Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT ON A CREDIT (IDA IDA-3815A)

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT ON A CREDIT (IDA IDA-3815A) IN THE AMOUNT OF SDR87.1 MILLION (USD120 MILLION EQUIVALENT) AND A GRANT (IDA-H366) IN THE AMOUNT OF SDR37.5 MILLION (USD60 MILLION EQUIVALENT) TO THE DEMOCRATIC REPUBLIC OF CONGO FOR A Report No: ICR3320 PRIVATE SECTOR DEVELOPMENT AND COMPETITIVENESS PROJECT (P071144) Trade and Competiveness Global Practice AFCC2 Africa Region December 31, 2014

2 CURRENCY EQUIVALENTS (Exchange Rate Effective October 31, 2014) Currency Units US$ 1 = CDF FISCAL YEAR July 1 June 30 ABBREVIATIONS AND ACRONYMS AFRITAC African Regional Technical Assistance Center ANAPI National Agency for Investment Promotion (Agence Nationale de Promotion des Investissements) ATI African Trade Insurance Agency BCA African Continental Bank (Banque Continentale Africaine) BCC Congo Central Bank (Banque Centrale du Congo) BCCE Congolese Bank for External Trade (Banque Congolaise du Commerce Extérieur) BCECO Central Coordination Office (Bureau Central de Coordination) CAS Country Assistance Strategy COPIREP Steering Committee for Public Enterprise Reform (Comité de Pilotage de la Réforme des Entreprises Publiques) CPCAI Steering Committee for Improving the Investment and Business Climate (Comité de Pilotage pour l Amélioration du Climat des Affaires et d Investissements) DRC Democratic Republic of Congo FDI Foreign Direct Investment FPM Microfinance Promotion Fund (Fonds pour la Promotion de la Microfinance) GDP Gross Domestic Product GECAMINES Quarries and Mines Company (Générale des Carrières et des Mines) HIPC Highly Indebted Poor Countries ICR Implementation Completion and Results Report IDA International Development Association IMF International Monetary Fund INSS National Institute for Social Security (Institut National de Sécurité Sociale) IP Inspection Panel ISR Implementation Status and Results Report KfW German Credit Agency for Reconstruction (Kreditanstalt für Wiederaufbau) LAC Congo Airlines (Lignes Aériennes du Congo) ii

3 MAP M&E NBK NPS OCPT OHADA ONATRA PAD PDO REGIDESO ROA RVA SCPT SCTP SEZ SME SNCC SNEL SOE UNCDF UNDP USAID USD Management Action Plan Monitoring and Evaluation New Bank of Kinshasa (Nouvelle Banque de Kinshasa) National Payments System Congolese Post and Telecommunications Office (Office Congolais pour la Poste et les Télécommunications) Organization for Harmonization of Business Law in Africa (Organisation pour l Harmonisation en Afrique du Droit des Affaires) National Transportation Company (Office National des Transports) Project Appraisal Document Project Development Objective Water Utility (Régie des Eaux) Return on Assets State Air Transportation Company (Régie des Voies Aériennes) Commercial Company for Posts and Telecommunications (Société Commerciale de la Poste et des Télécommunications) Commercial Company for Transport and Ports (Société Commerciale des Transports et des Ports) Special Economic Zone Small and Medium Enterprise Congolese National Railway Company (Société Nationale des Chemins de Fer du Congo National Electricity Company (Société Nationale d Electricité) State-Owned Enterprise United Nations Capital Development Fund United Nations Development Program United States Agency for International Development United States Dollar Senior Global Practice Director Anabel Gonzalez Acting Global Practice Manager John F. Speakman Project Team Leader Steven Dimitriyev ICR Team Leader Jeremy Robert Strauss iii

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5 Democratic Republic of Congo Private Sector Development and Competitiveness Project (P071144) CONTENTS ABBREVIATIONS AND ACRONYMS... ii A. Basic Information... v B. Key Dates... v C. Ratings Summary... v D. Sector and Theme Codes... vi E. Bank Staff... vi F. Results Framework Analysis... vi G. Ratings of Project Performance in Implementation Status and Results Reports (ISR)... x H. Restructuring (if any)... x I. Disbursement Profile... xi 1. Project Context, Development Objectives, and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Recipient/Implementing Agencies/Partners Annex 1: Project Costs and Financing Annex 2: Outputs by Component Annex 3: Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5: Summary of Borrower s ICR Annex 6. Summary of Inspection Panel Case Annex 7. List of Supporting Documents iv

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7 A. Basic Information Country: Democratic Private Sector Development Project Name: Republic of Congo and Competitiveness Project Project ID: P L/C/TF Number(s): IDA-38150; IDA-3815A;IDA- H3660 ICR Date: December 31, 2014 ICR Type: Core ICR Lending Instrument: SIL Recipient: Government of the Democratic Republic of Congo Original Total Commitment: XDR 87.18M Disbursed Amount: XDR M Revised Amount: XDR M Environmental Category: B Implementing Agency: Comité de Pilotage de la Réforme des Entreprises Publiques (COPIREP) Co-financiers and Other External Partners: 1) KfW; 2) UNDP; 3) IMF; 4) AFRITAC; 5) IFC B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 10/Jan/2002 Effectiveness: 02/Dec/ /Dec/2003 Appraisal: 04/Apr/2003 Restructuring(s): 22/Apr/2008; 19/Dec/2012; 27/Jun/2013 Approval: 29/Jul/2003 Mid-term Review: 30/Jun/ /Jun/2007 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Closing: 31/Mar/ /Jun/2014 Moderately Satisfactory Moderate Moderately Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory Overall Bank Performance: Moderately Satisfactory Overall Borrower Performance: Moderately Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation Performance Indicators QAG Assessments (if any) Rating Potential Problem Project at any time (Yes/No): Yes Quality at Entry: None Problem Project at any time (Yes/No): Yes Quality of Supervision: None PDO rating before Closing/Inactive status Moderately Satisfactory v

8 D. Sector and Theme Codes Sector Code (as % of total Bank financing) Original Actual General Transportation (TZ) General Public Administration (BZ) Banking (FA) Hydropower (LH) 8 8 Water Supply (WC) 7 7 Theme Code (Primary/Secondary) SOE Restructuring and Privatization (43) Infrastructure Services for PSD (39) Regulation and Competition Policy (98) Other Public Sector Governance (30) 5 5 E. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Callisto E. Madavo Acting Country Director: Jan Walliser Emmanuel Mbi Acting Global Practice Manager: John F. Speakman Demba Ba Project Team Leader: Steven Dimitriyev Ivan Rossignol ICR Team Leader: ICR Primary Author: F. Results Framework Analysis Jeremy Robert Strauss Eustacius Betubiza Project Development Objectives (from the PAD) The project's development objective is to increase the competitiveness of the economy, and thereby contribute to economic growth. The project will achieve these objectives by assisting with improving the investment climate; by supporting reform of public enterprises in the mining, telecoms, financial, transport, and energy sectors; by stimulating economic diversification and development in the Katanga region through community-driven development approaches and by facilitating the reintegration of retrenched workers in the local economy through support for training, business development services and finance. Revised Project Development Objectives (as approved by original approving authority) No revisions to the PDO throughout the project s implementation. vi

9 (a) PDO Indicators Indicator (1): ` Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Annual Foreign Direct Investment (FDI) in the mining, transport, energy, telecomm, and financial sectors reaches US$1 billion per year by 2009 (from US$200 million in 2002) Value: $200 million $1 billion $3.3 billion Date: 31-Dec Dec Dec-2012 Comments: FDI data varies across sources (the Central Bank, the National Investment Promotion Agency). However, all data sources point to strong FDI growth over the past 6 years, especially in services and industry sectors. Indicator (2): Return on Assets for each of the targeted state-owned enterprises (National Electricity Company SNEL; National Railways Company SNCC; National Airports Agency RVA; Congolese Post and Telecommunications Company OCPT (renamed SCPT); City Bus Company City Train; Quarries and Mines Company -- GECAMINES; Congolese Airlines LAC) increases from the average of -21 percent to an average of +2 percent by the end of project implementation Value: -21% 2% -3.1% Date: 31-Dec Dec Dec-2012 Comments: Data for 2013 was not available at time of ICR. There was a gain of 18 percentage points, although not enough to bring the target SOE s to profitability, except SNEL which turned a (small) profit 0.88 percent. Indicator (3): Net fiscal contribution from state-owned enterprises increased by $10 million annually Value: 0 US$ 10 million US$300 Date: 31-Dec Dec Dec-2012 Comments: Data for2013 was not available at time of ICR. This data needs careful interpretation. Fiscal contribution largely came from one source, GECAMINES (84%), and mostly from sign up bonuses, export fees, and other fees, since GECAMINES (just as most other SOEs) is not yet profitable to pay dividends or profit taxes to the State. Indicator (4): Total domestic credit to private sector is increased to 4.8 percent of GDP by 2011 Value: 2.8% 4.8% 18.1% Date: 31-Dec Dec Dec-2012 Comments: This was added during the Additional Financing in Data for2013 was not available at time of ICR. By December 2011, this indicator stood at 13.3%. Indicator (5): Total savings in financial sector is increased to 10.4 percent of GDP by 2011 Value: 6.1% 10.4% 33.9% Date: 31-Dec Dec Dec-2012 Comments: This was added during the Additional Financing in Data for2013 was not available at time of ICR. M3 has been used as a proxy for this indicator. By December 2011, total savings had already reached 26.8%. vii

10 (b) Intermediate Outcome Indicators Indicator Baseline Value Original Target Values (from approval documents) Indicator: Formally Revised Target Values Actual Value Achieved at Completion or Target Years Laws entered into Congolese Gazette slightly modified in 2008 to Legal Gazette published regularly and available on online Value: N/A N/A Done Date: N/A 31-Dec Jun-2014 Comments: Legal texts are posted regularly. So far, over 3,000 legal texts are available on line, as well as 10 pieces of legal literature, and 87 Supreme Court of Justice judgments. DRC is connected to the Global Legal Information Network. Indicator: Average length of time to register a company falls from3 years to 3months by midterm review slightly revised in 2008 to Number of days to create a company reduced by 50% between 2006 and 2011 (Doing Business) Value: Date: 31-Dec Dec June-2014 Comments: Recent progress has not been fully reflected in Doing Business reports. For instance, a survey by CPCAI showed that 84% of respondents did indeed complete the process in 3 days at the Single-Stop-Windows (Guichet Unique), the Government target. Indicator: By end 2010, the commercial courts of Kinshasa and Lubumbashi render an average of 50 judgements per year, and the commercial courts established under the Project are fully operational Value: Date: 31-Dec Dec June-2012 Comments: This was added during the Additional Financing in The commercial courts in the two cities are fully operational. Commercial courts have also been set up in Matadi, Mbuji-Mayi and Kisangani and operational. Indicator:: An OHADA commission has been established no later than 6 months from the date DRC joins OHADA and is fully operational within a year from such date Value: N/A Expected Yes Date: 31-Dec Mar Jun-2014 Comments: This was added during the Additional Financing in The OHADA National Commission was established by Decree No. 010/13 on 23 March The project supported the rehabilitation and furnishing of the commission s premises, as well as technical assistance for the commission. Indicator:: By the end of the Project, 500 magistrates have received training in OHADA laws Value: Date: 31-Dec Dec Jun-2014 Comments: This was added during the Additional Financing in In addition, 350 judicial officials and staff were trained, plus 10 trainers of trainers to continue the training. In addition, 450 Congolese lawyers and economists were trained. Indicator: By the end of the Project, an OHADA training curriculum has been established in 3 universities within DRC Value: None 3 N/A* Date: 31-Dec Jun-2014 Comments: This was added during the Additional Financing in The project did not monitor the curricula established. However, 50 university professors across several universities were trained and materials were provided to their universities. The expectation was that the viii

11 professors would mainstream OHADA dimensions in pertinent programs. Indicator: By the end of the project, at least 5 microfinance institutions have reached operational self-sufficiency Value: N/A 5 2 Date: 31-Dec Dec Dec-2012 Comments: This was added during the Additional Financing in There were 149 microfinance institutions in the Central Bank database as December 31, Indicator: By the end of the Project, the microfinance sector in DRC reaches at least 300,000 clients (from an estimated 100,000) Value: 100, ,000 1,050,000 Date: 31-Dec Dec Dec-2012 Comments: This was added during the Additional Financing in Indicator: Commercial banks compliance with prudential regulations is satisfactory (as per IMF assessment) Value: N/A 100% 100% Date: 31-Dec Dec Dec-2013 Comments: This was added during the Additional Financing in According to the 2003 FSAP, data quality is still an issue. Indicator: New privatization laws entered into Congolese gazette Value: N/A Expected Done Date: 28-Mar Dec Jul-2008 Comments: The new privatization laws were published in the Official Gazette of 12 July Indicator: All targeted SOEs firms have some private sector involvement either through public/private partnership, management contract or other arrangement Value: Date: 28-Mar Dec June-2014 Comments: GEMANIMES, SNCC, RVA, and SCTP/ONATRA benefited from Stabilization Contracts by private service providers (Sofreco, Vecturis, ADPI/KPMG, and Progosa respectively). REGIDESO currently has a service contract (Sénegalaise des Eaux/Finagestion). A Service Contract for SNEL was put in place after the project s closing. Procurement for a service provider for SCPT (former OCPT) was not successful. Indicator: At least 3 packages of GECAMINES assets to the private sector by end of project Value: Date: 28-Mar Dec Jun-2014 Comments: GECAMINES currently has 26 mining partnerships with other private sector companies. Part of the project s technical assistance was to review the consistency of these partnerships with the mining code and other pertinent laws and regulations. Indicator: By July 2010, a restructuring strategy acceptable to IDA for SNCC is approved by the Government, which includes the identification and implementation of the most suited divestiture method Value: N/A Expected Achieved Date: 31-Dec July Jun-2014 Comments: Indicator: By July 2009, inventories of SNCC assets and liabilities are completed Value: N/A Expected Achieved Date: 26-Mar July Jun-2014 Comments: ix

