Implementation Status & Results Congo, Democratic Republic of DR Congo Private Sector Development and Competitiveness Project (P071144)

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1 Public Disclosure Authorized Public Disclosure Authorized The World Bank Implementation Status & Results Congo, Democratic Republic of DR Congo Private Sector Development and Competitiveness Project (P071144) Operation Name: DR Congo Private Sector Development and Competitiveness Project Stage: Implementation Seq.No: 20 Status: ARCHIVED Archive : 19-Dec-2012 Project (P071144) Country: Congo, Democratic Republic of Approval FY: 2004 Product Line: IBRD/IDA Region: AFRICA Lending Instrument: Specific Investment Loan Implementing Agency(ies): Key s Board Approval 29-Jul-2003 Original Closing 01-May-2010 Planned Mid Term Review Last Archived ISR 20-Jun-2012 Effectiveness 02-Dec-2003 Revised Closing 31-Dec-2012 Actual Mid Term Review Project Development Objectives Project Development Objective (from Project Appraisal Document) 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. Has the Project Development Objective been changed since Board Approval of the Project? Yes No losure Authorized Public Disclosure Authorized Component(s) Component Name Component Cost IMPROVING THE INVESTMENT CLIMATE IMPLEMENTING THE PARASTATAL REFORM PIONEERING MINING COMPETITIVENESS IN THE KATANGA REGION 7.30 PROJECT COORDINATION AND IMPLEMENTATION ARRANGEMENTS 6.20 UNALLOCATED (PPF) 1.50 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Unsatisfactory Moderately Satisfactory Overall Risk Rating Substantial Implementation Status Overview Page 1 of 8

2 Strong implementation achievements by the new government since June have significantly improved the performance and outlook of this project, whose implementation is now galloping across all components, in start contrast with lack of forward movement during the political elections period. Major breakthroughs occurred that unblocked core reforms across the SOE agenda, investment climate, and financial sector, after months of wait in state of preparedness. (Highlights are listed in the 2 bullet points below.) Impressive implementation progress during the latest supervision period warrants an improved rating to Moderately Satisfactory, which is the Project's PDO rating, given that most of the measurable indicators have been achieved. Institutional reforms are significant and irreversible. The closing of the Project will be postponed by 6 months to allow smooth closure and transfer of selected unfinished activities to other projects. 1. On the SOE agenda, the long-stalled Decree for Resolution of Non-Secured SOE Liabilities was finally implemented and facilitated the completion of restructuring of the first strategic SOEs, i.e. Gecamines, among others; other SOEs (e.g. SNEL and REGIDESO) instituted management performance contracts supported by private consultants, and a private operator was sought for airport authority RVA, while a new PPP strategy was prepared to complete the restructuring of ONATRA/SCTP; a new regulatory framework was completed for the telecommunications industry and for the restructuring of OCPT; settlement of social debts and revision of collective union agreements has started with success at the SOEs after unions accepted massive debt write-down of labor claims at the national airline LAC, thereby setting an important precedent applicable across the sector. 2. On investment climate and the financial sector, a series of high-impact reforms were realized, including OHADA adhesion and new legal framework becoming effective in September, while government is actively preparing to sign the NY Convention on Arbitration; CPCAI is vigorously implementing a pilot One Stop Shop for business registration with Prime Minister calling for 3 day target registration time; the PM personally intervened to unblock the customs/trade facilitation single window and speed up the processing of trade transactions at borders; the CPCAI Roadmap is moving swiftly forward across all fronts, including the drafting of new laws on labor, land use, consumer protection, etc., though facing funding shortage at Project closure. IDA funding of the Microfinance fund was successfully processed disbursed to servicing beneficiaries; procurement hurdles were overcome for Payment Systems TA; and a number of regulatory improvements made in the financial sector, including training of inspectors, and new laws for regulation of credit cooperatives. Project disbursement improved dramatically, with $8.7 million disbursed since June bringing total disbursements to $164.2 million (91% of project proceeds). The FMS was upgraded to satisfactory, while the executing agency COPIREP has been delivering consistently good performance despite a tighter budget constraint and higher workloads. Locations Country First Administrative Division Location Planned Actual Congo, Dem Rep Province du Katanga Province du Katanga Congo, Dem Rep Ville de Kinshasa Ville de Kinshasa Results Project Development Objective Indicators Page 2 of 8

