FOR OFFICIAL USE ONLY RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING BUSINESS DEVELOPMENT AND INVESTMENT PROJECT GRANT H865-0-HT

Transcription

1 Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES15978 Public Disclosure Authorized RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF BUSINESS DEVELOPMENT AND INVESTMENT PROJECT Public Disclosure Authorized GRANT H865-0-HT BOARD APPROVAL DATE: 21 MAY 2013 TO THE REPUBLIC OF HAITI DECEMBER 21, 2015 Public Disclosure Authorized GTCDR LAC This document has a restricted distribution and may be used by recipients only in the performance of their official duties Its contents may not otherwise be disclosed without World Bank authorization

2 ABBREVIATIONS AND ACRONYMS BDS CCSPP CCAH CFI CPRDA DB ERR ESMF FM FY IBRD IDA IEZ IFC LAC MCI M&E MEF MSME NPV ORAF OSS PAD PDO PIU PPA PSEF TTL UCP US Business Development Services Cellule de Coordination et Suivi des Politiques Publiques Chambre de Conciliation et d Arbitrage d Haiti Centre de Facilitation des Investissements Commission Présidentielle de Réforme du Droit des Affaires Doing Business Economic Rate of Return Environmental and Social Management Framework Financial Management Fiscal Year International Bank for Reconstruction and Development International Development Association Integrated Economic Zone International Finance Corporation Latin America and the Caribbean Ministère du Commerce et de l Industrie Monitoring and Evaluation Ministry of Economy and Finance Micro, Small and Medium Enterprises Net Present Value Operational Risk Assessment Framework One Stop Shop Project Appraisal Document Project Development Objective Project Implementation Unit Project Preparation Advance Private Sector Economic Forum Task Team Leader L Unité de Coordination de Projet United States 2

3 US$ WB WBG United States Dollar World Bank World Bank Group Regional Vice President: Country Director: Senior Global Practice Director: Practice Manager: Task Team Leader: Co-Task Team Leader: Jorge Familiar Calderon Mary Barton-Dock Anabel Gonzalez Marialisa Motta Maria Deborah Kim Emiliano Duch 3

4 HAITI Business Development and Investment Project CONTENTS A SUMMARY 7 B PROJECT STATUS 9 C PROPOSED CHANGES 12 D APPRAISAL SUMMARY 15 ANNEX 1: RESULTS FRAMEWORK AND MONITORING 16 ANNEX 2: SUPPLEMENTAL TECHNICAL AND FIDUCIARY INFORMATION 27 ANNEX 3: OPERATIONAL RISK ASSESSMENT FRAMEWORK 31 4

5 DATA SHEET Haiti Business Development and Investment Project (P123974) LATIN AMERICA AND CARIBBEAN Trade & Competitiveness Report No: RES15978 Basic Information Project ID: P Lending Instrument: Specific Investment Loan Regional Vice President: Jorge Familiar Calderon Original EA Category: Partial Assessment (B) Country Director: Mary A Barton-Dock Current EA Category: Partial Assessment (B) Senior Global Practice Director: Anabel Gonzalez Original Approval : 21-May-2013 Practice Manager: Marialisa Motta Current Closing : 31-May-2018 Team Leaders: Maria Deborah Kim Emiliano Duch Borrower: Responsible Agency: Republic of Haiti Ministry of Trade and Industry Restructuring Type Form Type: Full Restructuring Paper Decision Authority: Country Director Approval Restructuring Level: Level 2 Financing ( as of -Nov-2015 ) Key s 5

