social assistance. On the basis of the discussions with the institutions, it was therefore agreed on an additional indicator to measure the impact on reforms on all programs. The new indicator took into account the total spending on social assistance programs being improved with support from the DPL series. 6

21 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance 16. The Sustainability and Competitiveness Loan consisted of three programmatic DPLs, which supported the government s medium term reform agenda to improve fiscal sustainability and private sector competitiveness. The first DPL was approved by the World Bank Executive Board on September 20, 2012 and closed on June 30, The second DPL was approved on September 26, 2013 and closed on June 30, 2014; while the third was approved on September 26, 2014 and closed on December 31, All required prior actions were completed prior to the operation s approval. Operation Approval Date Disbursed Amount (US$M) Closing Date DPL 1 Sept. 20, June 30, 2013 DPL 2 Sept. 26, June 30, 2014 DPL 3 Sept. 26, Dec. 31, Major Factors Affecting Implementation: 17. As the overall performance of the DPL program has been timely and adequate, the major factors affecting implementation have been positive and conducive to the continued success of the program and they are highlighted below: Strong government support. During the election of May 2011, the then President (Mr. James Michel) renewed Seychelles commitment to continuing the basic direction of structural reforms, consolidating the improvement in macroeconomic management, boosting productivity, and encouraging innovation, while giving special attention to the social sectors (particularly to improving health services and maintaining the continuity and sustainability of the housing program). The result was a DPL program that was driven by the government s own reform agenda. Soundness of background analysis underpinning the program. The analytical underpinnings for the reform program were provided through analytical work that shaped the government s reform agenda and included Public Expenditure Reviews; a strategy for Strengthening Budget Management; a Public Financial Management Performance report; a review of Administrative Barriers to Private Sector Development and Business Environment in the Seychelles; and a Review of the Policy Regulatory and Administrative Environment. Challenging external economic conditions called for accelerated reforms. During the DPL preparation period, the government had faced a challenging economic environment in light of uncertainties in global economic conditions, especially in Europe, given the predominant importance of European tourism in the Seychelles economy. This posed a threat to the fiscal position that remained vulnerable, with a public debt that was still high and the consolidation 7

22 path projected to remain sensitive to a range of potential shocks and adverse outcomes. This highlighted the need for measures that would substantially increase public sector efficiency, enhance private sector competitiveness, and improve social protection programs to help the poor and the vulnerable. Although this sense of urgency was appropriate, the Program implementation was not affected negatively as the anticipated risks posed by the external conditions did not, in the event, materialize. Coordination with development partners. Coordination with other partners was instrumental in the reform process. The sectors selected for the DPL series were identified based on continuous dialogue between the International Monetary Fund (IMF), the World Bank, the African Development Bank (AfDB), and other development partners, including with the participation of the government. The AfDB began a project in 2015 to support to the government in developing a Human Resource Strategy and a statistical capacity-building program, while the United Nations Development Program (UNDP) assisted in developing a capacity development plan. Regular meetings between the Bank, IMF, and European Union (EU) took place during the preparation of the DPL series to pool resources, particularly knowledge. The World Bank staff missions were also open to the participation of all development partners. Lessons learned from previous operations. The first two operations of this series (DPL 1 and 2), provided important lessons that informed the preparation of DPL 3. The previous two operations (prior to this series), however, offered only limited insights and lessons as they took place in a macroeconomic crisis context following the 2008 debt default, whereas this DPL series dealt with more long-term challenges. These lessons included the need to ensure: (i) a strong emphasis on knowledge and technical assistance to increase institutional capacity and support reform implementation; (ii) close coordination among development partners; and (iii) strong government leadership. Given the broad reform program and the limited capacity of the public sector in a few areas where knowledge and highly specialized skills were required, a combination of analytical work and technical assistance was considered critical. 18. Overall, implementation of this programmatic series benefited from a mix of continuing analytical work, donor coordination, and strong government ownership. The Bank produced analytical reports, often financed by the government (through reimbursable advisory services, RAS), to inform policy reforms, including on program-based budgeting, pension sustainability, and tariff reforms. In addition, technical assistance, also often financed by the government, supported the implementation of all reforms supported by this program. Also, donor coordination and the harmonization of policy dialogue and support provided to the government proved to be essential to prevent duplication and reduced the government s transaction costs. Finally, leadership and political commitment were critical factors in the successful implementation of reforms, complemented by strong institutional focus at the 8