12 Indicator: By April 2010, an agreement on the settlement of public debts of SNCC has been reached, commercial debts are identified Value: N/A Expected Achieved Date: 26-Mar April Jun-2014 Comments: This was added during the Additional Financing in Indicator: 10,000 GECAMINES workers retrenched Value: N/A 10,000 10,654 Date: 28-Mar Dec Dec-2004 Comments: Indicator: By April 2010, the required retrenchment program at SNCC has been completed Value: N/A N/A Achieved Date: 28-Mar April Sep-2013 Comments: This was added during the Additional Financing in This was reformulated as a retirement program, and carried out in two phases, one in September 2009 (2,268 individuals), and another in 2 July 2013 (1,618 individuals). Also, their contribution to the National Institute for Social Security in the amount of US$ 0.8 million was made. G. Ratings of Project Performance in Implementation Status and Results Reports (ISR) ISR No. Date PDO IP *Actual Disbursements USD Millions 01 09/15/2003 Satisfactory Satisfactory /25/2003 Satisfactory Satisfactory /03/2004 Satisfactory Satisfactory /07/2004 Satisfactory Satisfactory /24/2005 Satisfactory Satisfactory /29/2005 Satisfactory Satisfactory /25/2006 Satisfactory Satisfactory /13/2006 Satisfactory Satisfactory /18/2006 Satisfactory Satisfactory /25/2007 Satisfactory Satisfactory /19/2007 Satisfactory Satisfactory /19/2008 Satisfactory Satisfactory /29/2008 Satisfactory Satisfactory /30/2009 Satisfactory Satisfactory /29/2009 Satisfactory Satisfactory /30/2010 Satisfactory Satisfactory /25/2011 Satisfactory Satisfactory /15/2011 Satisfactory Moderately Satisfactory /20/2012 Moderately Satisfactory Moderately Unsatisfactory /19/2012 Moderately Satisfactory Moderately Satisfactory /22/2013 Moderately Satisfactory Moderately Satisfactory /29/2013 Moderately Satisfactory Moderately Satisfactory /29/2014 Moderately Satisfactory Moderately Satisfactory *Disbursements include both the Credit and the Grant H. Restructuring (if any) x

13 There have been a series of restructurings to the Project as follows: (1) On August , to, among other things, clarify funding arrangements for DRC s participation in the African Trade Insurance (ATI) agency (also the project closing date was moved from March 31, 2010 to April 30, 2010). (2) On March 26, 2008, to add an Additional Financing to support a new microfinance activity, a national payments system, and extend the voluntary retirement program to SNCC, among others. (3) In April 2010, to extend the closing date of the original credit from April 30, 2010 to December 31, (4) On December 12, 2012, to extend the closing dates of both the original credit and the additional financing from December 31, 2012 to June 30, (5) On June 30, 2013, to extend the project s closing date to June 30, 2014 in order to allow completion of the Management Action Plan of the Inspection Panel case, as well as ensure uninterrupted support to the modernization of the National Payments System. I. Disbursement Profile xi

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15 Democratic Republic of Congo Private Sector Development and Competitiveness Project 1. Project Context, Development Objectives, and Design 1.1 Context at Appraisal 1. At project appraisal, the economy of the Democratic Republic of Congo (DRC) had severely deteriorated. This was the result of three decades of economic neglect exacerbated by the military conflicts of the late 1990s. However, by 2002, the DRC Government was actively pursuing measures to end the armed conflict, and had signed peace agreements with the warring factions. In order for the peace to hold, the Government and its development partners were acutely aware of the urgency of restoring the economy to rekindle people s hopes and faith in their Government. This was critical to forestalling a return to open conflict. 2. In this context, the Bank, which had reengaged with DRC in 2001 after suspending programs in 1993, had supported two emergency operations aimed at stabilizing the economy and undertaking emergency repairs to restore basic services. However, promoting private sector development, a key to long-term, broad-based growth, required a dedicated project to help the government implement investment climate reforms and address the problems of state-owned enterprises (SOEs). In addition to water and power utilities and major transport infrastructure (ports, airports, and railways), the state portfolio consisted of banks and a number of agricultural enterprises. Several of these SOEs had been acquired in the early 1970s through nationalization, resulting in a portfolio of approximately 58 major enterprises dominating almost every aspect of the economy, and accounting for about 80 percent of formal employment. 3. These SOEs were in a sorry state: poorly managed, loss-making, heavily indebted, and owing salary arrears dating back several years in some cases. They constituted a major drag on the DRC economy. The dominance of the financial sector by poorly performing state-owned banks had undermined confidence in it, and hindered the emergence of a vibrant private banking industry. This was compounded by onerous and opaque rules and procedures concerning taxation, business registration, and other bureaucratic constraints to private investment. These factors created a strong imperative and a sense of urgency to improve the investment climate, and confront SOE issues, especially in critical areas such as transport, telecommunications, energy, mining, and banking, in order to restore economic growth. 1.2 Original Project Development Objectives (PDOs) and Key Indicators (as approved) Original development objective (from the PAD) 4. The project's development objective was to increase the competitiveness of the economy, and thereby contribute to economic growth. The project would achieve these objectives by assisting with improving the investment climate; by supporting reform of public enterprises in the mining, telecoms, financial, transport, and energy sectors; by stimulating economic diversification and development in the Katanga region through community-driven development 1

16 approaches and by facilitating the reintegration of retrenched workers in the local economy through support for training, business development services and finance. Original key performance indicators 5. The original key outcome indicators from the Results Matrix were 1 : (i) (ii) Foreign Direct Investment (FDI) in the mining, transport, energy, telecom, and financial sectors reaches US$1 billion per year by 2009 (from US$200 million in 2002); Return on Assets for each of the targeted state-owned enterprises (National Electricity Company SNEL; National Railways Company SNCC; State Air Transportation Company RVA; Congo Post and Telecommunications Company OCPT (renamed SCPT); City Train a local bus company; Quarries and Mines Company GECAMINES; Congolese Airlines LAC) increases from the average of -21 percent to an average of +2 percent by the end of project implementation; and (iii) Net fiscal contribution from parastatals is increased by US$10 million annually. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification Revised PDO 6. No revisions were made to the PDO. Revised project outcome indicators and targets 7. Two additional outcome indicators were added to the original three outcome indicators during the processing of an additional financing in These new indicators were meant to correct for the absence of outcome indicators for the access-to-finance dimensions of the project as a whole, including for the original credit, which was already financing several activities on access-to-finance, but with no related outcome indicators. Hence, these are not outcome indicators for the additional financing, but for the whole project. These additional indicators are: (iv) Total domestic credit to the private sector increased to 4.8 percent of Gross Domestic Product (GDP) by 2011; and (v) Total savings in the financial sector increased to 10.4 percent of GDP by The principal text of the PAD had two additional PDO indicators which, in the PAD s Results Matrix in the annex, were instead mentioned as output indicators, namely: (iv) Average number of days to create a company reduced from three years to three months by the time of the midterm review; (v) Private sector participation in GECAMINES, SNEL, SNCC, RVA, LAC, OCPT (renamed SCPT in 2010) achieved by the end of the project, whether through public/private partnerships, fully private, management contract, or other arrangement. 2

17 1.4 Main Beneficiaries 8. The primary target group of the project included, inter alia: (i) Government ministries and institutions, including the Justice and Mining ministries, the Congo Central Bank (BCC), the Investment Promotion Agency (ANAPI), the Steering Committee for Public Enterprise Reforms (COPIREP), and other agencies deemed critical to improving the investment climate and championing/coordinating SOE reforms; (ii) selected SOEs with potential for serving as engines of private sector-led growth which were targeted for reform; (iii) the retiring staff of some of these SOEs whose departure the project would facilitate; and (v) microfinance institutions because of their critical role in expanding financial inclusion for broad-based growth. 1.5 Original Components (as approved) 9. Component 1: Improving the Investment Climate. The project would: (i) help put in place business dispute resolution mechanisms and facilitate the dissemination of legal information; (ii) promote financial intermediation by strengthening BCC s capacity, by facilitating the liquidation of three defunct state-owned banks (Congolese Bank for External Trade BCCE, African Continental Bank BCA, and New Bank of Kinshasa NBK), and by facilitating DRC s membership into the African Trade Insurance (ATI) agency; (iii) build the capacity of the Ministry of Mines to adequately implement the then new (2002) Mining Code; and (iv) facilitate dialogue between the Government and the private sector. 10. Component 2: Implementing Parastatal Reform. The project would: (i) help set-up and/or strengthen regulatory authorities in the telecommunication, transport and energy sectors 2 ; (ii) facilitate Government s divestiture from public enterprises in the telecommunication, transport, energy, financial and mining sectors; and (iii) facilitate the staff severance process at GECAMINES, SCPT, and the three defunct state-owned banks. 11. Component 3: Initiatives for Economic Development in Katanga Region. The project would support: (i) workers departing from GECAMINES to undertake economically viable activities through matching grants; (ii) technical assistance to help identify investment opportunities and upgrade skills and capacity of Small and Medium Enterprises (SMEs) around an emerging private mining industry; and (iii) facilitate GECAMINES transfer of social services to municipalities. 12. Component 4: Project Coordination and Implementation Arrangements. Initially, the project was to be implemented by the Central Coordination Office (BCECO) and the Ministry of Mines for mining related issues. However, once ready, the COPIREP would take over from BCECO. 1.6 Revised Components 2 The Post and Telecommunications Regulatory Authority had been established in The Transport Regulatory Authority and the Electricity Regulatory Authority were yet to be created. The latter was only recently created in January 2014, but the Transport Regulatory Authority had not been created by the time of the ICR. The Civil Aviation Authority was established in June

18 13. As part of an Additional Financing, which was approved by the Board in 2008, activities were added to Components 1 and 2 as follows. Component 1: Improving the Investment Climate. The principal activities added were: (i) supporting the growth of microfinance institutions (MFIs), and strengthening their oversight by BCC in order to promote SMEs; (ii) developing a National Payments System (NPS) to strengthen financial intermediation; and (iii) supporting the process of DRC s adherence to the Organization for Harmonization of Business Laws in Africa (OHADA). It also supported some ongoing activities, such as continuing the work on simplification of business registration and licensing, and extending commercial courts countrywide (Matadi, Goma, Bukavu, Mbuji Mayi, and Kisangani). Component 2: Implementing SOE Reform. Funding was also provided to: (a) finance the SNCC stabilization contract and development of a concession plan; and (b) facilitate the SNCC staff severance process. 1.7 Other Significant Changes 14. Extension of Project Closing Date. There were a series of extensions of the project s closing date: from March 2010 to December 2012; then to June 2013 and finally to June The first extension was to accommodate the scaling up discussed above. The other extensions were to allow time to complete the implementation of the NPS and the Inspection Panel Management Action Plan (discussed further under paragraph 24). 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design, and Quality at Entry i) Soundness of the background analysis supporting the project, lessons learned incorporated, and the rationale for the Bank s intervention 15. Soundness of Background Analysis. Broad-based public consultations on SOEs were held in December 2000, and further consultations in September In addition, operational audits of SOEs were carried out during the first half of All this served as a good basis for the project s formulation. However, to the extent that in-depth analysis of a large number of enterprises with complex issues in a challenging post-conflict environment would take a significant amount of financial resources and time, some of the more refined SOE studies and audits were made part of the project and left to be carried out during implementation. The downside to this otherwise pragmatic approach was that the team could not gauge adequately the enormity of the task ahead, which led to unrealistic expectations regarding the time and effort needed to return these moribund SOEs to profitability. 16. Incorporation of Lessons Learned. The project drew adequately from past experience, such as: (i) maximizing buy-in through extensive consultations with civil society, trade unions, government officials, etc.; (ii) coupling reform of pivotal SOEs such as utilities and those in charge of transportation infrastructure with the broader investment climate reform agenda; and 4