6 Project Ln/Cr/TF Status Approval Signing Effectiveness Original Closing Revised Closing P IDA-H8650 Effective 21-May Jun Nov May Nov-2019 Disbursements (in Millions) Project Ln/Cr/TF Status Currency Original Revised Cancelle d Disburse d Undisbur sed % Disburse d P IDA-H8650 Effective XDR Policy Waivers Does the project depart from the CAS/CPF in content or in other significant respects? Yes [ ] No [ X ] Does the project require any policy waiver(s)? Yes [ ] No [ X ] A Summary of Proposed Changes This document proposes a Level 2 restructuring at the request of the Recipient The Business Development and Investment Project will continue to pursue its development objective of improving the conditions for private sector investment and inclusive growth, but will move away from a focus on integrated economic zones and instead focus on the development of value chains The restructuring will reallocate funds from the integrated economic zones activities towards: (i) the expansion of support for the Ministry of Commerce and Industry (MCI) s regional offices, from 1 to 10 regional offices; and (ii) aggregating the Matching Grants to benefit a group of Micro, Small and Medium Enterprises (MSMEs) and increasing the total envelope for Matching Grants from USD 4 to USD 8 million Through the proposed restructuring, the project no longer aims to establish IEZs The Matching Grants would be allocated to groups of MSMEs in the same value chain (no longer individual MSMEs) to improve the quality of their products and access services currently missing from the value chain which are needed to increase the MSMEs share of value of the product and to reach more lucrative markets The restructuring proposes to reduce the number of matching grants and increase their value, in order to increase their impact and reduce transaction costs The project will finance two types of Matching Grants: (1) Matching Grants for Business Improvement to increase value chain productivity and competitiveness (up to USD 100,000 in matching per value chain, with a minimum involvement of 4 MSMEs) and (2) Matching Grants for Common Services to develop logistical and other services that require economies of scale (ranging from USD 500,000 and USD 1,500,000 in matching, with a minimum involvement of 60 MSMEs) This new approach departs from the original enclave spatial development focus and follows an inclusive regional development methodology which is expected to lead to the development of at least 20 value 6

7 chains over the duration of the project (mostly agricultural) and a stronger focus on shared prosperity by enlarging the value chain diagnostics to include the poorest departments of the country The new proposed approach was developed jointly with the MCI, who fully endorses it Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ X ] No [ ] Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing (s) Yes [ X ] No [ ] Cancellations Proposed Yes [ ] No [ X ] Change to Financing Plan Yes [ ] No [ X ] Change in Disbursement Arrangements Yes [ ] No [ X ] Reallocation between Disbursement Categories Yes [ X ] No [ ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ ] No [ X ] Change in Implementation Schedule Yes [ X ] No [ ] Other Change(s) Yes [ ] No [ X ] Appraisal Summary Change in Economic and Financial Analysis Yes [ X ] No [ ] Appraisal Summary Change in Technical Analysis Yes [ ] No [ X ] Appraisal Summary Change in Social Analysis Yes [ ] No [ X ] Appraisal Summary Change in Environmental Analysis Yes [ ] No [ X ] Appraisal Summary Change in Risk Assessment Yes [ ] No [ X ] 7

8 B Project Status The project is currently rated as Moderately Unsatisfactory for progress towards achievement of the Project Development Objective (PDO) The PDO rating will be upgraded to Moderately Satisfactory once the project restructuring is completed The overall implementation progress is rated Moderately Satisfactory because it has been limited by the current project design, which does not allow to fully implement the newly envisioned value chain component As of December 18, 2015, project disbursement was USD 48 million or 26% of the total project budget Disbursements have been driven by: (i) progress under Component 1; and (ii) the establishment and operationalization of the Enterprise Support Services (including salaries and equipment) Some achievements to date include the following: Component 11 Business Environment Reform - In October 2015, the President signed several decrees (eg electronic signature) which were the first significant reforms for the business environment since Project effectiveness The Project is providing technical assistance to the Prime Minister s Office to coordinate business environment efforts across government ministries and agencies The project has provided technical assistance to the Centre de Facilitation d Investissement (CFI) to enhance transparency and cohesion in the investment incentives regime and will support the Ministry of Economy and Finance in undertaking competition assessments The Project Implementation Unit will soon launch the Request for Proposal for the Electronic Secured Transactions Registry Component 2 Business Development Services for MSMEs - To date, financing under this component has made possible the establishment and operationalization of 10 regional offices of the MCI and the hiring of its staff Through the Project, regional offices' staff have been trained in conducting sector-specific value chain diagnostics These value chains are: coffee (North, Grand Anse and Southeast), cocoa (Northwest), avocado (Center), mango (Artibonite), honey (Northeast and Nippes), vetiver (South) and textiles (West) Through interviews, field visits and public meetings, the teams have mobilized nearly 400 smallholder farmers and MSMEs C Proposed Changes Project Development Objectives Original PDO Development Objectives/Results 8