23 Ministry of Finance, Trade, and Economic Planning (MOFTEP) 10 on designing and monitoring the implementation of the reform agenda 11/. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: Overall Rating: Substantial M&E Design: 19. The Results Framework presented in Annex 2 was used as a monitoring tool by both the Government of Seychelles and the Bank. The Program s M&E design called for the government and the Bank to review the progress of the DPL program twice a year. Aidememoires were produced by the Bank supervision teams, although no formal ISRs were prepared. MOFTEP was responsible for the overall coordination and monitoring of the reform program and furnished information to the Bank, as required, to monitor outcomes in the results framework. MOFTEP regularly liaised with the focal points in the other ministries, departments, and agencies involved as needed. Periodic monitoring and dialogue with the relevant line ministries and other stakeholders involved in implementing the reforms took place through Bank field missions. Thus, although the Bank has no country office in Seychelles, monitoring was done on a relatively continuous basis, and there was regular dialogue on the continuing progress towards the reforms supported by the programmatic sector. The indicators remained relevant to the PDOs, being slightly modified during implementation to better reflect progress of the reforms. M&E Implementation: 20. The M&E activities were carried out by the task team in partnership with the MOFTEP (implementing agency) based on the agreed activities and indicators. The implementing agency provided necessary information regarding disbursement and utilization of funds and provided regular and reliable documentation on progress regarding the reform program. Monitoring activities provided valuable means of tracking progress toward the key progress indicators and the PDOs. M&E Utilization: 21. Appropriate data collected by the government on the indicators were evaluated and used during supervision missions, and also to choose Prior Actions for subsequent DPLs. The information provided was also used in dialogue with the government for further shaping and improving public sector governance. 10 Throughout this document, the Ministry of Finance, Trade and Economic Planning (MOFTEP) is used to refer to the implementing core ministry, which was variously also the Ministry of Finance, Trade and Investment, and the Ministry of Finance, Trade and the Blue Economy, during implementation. 11 For a comprehensive evaluation of the World Bank s overall support to Seychelles efforts to improve competitiveness and support the private sector, including with this programmatic DPL series, see IEG, 2016, Cluster Country Program Evaluation on Small States, Seychelles Country Case Study (FY07 15): Enhancing Competitiveness and Private Sector Development. 9

24 2.4 Expected Next Phase/Follow-up Operation (if any): 22. The Bank is continuing to provide support in the domains covered under this program. The stand-alone Sustaining Reforms for Inclusive Growth DPL which was approved on October 23, 2015, is the deemed follow-up operation. The development objective of this DPL was to raise efficiency of public expenditure and improve the business environment. To achieve these objectives, this operation supported actions that would: (i) raise efficiency of public expenditure; (ii) facilitate access to credit; and (iii) improve public investment. In parallel, the Bank has continued to provide TA in critical areas to support implementation. 3 Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 23. The objectives of the program are clear and remain relevant to the Bank s engagement in Seychelles. The program has served as an integral part of the Bank s ongoing overall engagement in the public sector, which supports policy and institutional measures that are helping Seychelles sustain its reform momentum. The program complements other World Bank assistance that supports regional integration and private sector development, public sector efficiency, social protection, and the sustainable development of the fisheries sector. Through reimbursable advisory services, the Bank is providing technical assistance to support improvements in social protection legislation, implementation of Program Performance Based Budgeting (PPBB), and has delivered institutional development and training to reinforce public investment management. In terms of regional economic integration efforts, supporting trade and private sector development, the Bank is supporting Seychelles participation in the regional Accelerated Program for Economic Integration through a programmatic DPO series. As mentioned above, the DPL series was the principal instrument identified in the Bank s CPS for supporting the government s reform program, and was also fully aligned with the budget cycle which was the government s primary vehicle for introducing new policy initiatives. All triggers were converted into prior actions that were critical to achieving the PDO. 3.2 Achievement of Program Development Objectives Overall Achievement of Objectives Rating: Moderately satisfactory 24. The DPL series has contributed to the reform process in both the main pillars of reforms the business environment, and the fiscal sector. The business climate has been improved, with easier business registration procedures, and mediation rules in place. In the fiscal sector, the public financial management system has been improved with the introduction of performance budget systems. The main poverty-focused program (Social Welfare Assistance, SWA) and housing benefits are better targeted and pension calculations better reflect the entire work life. Fiscal oversight and control over public enterprises has been strengthened through the introduction of monitoring units and more stringent presentation of audited accounts. Combined 10

25 with increased utility tariffs, these measures are expected to help manage fiscal risks, although challenges remain. Furthermore, the government and the Bank adapted the program during implementation to balance institutional capacity constraints with the ambitious reform program of the government. Progress against the results indicators and the Bank s contribution during the DPL process is detailed below, and each of the two pillars is assigned a rating to guide the overall rating for the programmatic series. Pillar 1: Enhance Private Sector Competitiveness Rating: Moderately satisfactory 25. The private sector competitiveness reforms supported by the series are gauged to have had a substantial positive impact overall, meriting a moderately satisfactory rating. Overall, the business environment improved over the period of the program, as also assessed by recent IEG research 12. Following are the achievements realized for the agreed objectives against each result indicator: Improve private sector business environment: 26. Reduction in the number of days required to register a business (indicator not met): The government has introduced a number of legislative and administrative amendments to simplify the process of registering a business and obtaining a business license and work permit. The government has also established an operational online system for registration of companies. A virtual one-stop shop for registering a business was implemented and business processes were automated, resulting in faster and more effective processing of documents and of electronic data exchange between businesses and the Office of the Registrar General (ORG). The revisions to the 1972 Companies Act subsequently enabled the government to use the online one-stop shop, thus allowing all investors to interact with regulators online without being physically present. The revisions allowed a flat fee structure for various services associated with company registration, and eliminated the obligation for notaries or other third-party intermediaries to participate in the registration process. However, there was only a marginal improvement in reducing the overall number of days required to register a business compared to the baseline value of 39 days; by the end of the operation in December 2015, this number had reduced to 32 days, still a much higher number than the target of 3 days. The single most important remaining bottleneck appears to be the time required towards the end of the registration process to obtain a business license from the Licensing Authority (14 days on average). 28. Increase in the percentage of businesses filing their taxes online (indicator substantially met): The government has introduced electronic payment facilities for all taxes, increasing transparency and fairness of government processes, and ensuring more rapid delivery of services. The SRC has implemented e-filing for submission of returns on a monthly basis, because of which the number of VAT returns lodged online has substantially increased from the 12 IEG Working Paper, 2016, Cluster Country Program Evaluation on Small States: Seychelles Country Case Study (FY07-15), Enhancing Competitiveness and Private Sector Development. 11