19 (iii) recognizing the impact of solving the issue of failed/failing state-owned banks on restoring confidence in the banking sector. 17. Soundness of Rationale for the Bank s Intervention. There was clearly a strong justification for the World Bank to intervene, including the need for helping the Government to implement critical reforms, some of which had been formulated with support from the World Bank through an Institutional Development Fund grant and two emergency operations. This work had prepared grounds for more robust private sector development support. In addition, the issue of salary arrears among SOEs was becoming explosive, especially at GECAMINES, and if left unattended, was likely to undermine the efforts of consolidating the still very fragile peace process, and reforming these SOEs. (ii) Assessment of the project design objectives, components, and organization including its realism and the degree of complexity 18. The project s objectives and components covered a broad array of areas with a coherent internal logic, principally: stem the dizzying decline of the principal engines of economic growth (power, transportation, telecommunication, mining, banking), while creating a business-friendly environment conducive for private sector led growth, hence the pertinence and complementarity of the Investment Climate and the SOE Reform components. Promoting economic activity in Katanga was important for GECAMINES retrenchment program, and for preparing the local communities to benefit from the expected growth in mining through better economic integration with the mining sector. Regarding implementation, having a dedicated institution (COPIREP) to champion the reforms and deal with the cross cutting issues such as divesture laws, labor issues, SOE cross-debts etc. was a good design feature. However, the expectations on how much could be achieved in restoring the SOEs under the project were set too high given that these enterprises would require massive investment capital that the project wasn t providing and whose other likely sources (e.g. the private sector) were still very uncertain in the fragile political environment that prevailed at the time. iii) Adequacy of government s commitment, stakeholder involvement, and/or participatory processes 19. Government Commitment. In the lead up to, and during appraisal, the Government was very engaged and took the lead in the reform process, including organizing the public consultations referred to earlier, which were held under the aegis of the Presidency. In addition, Government had passed a series of reforms and needed the Bank s assistance for their implementation. 3 It had also established COPIREP (October 2002) to coordinate and champion SOE reforms and looked upon the project as a critical instrument in implementing these reforms. 20. Other stakeholders. Apart from Government, principal stakeholders included the trade unions which were critical partners in the reform process and which were heavily consulted 3 These included: (a) the law establishing commercial tribunals (July 2001); (b) a new Investment Code (February 2002); (c) the law on Savings and Credit Cooperatives to promote financial inclusion (February 2002); (d) a new Central Bank charter strengthening its independence in setting monetary and foreign exchange policies (May 2002); and (e) a new mining code in line with International Standards (July 2002), among others. 5

20 during the project s preparation and implementation. Within the World Bank Group, the International Finance Corporation (IFC) was a key partner, especially on investment climate issues. This project was an example of a successful collaboration with IFC. Other stakeholders included development partners, such as the German Credit Agency for Reconstruction (KfW), United Nations Development Program (UNDP), United Nations Capital Development Fund (UNCDF), especially on access-to-finance. The International Monetary Fund (IMF) and the African Regional Technical Assistance Center (AFRITEC) were critical partners on tax related issues. There was also strong coordination with the United Nations peace keeping mission as some parts of the country, especially in the East, were still insecure (and remained so throughout most of the project s implementation). iv) Assessment of risks and mitigation measures 21. The PAD had noted: (i) the likelihood of Government s reduced commitment to reforms over time; (ii) potential for corruption and mismanagement with respect to SOE reforms; (iii) external market risks, and (iv) potential controversy over layoffs at SOEs. The undulating political climate became a major drag on the project, which the project s mitigated by focusing on technical issues during politically unfavorable times, while pushing for reforms whenever political circumstances were more opportune. Financial mismanagement at the targeted SOEs with respect to project funds did not occur. There were indeed external market shocks in 2008/2009 arising from the Global Financial Crisis and the mining sector in particular experienced some setbacks. However, the crisis was short-lived, and economic activity quickly rebounded. As feared, controversies over the reinsertion program did arise, and as noted in Paragraph 24 below, significantly disrupted implementation since further compensatory measures had to be undertaken and the project restructured to accommodate these new developments. 2.2 Implementation 22. In a post conflict environment with very little capacity, the establishment of COPIREP in October 2002, and later the establishment of the Steering Committee for Improving the Investment and Business Climate (CPCAI) in August 2009, with input from IFC, greatly facilitated project implementation, including serving as a bridge across constant changes in Government composition. Also, DRC s attaining of the completion point of the Highly Indebted and Poor Countries initiative (HIPC) in July 2010, which resulted in cancellation of 83 percent of its external debt (US$10.8 billion), created fiscal space for the country to stabilize the economy, and sent a strong signal to investors about DRC s growing fiscal viability, and hence a promising investment destination. 23. However, there were also some strong headwinds, especially arising from the country s political fragility. The reform momentum of 2001/2002, when major strides had been made, significantly waned during the era of the power-sharing Government of former belligerents, and only resumed in 2007/2008 after the November 2006 elections. Furthermore, the tense atmosphere and street violence in 2011 triggered by disputes over the presidential election outcome also negatively affected project implementation. The Bank s Country Office even temporarily relocated from Kinshasa to neighboring Brazzaville. 6

21 24. In addition, some of the beneficiaries of the Voluntary Departure Program carried out at GECAMINES lodged complaints with the Bank s Inspection Panel in February and March, 2009 (see Annex 6 for details). Bank Management disputed the claims but agreed to support the Government in undertaking a set of measures, including extending health care and education benefits to the complainants. Addressing these issues diverted attention from project implementation as the project had to be restructured to accommodate these unanticipated expenditures, and the task team had to focus on the mitigation action plan for an extended period. 2.3 Monitoring and Evaluation (M&E) Design, Implementation, and Utilization 25. M&E Design. The M&E s broad sector indicators, such as FDI inflows were relevant measures of improvements in the investment climate, just as SOE profitability was a good proxy for improved SOEs technical and managerial efficiency that was being facilitated by the project. However, from the Project perspective, it was difficult to determine how much of the changes in some of these expected PDO outcomes (e.g. FDI) could be ascribed to the Project. In addition, the project s expected outcomes did not evolve in tandem with the evolution in the project s focus. Over time, the project s scope shifted from focusing on individual SOE-specific interventions which were progressively being relegated to the emerging sector-specific operations, to creating an enabling environment for SOE reforms more generally, such as the divestiture framework, cross-debt resolution, etc. Hence, the project s role evolved into one of stabilizing SOE operations as sector-specific operations drove them to profitability, including undertaking major rehabilitation. However, the project s expected outcomes were not recalibrated in order to circumscribe them to the activities for which the project, in its new configuration, was responsible. 26. M&E Implementation, Utilization, and Sustainability. After initial difficulties, the implementing agencies adequately implemented the M&E system although timely SOE data still remains a challenge. The data generated by the M&E system is relevant to the respective institutions (CPCAI and COPIREP) which heavily rely on it to gauge progress of the reforms they are championing. The M&E System is embedded in these permanent institutions whose functions will continue beyond the project, thus ensuring its sustainability. 2.4 Safeguard and Fiduciary Compliance Safeguard Compliance 27. Environment. At appraisal, the project s environmental status was rated as Category B. Environmental issues were mostly related to ensuring proper waste disposal in the enterprises targeted for reforms. An environmental audit was carried out for GECAMINES, which resulted in recommendations for improving its environmental compliance. A similar study at Somika, a private mining company, made a number of recommendations including the need for closely monitoring the quality of underground water which supplies Lubumbashi. More generally, it was 7

22 determined during the course of the project s implementation that the emerging sectoral projects were better placed to deal with the environment issues in their respective sectors Social. The project s social aspects principally revolved around assisting some of the enterprises targeted for reform in paying terminal benefits for departing employees. The project facilitated this process at GECAMINES (10,654 individuals), SNCC (3,886 individuals), SCPT (4,950 individuals), and at the three defunct state-owned banks, BCA, BCCE, and NBK (3,480 individuals). This program was accompanied by training for the departing staff in different livelihoods to facilitate their smooth transition into their new life. As indicated earlier, some retirees petitioned the Inspection Panel, and while Bank Management disputed the grounds of the petition, the Bank financed Government s provision of health benefits to 22,155 individuals and education benefits to 11,500 children (see Annex 6). Fiduciary Compliance 29. Financial Management. The migration of the project s financial management function from BCECO to COPIREP was completed in Transition issues were largely related to the initial absence of an internal audit manual at COPIREP, inadequate utilization of the TOMPRO accounting software, delays in payment of invoices, and weaknesses in the analysis of the variances between budgeted and actual expenditures. For a time, the accounting system was not properly organized and financial information not readily available. There was also one case of ineligible expenditures, which was resolved. By project s end, the system was running smoothly and financial management was consistently rated as satisfactory. 30. Procurement. Procurement performance was generally satisfactory. There were occasional instances of procurement delays and stale transactions in Procys which were resolved by strengthening COPIREP s procurement unit. A challenge in December 2013 by one of the two bidders for the NPS led to this task not being completed under the project. It will be completed under another project to which it has been transferred. 2.5 Post-completion Operation/Next Phase 31. Investment climate reforms will continue to be championed and coordinated by CPCAI, ANAPI, and the proposed Special Economic Zones Regulatory Authority which is their institutional mandate. Similarly, SOE reforms will continue to be championed and coordinated by COPIREP. Policy dialogue and accompanying investments, as applicable, will be carried out in the context of the relevant sectoral projects in the World Bank s portfolio in DRC. This includes: (i) The Financial Infrastructure and Markets Project (business climate/access-to-finance issues, completing the NPS); (ii) The Growth with Governance in the Mining Sector Project (mining sector issues); (iii) The Regional and Domestic Power Markets Development Project, and The Southern African Power Market Project (energy sector issues); (iv) The Multi-Modal Transport Project (transport sector issues), and (v) The Central African Backbone Project (telecommunications issues). In addition, Special Economic Zone support will be implemented 4 These Bank-funded projects include: The Growth with Governance in the Mining Sector Project, The Regional and Domestic Power Markets Development Project, The Southern African Power Market Project, and The Multi-Modal Transport Project. 8

23 under the World Bank s Western Growth Poles Project, while further investment climate reforms will be undertaken under the proposed DRC Investment Climate Program. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design, and Implementation Overall Rating: High 32. Relevance of Objective. This is rated high. The project s development objective (both for the original credit and the additional financing), namely: to increase the competitiveness of the economy, thereby contribute to economic growth remains relevant. It is consistent with the Bank s FY13-FY16 Country Assistance Strategy (CAS), especially Strategic Objective Two, which seeks to boost competitiveness to accelerate private-sector-led growth and job creation, and to the Government s 2011 Poverty Reduction Strategy which, among other things, emphasizes private-sector-led growth. 33. Relevance of the Design. This is rated high. The choice of the three components remains valid. Improving the investment climate (including the activities added under the additional financing) and enhancing the performance of critical transport infrastructure, utilities, and telecommunications was critical for attaining the project s objectives. In addition, stimulating economic development in the Katanga Region was needed for successful integration of the staff expected to be laid off at GECAMINES into gainful employment. Equally importantly, it was critical that the regional economy increasingly integrate with, and be prepared to tap into, the expected growth in the mining sector. This is considered good practice in extractive industries. 34. Relevance of Implementation. This is rated Substantial. The project s approach, especially as it evolved during implementation is particularly pertinent, namely focussing on cross cutting issues such as the divesture framework, debt resolution, and the question of overstaffing/salary arrears, while the emerging sectoral programs dealt with sector policy issues and capital investments. However, the project should have been restructured to reflect this new focus, especially with respect to the M&E framework to strengthen attribution. Implementation through dedicated institutions (COPIREP and CPCAI) was particularly suitable for a post-conflict/inconflict country like DRC at the time. This allowed for better handling of cross-cutting issues and ensuring continuity amidst frequent changes in Government. 3.2 Achievement of Project Development Objectives Overall Rating: Moderately Satisfactory 35. Improving the Investment Climate. Progress towards improving the investment climate is rated Satisfactory. Major accomplishments were realized in creating a more business friendly environment, and increasing access to finance. 36. Contributing to a more secure and business friendly environment. Several measures were facilitated, including: (i) rendering seven commercial courts operational, which now handle an 9