9 The objective of the Project is to assist the Recipient in: (a) improving the conditions for private sector investment and inclusive growth; and (b) improving its capacity to respond promptly and effectively to an Eligible Emergency Change in Project's Development Objectives Change in Results Framework Explanation: Changes in the project design include the elimination of the Integrated Economic Zones subcomponent; the extension of support to the MCI's regional offices from 1 to 10 regional offices; and changes to the structure of the Matching Grants Four of the seven original PDO indicators have been dropped from the Results Framework and substituted by others to better reflect the changes brought about through this restructuring Some intermediate outcome indicators have been revised and new ones have been added At the PDO level, indicators for inclusive growth, private investment, and the business environment have been introduced For example, Private sector investment in supported value chains would demonstrate that the conditions for private investment have improved and Increase in value added of MSMEs in supported value chains in the poorest Departments (poverty rate above 60%) would demonstrate inclusive growth For part (b) of the PDO indicator, a new indicator has been introduced: Time taken to disburse funds requested by government for an eligible emergency Most of the original intermediate outcome indicators have been dropped, and indicators that better measure changes to the Project have been added Three new intermediate outcome indicators measure business environment reforms: (1) Number of recommended laws, regulations, amendments, codes enacted or Government policies adopted, (2) Secured transactions law revised and submitted to the Prime Minister's office and, (3) Electronic moveable collateral registry (to secure loans) system available for use by MSMEs Two intermediate income indicators on Matching Grants have been added: (1) total investment [grant + firms matching] disbursed and (2) amount of new services provided to MSMEs (measured in USD) Support to entrepreneurs and producers by the MCI will be measured as: Average number of hours of technical and managerial assistance received by MSMEs The indicator to measure strengthening institutional capacity is: "Number of Haitian public servants that have satisfactorily completed the Value chain Strategic Analysis Program (and completed 2 value chain diagnostics)" And finally, there are two indicator to measure citizen engagement Number of participants in public consultations and Percentage of participants in public consultations being MSMEs The complete Results Framework is in Annex 1 Compliance Other Changes to Safeguards Explanation: Given some changes to project design, the Environmental and Social Management Framework (ESMF) will be updated immediately following the clearance of the Restructuring Paper It is estimated that it will 9

10 be ready by January 30, 2016 The main expected changes to the ESMF are: update of the project description; removal of safeguards measures related to IEZ feasibility studies; and, update of text and annexes related to matching grants subprojects, as needed Change in Loan Closing (s) Explanation: Financing Given the proposed changes to the project, especially the expansion of support for MCI s regional offices from 1 to 10, and the increased allocation to matching grants, including matching grants for Common Services to develop logistical and other services that require economies of scale, which will have a certain degree of implementation complexity, it is proposed to extend the loan closing date from May 31, 2018 to November 30, 2019 The last ISR filed October 23, 2015 rated Financial Management as Moderately Satisfactory and the Project is in compliance with the audits, as stipulated in the Financing Agreement (there are no overdue audit reports) Ln/Cr/T F Status Original Closing Current Closing Proposed Closing Previous Closing (s) IDA- H8650 Effective 31-May May Nov May-2018 Reallocations Explanation: Given the changes in project activities, it is necessary to reallocate funds Ln/Cr/TF Currency Current Category of Expenditure Allocation Disbursement % (Type Total) Current Proposed Current Proposed IDA-H8650 XDR GO, NCS, CS, TR Pt A1, A2(a,b,e,f) 3,149, , GO, NCS, CS, TR Pt A2(c) 670, GO, NCS, CS, TR Pt A2(d) GO, NCS, CS, TR Pt B1, B2(a,b),B3 2,680, ,714, ,444,

11 Match Grants GO,CW,CS,TR Pt B2(c) GO, NCS, CS, TR Pt C 2,713, ,337, ,760, , OP Pt A1(a,c), A2, B3, C1 Emergency Expenditures Pt D 335, ,014, , , Preparation Advance 466, , Designated Account Designated Account Total: 13,400,000 13,400,000 Disbursement Estimates Change in Disbursement Estimates Explanation: Given changes in the project design and reallocations between components, the disbursement estimates are revised from the original project Current disbursement estimates (cumulative) are as follows: FY 2014 US$550,000 FY 2015 US$17 million FY 2016 US$61 million FY 2017 US$102 million FY 2018 US$145 million FY 2019 US$175 million FY 2020 US$186 million (*total funds available in USD value is US$186 million, due to exchange rate of the USD to XDR since 2013) Fiscal Year Current (USD) Proposed (USD) Total Components 11