26 time of its implementation in Data provided by the Seychelles Revenue Commission (SRC) show that the percentage of businesses filing taxes online has increased significantly to 3.7% in 2015 and 3.5% in 2016, compared to less than 1% in 2011, indicating substantial progress towards the target of more than 5%. 27. Increase in the number of commercial cases resolved at the commercial court within 12 months as a share of all cases lodged (indicator partly met): The government has established and started to operate a commercial division at the Supreme Court where the Supreme Court rules have been published in the government s official gazette. A trained and experienced judge has been nominated to head the commercial division of the Supreme Court and administrative staff posted in the commercial division of the Supreme Court to record the commercial cases and process them. Adequate budget has also been allocated to the commercial division of the Supreme Court. The government has submitted to its National Assembly a unified Insolvency Bill, which establishes a modern framework to save viable businesses and enable nonviable businesses to exit the market quickly. Since the Commercial List was first introduced in April 2012, 188 commercial cases have been filed. As of December 2015, 97 cases were completed, with 91 cases pending. The percentage of commercial cases resolved at the commercial court within 12 months as a share of cases lodged thus increased as of December 2015 to 52% against 85% targeted. 29. Increase in the number of approved housing loans using the new subsidy policy (indicator exceeded): The Recipient's Cabinet has approved a housing subsidy policy that better targets low-income households in need of assistance. The new subsidy housing policy has translated into 555 new loans, well beyond the target of 195. Improve transparency in key economic sectors 30. Public disclosure of key information in the petroleum sector (original indicator corresponding revised indicator, which includes fisheries transparency as discussed below, partly met): The government has adopted the Extractive Industries Transparency Initiative (EITI) principles to strengthen transparency in financial reporting in the petroleum sector. In March 2014, the government adopted a scoping report for the EITI Report, and a Road Map to ensure full EITI compliance, both prepared with Bank support. The Minister of Finance was appointed to lead EITI implementation and convened a Petroleum Multi- Stakeholder Group (MSG), including representatives of civil society and private companies to oversee the process. The MSG prepared a fully costed work plan with policy objectives, measurable targets, and a timetable for implementation. The government submitted the application for the Seychelles EITI candidacy in June Cabinet consideration of EITI policies to be adopted by law is imminent at the time of writing. 31. Public disclosure of key information in the fisheries sectors (original indicator corresponding revised indicator partly met): A list of Seychelles-flagged fishing vessels that was published in 2012 revealed the existence of 22 locally flagged vessels that were largely unknown outside the fisheries administration. The information on fishing agreements and fishing licenses in force during the previous 12 months are updated bi-annually on the Seychelles 12

27 Fishing Authority (SFA) website ( The Cabinet has also approved a policy to publicly disclose all future agreements and licenses that will be signed. The SFA is expected to launch a new user-friendly website in 2017, which would disseminate bulletins and all publications and statistical data related to fisheries. As a result, the government will be in a better position to analyze the fisheries value chain to identify ways to increasingly harness the sector s economic potential. Progress towards more transparency in the fisheries industry is also apparent through Seychelles commitment to supporting a global Fisheries Transparency Initiative, including readiness to pilot this initiative in the Seychelles. Tuna Bulletins are prepared every semester. However, the information published is not updated regularly or posted on the SFA website. For instance, the latest version of the bulletin has been produced, for the first semester of 2016, but is not yet available online, pending the planned upgrade of the SFA website. Overall, there has been progress but this results indicator regarding petroleum and fisheries sector transparency was only partly met. Pillar 2: Improve Fiscal Sustainability Rating: Highly satisfactory 32. The Program supported measures to maintain strong fiscal discipline necessary to achieve continued debt consolidation. Under Pillar 2, the programmatic series supported reforms to improve fiscal sustainability through better planning, increased fiscal discipline, and an improved budget-monitoring framework. Specifically, this program supported: (i) improving expenditure efficiency; (ii) improving targeting, automation, and the monitoring and evaluation (M&E) framework in the social protection system; and (iii) ensuring cost recovery and the longterm financial sustainability of utilities. Improving expenditure efficiency 33. Reduction in the difference between voted and executed budget (indicator exceeded): The government has improved accountability and predictability in the use of public funds and adopted a new Public Financial Management (PFM) Act that made provision for the introduction of Program Performance Based Budgeting (PPBB). The Program supported the government in introducing a new Chart of Accounts (CoA) that features a functional classification to facilitate fiscal reporting in compliance with the 2001 Government Finance Statistics Manual. The Program also supported the development of a policy framework that sets out the benefits of adopting PPBB and implementation guidelines for the PPBB, which describes key policy and institutional changes and the phased approach required to implement PPBB. The framework has served to inform and build consensus among sector ministries, which are now in the process of introducing PPBB. It was piloted at the Ministry of Education and the Ministry of Natural Resources (including the SFA) for the 2015 and 2016 budgets. PPBB was rolled out at MOFTEP, Ministry of Land Use & Housing, and the Ministry of Home Affairs in Between 2017 and 2019, PPBB will be rolled out at all ministries. The Program also helped the government adopt a revised financial instruction and accounting manual to further strengthen internal control policies and procedures as well as the accountability processes of ministries and 13