24 average of 460 cases per year; (ii) supporting DRC s adherence to the New York Convention on International Arbitration for added reassurance, especially to foreign investors; (iii) supporting DRC s membership in ATI, where insurance coverage for DRC investors now stands at US$361 million and growing; (iv) supporting DRC s membership in OHADA which ensures a secure commercial environment through harmonized and modern business laws among the seventeen regional members; (v) installing a computerized system for the management of mining titles (SIGTIM), and carrying out an organizational and financial audit of the Mining Cadaster as part of its restructuring and strengthening; and (vi) cutting down bureaucratic delays, such as reducing the time for business registration from 155 days in 2009 to 3 days by Together with the growing peace in the country, these measures were expected to contribute to easing investor concerns, including foreign investors. Even though the degree of attribution cannot be ascertained with precision, these measures are presumed to have contributed to the recent growth in FDI. Initially, most of the DFI was for the service sector, such as telecoms, construction and hotels, financial institutions, transportation, and others. However, industry, which includes the mining sector, is increasingly becoming a major component. 37. Contributing to increasing access to finance. The liquidation of three defunct state-owned banks, which were deemed to be undermining confidence in the banking sector, was completed as planned. Similarly, the planned activities for strengthening BCC s oversight capability were duly implemented. In addition, support was provided for setting up an electronic credit reference bureau, and strengthening the registry for movable collateral. The expectation was that this process would trigger the emergence of a more vibrant private financial sector that is better supervised by BCC. The financial sector has indeed grown as hoped, with the percentage of commercial bank assets growing from 5.1 percent in 2003, to 19 percent as of end June Credit has been growing fast, having more than tripled between 2006 and Unfortunately, installing the NPS could not be completed. The project supported the creation of a comprehensive design, long-term strategy and detailed specifications of the system s hardware and software, as well as the architectural designs for the physical facilities to house the system. Installation will be completed by another project. 5 DRC is rated by Doing Business 2015 among the 10 economies in the world that improved the most across 3 or more areas measured in 2013/14. DRC was particularly recognized for significant improvements in ease of starting a business, getting credit, protecting minority interests, getting electricity, and paying taxes. 10

25 38. Regarding MFIs, the project strengthened BCC s supervisory capability through training and logistical support. The Accounting Plan for Savings and Loan Cooperatives and Microfinance Institutions deployed in 2012 further helped strengthen the industry. As hoped, the Central Bank is beginning to enforce actively discipline in the industry. For instance, by end- March 2013, 37 largely inactive institutions were put under involuntary liquidation status (34 COOPECs and 3 MFIs) and, by end August 2013, 63 licenses had been withdrawn. While the industry is still weak, with only two institutions being operationally self-sufficient by June 2013, its growing discipline is contributing to its popularity. From 100,000 clients in 2006, the clientele has now surpassed 1 million. The project also directly supported training of selected MFIs through the Fund for the Promotion of Microfinance (FPM). In addition, US$ 3.5 million was passed on to the FPM to on-lend to qualifying MFIs reaching approximately 7,000 clients per cycle, with an average loan size of US$ 500. This is a typical loan size in the DRC microfinance industry. 39. Implementing SOE Reforms. Progress on improving the performance of SOEs in the mining, telecoms, financial, transport, and energy sectors is rated Moderately Satisfactory. Significant progress was made on several measures, with varying degrees of success. The major SOEs targeted for reforms were overstaffed, poorly managed, and hemorrhaging cash (average ROA of -21 percent). The project s immediate focus was, therefore, to stabilize their operations with the expectation that over time, and with the support of the emerging sector projects, they would become investment-grade companies able to attract private capital. In this regard, a series of measures to stabilize their finances was undertaken including: (i) staff reductions; (ii) partial debt-resolution; (iii) executing management contracts; and (iv) promulgating a new divestiture framework to permit private sector involvement. 40. Reducing Staff at Some of the SOEs. Regarding GECAMINES, its staff was reduced from 22,994 in 2003/2004 (133 percent of turnover) to 12,340 (71 percent of turnover) saving the company from bankruptcy. This gave it breathing space to regroup, and although it still has some financial difficulties, it has reduced its salary arrears from 31 months to 3 months, and its staff costs are now down to 30 percent of turnover (2012). With respect to SNCC, 3,886 were retired, bringing the percentage of the labor-force relative to turnover from 115 percent to 91 percent. This was the first phase, with the second phase later financed by the Multi-Modal Transport Project. However, as indicated further below, SNCC remains in a precarious condition because of repeated strikes and loss of mining clients. 41. SCPT s staff was reduced from 4,496 (140 percent of turnover) to 1,672 (51 percent of turnover). However it did not take advantage of this break to restructure its operations due to a prolonged debate over splitting postal from telecommunications activities. In addition, the telecommunication industry was undergoing a profound transformation with the advent of mobile telephony. SCPT s telephone business was based on fixed-lines, a service that had virtually collapsed, whereas market penetration of private mobile operators, now around 44 percent, was rapidly filling the void. SCPT now relies on expedited mail service for 94% of its revenue, which is not enough to pay its employees. Salary arrears date back several years. Managing the Government s newly laid fibre optic cables seems to be giving SCPT a reprieve (albeit inadequate for solving its immense financial difficulties), until the Government decides who should manage them. 11

26 42. Executing Management Contracts. Management contracts were executed at GECAMINES, RVA, SCTP/ONATRA, and SNCC. The specific activities carried out varied from enterprise to enterprise, ranging from greater financial controls, to better stock management, to human resource management. These SOEs had long lost a results-oriented culture. GECAMINES: The company had hit bottom by 2002, and its turnover was experiencing modest recovery, although its deficits were still on the rise, thus hampering sustained recovery. The intervention focused primarily on financial control and management of partnerships with other mining companies, which brought some stability to its finances. To accelerate the recovery, however, the company still needs to retire about 6,000 workers, for which it needs US$121 million (according to its own estimates), and is actively seeking private capital. It remains unresolved what to do about the company s non-core activities. 6 RVA: Like GECAMINES, the fall in its business turnover was bottoming-out, but poor financial and human resource management were undercutting prospects for profitability. The intervention focused on tighter financial control and increasing revenue. RVA is almost breaking even (ROA of -1.1 percent in 2012). SCTP/ONATRA: Profitability had been severely hampered by poor port operations and financial management which were the areas of focus for the stabilization intervention. SCTP is also almost breaking even (2012 ROA of -0.9 percent). SNCC: In the period preceding the stabilization intervention, SNCC business turnover was declining at about 6.5 percent per year. With the stabilization contract, the decline was halted through financial controls and improving maintenance to attract business. However, a series of labor strikes and slow rehabilitation of infrastructure have led to the loss of SNCC s mining clients to road transporters, leading to stagnation in business turnover and severe cash-flow constraints. 43. Promulgating Divestiture Laws. One of the project s principal accomplishments was assisting Government in the preparation and eventual adoption of the laws allowing the state to divest from its enterprises and ensure that those that stay in its portfolio behave as commercial businesses. Promulgating divesture laws in July 2008 paved the way for reconstituting SOEs as 6 GECAMINES operates six hospitals (1,320 beds), 6 clinics, 26 health centers, and 17 health service outlets. It also operates 111 schools (953 class rooms) with about 41,000 students. These facilities also service the general public. It also operates 7,600 ha of agricultural activities, and processes 700 tons of flour per day and other products (cooking oil, etc.). 12

27 commercial entities, operating on the basis of modern commercial principals, and not as Government departments. All steps for transformation have been completed for GECAMINES, SNCC, and ONATRA including debt restructuring, asset ownership confirmation, and new balance sheets. The process is ongoing for REGIDESO, SNEL, and RVA. The process at SCPT will be supported under a sector project. 44. Partial Debt Resolution. By Decree Number 12/031 of October 2012, the Government provided a framework for resolving SOE financial obligations (as audited for the year ending on December 31, 2011) that were deemed to be beyond SOEs capacity to meet. These obligations, which amounted to about US$ 3.5 billion as at December 31, 201, included commercial debts, salary arrears (about US$ 800 million), tax obligations, enterprise-to-enterprise debts, and others. Some of these obligations will be cancelled outright and others converted into equity. This major exercise was another important milestone in the SOE restructuring process. However, there are still residual obligations, especially salary arears, that will still need to be worked out. 45. A combination of the above measures has significantly reduced the losses at the targeted SOEs by 18 percent, from -21 percent at appraisal to -3 percent by end 2012, against a target of +2 percent at appraisal 7. Only SNEL registered a modest profit. Considering the continued weakness in most of the portfolio, and in view of the ongoing restructuring exercise referred to above, most of the companies are not yet in a position to pay taxes or dividends to Government. In 2012, for instance, total contributions to the Government budget by SOEs, which amounted to about US$ 300 million, was largely from GECAMINES (84%) in the form of joint-venture signing bonuses and other related charges. 46. Finally, the project supported important studies which provided the analytical foundation for sector policy dialogue and capital investments that followed under sector programs at SNEL, SNCC, REGIDESO, GECAMINES, RVA, and SCTP/ONATRA. 8 These sector programs will continue the SOEs reforms. 47. Improving Economic Competiveness in Katanga Region. This objective was partially achieved. The project s duo objective was to assist GECAMINES voluntary retirees with economically viable projects through matching grants on the one hand, while carrying out activities to stimulate economy-wide business activity in the region on the other. However, only reinsertion activities were fully executed, including supporting 231 micro-projects involving 3,289 individuals. Seventy-nine associations of voluntary departures involved in agricultural projects in the Lubumbashi, Likasi, and Kolwezi basin benefited from training by agricultural consultants. In addition, studies on the restructuring of GECAMINES medical network and 7 According to 2012 figures, the most recent available, ROAs were are follows: GECAMINES -5.0%; REGIDESO - 3.1%; RVA -1.1%; SNEL 0.9%; SNCC -6.9%; SCTP/ONATRA -0.9%; and SCPT -5.4%. City Train and LAC are defunct, nor was much done about them during the project. 8 Energy Sector: (1) The World Bank, through two projects Regional and Domestic Power Markets Development Project, and the Southern African Power Market Project, has committed US$ 1.1 billion; (ii) The European Investment Bank has committed US$151.8 million; (iii) The African Development Bank has committed US$156.put8 million; and (iv) Private companies have committed US$535 million. (2) Water Sector: The World Bank, through the Urban Water Supply Project as committed US$ 190 million; (3) Airport Infrastructure: The World Bank has committed US$ 9.3 million; the African Development Bank US$ million; EXIM Bank of China US$ 60 million. 13

28 schools were carried out. Given the care needed in handling such a transfer, it was decided that this would be handled in another phase of GECAMINES restructuring. Support to local SMEs was not carried out as virtually funds were used on the first objective. 3.3 Efficiency Overall Rating: Substantial 48. On the whole, the project was implemented efficiently. The project management costs were only 7.4 percent of the total project cost, which is comparable to similar projects, especially given its level of complexity, and were lower than appraisal estimates (84 percent). The project management team had highly competent members who often times carried out the required analysis in-house, at a time when foreign expertise attached a high risk premium to their services because of DRC s prevailing political fragility. The local team had the added advantage of local knowledge in a highly complex environment. On the World Bank side, project performance improved significantly after 2007 when task team leaders were field-based. This made daily trouble-shooting possible, further amplifying project implementation effectiveness and project efficiency. 49. Several services have become faster and cheaper, as processes became more efficient, such as: (i) obtaining a construction permit, which used to take 117 days, at a cost of US$ 3,149 now takes 30 days at a cost of US$ 1,602; (ii) creating a business which needed 11 procedures and took 155 days at a cost of US$ 440 minimum, is now down to 3 procedures, 3 days with a cost of US$ 170; (iii) the export process that took 44 days and cost US$ 3,155 per container, now takes 13 days and US$ 1,930. There are also signs that service delivery at some SOEs is beginning to improve. The time for getting electricity service connected has been reduced by 17 percent, and the cost has been reduced by 31 percent. 50. As discussed in Paragraph 25, some of the project impact is more difficult to isolate with a reasonable degree of certainty as the project s monitoring and evaluation system did not allow for the precise attribution of the various sector outcomes to project activities. This is particularly the case with certain investment climate outcomes such as growth in FDI, where the project s contribution was significant, and where the mildest of assumptions point to the project s potentially high economic impact. For instance, assuming a 5 percent project attribution for the growth in the copper industry translates into an incremental gross value of US$ 350 million of the copper produced in 2013 alone. However, in the absence of a credible methodology to ascribe cause and effect, a more accurate economic analysis cannot be carried out. Regarding the initiatives for increasing competitiveness in Katanga region, the activities were of very limited scope relative to the overall project (3.7 percent of final project costs), and no reliable data was available to assess their economic impact. 51. Rather, the economic analysis focused on the impact of the project s stabilization efforts in selected SOEs, which could be reasonably assessed. Economic benefits principally derived from losses prevented by the project. Specifically, the rate of financial hemorrhage was decelerated, or even halted due to improvements in financial management and control at a number of SOEs. As a result, average ROA increased by 18 percentage points, from -21 percent to -3 percent. On the 14