12 Change to Components and Cost Explanation: As a result of changes to the project design at the request of the Recipient, a level 2 restructuring is proposed with the following changes to components and cost, which will increase the likelihood of achieving the PDO and project results Through the proposed restructuring, the project no longer aims to establish IEZs Component 1: Business Environment and Investment Generation There are no changes or reallocation of costs for subcomponent 11 (Business Environment Reform, USD 20 million) Given the client request to move away from a focus on integrated economic zones and instead further develop the Business Development Services for MSMEs in all 10 departments of the country, the original allocation of USD 8 million for subcomponent 12 (Investment Generation) will be reallocated to Component 2 (Business Development Services for MSMEs) However, subcomponent 12 will remain in the project because USD 13,597 were incurred prior to restructuring for some work on the Integrated Economic Zones legal framework The remaining activities will be cancelled and amended in the Financing Agreement Component 2: Business Development Services for MSMEs This Component will continue to strengthen MSMEs links to value chains through Business Development Services (BDS), but as requested by the Recipient will expand support from 1 regional Department to all 10, and will also focus BDS and Matching Grants on groups of MSMEs in value chains, instead of individual MSMEs The expansion of support from 1 to 10 Departments will allow for the development of 20 value chains over the duration of the project, which will increase opportunities for investment and also ensure inclusive growth by providing services to MSMEs in the poorest regions of the country Component 2 will continue to provide support for: sector-specific value-chain diagnostics; preparation of the Matching grants manual; provision of training to MSMEs on business improvement; provision of technical assistance to assist MSMEs in preparing business improvement plans (but at the value chain level, not on an individual firm level); provision of Matching Gants to Beneficiary firms to carry out Subprojects; and, enhancement of the capacity of regional offices of MCI for the management, implementation, monitoring and evaluation of the above services (though expanded from 1 regional office to all 10 regional offices) With the reallocation of USD 8 million from Component 1, Component 2 will increase from USD 7 million to USD 15 million The USD 15 million will be broken down as follows: Subcomponent 21 Support for value chain improvement (USD 2 million); Subcomponent 22 Matching Grants for MSMEs (8 million); and Subcomponent 23 Support for 10 MCI regional offices (5 million) The services provided through Component 2 would correct the market and coordination failures currently preventing MSMEs and local producers from increasing the value of their products or accessing lucrative 12

13 markets These market and coordination failures include: logistical constraints on access to markets, lack of access to international buyers, lack of managerial and technical skills to export and improve productivity, lack of knowledge in production and quality techniques, and limited access to finance for working capital and investment in innovative technologies, processes and products The original BDS and Matching Grants to individual beneficiary firms would not be sufficient to correct these market failures, as such, the Restructuring aggregates the Matching Grants to benefit groups of MSMEs in particular value chains, instead of individual MSMEs As the original Matching Grants were for individual MSMEs, they could not exceed USD 25,000 per beneficiary firm, but as matching grants will be given to groups of beneficiary firms under the restructured project, the limit for matching grants is being raised There will be two types of matching grants: (1) Matching Grants for Business Improvement to increase value chain productivity and competitiveness (up to USD 100,000 in matching per value chain, with a minimum involvement of 4 MSMEs) and (2) Matching Grants for Common Services to develop logistical and other services that require economies of scale (ranging from USD 500,000 and USD 1,500,000 in matching, with a minimum involvement of 60 MSMEs) One of the criteria for eligible Matching Grants for Common Services will be that the service be open to any firm in Haiti It is anticipated that there will be 4-6 large common services subprojects over the course of the project A matching contribution will be required by the MSME, based on the sliding scale in Table 1, that will be included in the Matching Grants Manual The formula for determining the contribution from the MSME will be a weighted score (50/50) of firm size (number of employees) and annual revenue Table 1 Sliding Scale # of Employees Annual revenue (USD) Contribution of enterprise 0<10 $ <25 $10,000 25% 26<50 $100,000 50% 51>100 $500,000 75% >100 $1,000, % For the Matching Grants for Business Improvement, the process for approval of matching grants will be defined in the Matching Grants manual (as per the provisions in the original Financing Agreement), including appraisals conducted by the Grant Selection Committee, in accordance with provisions of the matching Grants manual and the eligibility criteria for Subprojects The Matching Grants for Common services will co-finance common services identified in the regional business improvement plans, which would be open to any firm in Haiti, and will be presented by the regional offices of the MCI to the Grant Selection Committee Examples of supported common services for agribusiness could be grading and packing services, cold chain transportation and warehousing; for light manufacturing could be common testing, certification and logistic services There will be no changes to procurement modalities 13