28 budget-dependent entities in line with the 2012 PFM Act. This imposes a more stringent budget implementation in line with the voted budget. After the implementation of these reforms, the difference between voted and executed expenditures as a whole diminished from 4.2% in 2011, to 0.5% in 2015, exceeding the 2.5% target set for the DPL series. 34. Increase in the percentage of public enterprises that submit their audited financial statements to the Minister of Finance and to the PEMC by March 31 (indicator exceeded): This DPL Program supported the requirement that public enterprises must present audited accounts to the PEMC. Each public enterprise is now required to submit an annual report on its operations to the Minister of Finance, the responsible Minister, and the PEMC, with a copy of its annual audited accounts and any report by the auditors on its management and accounting practices three months after year end. In 2015, 95% public enterprises (20 out of 21) had submitted their audited financial statements, exceeding the 60% target. Improve targeting, automation, and M&E framework in the social protection system 35. Reduction in the share of ineligible beneficiaries of welfare assistance (indicator exceeded): The Recipient s Cabinet has approved a policy memorandum to include mental health related disabilities into the Social Security Act. The Recipient s Agency for Social Protection Board has approved revised regulations regarding the certification process for disability and sickness benefits, including roles and responsibilities of the Medical Board. The revised regulations include: (a) written procedures for the Medical Board to guide assessments consistent with the WHO international classification of functioning; (b) tightened monitoring and control (including sanctions) of both medical doctors certifying sick leave as well as workers on sick leave; (c) any sick leave over three months should be required to be approved by the Medical Board. The Borrower s Cabinet has approved regulations limiting sick leave payments by the government to 15 days per person and per year. Overall, the share of ineligible beneficiaries of welfare assistance has been reduced from 33% to 12.6%, far exceeding 20% targeted. 36. Spending on reformed social assistance programs stabilizes (indicator fully met): With the help of the DPL Program, the government has strengthened targeting and monitoring of the social protection programs. The Program has helped develop the Agency for Social Protection (ASP) and the revision of the methodology for assessing applicants income to determine eligibility for benefits. To further improve the system for determining eligibility for social assistance, the Program provided support to the ASP to link its databases with those of five other relevant government agencies, to make it possible to perform automated crosschecks to verify beneficiaries claims about their circumstances. The Program has helped fund the introduction of a Review Panel to handle clients appeals against the ASP s decisions with clear guidelines to ensure objectivity and transparency. Further, regulations associated with the implementation of the Social Security Act were revised to include mental health conditions and injuries in the coverage of the social security disability benefits, as discussed above. Also, regulations regarding the certification process for disability and sickness benefits were revised to include a functional capacity assessment to encourage partially disabled workers to return to work and to improve monitoring. At the same time, the government has consolidated the Family Support 14