29 basis of loss prevented, the ERR for the SOE reform component (which constituted 53 percent of project costs) was re-estimated at 22 percent, which was comparable to the 19 percent computed at appraisal (see Annex 3 for details). 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 52. The project s objectives, design, and implementation remain highly relevant. In addition, the difficulties of discerning attribution notwithstanding, the project s unrelenting efforts in a very tough and fragile environment have contributed to appreciable improvements in the business climate with growing investor security. Access to credit, including within the microfinance market segment, also improved as a result of the additional financing. Unfortunately, installing the NPS under the additional financing could not be completed. Regarding SOEs, the project laid a strong legal foundation for their reform, and the financial position of several of them while still mostly in the red has registered appreciable improvement. Their successful turnaround will require continued strengthening of management, resolving residual financial obligations, and accelerating ongoing capital investment programs. Katanga region activities, which ultimately focussed almost exclusively on resettling GECAMINES workers, was generally successful, despite issues associated with the Inspection Panel requests. The efficiency of implementing both the original credit and the additional financing was substantial. The overall rating is assessed as Moderately Satisfactory. Original Credit Additional Financing Overall Rating 1 Rating Moderately Satisfactory Moderately Satisfactory Moderately Satisfactory 2 Rating Value Weight (% disbursed: Original Credit/Additional Financing % 4 Weighted Value Overarching Themes, Other Outcomes, and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 53. Poverty Impact. Tracking the project s impact on poverty was not part of the M&E design. However, several project activities had an impact on poverty reduction. For instance, the project contributed to the growth in the microfinance industry from 100,000 clients in 2007 to over 1,000,000 clients in Similarly, it facilitated the reinsertion of over 20,000 SOE retirees, including meeting medical needs for 22,155 individuals and meeting education expenses for 11,500 children. 54. Gender. At its conception, the project did not have specific gender targets. However, some of the project activities did have a gender impact. For instance, approximately 38% of the microfinance sector clients are women. In addition, progress was made on amending the Family Law to make it easier for women to register businesses, and open bank accounts. This bill is awaiting approval in the second house of the National Assembly. 15

30 55. Social Development. As indicated above, the project met the cost of terminal benefits and facilitated the reinsertion of several thousand individuals, including meeting their health and education needs. (b) Institutional Change/Strengthening 56. The project supported various institutional strengthening activities including: BCC to reinforce its oversight capabilities; a number of MFIs to expand financial inclusion; ANAPI and CPCAI which champion and coordinate improvements in the country s investment climate; and the judiciary, particularly regarding arbitration institutions and commercial courts. With respect to SOE reforms, the project strengthened COPIREP s capacity to champion public enterprise reforms, and stabilized the operations of various institutions including GECAMINES, SNCC, RVA, SCTP (former ONATRA). It also strengthened the capacity of the Post and Telecommunications Regulatory Authority. (c) Other Unintended Outcomes and Impacts 57. One of the unintended outcomes from the project is the increased experience gained from the Inspection Panel case on how to conduct retrenchment programs. Drawing from this experience, some of the key elements to consider in designing Bank-financed retrenchment programs include: (i) ensuring that the reinsertion activities are ready to be launched at the time of starting the retrenchment process; (ii) the use of rapid surveys to track poverty patterns and social impact immediately after retrenchment and up to five years after if possible; (iii) ensuring that these rapid surveys also help identifying alternative reinsertion mechanisms during the life of the project; (iv) considering the provision of payments in tranches, creating partnerships with financial institutions, providing training on money management, etc.; and (v) allowing flexibility in the design of reinsertion activities to adapt to rapid changes in the economic environment. Subsequent programs, one REGIDESO and another at SNCC drew heavily from this experience and went smoothly. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 58. A stakeholder workshop was held in Kinshasa in June 2014 to discuss the pertinence of the project s objectives, implementation performance, project outcomes, and lessons learned. It was attended by Government officials (including a number of Government ministers), representatives from SOEs, the private sector, and civil society. There was great appreciation for the project s outcomes, especially the significant improvements in the investment climate. The project s role in stabilizing the SOEs and preparing them for further transformation was greatly commended. Participants called upon Government authorities to capitalize on these achievements by completing the remaining reforms including social debt resolution, and completing the ongoing capital investment programs, especially in critical areas such as power and transportation infrastructure. 4. Assessment of Risk to Development Outcome Rating: Moderate 16

31 59. On the investment climate, the Government is determined to continue simplifying regulations and processes. Although Government was slow to implement investment climate reforms because of the fragile political environment that characterized most of the project implementation period, it has been consistently on the reform path since 2001/2002 when most of the enabling legislation was passed as indicated in Paragraph 19. Over a decade later, there have been no debates on, or attempts at, policy reversal. Similarly, on the SOE reforms, the legal framework for their transformation into commercial entities is firmly in place. However, the transformation process, like previous other reforms, has been slow, partly because of the complexity of the issues (debt resolution) and partly because of the country s frequent ebb-andflow political tides, which undermine the sustenance of a reform momentum. As a result, major policy decisions remain outstanding for extended periods of time, hence the moderate rating. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance Bank performance in ensuring quality at entry Rating: Moderately Satisfactory 60. On the positive side, the Bank carried out significant preparatory work, and held extensive consultations with various stakeholders, which informed the architecture of the project, and strengthened the buy-in from the various stakeholders. The Bank also clearly tapped into lessons from past experience. The project, which was prepared over a period of 11 months, had a broad range of expertise that adequately reflected the project s diverse set of activities. However, the Bank could have been more selective by restricting its SOE-specific interventions to a few truly transformative SOEs while focusing on the broader cross-cutting issues. On the SOE reforms, it was overly optimistic about turning their performance around in such a short time, especially given their immense capital investment needs, the non-commercial habits that prevailed among these SOEs, the weak capacity, and a politically fragile environment. Quality of supervision Rating: Satisfactory 61. The team s satisfactory performance derives from, among other things: (i) demonstrating flexibility and resilience in a very fragile environment by constantly searching for opportunities where success was possible, including focussing on technical work during politically low moments, and pushing for major legislation at opportune moments; (ii) forging exemplary strategic partnerships with other development partners, IFC, and other World Bank project teams (especially mining, telecommunications, energy, transport, water); and (iii) undertaking regular implementation support missions with a broad range of expertise (in joint or separate missions) with clear action plans in the aide-memoires; and (iv) Task Team Leaders taking up residence in Kinshasa to offer day-to-day implementation support. Dialogue with the authorities was also bolstered by the Country Director s residence in Kinshasa starting in early As indicated 17

32 earlier, one area where the team could have done more would have been to restructure the project to reflect its evolving focus over time, including circumscribing the project s scope on SOE reforms and the expected outcomes to better reflect its new focus. 5.2 Recipient Performance Government performance Rating: Moderately Satisfactory 62. In multiple instances, Government exhibited strong performance in ensuring that the project met its objectives. For instance, in the lead up to project appraisal, the Government undertook a series of major reforms aimed at improving the investment climate and promoting financial inclusion. In addition, during project implementation, a number of measures were undertaken with profound implications for DRC s investment climate, ranging from significantly cutting red tape for businesses, to joining OHADA, to adhering to the New York Convention, to passing sweeping SOE divestiture laws, etc. Often times, Government had to overcome strong headwinds from some segments of society who saw joining OHADA or adhering to the New York Convention as a major infringement on their national sovereignty. A blemish on this strong record is the amount of time it took to carry out these measures. While at times the pace was dictated by the imperatives to build the needed consensus, at other times in was a result of the undulating episodes of political fragility that characterized the project s long implementation period: a weak transitional coalition government in , the election time interruptions of 2010/2011, and a Government that was only in an acting capacity for the project s last six months of implementation. Implementing agency or agencies performance Rating: Satisfactory 63. COPIREP and CPCAI worked hard to carry out the needed analytical work, draft the needed legislation, and diligently follow-up on their passage in Parliament, all of this in a politically fragile environment with weak governments. They had to overcome vested interests among those whose powers and privileges were threatened by the reforms. They worked hard to get the best technical assistance possible, at a time when a significant number of external service providers were leery about DRC s security situation. COPIREP handled a large volume of transactions: 895 service contracts, 206 contracts for goods, and 68 contracts for works. CPCAI s diligent work has earned DRC the recognition of being one of the leading investment climate reformers in the 2015 Doing Business Report. Justification of rating for overall recipient performance Rating: Moderately Satisfactory 64. The implementing agencies did a phenomenal job just as Government made major strides on investment climate reforms and in laying the legal framework for SOE transformation. 18

33 However, the reform process was slow, and there is still a significant amount of work to do on SOE transformation, hence the overall Moderately Satisfactory rating. 6. Lessons Learned 65. Monitoring and Evaluation Systems should be constantly revisited for continued pertinence. The project s M&E was too broad, making it difficult to attribute the expected outcomes to project activities. Corrective action could have been undertaken during project implementation. In addition, it is important to build into the project other forms of data gathering, such as surveys to provide information that cannot be obtained through routine monitoring and reporting processes. 66. In a fragile environment, it is important to moderate expectations in project design. Postconflict environments are characterized by weak implementation capacity, political inertia, and powerful vested interests, hence the need to moderate expectations and aim for simplicity, with possibilities for scaling up as opportunities arise. 67. Flexibility at project and country program level is critical in post-conflict situations. Because of many unknown factors in a post-conflict setting, it is important to allow for greater flexibility within the project and across the Country Program as a whole to more effectively take advantage of opportunities as they arise. 68. It is important to pair SOE reforms with pension reforms as part of the Country Program, especially where staff reductions are a significant element. The absence of a functional pension system seems to have, in part, motivated the Inspection Panel case lodged by some retirees. More detail of the important lessons derived from this experience are in Annex Credible permanent institutions in a volatile environment are critical in championing reforms. Fragile states emerging out of conflict are often characterized by weak governments and/or frequent changes in Government composition. Having credible institutions (such as COPIREP, BECECO, CPCAI) as islands of stability and continuity allows for championing reforms among various administrations. 70. Field Team Leadership is important in fragile environments. Because of weak capacity in fragile settings, there is need for an interactive, day-today approach to project implementation support. Project implementation improved significantly when task team leaders became fieldbased, starting in September Comments on Issues Raised by Recipient/Implementing Agencies/Partners (a) Recipient/Implementing agencies Please see Annex 5. (b) Other partners and stakeholders 19

34 71. IFC offered good guidance on how to do justice in the ICR write-up to the exemplary partnership that prevailed during the project s implementation, which have been integrated into the document. They related to collaboration on OHADA, HIPC, Special Economic Zones, and Doing Business reforms among others. 20

35 (a) Project Cost by Component Component Annex 1: Project Costs and Financing Allocated (USD Million) Percentage of Total Disbursed (USD Million) Percentage of Appraisal Improving the Investment % Climate Implementing the Parastatal % Reform Initiative for Development of % the Katanga Region Project Coordination and % Implementation Arrangements Physical Contingencies % Price Contingencies % PPF % Total Project Costs % Allocated amount includes US$ 120 million from original credit, US$ 60 million from additional financing, and US$ 3.83 from Government contribution. Figures may not add up due to rounding. (b) Financing Source of Funds Type of Cofinancing Appraisal Estimate (USD millions) Actual/Latest Estimate (USD millions) Borrower Parallel IDA Credit IDA Grant Total Project Costs Figures may not add up due to rounding Percentage of Appraisal 1. Due to delays in execution, about $8 million from the IDA Grant will be canceled and transferred to the new Bank financed project (Financial Infrastructure and Markets Project), which will take-over the implementation of the National Payments System. An undisbursed amount of US$ 2.85 million from the Special Account relating to the IDA Credit has been reimbursed to the World Bank (the transaction is complete). However, COPIREP is still working with the World Bank on the resolution of Bank service charges of approximately US$20,000. This issue was still outstanding by the time of the ICR. Government s contribution mostly related to the management contract for SCTP in the amount of US$ 6.15 million, and the management contract for RVA in the amount of US$ 4.30 million. 21

36 Annex 2: Outputs by Component 1. The Project had four components: (i) Improving the Investment Climate; (ii) Implementing Parastatal Reform; (iii) Initiatives for Economic Development in Katanga Region; and (iv) Project Coordination and Implementation Arrangements. Component 1: Improving the Investment Climate 2. Under this component, the project implemented a series of measures aimed at improving the investment climate, especially measures pertaining to: (1) strengthening the judicial system and improving the legal and fiscal framework; (2) facilitating financial intermediation; (3) contributing to improving the capacity of the Ministry of Mines; and (4) facilitating Public- Private Sector dialogue. Subcomponent 1: Strengthening the Judicial System and Improving the Legal and Fiscal Framework. 3. The project successfully implemented the activities envisaged under this sub-component, namely: (i) rehabilitating, equipping (including setting up archiving systems), and training the staff of, the General Inspection of Judiciary Services, the Kinshasa/Gombe Appeals Court, and the High Court; (ii) rehabilitating and facilitating the operations of two private arbitration centers (CAC and CENACOM); and (iii) rehabilitating and equipping 7 commercial tribunals. With support both the World Bank and IFC, DRC promulgated on June 26, 2013 the Law No. 13/023 to join the Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed in New York, on June 10 th, In July 2012, after advocacy efforts from both the World Bank and IFC, the Government formally joined OHADA, an organization of 17 member states, whose goal is to facilitate and encourage both domestic and foreign investment in the member states and ensure a secure commercial environment through harmonized and modern business laws. OHADA members agree to adopt a common set of commercial laws including contract, company and bankruptcy laws and to submit interpretation of those laws to the final jurisdiction of the OHADA court, which sits in Abidjan in the Ivory Coast. Apart from assisting with drafting the OHADA adhesion laws and facilitating the establishment of the OHADA National Commission, the project also supported related training for lawyers, clerks, and bailiffs, and the distribution of documents on harmonizing DRC s laws with OHADA. 5. Payment of taxes was greatly facilitated by, among other things: the unification of the filing deadlines; simplification of the tax form; and reducing the corporate tax rate. The project also supported staff training for the Ministry of Mines and the Ministry of finance on procedures for collecting fiscal revenue under the new mining code. In addition, it supported the General Directorate for Customs and Excise (DGDA) in setting up the Single Window at Matadi. 22