14 There are no changes to Component 3 (Project Management, Monitoring and Evaluation) and Component 4 (Immediate Response Mechanism) of the Project Current Component Name Proposed Component Name Current Cost (US$M) Proposed Cost (US$M) Action Component 1 - Business Environment and Investment Generation Component 2 - Business Development Services for MSMEs Component 3 Project Management, Evaluation and Monitoring Component 4 Immediate Response Mechanism Component 1 - Business Environment and Investment Generation Component 2 - Business Development Services for MSMEs Component 3 Project Management, Evaluation and Monitoring Component 4 Immediate Response Mechanism Revised Revised Total: Other Change(s) Change in Implementation Schedule Explanation: The project closing date will be extended from May 31, 2018 to November 30, 2019 This additional time will allow for the value chain component to be fully implemented Appraisal Summary Appraisal Summary Change in Economic and Financial Analysis Explanation: The economic and financial rates of return of the Project activities, calculated following the methodology of the original PAD (Annex 6), will improve under the present restructuring, since the funds are being reallocated to activities, which were already existing, with higher Economic Rate of Return In fact the only change is the reallocation of US$80 million from Component 12 (Investment Generation), that had an estimated ERR of 56%, to the original Component 2 (Business Development Services) activities, that included Capacity Building of the government provided BDS (US$30 million) and matching grants (US$40 million), that had and estimated ERR of 75% 14

15 The original estimation of economic benefits relied more on the assumption of an increase of a 2% in FDI as a result of the Investment Generation component, whereas the restructured project relies more on the increased revenue of MSMEs benefiting from business development services support (estimated at 5% per five years) These increased revenues will accrue from the increase in value added and exports by the existing MSMEs that will receive matching grants that will facilitate the investments in common services and facilities in the value chain The investment cost per supported MSME continues being a maximum of USD 25,000; it is just aggregated in groups of a minimum of 4 and a maximum of 60 beneficiary MSMEs 15

16 Annex 1: Results Framework Project Name: Haiti Business Development and Investment Project (P123974) Project Stage: Restructuring Status: DRAFT Team Leader(s): Maria Deborah Kim Requesting Unit: LCC8C Created by: Maria Deborah Kim on 12-Aug-2014 Product Line: IBRD/IDA Responsible Unit: GTC04 Modified by: Maria Deborah Kim on 11-Dec-2015 Country: Haiti Approval FY: 2013 Region: LATIN AMERICA AND CARIBBEAN Lending Instrument: Specific Investment Loan Project Development Objectives Original Project Development Objective: The objective of the Project is to assist the Recipient in: (a) improving the conditions for private sector investment and inclusive growth; and (b) improving its capacity to respond promptly and effectively to an Eligible Emergency Results Core sector indicators are considered: Yes Results reporting level: Project Level Project Development Objective Indicators

17 Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target New Private sector investment in supported value chains Amount(USD) Value Nov-2019 New private sector investment is defined as any investment by any firm in the supported value chains New Increased value added of supported MSMEs in the selected value chains Percentage Value May May-2019 Baseline to be established when the Business Improvement Plans are launched by surveying participating MSMEs for the first cohort Average increase in total value added for products and services of supported MSMEs in the selected value chains 17

18 New New Increase in value added of poorer supported MSMEs in the selected value chains in the poorest Departments (poverty rate above 60%) Time taken to disburse funds requested by government for an eligible emergency Percentage Value May Nov-2019 Baseline to be established Baseline to be established when the Business Improvement Plans are launched by surveying participating MSMEs for the first cohort Days Value 3000 Poorer MSMEs are defined as having fewer than 50 employees and less than USD 100,000 in annual revenue The poorest departments of the country are Departments with poverty rates over 60%, as per the 2014 Poverty Assessment (World Bank, ONPEs and MPCE) Time in days taken to 18

19 disburse funds requested by the Government for an eligible emergency Marked for Deletion Marked for Deletion Marked for Deletion Marked for Deletion Marked for Deletion Additional jobs in MSMEs supported by the Project Additional investment facilitated by the Project Specific reduction of regulatory time/cost to operate a business Number of MSMEs benefitting from moveable collateral to secure loans Value of loans secured with movable assets Number Value 000 Number Value Number Value Number Value Apr Sep May-2018 Amount(USD) Value Apr Dec May