29 Program and Home Carers Program into one means-tested program with well-defined eligibility rules. With the support of this DPL Program, the government has reduced spending on sickness benefits. In 2015, regulations were adopted to limit the government contributions to sick leave payments and shift part of that cost to the employer. As a result, employees can now claim up to 15 days of sick leave per year, instead of 30 days. Overall, government spending on sickness benefit, home carers, and social welfare assistance programs accounts for 1.2% of GDP (2015), representing a stabilization of these expenditures relative to GDP (the 0.1 percentage point increase compared with the baseline of 1.1% of GDP is negligible). 37. Increase in contribution revenues to the Seychelles Pension Fund (indicator exceeded): To improve financial sustainability of the SPF, the government has increased the contribution rate by 1% from 3% to 4%, effective from The DPL Program supported instituting a benefit formula to improve the equity of the SPF. The benefit calculation strengthened the link between benefits and the contribution period as well as the amount of contributions paid. As a result, the SPF Regulations were amended to: (i) introduce an accrual rate through a benefit formula; (ii) gradually increase the averaging period taken into account in the calculation of pensions; and (iii) adjust past earnings by wage growth at the time of retirement. This will reduce the disincentives to contribute beyond the vesting period and to declare correct earnings, and improved equity of the SPF benefit calculation. SPF contribution revenues increased to 1.8% of GDP in 2015 against 1.1% targeted. Ensure cost recovery and long-term fiscal sustainability of utilities 38. Reduction in operating losses incurred by the Public Utility Company before subvention by government (indicator exceeded): To increase the financial viability of the Public Utilities Corporation (PUC), reduce the investment subsidies, and eliminate ad hoc tariff increases, the DPL Program supported the government in: (i) passing on to consumers at least 70% of future increases in the fuel prices and (ii) adopting quarterly automatic tariff adjustments to reflect changes in key variables like the exchange rate and fuel prices. The PUC s losses in 2012 decreased to SR 12.9 million compared to SR million (prior to government subsidies) in PUC has been continuously making profit since 2012 and in 2015 it erased all its past accumulated losses, helped by the dramatic reduction in global energy prices since mid Justification of Overall Outcome Rating Overall Rating: Moderately Satisfactory 39. Overall, the DPL program has delivered highly relevant reform progress in the areas undertaken. When the Program began, Seychelles faced the challenge of building on its successful macroeconomic policy stabilization efforts through making more far-reaching reforms to strengthen the role of the private sector, buttress state finances, and modernize the fiscal sector. Looking back, the DPL supported a wide range of private sector and fiscal reforms, and served as an incubator for other potential support. The continued impetus for reform was helped, and in turn reinforced, by the authorities success in maintaining a stable macroeconomic 15

30 environment, and by strong coordination amongst the government and development partners including the World Bank, IMF, AfDB, and the UNDP. 40. The overall rating of moderately satisfactory reflects, conservatively, the combination of a moderately satisfactory rating for pillar 1 and the highly satisfactory rating for pillar 2. Out of the five results indicators under Pillar 1, one was assessed to have been not met, two were partially met, one was substantially met, and one was exceeded. Out of the six indicators under Pillar 2, one was assessed to have been fully met while the remaining five were assessed to have exceeded their targets. As discussed above, progress towards the first pillar (enhancing competitiveness) was hence judged moderately satisfactory, while progress towards the second pillar (improving fiscal sustainability) was highly satisfactory. Across both pillars, the wide range of reforms supported had a mix of complexity and difficulty, and of return in generating shared prosperity. In some areas, slower than expected progress can be linked to capacity constraints and perhaps underestimation of implementation challenges (e.g. in ICT development and take-up of tax e-filing). In other areas, progress was as expected or exceeded expectations, including even in more politically complex areas at potential risk of reversals (e.g. in social protection, where progress was made on targeting; and in SOE governance, where progress was made on financial disclosure). 3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 41. Poverty Impact: The operation has likely had a favorable impact on poverty and social indicators, although it was not focused on making direct distributional impacts on the poor. The policy focus of the operation addressed poverty and inequality in the following ways: Approved housing subsidy policy that now targets low-income to middle income households in need of assistance. The new subsidy policy has resulted in an increase in the number of approved housing loans from zero in 2011 to 195 in 2015, and 555 in Approved policy to consolidate home carers and family support programs into one means tested program, with well-defined eligibility rules. Improved quality of key public services: raising the allocative and technical efficiency of public expenditure in human development would improve the services available to the poor, notably in health and education provision, an important channel in Seychelles given the free public provision of these services and high rates of access (but uneven quality). A stronger and more equitable pension system: reforms supported by DPL3 to better link contributions and pensions paid are expected to have a positive impact on equity, and a transition period is put in place to protect those close to retirement. The reforms promoted equity among SPF beneficiaries by ensuring that benefits are linked to the length of the contribution period as well as to the amount of contributions paid. 16

31 Contributions will be linked directly to benefits, and SPF pension benefits will continue to serve as an income replacement tool in retirement. The current non-contributory social pensions will complement the SPF benefits and help to protect retirees from falling into poverty. Smoothing of and compensation for needed utility tariff rises: the increase in utility tariffs supported in DPL3 has been accompanied by measures to shield the poor. The effect of the tariff increase on the poverty and vulnerability of households is expected to be moderate, mainly because it is being phased in gradually from now until The government has decided that households will be compensated for the tariff increase through the Social Welfare Assistance Program. Better targeted social protection: improved targeting of social protection services supported under this operation will also improve the identification of vulnerable households and protect them from additional tariff increases in the future. 42. Gender Aspects: There were no gender aspects in the DPLs. 43. Social Development: Easier access to buy houses because of the availability of housing loans, targeted at the less affluent, from HFC would contribute in improving living conditions. In particular, the cash grant subsidy has helped low to middle income families to complete house construction and meet mortgage costs. The operation considered all aspects of elderly care with the objective of reducing poverty in this demographic, as well as improving their quality of life. For instance, the DPL created a base to professionalize the home carers program to deliver better homebased care of elderly people. About 10% of Seychellois are estimated currently to be aged 65 and above, a share that is projected to climb to double to about 20% by 2030 (UN World Population Prospects). (b) Institutional Change/Strengthening: The operation has improved the targeting of assistance to poor and vulnerable people. For instance, it supported the implementation of a robust, automated management information system (MIS) to determine eligibility for benefits, thereby reducing management s discretionary power over the determination of eligibility. It is estimated by the ASP that this reform will increase the share of beneficiaries in the poorest quintile from 56% to 64%, while the number of beneficiaries in other quintiles will fall commensurately Third DPL Program Document, Page 27, paragraph