37 Subcomponent 2: Facilitating Financial Intermediation 6. Capacity Building for BCC. The project supported strengthening financial sector oversight regulations, and the introduction of regulations for secured transactions (specifically, providing legal definition of movable collateral). The Project strengthened BCC s capacity to oversee the microfinance industry including the provision of equipment (vehicles, computers), staff training, and dissemination of Charts of Accounts and legal texts for Savings and Credit organizations and other microfinance institutions. 7. Technical assistance for liquidating failed state-owned banks. The project supported technical assistance for the liquidation of three defunct state-owned banks, including verifying those who were eligible, and the amounts due. All concerned were identified and paid. 8. Facilitating DRC s membership in ATI. The project provided funds ($100,000) for DRC s participation in the ATI arrangement. So far, insurance coverage of DRC investors under ATI is US$361 million and growing. 9. National Payments Systems (NPS). The NPS was added to the project as part of the Additional Financing in The project supported the production of a comprehensive design of a long term strategy and detailed specifications of the system s hardware and software, as well as the architectural designs for the physical facilities to house the system. However, progress was slow due to the lengthy process of consensus-building among the public and the private stakeholders after decades of mistrust. This was compounded by the absence of a strategy for the conduct of monetary policy in an environment dominated by the use of foreign currency rather than local, and starting from scratch as far as a vision for financial integration across the country, as well as regionally, was concerned. Furthermore, a challenge by one of the bidders added to the delays, and the task could, therefore, not be completed under the project. It will be completed under the new Financial Infrastructure and Markets Project, which was approved in March Microfinance. The project supported microfinance institutions through FPM. FPM was originally created as an activity within a UNDP-financed project in 2007 but has since evolved into an autonomous wholesale lender to MFIs. The project provided funds for on-lending to MFIs. It also supported capacity building for selected MFIs. Other participating development partners included KfW, Swiss Cooperation, German Cooperation, UNCDF, and Belgian Cooperation. Subcomponent 3: Building the Capacity of the Ministry of Mines 11. The Project implemented a series of activities, including: (i) disseminating the new mining code and its regulations; (ii) putting in place and financing the activities of the Commission for Validating Rights to Mines and Quarries; and (iii) providing logistical support to the provincial mining administrations (Maniema, Sud-Kivu, Equateur, Province Orientale, and Kasai-Oriental). The project supported the installation of a computerized system for the management of mining titles (SIGTIM), and carried out an organizational and financial audit of the Mining Cadaster as part of its restructuring and strengthening 23

38 Subcomponent 4: Facilitating the dialogue between the Government and the Private Sector 12. The Project supported a number of activities including: (i) the National Economic Forum held in December 2004; (ii) a study on administrative barriers to investments (carried out by IFC); (iii) simplification of regulations for zoning, granting construction permits, and property transfer; and (iv) the creation of special economic zones, including financing the operating costs (for three years) of that project s steering committee. 13. The project facilitated the operations of the National Agency for Investment Promotion (ANAPI) and the Steering Committee for Improving the Business and Investment Climate (CPCAI) by providing operating costs. CPCAI was set up by the Government in August 2009, after advocacy efforts from both the World Bank and IFC, to identify constraints to investors, propose the needed reforms, and accelerate and monitor their implementation. In parallel, IFC delivered an assessment of ANAPI s performance. 14. In November 2012, the Government created a One-Stop-Shop ( Guichet Unique ) for the creation of enterprises. It was formally launched in April of Since its launch, there has been significant improvement in the business climate including: (a) a reduction in the number of procedures to create an enterprise from 11 to 3; and (b) a reduction in the number days to register an enterprise from 31 to 3, at a cost of US$170 (77% of GDP) instead of US$ 440 (200% of GDP) previously. Component 2: Implementing the Parastatal Reform 15. Principal activities supported under this component consisted of: (i) creating a regulatory framework; (ii) facilitating divestiture from public enterprises; and (iii) supporting the social cost of the reforms. Subcomponent 1: Creating a regulatory framework 16. Creating/Strengthening Regulatory Institutions. The project supported: (i) the Ministry of Posts, Telephones, and Telecommunications and the Authority for Regulation of Posts and Telecommunications in elaborating a sector policy document for telecommunications; (ii) the Ministry Energy in elaborating an electricity sector policy document and a draft Electricity Code (the Authority for Regulating the Electricity sector was passed by Parliament in January 2014), and in elaborating a draft Water Code; (iii) the Transport Ministry in preparing a draft law for the creation of the Authority for Transport Regulation (this hasn t been created, but the Authority for Civil Aviation was created in June 2011). 17. The Authority for Regulation of Posts and Telecommunications continues to face financial difficulties and suffer from insufficient technical know-how. Meanwhile, there has been significant growth in the wireless market segment. This has been achieved thanks to a relatively buoyant competitive market with six main active operational wireless network operators in 2014: Africell (7.7%), Airtel (37.5%), Oasis (12.9%), Vodacom (34.0%) and Orange (7.9%). The telecommunications industry has become the most dynamic sector in the economy of the DRC. More than $500 million was invested by the sector in the DRC between 24

39 1998 and Since 2006, Tigo alone has invested more than $300 million. The sector is generating annual revenues of more than $850 million, second only to the mining sector. In 2008, it contributed more than $160 million to the government budget one-third of the total government receipts.. However, mobile taxation (as a proportion of the cost of mobile phone ownership) is higher (29.14%) than the global average in African countries (18.14%). Such high taxes could undermine the adoption and use of broadband, mobile and other advanced ICT sector tools that are major drivers of development and growth. 18. Promulgating New Divestiture Laws. New privatization laws were promulgated aimed at divesting from state-owned enterprises and transforming them into commercial entities. These laws are: (i) Law No. 08/007 of 7 July 2008 laying down general provisions on the transformation of public enterprises; (ii) Law No. 08/008 of 7 July 2008 laying down general provisions on the divestiture from the State Enterprise Portfolio; (iii) Law No. 08/009 of 7 July 2008 laying down general provisions applicable to public institutions; and (iv) Law No. 08/010 of 7 July 2008 laying down rules on the organization and management of the State Portfolio. 19. A series of implementation decrees were also issued, namely: (i) Decree No. 09/11 of 24 April 2009 laying down transitional measures for the transformation of public enterprises; (ii) Decree No. 09/12 of 24 April 2009 establishing the list of public enterprises transformed into commercial companies, public institutions, and public service agencies; (iii) Decree No. 09/13 of 24 April 2009 on the dissolution of some public enterprises; (iv) Decree No. 09/14 of 24 April 2009 on the establishment, organization and operation of a public institution called "Special Fund for the Portfolio"; and (v) Decree No. 09/15 of 24 April 2009 on the establishment (as a public institution), as well as the organization and operation of COPIREP. 20. The state-owned enterprises were split into three categories: 20 commercial companies; 20 public establishments (6 of which were placed in liquidation); and 4 public service agencies. The project provided support for their re-registration under their new legal statuses, and the publication of their new articles of association in the Official Gazette (December 2010). It should be noted that all these SOE s will need to be re-registered again under OHADA corporate statutes to Société Anonyme (SA). In this regard, they need finalize valuations of their capital and prepare new balance sheets, as well as implement corporate governance structures. The project supported SOE governance and management training in OHADA accounting and corporate structures. Subcomponent 2: Facilitating Divestiture from public enterprises 21. Support to, and transformation of, SOEs proceeded in two phases: (i) stabilization and recovery of selected enterprises (carried out under this project); and (ii) their detailed restructuring (ongoing under sectoral projects). The project supported stabilization contracts for GECAMINES (Sofreco), SNEL (Vecturis), RVA (ADPI/KPMG), and ONATRA (Progosa) Regarding financial and operational restructuring, progress continues to be registered, albeit unevenly. Of the 7 strategic SOE s (GECAMINES, SNCC, SCTP/ONATRA, SNEL, SCPT, REGIDESO, and RVA), all steps for transformation have been completed at 3 of them 9 The RVA and ONATRA contracts were funded by Government as part of its contribution to the project. 25

40 (GECAMINES, SNCC, and SCTP/ONATRA), including debt restructuring, asset ownership confirmation, and new balance sheets. SNEL is mostly done with the asset and debt revaluation part of the process. 23. However, progress has been slower at SCPT, REGIDESO, and RVA due to their sectorspecific circumstances. SCPT s transformation remains constrained by the unresolved debate over splitting the postal from the telecomm business. REGIDESO has resolved is social debts, but key strategic decisions such as whether to keep it as one company or split it into autonomous regional companies are yet to be made. Issues at RVA relate to splitting assets and personnel between RVA and the Civil Aviation Authority that was created in June All of the SOEs face the heavy burden of resolving their employee-related debts, which is a subject that is being collectively addressed for all the enterprises by the Ministry of Labor and COPIREP. Subcomponent 3: Supporting the social cost of the reform 25. The project facilitated Voluntary Departure Programs at GECAMINES (10,654 individuals), SNCC (3,886 individuals), OCPT (4,950 individuals), and at the three defunct stateowned banks, namely BCA, BCCE, and NBK (3,480 individuals). The SNCC staff separation program was co-financed by the Multi-Modal Transport Project, whereas the REGIDESO departures were entirely financed by the Urban Water Supply Project. These programs were accompanied by training for the departing staff in different livelihoods to facilitate their smooth transition into their new life. Support was particularly concentrated in Katanga (third component of the project) given the large numbers of the concerned people in that province. 26. Some retirees petitioned the Inspection Panel, and while Bank Management disputed the grounds of the petition, additional health benefits were extended to 22,155 individuals and education benefits to 11,500 children. The project also supported audits for the INSS (Institut National de la Sécurité Sociale). Component 3: Initiative for Economic Development in the Katanga Region 27. The component aimed at creating new economic opportunities for the workers retrenched from GECAMINES and other public enterprises present in Katanga and at fostering regional economic development. Subcomponent 1: Small grants program to finance local economic development activities (US$2.40 million at appraisal) 28. These were small grants program to finance local economic development activities (such as worker training, seminar attendance, purchase of necessary equipment and improvement of production and marketing techniques). Linkages had been envisaged between this program and microfinance institutions active in Katanga. US$3.76 million was disbursed (the higher amounts disbursed are due to changes in the exchange rate during project implementation). This small grant program focused on partants volontaires. The Project supported several micro-projects for 26

41 1,569 individuals. In addition, 79 associations of voluntary departures involved in agricultural projects in the Lubumbashi, Likasi, and Kolwezi basin benefited from training from agricultural consultants. The linkages with microfinance institutions did not take place as expected, due to the weakness of the microfinance sector in Katanga. Subcomponent 2: Improvement of competitiveness in the region (US$0.94 million at appraisal) 29. This was aimed at activities to improve the competitiveness of the region by supporting technical assistance to help identify investment opportunities and upgrade skills and capacity of small and medium size enterprises around an emerging private mining industry. Linkages were to be created with local community development and business partners, namely mining companies, NGOs, microfinance institutions, business associations. Linkages would also be created with the economy of Zambia s copper belt. No activity was financed by the subcomponent. The IFC undertook an assessment of the copper belt mining supply chain in the Katanga province. Subcomponent 3: Transfer of social services to municipalities (US$1.04 million at appraisal) 30. This activity was to support the transfer of social services from Gecamines by transferring housing and social infrastructure assets that are on the balance sheet of GECAMINES to local private or non-profit institutions or to the Central Government. US$1.31 million was disbursed. In the context of GECAMINES restructuring, two in-depth analyses of the reorganization options for education and health activities were undertaken. It was recognized that for GECAMINES to recover and to become again a profitable mining enterprise, it could not continue to operate such a broad network of schools, health centers and hospitals. The important role of these schools and health services in the Katanga region was also recognized. However, it was determined that a gradual and careful transfer of GECAMINES schools and health services would be undertaken in the context of the next phase of GECAMINES restructuring. Transition support to GECAMINES schools and health services was funded under this subcomponent. Subcomponent 4: Set up of regional development frameworks (US$2.51 million) 31. Activities envisaged under this subcomponent included: (i) financing of local economic development activities and capacity building of local communities; (ii) assessment of infrastructure required to make private investment viable; (iii) analysis of the respective role and capacity of central and local governments to deliver essential services and to implement and maintain public infrastructure; and (iii) formulation of regional and local development frameworks. This would include the preparation of local (urban and rural) development plans and investment programs using participatory approaches. Help to design appropriate tools and methodologies for urban and rural communities to better manage local infrastructure maintenance and basic services delivery to their population. 32. US$70,000 was disbursed. COPIREP organized two workshops in Katanga on regional development frameworks. A number of these activities are undertaken in the context of other World Bank operations. In the context of the preparation of the forthcoming mining operation, an analysis of the infrastructure need of the mining sector is on-going (with participation from the 27