3 Indicator Name Core Unit of Measure Baseline Current End Target Increased FDIs in the mining, transport, Text Value US$200m annually Fell to $1.69 in 2011 but US$1bn annually energy, telecom and financial sectors. recovered to $2.9 billion in 2012 to date 02-Jul-2003 Return on assets for targeted SOEs (SNEL, SNCC, RVA, OCPT, City Train, Gecamines, LAC) from -21% to 2% by end of project Increased net fiscal contribution from parastatals. This target has been surpassed but is interesting only for illustration, not for attribution, as the economy is susceptible to external shocks and is experiencing military action on its territory Target largely achieved, except when hit by acute external shocks such as in Text Value -21% This indicator contains nontargeted 2% SOEs which are defunct and can not be measured. Moreover the Return on Assets can not be compared with old, due to adoption of new balance sheets after transformation to SARL status and adoption of OHADA, it renders the comparison of Return on Assets useless and inappropriate. 02-Jul-2003 Text Value 0 Problematic indicator because US$10m annually. of difficulty to measure, and makes no sense to compare old SOE with posttransformation to SARL, dueto changed balance sheets and new dividend policies 02-Jul-2003 Page 3 of 8

4 Total domestic credit to private sector increase to 4.8% of GDP by 2011 Total savings (M3) in financial sector increase to 10.4% of GDP by 2011 Text Value 2006: 2.9% Slow to get this data, will not 4.8% in 2011 have the year-end update till early Dec-2006 Text Value 2006: 6.3% Target surpassed, 2012 data 10.4% in 2011 will be avialable in early 2013, however, performance of commercial banks has improved as per recent IMF report 31-Dec-2006 Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target ATI: Issuance of Insurance Contracts of $10,000,000 by Y3 and $100,000,000 by Y6. Legal gazette regularly published and available online Number of days to create a company reduced by 50% between 2006 and 2011 Text Value 0 Target was achieved and this project has ended its support to ATI (unless later revived) 16-Aug-2004 Target achieved. Current value of DRC portfolio is over $300 million, thus exceeding targets. Text Value Legal gazette not regularly Done regularly published 31-Dec-2003 Target achieved on regular basis. Text Value 2006: 155 days Target acheived (58 days as per DB2013) and continues to improve. 31-Dec-2006 Target largely achieved, while work continues on Single Window (one stop shop) that can process in 3 days Issuance of Insurance Contracts of $10,000, Dec-2010 Target achieved Legal gazette regularly published and available online Target achieved 2011: 78 days Target largely achieved, with further improvement expected Page 4 of 8

5 By end 2010, the commercial courts in Kinshasa and Lubumbashi render an average of 50 judgments per year, and the new commercial courts are operational OHADA Commission created within 6 months of OHADA ratification and operational within one year By end of project, the microfinance sector reaches around 300,000 clients in DRC Commercial banks compliance with key prudential norms is satisfactory Text Value Commercial courts in Gombe and Matete (Kinshasa) and in Lubumbashi are operational 31-Dec-2007 Target approximately achieved, will compile 2012 summary in early 2013 New courts are operational, but the number of cases is still a trickle due to preference to settle out of court, often opting for the alternative dispute resolution methods also supported by the project. Precise numbers still being collected. 50 judgments by end 2011 Text Value OHADA treaty not yet ratified Target achieved OHADA Commission operational 31-Dec-2007 National OHADA Commission was already inaugurated in April Text Value 100,000 (estimate) Target achieved, next update 300,000 in early Dec-2007 As of Dec 31, 2009, clients exceed 500,000, indicating phenomenal sector growth. Target already exceeded. Text Value Information not available Target achieved, with IMF help. 31-Dec-2007 FSAP will examine in detail in All banks respect key prudential ratios New privatization laws promulgated Text Value Laws not yet promulgated Target achieved in New privatization laws promulgated 31-Dec-2003 Target met in 2008, and reinforced by decrees in Dec-2009 Done Page 5 of 8