32 Because of the adoption of good governance practices, transparency and accountability have been strengthened on the part of SOEs in Seychelles. For instance, in terms of reporting, most of the SOEs have switched to International Financial Reporting Standards (IFRS) and are fully complying with IFRS. Further, unlike in the past, SOEs are now required to submit audited financial statements, and the data from SOE sector is included in the Treasury s annual financial statements. The financial performance of SOEs is also tabled in the budget presented to parliament. The MOFTEP, line ministries, and other institutions in the country benefited from the capacity-building programs and technical assistance on various fronts provided by the Bank, AfDB, IMF, and the UNDP. The Bank provided technical assistance to build institutional capacity in areas supported by this DPL series through reimbursable technical assistance, in addition to the Bank s analytical work program. Dialogue under the DPL itself was another way to build bridges between the different ministries involved in the reform program and enhance coordination. The operation was instrumental in strengthening cooperation and coordination of the CBS with other institutions including the Attorney General s Office, Office of Registrar General (ORG), Department of ICT (DICT), and Seychelles Licensing Authority (SLA). The benefit of guidance, expertise, and advice from the Bank in connection with the operation has contributed to strengthening the capacity of various institutions including, CBS and ORG, as well as MOFTEP and other line ministries. (c) Other Unintended Outcomes and Impacts (positive and negative): None 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops NA 4. Assessment of Risk to Development Outcome Rating: Moderate 44. While recognizing the major economic management and institutional reform progress already achieved, the continuing risk to development outcomes supported by the DPO series is moderate. The government has shown strong leadership in pursuing the reform agenda, and the country has already achieved substantial results from the three operations, which has reduced the risk of political and social resistance to more reforms. However, while there appears to be a wide consensus on the need for continued reforms, rising political competition may make it more challenging to move forward in potentially sensitive areas. In addition, there is a limited institutional capacity within sector ministries and agencies, potentially slowing continued policy reform and implementation progress. Overall, Seychelles remains a country in 18

33 complex transition from having had an over-extended state sector, and remains exposed to economic shocks. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: First Sustainability and Competitiveness DPL: Satisfactory Second Sustainability and Competitiveness DPL: Satisfactory Third Sustainability and Competitiveness DPL: Satisfactory 45. The Bank worked closely with the government to identify reforms and to follow-up on the progress. The quality at entry was ensured by a strong program of support outside of the DPL to help facilitate technical assistance and guidance in the trigger selection and execution. As a result, all triggers were converted into prior actions with fewer changes than normally associated with programmatic DPLs. This demonstrated the strategic relevance and the buy-in of government commitment. The DPLs were also prepared in close collaboration with the AfDB, UNDP, IMF, and the EU. This provided a harmonized approach to policy-based lending and also reduced the government s transactional costs. (b) Quality of Supervision Rating: First Sustainability and Competitiveness DPL: Satisfactory Second Sustainability and Competitiveness DPL: Satisfactory Third Sustainability and Competitiveness DPL: Satisfactory 46. During implementation, the Bank's performance was satisfactory. The Bank focused on the program s development impact and allocated sufficient budget and staff resources to carry out adequate supervision by closely monitoring program activities. Aide-Memoires were prepared to alert the government on issues found during implementation and prompt corrective actions were taken when necessary. The Bank deepened policy dialogue with the institutions involved in the implementation of reform program, and ensured the availability of staff and specialists to advise the government on all policy and technical areas involved. The task team closely monitored the program s progress and worked effectively with the Country Management Unit for dialogue with the government. The IMF also participated in the Bank s relevant review meetings. (c) Justification of Rating for Overall Bank Performance: Rating: First Sustainability and Competitiveness DPL: Satisfactory Second Sustainability and Competitiveness DPL: Satisfactory 19