42 IFC). The recently approved decentralization operation intends to provide support to the Government of Katanga on regional and local development. Subcomponent 5: monitoring and evaluation (US$0.51 million) 33. Establishment of a monitoring and evaluation system for the program. US$ 160,000 was disbursed. Two studies from the University of Lubumbashi (base line survey and technical assistance to GECAMINES restructuring) were undertaken within this subcomponent. The impact study under the CRETES evaluation report was also undertaken within this subcomponent. Component 4: Project Coordination and Implementation Arrangements 34. The project strengthened the capacity of COPIREP turning it into a preeminent institution for leading SOE reforms. By Project s end, it had completed over 895 service contracts and conventions, 206 contracts for goods, and 68 Contracts for works. 28

43 Annex 3: Economic and Financial Analysis Introduction 1. The project's development objective was to increase the competitiveness of the economy, and thereby contribute to economic growth. The project was to achieve these objectives by assisting with improving the investment climate; supporting reform of public enterprises in the mining, telecoms, financial, transport, and energy sectors; stimulating economic diversification and development in the Katanga region through community-driven development approaches and facilitating the reintegration of retrenched workers in the local economy through support for training, business development services and finance. Restatement of Economic Analysis Estimates at Project Appraisal 2. In order to contextualize the team s analysis, the PAD had noted that the cost-benefit analysis of this type of private sector development and competitiveness project is delicate and presents the limits encountered in all similar projects, because of the difficulty in quantifying the economic benefits resulting mainly from the indirect relationship between the project s interventions and the stream of benefits With that caveat, the overall ERR at appraisal was estimated at 18.4 percent, with the corresponding NPV at US$ 31.5 million (for a 12 percent discount rate). Cost-benefit analysis was done for each of the principal elements of the project as follows: Improving the Investment Climate Matching Grant in the Katanga province Pioneering Mining competitive in the Katanga province Retrenchment Program Divestiture from the public enterprises NPV (US$ million) ERR ICR Update of the Project s Economic Analysis 4. Improving the Investment Climate. As stated above by the project appraisal team, linking changes in general economic activity to a specific project s interventions is always tenuous at best. In the case of the Improving the Investment Climate component under this project, the situation is compounded by lack of data in the project s M&E framework to facilitate such an analysis. Therefore, in the absence of a credible methodology to ascribe cause and effect, and due to the lack of necessary data in the M&E system, economic analysis linking changes in the country s general economic activity to improvements in the investment climate spurred by this project s interventions could not be updated, although it is widely acknowledged that project activities greatly contributed to significant improvements in the investment climate. 5. Matching Grants and Katanga Region Development. With respect to the matching grant, there were ultimately very few such activities carried out under the project. Only a small number of associations of retirees were given some funds, and this never became a significant activity of 29

44 the project. Same thing with the pioneering mining competitiveness in the Katanga province. No broad scale economic development program was undertaken by this small component: only a few activities to integrate retirees into their new life. Therefore, the economic analysis associated with these two activities is no longer applicable. 6. SOE Staff Retrenchment and Divestiture. The goal of the staff retrenchment program was to relieve companies of excess staff (a large number of whom were way over past retirement age, and not expected to be great entrepreneurs after leaving the SOEs). The economic value of the retrenchment activity was mainly in the improved financial performance of the SOEs. Therefore, the economic benefits of retrenchment are captured in the economic analysis of the SOE reform component. 7. Under the SOE Reform program, economic benefits would primarily derive from reduced SOE losses. Indeed, losses were reduced at the SOEs targeted for reform, although not enough to bring them to full profitability. The return on assets for the enterprises targeted by the project (GECAMINES, SNCC, RVA, ONATRA, SCPT, LAC, City Train, SNEL, and REGIDESO) was estimated at an average of -21 percent in By 2012, the average rate of return on assets for this group of enterprises had improved to -3 percent, a net gain of 18 percentage points. This was in part due to stabilization programs carried out at some of the SOEs (see Table 3.1 below) aimed at decelerating, halting, or otherwise reversing financial hemorrhage. 10 Table 3.1: Stabilization Contracts at 4 State-Owned Enterprises SOE Activity Contractor Period SNCC Railways Vecturis ; RVA Airport ADPI/KPMG ; ONATRA Ports, Vessels, Railway, etc. Progosa GECAMINES Mining Sofreco The specific activities carried out varied from enterprise to enterprise, ranging from greater financial controls, to better stock management, to human resource management. These SOEs had long lost a results-oriented culture. SNCC RVA In the period preceding the stabilization intervention, SNCC business turnover was declining at about 6.5 percent per year (with variation across years). With the stabilization contract, the decline was halted through financial controls, improving maintenance, etc., thus attracting business. RVA s business turnover was growing prior to the stabilization contract, by about 14 percent annually, but poor financial and human resource management were undercutting prospects for profitability. The intervention particularly focused on tighter financial control and increasing revenue. Overall, the stabilization s value-addition has been estimated at about 2 percent of business turnover. SCTP/ONATRA Similarly, ONATRA s turnover was growing at about 15 percent annually, 10 Stabilization at the utilities is part of the ongoing sector programs. The Urban Water Supply Project for REGIDESO, and several energy sector projects for SNEL. 30

45 but profitability was severely hampered by (among other things) poor port operations and financial management which were the areas of focus for the stabilization intervention. Its value-added was estimated at about 3 percent of business turnover. GECAMINES GECAMINES intervention was the most difficult. The company s turnover was growing, and so were the deficits. The intervention focused primarily on financial control and management of partnerships with other companies. Its contribution to stabilizing GECAMINES finances was estimated at 3 percent of current turnover. 9. The above information was used to construct a with and a without project scenario. The economic analysis is computed solely on the basis of the SOE reform component, which constituted 53 percent of project costs. The ERR is estimated at 22 percent. 31

46 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Lending Alain Labeau Senior Program Coordinator AFTTR Transport Alexandre Dessou Senior Transport Specialist AFTTR Transport Amadou Dem Economist AFTFP Econ. Analysis Ann Rennie Lead Financial Sector Specialist AFTFP Financial Sector Babacar Faye Legal Advisor CAFAS Legal Celeste Mukuna Team Assistant AFMCD General Support Gilles Veuillot Senior Counsel LEGAF Legal Guillemette Jaffrin Finance Sector Specialist AFTFP Financial Sector Irene Chacon Operational Analyst AFTPF Analytical Support Ivan Rossignol Sector Leader AFTFP Team Leader Jean Charles Kra Senior Financial Management Specialist AFTFM Financial Management Josephine Ngou Program Assistant AFTFP General Support Marie Khoury Consultant LOAFC Disbursements Maurice Adoni Procurement Specialist AFTPC Procurement Michael Goldberg Senior Private Sector Dev. Specialist LCSPF Public Enterprises Philippe Mahele Procurement Specialist AFTPC Procurement Pierre Pozzo di Borgo Senior Transport Economist AFTTR Transport Vincent Palmade Lead Economist FIAS Investment Climate Supervision/ICR Amadou Dem Senior Economist GTCDR Investment Climate Andrea Vasquez-Sanchez Sr. Program Asst. GFMDR General Support Ann Christine Rennie Consultant GFMDR Financial Sector Bourama Diaite Senior Procurement Specialist GGODR Procurement Celeste Mukuna Team Assistant AFCC2 General Support Clement Tukeba Lessa Kimpuni Senior Procurement Specialist GGODR Procurement Etienne NKoa Sr. Financial Management Specia AFTME - HIS Financial Management Gilberto de Barros Senior Private Sector Developm GTCDR Public Enterprises Gilles Marie Veuillot Consultant AFTN2 - HIS Legal Guillemette Sidonie Jaffrin Senior Private Sector Developm GFMDR Team Leader Ivan Rossignol Chief Technical Specialist GTCDR Team Leader Jacqueline Beatriz Veloz Lockward Program Assistant GTCDR General Support Jean Charles Amon Kra Sr. Financial Management Specia GGODR Financial Management Josiane V. Raveloarison Senior Private Sector Developm AFTFE - HIS Investment Climate Julien Emmanuel Galant Consultant GTCDR Public Enterprises Leonce Kazumba Team Assistant AFCC2 General Support Maurice Adoni Senior Procurement Specialist GGODR Procurement Mohammed A. Bekhechi Consultant GSURR Legal/Safeguards Paul Jonathan Martin Program Leader AFCW3 Investment Climate Philippe Mahele Liwoke Senior Procurement Specialist GGODR Procurement Pierre A. Pozzo di Borgo Principal Investment Officer CNGSI Transport Rebecca Kumuamba Team Assistant AFMCD - HIS General Support Richard Muamba Kasenga Associate Investment Officer CAFE1 Investment Climate 32

47 Thomas Jeffrey Ramin Senior Operations Officer DFGPE Results Framework Tonle Josephine Ngou Mawamba Senior Executive Assistant GSPDR General Support Veronique Gorce Program Assistant GTCDR General Support Vincent Palmade Lead Economist GTCDR Investment Climate Irene Marguerite Nnomo Ayinda- Mah Program Assistant GTCDR General Support (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY FY FY Total: Supervision/ICR FY FY FY FY FY FY FY FY FY FY FY FY FY Total: 1,

48 Annex 5: Summary of Borrower s ICR I. Project Description 1. The Private Sector Development and Competiveness Project, which was financed by the World Bank and the Government, and implemented by COPIREP, became effective on 02 December, Its initial closing date was 31March 2010, but it was extended twice, first to June , then to June 30, World Bank financing was provided under Credit Number 3815-DRC for SDR 87.1 million (US$ million), and under Grant Number H3660-DRC for SDR 37.5 million (US$ 60 million). 2. The objectives of the project were to: (i) improve the business climate by putting in place a new judicial and fiscal regime; (ii) enhance private sector participation in the economy; and (iii) revitalize the Katanga mining region as part of reforming the mining sector. 3. Expected results included: (i) employment generation in the medium term; (ii) increased private investments; (iii) improved access to telephone, electricity, rail and air transport, and water services; (iv) greater fiscal space through divestiture and a reduction in subsidies to stateowned enterprises; (v) economic growth (per capita GDP), and (vi) a reduction in poverty. 4. The project components were: (i) Improving the Investment Climate; (ii) Reforming Public Enterprises; (iii) Initiatives for development in Katanga region; and (iv) and Project Management. 5. Improving the investment climate. The principal aims were to: (a) consolidate the judicial system and improve the fiscal and legal framework; (b) facilitate financial intermediation; (c) contribute to improving the capacity of the Ministry of Mines; and (d) facilitate Public-Private Sector dialogue. Priority actions included: (a) supporting the judicial system and the General Inspection of Judicial Services; (b) setting up arbitration centers; (c) supporting commercial tribunals; (d) supporting the process of DRC s adhesion to OHADA; (e) restoring financial intermediation; (f) strengthening the capacity of the Ministry of Mines; (g) promoting the dialogue between the public and private sector. 6. Implementing SOE reforms. The principal aims were to: (a) establish a regulatory framework; (b) facilitate the State s divestiture from public enterprises; (c) support social costs of the reforms; and (d) support the implementation of the reforms. Priority actions included: (a) modernization of legal and institutional framework of public enterprises; (b) support to sector reforms; (c) transformation of public enterprises; (d) restructuring of public enterprises; (e) implementation of the social dimension of the reforms; and (f) reform of the Superior Council of State Enterprises. 7. Initiative for development of Katanga Region. The principal aims were to: (a) finance micro projects; (ii) study the chain of sub-contracting and improvements in the competitiveness of the SMEs in Katanga; (iii) transfer social services to municipalities; and (iv) support rural development. 34