6 All targeted SOEs have some private sector involvement, either through PPP, management contract or other arrangement By July 2010, a restructuring strategy acceptable to IDA for SNCC is approved by the Government (includes the identification and implementation of the most suited divestiture method) By July 2009, inventories of SNCC assets and liabilities are completed. By April 2010, an agreement on the settlement of public debts of SNCC has been reached, commercial debts are identified Text Value No private sector participation Achieved at 5 of 7 strategic SOEs. 31-Dec-2002 Text Value No restructuring strategy for SNCC 31-Dec-2007 Recently completed PPP strategy for ONATRA/SCTP and RVA. RVA is bringing back a private operator ADP. Only ONATRA andocpt remains without partner, the latter being largely defunct. Target achieved. Restructuring strategy approved by government in March 2010, to be supported by Multimodal Transport Project approved by Board on June 29, 2010, in tandem with this project. Text Value No inventory available Ongoing by private operator as part of valuation of company. 31-Dec-2007 Work not completed due to difficulty of private contractor to account for assets located in conflict areas of DRC. Text Value No reliable financial information available Target achieved. Debt restructuring/settlement is an ongoing process. All targeted SOEs have some private sector involvement, either through PPP, management contract or other arrangement By July 2010, a restructuring strategy acceptable to IDA for SNCC is approved by the Government (includes the identification and implementationof the most suited divestiture method) 31-Jul-2010 Done 31-Dec Apr-2010 By July 2009, inventories of SNCC assets and liabilities are completed 31-Jul-2008 By April 2010, an agreement on the settlement of public debts of SNCC has been reached, commercial debts are identified Page 6 of 8

7 10,000 Gecamines workers retrenched Text Value Retrenchment plan not completed 31-Dec-2002 By April 2010, the required retrenchment program at SNCC has been completed. Text Value Initial retrenchment plan not completed 31-Dec-2007 Debts audit was delayed by procurement challenge of selected audit firm. This task has been cancelled. It will be financed by themultimodal Transport Project in Target achieved Target met in Target achieved Retrenchment program had to be reformulated as a purely retirement program, with a new requirement for government co-financing of all salary arrears. Union agreement had to be renegotiated in April Now awaiting funding from the project, once its restructuring/reallocation is completed by April ,000 Gecamines workers retrenched 31-Dec-2009 Done By April 2010, the required retrenchment program at SNCC has been completed. 30-Apr-2011 Depends on when the Multimodal Transport Project becomes effective, now scheduled for April 2011 Data on Financial Performance (as of 23-Nov-2012) Financial Agreement(s) Key s Project Ln/Cr/Tf Status Approval Signing Effectiveness Original Closing Revised Closing P IDA Effective 29-Jul Aug Dec Mar Dec-2012 P IDA-3815A Closed 29-Jul Aug Dec May May-2010 P IDA-H3660 Effective 22-Apr May Aug Dec Dec-2012 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P IDA Effective XDR P IDA-3815A Closed XDR P IDA-H3660 Effective XDR Page 7 of 8

8 Disbursement Graph Key Decisions Regarding Implementation Following adoption of laws for resolution of Non-secured SOE liabilities, there are still pending government policies to decide on the ownership of strategic assets at SOEs in order to complete the restructuring of public utility companies, though it should be noted that the pace of this work has improved on a sector-by-sector basis (energy, water, transport, etc) due to policy-level support from Bank s other sector projects. Currently in process is legislative approval of adhesion to the New York Convention on Commercial Arbitration. Agreement was reached to extend the Project to June 2013 to facilitate smooth transfer of continuing activities (e.g. the Gecamines IP action plan and Payments System) to other Bank projects. Restructuring History There has been no restructuring to date. Related Projects P Additional Financing for Private Sector Development and Competitiveness Project Page 8 of 8