20 Marked for Deletion Number of reforms measured by the Doing Business Report Number Value Apr Jun May-2018 Marked for Deletion Number of jobs Number Value Intermediate Results Indicators Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target New Total investment (matching and firm s contribution) as a result of financed business improvement plans Amount(USD) Value Nov-2019 Total investment financed (matching grants provided by the project + matching provided by the beneficiaries) New Amount(USD) Value

21 Total investment (matching and firms contribution) as a result of Matching Grants for Common Services 01-Nov-2019 New services made available to MSME by project (in USD millions of awarded service contracts ) New New New Number of participants in public consultations Percentage of MSMEs participating in public consultations Number of MSMEs given technical and managerial assistance by MCI SAE teams Number Value Nov-2019 Percentage Value 000 Number Value Nov-2019 New Hours Value Nov

22 New New Average number of hours of technical and managerial assistance received by MSMEs Satisfaction of entrepreneurs/producers with assistance supported by SAE teams Number of Haitian public servants that have satisfactorily completed the Value chain Strategic Analysis Program (and completed 2 value chain diagnostics) Percentage Value Number Value Aug Apr-2019 The Value chain Strategic Analysis Program is financed by the Haiti Competitive Industries and Innovation (CIIP) grant Following the training received, the participants are assessed on their understanding of concepts and the 22

23 New Revised Number of recommended laws, regulations, amendments, codes enacted or Government policies adopted Secured transactions law revised and submitted to the Prime Minister's office Revision of secured transactions law, establishment of collateral registry Number Value quantity and quality of their participation throughout the program 01-Nov-2019 Can include investment incentives, competition policy and other business environment reforms Text Value Not existent Law submitted 25-Apr Dec May-2018 Text Value Not existent Registry in operation 25-Apr Apr May

24 New Electronic moveable collateral registry (to secure loans) system available for use by MSMEs Yes/No Value No Yes 01-Nov-2019 Availability of service Marked for Deletion Cumulative number of firms receiving matching grants Number Value Marked for Deletion Marked for Deletion Cumulative percentage of selected firms receiving targeted training Percentage of selected Municipalities with needs assessment of MSMEs Percentage Value Percentage Value Marked for Deletion IEZ legal framework (process indicator) Text Value Diverse regimes (Free zones, industrial parks) and institutions Action plan for IEZ regulatory and institutional framework implemented 24

25 (DZF, SONAPI) Marked for Deletion Competition framework (process indicator) Text Value Not existent Draft laws/amendmen ts submitted to Parliament 25-Apr Apr May-2018 Marked for Deletion IEZ Feasibility study Text Value Not existent Study finalized, decision on next steps taken by authorities Marked for Deletion Creation of a one-stop shop for investors Text Value Not existent One stop shop implemented 25

26 Marked for Deletion Business environment action plan (process indicator) Text Value Not existent 1-2 reforms completed 25-Apr Apr May

27 ANNEX 2: Supplemental Technical and Fiduciary Information Support for MCI Regional Offices The Restructuring of the BDI Project expands support to all 10 regional offices of the Ministry of Commerce and Industry (MCI) More specifically, the Project will enhance the capacity of the offices for the management, implementation, monitoring and evaluation of Business Development Services for MSMEs To do so, the Project will establish and support the functioning of ten Enterprise Support Services (Service d Appui aux Entreprises, SAEs) in the 10 regional Departments that will manage and implement the sector-specific value chain diagnostics and the business improvement plans (for the value chain) and other Business Development Services, through the provision of consultants services, goods, training and operating costs The establishment of the SAE Program introduces a new service of the MCI in all ten regional Departments, which provides local support to MSMEs, which is currently limited or inexistent Each SAE is comprised of 7 staff members: 3 Mobile Agents (agronomist, economist and industrial engineer), 1 lawyer, 1 accountant, 1 assistant and 1 driver The lawyer and accountant will provide support to all enterprises in the Department who request assistance, while the 3 Mobile agents will focus primarily on carrying out the value chain diagnostics and business improvement plans, in existing value chains in their Department The Project will finance two value chain diagnostics and business improvement plans per Department, but with the training and capacity building received, the teams would be able to continue implementing more in new value chains year after year The SAE teams capacity in value chain diagnostics and business improvement plans will be enhanced through a training program partially financed by a Competitive Industries and Innovation Program (CIIP) grant The training program takes a learning by doing approach, in which the SAE Mobile Agents receive in-class training, carry out their value chain diagnostics in the field, all while receiving continuous support from coaches In each value chain, the Mobile Agents will identify local value chain agents (ie MSMEs such as smallholder producers/farmers, associations, cooperatives) bring them together in public meetings, present the findings of the value chain diagnostics, and identify investments, reforms, and capacity building needs to increase competitiveness of the MSMEs At the end of each value chain diagnostic, the participant MSMEs in the value chain will have a set of recommendations which will be integrated into a business improvement plan detailing the investment needed to make the value chain more competitive, increase productivity, and boost local Shared Value (ie, the value for the poorest MSMEs) Furthermore, SAE teams will also work with the MSMEs in their value chain to develop business improvement plans to identify common services needed to increase shared value and reach more lucrative markets Through the support to the SAEs, the Project will support two value chain diagnostics per Department over the duration of the project In order to ensure that the SAE program will be sustained after the life of this project, the Project team will work with the MCI on a strategy that