49 8. Project Management. This entailed: (i) project administration; and (ii) managing the social aspects of GECAMINES through the Reinsertion Unit for Katanga (URK). II. Project Outputs A) Improving the Investment Climate 9. Supporting the judicial system: (i) rehabilitation of the building and providing furniture and computers to the General Inspection of Judiciary Services; (ii) supporting a program for archiving judicial documents and the training of clerks on the new archiving program of judicial documents; (iii) rehabilitating and equipping the Archives Room of the Appeals Court of Kinshasa/Gombe with shelving equipment, furniture, computers and archiving boxes; (iv) archiving judicial documents of the Appeals Court of Kinshasa/Gombe; (v) supplying computers to the Appeals Courts and the High Court of Kinshasa, Lubumbashi and Kisangani; Providing computer training to the staff of the Appeals Court and High Court of Kinshasa 10. Setting up Arbitration Centers: (i) rehabilitating the premises for CAC and CENACOM; (ii) providing furniture, computers, and setting up websites for these two centers, training arbitrators, and auxiliary staff of these centers; (iii) supporting operating costs and staff costs of these two centers. 11. Support to the Commercial Tribunals: (i) support of local and external training (at International Development Law Organization in Rome) of judges; (ii) provision office equipment, furniture, and robes for commercial tribunals in Kinshasa/Gombe, Kinshasa/Matete and Lubumbashi; (iii) rehabilitation of the building for the Commercial Tribunal of Kisangani; (iv) rehabilitation of the building for the Commercial Tribunal of Matadi. 12. Support to the process of DRC s adhesion to OHADA: (i) training of 450 Congolese lawyers and economists about the OHADA laws in 2005; (ii) training of 350 Congolese magistrates, clerks, and bailiffs in OHADA laws at the School of Higher Education for Judges (Ecole Supérieure de la Magistrature) in February 2011; (iii) training of 10 trainers at ERSUMA in December 2011; (iv) distribution of the OHADA laws to the Supreme Court, to the Appeals Courts, and the prosecutors at the Appeals Courts, universities and different other institutions in the country printing of 8,000 copies of the documents on harmonization of the Congolese law to OHADA laws and their distribution to universities and administrative jurisdictions; (v) conducting a study on the modalities of DRC s adhesion to OHADA, a study which facilitated Government in transmitting DRC s letter of intention to adhere to OHADA; (vi) completing a study on harmonizing the national laws to the OHADA regime, et a draft law on implementing OHADA which was transmitted to the Government; (v) preparing and transmitting to Government of the draft text for the creation of the OHADA National Commission (CNO) in 2006 and 2009; (vi) providing a technical assistant to the CNO for establishing that institution; (vii) rehabilitation and furnishing the CNO premises. 13. Strengthening the Capacity of the Ministry of Mines: (i) dissemination of the Mining Code and its Regulations; (ii) putting in place the Commission for Validating Rights to Mines and Quarries; (iii) organizing a seminar on artisanal mining in Katanga; (iv) training staff of the 35

50 Ministries of Mines and Finance on procedures of collecting fiscal revenue under new mining code; (v) financing operating costs of the Commission for Validating Mining Titles; (vi) supporting the process of writing the Mining Plan aimed at clarifying the mining policy and maximizing the benefits of the mining sector reforms; (vii) provision of four-wheel drive vehicles to provincial mining administrations (Maniema, Sud-Kivu, Equateur, Province Orientale and Kasaï-Oriental). 14. Promoting dialogue between the public and private sectors: (i) financing the National Economic Forum held in December 2004 and the study on administrative harassment and barriers to investments which was carried out by FIAS (Foreign Investment Advisory Service); (ii) supporting operating costs of the National Agency for Investment Promotion (ANAPI); (iii) supporting operating costs of the Steering Committee for Improving the Business Climate (CPCAI); (iv) assisting the Government in implementing a program for improving and simplifying regulations on urbanism and the procedures for granting construction permits as well as land, and administrative procedures for property transfer; (v) supporting the project for creating special economic zones by financing operating costs (for three years) of that project s Steering Committee; (vi) supporting the General Directorate for Customs and Excise (DGDA) in setting up the Single Window at the Port of Matadi. B) Public Enterprise Reform 15. Modernizing the legal and institutional framework for public enterprises. (1) Drafting the following four laws promulgated by the President of the Republic, namely: (a) Law No. 08/007 of 7 July 2008 laying down general provisions on the transformation of public enterprises; (b) Law No. 08/008 of 7 July 2008 laying down general provisions on the divestiture from the Enterprise Portfolio; (c) Law No. 08/009 of 7 July 2008 laying down general provisions applicable to public institutions; (d) Law No. 08/010 of 7 July 2008 laying down rules on the organization and management of the State Portfolio. (2) Preparation and monitoring of six decrees implementing the four laws mentioned above, namely: (a) Decree No. 09/11 of 24 April 2009 laying down transitional measures for the transformation of public enterprises; (b) Decree No. 09/12 of 24 April 2009 establishing the list of public enterprises transformed into commercial companies, public institutions and public service agencies; (c) Decree No. 09/13 of 24 April 2009 on the dissolution of some public enterprises; (d) Decree No. 09/14 of 24 April 2009 on the establishment, organization and operation of a public institution called "Special Fund for the Portfolio"; (e) Decree No. 09/15 of 24 April 2009 on the establishment, organization and operation of a public institution called the "Steering Committee for the Reform of State Enterprises, COPIREP in short." 16. Support to Sector Reforms. (i) supporting the process for the planned creation of an Authority for Transport Regulation (ART) including training of future staff of ART and preparing a draft law for the creation of ART (law hasn t been approved yet) ; (ii) supporting the writing of an electricity sector policy document and drafting the Electricity Code; (iii) providing financial and technical support to the Technical Support Unit of the Ministry of Energy in elaborating a draft Water Code; (iv) providing financial and technical support to the Ministry of Posts, Telephones, and Telecommunication (PTT) and to the Authority for Regulation of Posts and Telecommunications (ARPTC) in elaborating a sector policy document for 36

51 telecommunications. (v) supporting Mining sector reforms, including setting up satellite offices/counters in Kinshasa and Lubumbashi and a computerized system for the management of mining titles (SIGTIM), carrying out an organizational audit of Mining Cadaster as part of its restructuring, putting in place a financial audit of the Mining Cadaster in order clean up its financial situation, revising the southern one third of the DRC geodetic network in order to strengthen the technical capacity to manage mining titles; (vi) support to Financial Sector Reforms, including supporting the drafting of the Insurance Code, providing financial support for the Fund for the Promotion of Microfinance, and supporting the establishment of the national payments system. 17. Transformation of Public Enterprises. Supported the transformation of public enterprises into: 20 commercial companies, 20 public establishments, 4 public service institutions. Also supported the adoption of the Statute of the 20 commercial companies and for their filing with the registry of the commercial courts, and the publication of their articles in the Official Gazette dated December 29, In addition, recruited international firms to assist in carrying due diligence of the six transformative companies for the purpose of determining their authorized capital and the establishment of their opening balance sheet. 18. Restructuring of the Public Enterprises. For the targeted enterprises, supported general assessments and the elaboration of restructuring options. (i) (ii) REGIDESO: The strategy adopted involves the implementation of an Emergency Recovery Plan with a performance contract between the State and REGIDESO and a service contract with a specialized operator for strengthening REGIDESO s capabilities in key functions. The State REGIDESO performance contract was signed on 27 February FINAGESTION/SDE was selected for the service contract and LAHMEYER International for the audit contract both of which are ongoing. SNEL: Implementation of the first phase of an emergency recovery plan for five years under a State-SNEL performance contract, and a service contract with a specialized operator for strengthening SNEL s capacity critical functions. The State-SNEL performance contract was signed on 27 February The selection process for operators to act under service and audit contracts resulted in the hiring of KPMG, which has been operational for the audit contract. (iii) GÉCAMINES: Establishment of a preliminary recovery strategy in the form of a stabilization and recovery plan of industrial activities before proceeding to the actual restructuring. The Stabilization Plan of GECAMINES industrial activities was carried out from 2006 to 2008 by the firm SOFRECO. GECAMINES general diagnosis of 2010 was updated in 2014 in order to define strategic options for its final restructuring. Besides the possibility of maintaining it in its current form (status-quo) and externalizing its social sector, three restructuring options are possible, namely, the creation of: (a) a Holding with four distinct subsidiaries (Mines, Joint-Ventures, Profit Centers, and Agroindustry); (b) four distinct 37

52 companies: Mining (prospecting, mines and metallurgy), joint-ventures (nonmining partnerships, mining partnerships, asset management patrimony, Industrial (Profit Centers) and Agroindustry; (c) three distinct companies mining, joint-ventures, and industry (Profit Centers and Agroindustry). (iv) (v) (vi) (vii) SNCC: The stabilization and recovery assignment was given to Vecturis. The restructuring strategy is as follows: (a) refocussing SNCC on its core business, namely rail transport; (b) assignment as an Integrated Concession (track and rolling stock) of the railway activity to a private operator; (c) the State s divestiture from SNCC s ancillary activities RVA: The management assistance mission was given to ADPI/KPMG. Strategy entails: (a) putting in place technical assistance, in accordance with the recommendations of the donors, in order to ensure the safety of investments to be made; (b) a phase for recovery and consolidation of the stabilization aimed at preparing RVA for effective restructuring; (c) organization of a donors round table for financing RVA s investment program; (d) separation of RVA into two entities; (e) putting in place public-private partnerships with the entity responsible for managing the airports. SCTP (ONATRA): Stabilization mission given to Progosa SA. Restructuring strategy envisages its transformation into a State-owned company with in operational activities run through a PPP. SCPT: The strategic options under consideration include splitting the company into two distinct branches: (i) the Post on the one hand, and Telecommunications on the other; or (ii) creating a single company for the Post and two telecommunications companies, namely: a) Congo Telecomm, a retail telecommunication company, and (b) Congo Câble, a wholesale telecommunication company. Implementation of the Social Program. (i) GECAMINES: The social plan for voluntary departures for USD 43 million. (ii) Liquidated Public Banks: Implementing the social program related to the liquidation of NBK, BCA and BCCE. Payment of terminal benefits to 220 active staff and 73 non-active staff of BCA, 1369 active staff and 541 non active staff of BCCE, and 1,012 active stuff and 265 non-active staff of NBK. The total terminal benefits paid amount to USD 10,698,895. (iii) SCPT: Terminal benefits in the amount of USD 11.5 million were paid for 2,211 persons, namely: 369 staff retired in 2003 and 2004 as well as 1,423 staff retired between 1984 and 2002; and 289 dead staff represented by their next of kin. 38

53 (iv) REGIDESO: This plan (in the amount of USD9,753,836.83) and covering 446 persons was financed by the Urban Water Supply Project which had come on stream by 2010 when the plan was implemented. (v) (vi) SNCC: The social plan was executed in November 2011 and in Terminal benefits amounted to USD 24 million for the first phase, and USD 26 million for the second phase. The third phase will cost USD 8.7 million for 480 retirees. CSP: Completed the organizational and strategic audit of the Supreme Council of the Portfolio (Conseil supérieur du Portefeuille) in order to adapt its mission and the way it works. C) Initiatives for the economic development of Katanga (i) The program of micro-financing and communication and monitoring the reinsertion projects was completed. (ii) 41 micro-projects involving 234 individuals, and a second lot of 111 projects for 1,486 individuals and another lot of 79 agricultural projects bringing together 1,569 individuals were completed. (iii) The 79 associations of voluntary departures involved in agricultural projects in the Lubumbashi, Likasi, and Kolwezi basin benefited from training from agricultural consultants. (iv) Studies on the restructuring of GECAMINES medical network and schools were completed. III. Project Outcomes 19. Foreign direct investment in mining, transport, energy, telecoms and financial reach USD 1 billion per year by 2012, starting in the amount of USD 200 million. This has been achieved in five out of the last six years. 20. The average return on assets for each targeted company (GECAMINES, REGIDESO, RVA, SCPT, SCTP, SNCC and SNEL) increased from the average of -21% to +2% by the end of project implementation. This has not been achieved by any of the enterprises, and only SNEL has a positive return on assets. 21. Net budgetary contribution of public companies and portfolio companies increased by $ 10 million annually. This has been achieved. 5.00% 0.00% -5.00% % Gécamines REGIDESO SNEL SNCC RVA SCTP SCPT 39

54 22. Total Domestic credit to the private sector reaches 4.8 % of GDP in This has been achieved. 23. Total savings of the financial sector reaches 10.4 % of GDP in This has been achieved. 24. Number of days for small business creation by 50% between 2006 and 2011 (Doing Business indicator). Achieved IV. Constraints (i) Multiplicity of decision centers and divergence of views among stakeholders (ii) Inadequate resources for financing activities (iii) Misperception of COPIREP s duo role as an advisory body of Government for public enterprise reforms and an implementing agency of a World Bank-funded project (iv) Lukewarm support for public enterprise reforms from certain decision makers, leaders of certain enterprises, as well trade unions for different reasons (v) The delay or lack of decision to enable advancing in implementing certain restructuring strategies (vi) Lack of investment and working capital because of lack of own-funds and poor creditworthiness of the enterprises, and limited resources of the State (the owner) (vii) Lack of resources to finance the reform, including the social dimension, without which business recovery would be an illusion (viii) Absence of reliable financial statements making it difficult to know the real situation of the company (ix) Ignorance about the true magnitude of the decay of the enterprises at the beginning of the project (x) Sometimes lack of diligence by IDA to non-objection requests (xi) Excessive debt levels for the most part, although reduced by the implementation of the decree on non-assumable debts (xii) Absence of a results culture (xiii) Confusion entertained of wrongly equating the reform to selling off cheaply the national heritage, increasing the cost of social services, and accentuating unemployment 40