34 Third Sustainability and Competitiveness DPL: Satisfactory 47. With a Satisfactory rating for quality at entry, and a Satisfactory rating for quality of supervision, the overall Bank performance is rated as Satisfactory in accordance with IEG s harmonized rating criteria. 6 Borrower Performance Rating: First Sustainability and Competitiveness DPL: Satisfactory Second Sustainability and Competitiveness DPL: Satisfactory Third Sustainability and Competitiveness DPL: Satisfactory 48. The Government s commitment to and ownership of the program was adequate and satisfactory. As the implementing agency, MOFTEP with adequate support from the President s office, took full ownership of the program development and implementation and worked closely with the Bank team in the design and implementation of this program. MOFTEP also took responsibility for the overall supervision and monitoring of the program and furnished relevant documents to the Bank to validate the program s progress. The critical overall support, provided by the President s office, helped MOFTEP in proper coordination and communication across ministries in program development and implementation. The Borrower s commitment and ownership of the program during preparation and implementation was adequate and their commitment was evident in their successful implementation of the prior actions and interest in implementation of the program. X Click here if the Government and the Implementation Agency is the same or indistinguishable 7. Lessons Learned (both operation-specific and of wide general application) 49. The following lessons were learned from the development and implementation of this Program: In a country such as Seychelles where various institutions are in different stages of automation, the implementation of Information Technology (IT) systems is very challenging. Many small business owners are not equipped to deal with e-payment systems. Connectivity can be a challenge (ICT infrastructure has developed but gaps remain), and broadband internet access is not universal (the penetration rate for businesses is not known). In light of these factors, Seychelles would need more support for strengthening automation and e-services including e-payments and e-filings. Clarity of instructions is necessary for IT systems. Clients such as SRC, CBS, and ORG should provide clear and specific instructions on the actions to be taken by DICT, so that IT system can be developed without unnecessary delays. Further, sufficient manpower 20

35 resources including programmers should be allocated upfront so that implementation can progress according to schedule. Also, reports, assessments, and recommendations from independent evaluators, especially ICT consultants, should be considered seriously, as they are valuable tools for strengthening institutions in a country such as Seychelles with limited human resources. Legal disputes can at times be resolved faster through mediation. Adequate publicity should be given through various campaigns so that more people could seek this facility for finding solutions to their legal disputes. Further, mediation as a mode of resolving legal disputes could be included as part of the curriculum for legal studies in universities. Sectoral development policy operations can be quickly mobilized and achieve good results in the context of strong reform momentum. The Bank has the ability to respond quickly to provide budget support when facilitated by strong government ownership of a reform agenda. The government had a deep commitment to a sector-specific reform agenda, which formed a ready foundation for the Program when the country needed budget support. The Bank s engagement provided momentum in the right direction, and assistance with appropriate sequencing and implementation, at a time when the reform agenda could have gone off-track due to multiple challenges then facing the government. In brief, the experience of the series reinforces that sectoral DPLs are successful if there is a coherent narrative and other supportive operations that allow for an integrative approach to problem solving. Close coordination and engagement using the range of Bank instruments and with other development partners is useful. The coordination of reform support with analytical work and technical assistance (through reimbursable or trust-funded advisory services) is critical, given the limited capacity of the public sector in areas where knowledge and highly specialized skills are required. Limited capacity. Since the capacity of line ministries is limited, it is important to be realistic about the number of projects and policy interventions that can be done/implemented in small countries. As a result, cross-sectoral DPLs such as this series can work well to support reforms in small countries. 8. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) (b) (c) Borrower/Implementing Agencies: N/A Co-financiers: N/A Other partners and stakeholders (e.g. NGOs/private sector/civil society): 21

36 N/A Annex 1: Bank Lending and Implementation Support/Supervision Processes (a) Task Team members P First Sustainability and Competitiveness DPL Name Sawkut Rojid (TTL) Aleksandra Posarac William David Wiseman Patrick Kabuya Economist Lead Economist Senior Economist Senior FM Specialist Title Netsanet Walelign Workie Mark Charles Dorfman Lucian Bucur Pop Xavier F. P. Vincent Jingjie Chu Richard Alan Cunningham Helene Bertaud Antonia Preciosa Menezes Noreen Beg Simon Walley Khurshid Noorwalla Rita Obioma Itoro-Godfrey Najibullah Motahedy Alain D Hoore Senior Economist (Health) Senior Economist Senior Economist Senior Fisheries Specialist Senior Environmental Economist Senior Gas Specialist Senior Counsel Senior Financial Sector Specialist Senior Environment Specialist Senior Housing Finance Spec. Team Assistant Program Assistant Team Assistant Lead Economist 22

37 P Second Sustainability and Competitiveness DPL Name Title Sawkut Rojid (TTL) Patrick Kabuya Aleksandra Posarac Alain D Hoore William David Wiseman Mark Charles Dorfman Melis Guven Xavier F. P. Vincent Richard Alan Cunningham Netsanet Walelign Workie Helene Bertaud Antonia Preciosa Menezes Dobromir Christow Noreen Beg Silvia Martinez Romero Shahrzad Mobasher Fard Khurshid Noorwalla Rita Obioma Itoro-Godfrey Najibullah Motahedy Linda Sing Keith Whitelaw Richard Schlirf David Burdette Tobias Roy Economist Senior FM Specialist Lead Economist Lead Economist Senior Economist Senior Economist Sr. Social Protection Economist Senior Fisheries Specialist Senior Gas Specialist Senior Economist (Health) Senior Counsel Private Sector Dev. Specialist Operations Officer Senior Environment Specialist Sr. Renewable Energy Specialist Research Analyst Team Assistant Program Assistant Team Assistant Consultant Consultant Consultant Consultant Acting Mission Chief, IMF 23

38 Alex Culuic Christine Richaud Economist, IMF Lead Economist P Third Sustainability and Competitiveness DPL Name Title Rafael Muñoz Moreno (TTL) Sawkut Rojid Patrick Kabuya Melis Guven Sergiy Biletsky Xavier Vincent Helene Bertaud Hooman Farnejad Antonia Preciosa Menezes Madeleine Chungkong Khurshid Noorwalla Mariella Beugue Richard Schlirf Denis Nitikin Hilda Harnack David Burdette Bernard Funck Julio Revilla Souleymane Coulibaly Francisco Galrao Carneiro Senior Economist Economist Senior FM Specialist Sr. Soc. Protection Economist Social Protection Specialist Senior Fisheries Specialist Senior Counsel Senior Gas Specialist Sr. Private Sector Dev. Spec. Senior Program Assistant Program Assistant Program Assistant Consultant Consultant Consultant Consultant Practice Manager Lead Economist/Sector Leader Senior Economist Lead Economist 24

39 (b) Staff Time and Cost (from SAP) (the system pulls data available for all fields) Staff Time/Cost Stage (Bank Budget Only) No. of staff weeks USD ( 000) (including travel and consultant) P First Sustainability and Competitiveness DPL Lending FY Supervision FY Total: P Second Sustainability and Competitiveness DPL Lending FY Total: P Third Sustainability and Competitiveness DPL Lending FY Total:

40 Annex 2: Development Outcome Indicators Key Results Indicators, as listed in Annex 1 of the Program Document, are: Indicator Pillar 1: Enhance Competitiveness Baseline (Dec. 2011) Target (Dec. 2015) Achievement/Status 1. Reduction in # of days required to register business. 39 days 3 days 39 days 2. Increase in the percentage of businesses filing their taxes online (new indicator added). Less than 1% More than 5% Increased to 3.7% in 2015 and 3.5% in 2016, compared to less than one% in Number of commercial cases resolved at the commercial court within 12 months as a share of cases lodged increases. No case solved within 12 months 85% Since the Commercial List was first introduced in April 2012, 188 commercial cases had been filed from April 2012 to December As of December 2015, 97 cases had been completed, with 91 cases pending. 4. Increase in the number of approved housing loans using the new subsidy policy More public disclosure of key information in the petroleum and fisheries sectors No report EITI report submitted to EITI Secretariat for evaluation and quarterly information bulletins prepared by the SFA and disclosed on Fishing Authority website. Seychelles 2015 Annual Progress Report was submitted to EITI. SFA quarterly bulletins are not regularly posted on the website. 26

41 Pillar 2: Improve Fiscal Sustainability Indicator Baseline (Dec. 2011) Target (2015) Achievement/Status 1. Reduction in the difference between voted and executed budget. 2. Increase in the percentage of public enterprises that submit their audited financial statements to the Min. of Finance and to PEMC by March Reduction in the share of ineligible beneficiaries of welfare assistance (the ineligible are those who are in the 3rd, 4th, and 5th quintiles) i.e., errors of inclusion. 4.2% 2.5% 0.5% 33% 60% 95% 33% 20% 12.6% 4. Spending on reformed social assistance programs stabilizes. Spending on disability, sickness benefit, home carers program & social welfare assistance accounts for 1.1% of GDP Spending on disability, sickness benefit, home carers and social welfare assistance programs accounts for 1.1% of GDP 1.2% 5. Increase in contribution revenues to the Seychelles Pension Fund. SPF contribution revenues were expected to be 0.8% of GDP SPF contribution revenues after the reforms are expected to be 1.1% of GDP SPF revenue increased to 1.8% of GDP in Reduction in operating losses incurred by the Public Utility Company before subvention by government SR 123,511 Target: SR0 PUC has been continuously making profit since 2012 and in 2015 it erased all its past accumulated losses. 27

42 Annex 3: Stakeholder Workshop Report and Results NA

43 Annex 4: Summary of Borrower s ICR and/or Comments on Draft ICR The Principal Secretary, Economic Planning, at the Ministry of Finance, Trade and Economic Planning, reviewed the draft ICR and provided a number of editorial suggestions, corrections and clarifications, which were incorporated in this report. The from the borrower and attached draft with marked-up comments are included as a supporting document to this report. 29

44 Annex 5: Comments of Co-financiers and Other Partners/Stakeholders NA 30

45 Annex 6: List of Supporting Documents 1. Program Documents: Report No SC (August 2012) Report No SC (August 2013) Report No SC (August 2014) 2. Letter of Development Policy (July 2013) 3. Preparation and supervision mission documents: Scoping mission Aide Memoire (December 2011) Identification mission Aide Memoire (March 2012) Pre-ROC mission Aide Memoire (May 2014) Supervision mission Back to Office Report (August 2014) Staff visit summary to Finance Minister, including comments on DPL-3 progress (August 2015) 4. Borrower s comments on draft ICR 31

46 MAP 32