28 will allow MCI to fully fund the SAE and the value chain diagnostics through its own sources (ie Public Treasury) At the end of each value chain diagnostics, a meeting between the SAEs and Government officials working in the domain of policy and institutional reforms, public investment and public works will be organized in order for the SAE teams to convey to public officials the types of policy and institutional reforms, or public investments identified by their value chain diagnostics, and seen as necessary for increased growth and competitiveness of that particular value chain The policy recommendations will also be transmitted to the unit in the MCI in charge of policy formulation or involved in inter-ministerial policy dialogue These reforms could be eligible for financing under Component 11 (Business Environment Reform) The value chains for the first cohort of diagnostics were selected by the MCI in 2014, based on a study done jointly with the United Nations Development Program (UNDP) They are (names of Departments are included in brackets): coffee (North, Grand Anse and Southeast), cocoa (Northwest), avocado (Center), mango (Artibonite), honey (Northeast and Nippes), vetiver (South) and apparel (West) The selection of the next cohort of value chains will occur once the value chain diagnostics for the first year are completed The methodology for value chain selection will be revisited with the MCI and finalized in time for selection of the next cohort Matching Grants Procurement Arrangements The MCI regional teams will work with the MSMEs in their value chain to prepare business improvement plans The business improvement plans will include investment needs that could be financed by Matching Grants for Business Improvement or by Matching Grants for Common Services The business improvement plans will be submitted to the Grant Selection Committee, which will assess the eligibility of the proposed investments The eligible investments and/or current expenditures for the Matching Grants for Business Improvement, which would increase value chain productivity and competitiveness (up to USD 100,000 in matching per value chain, with a minimum involvement of 4 MSMEs), include the following categories: (i) equipment (including information technology); (ii) small works (eg coffee washing and drying facility); (iii) advisory services on access to financial services, agricultural extension, business management, markets and marketing skills, organic or other quality and compliance certification and other technical services; and (iv) training in technical or managerial skills Examples of investments and current expenditures co-financed by the matching grants include: quality improvements (eg traceability, organic certification, and training); harvesting and postharvesting equipment; training for managers, design of bottling and packaging, working with financial institutions for the creation of lines of credits for farmers, and export support Investments and/or current expenditures for each Matching Grant for Business Improvement, each proposal will not exceed US$100,000 each in matching, with a minimum involvement of 4 MSMEs for a total maximum of US$2 million for 20 value chains Matching Grants for Common Services to develop logistical and other services that require economies of scale will range from USD 500,000 and USD 1,500,000 in matching, each, with a 28

29 minimum involvement of 60 MSMEs) Types of eligible investments and/or current expenditures include: for agribusiness, the building and operating of a cold chain; or, for light manufacturing, a common logistics platforms for fast apparel The Grant Selection Committee composition will be defined in the Matching Grants Manual All investments and/or current expenditures under component 2 will follow regular World Bank procurement rules In most cases, procurement methods for subcomponent 22 will be open to international competition If and when possible, efforts will be made to invite top, industryleading firms to bid for the tenders Participation and verification of firms in Matching Grants According to the Enterprise Survey ( , MCI), only 12% of Haitian enterprises have annual accounted statements The SAE team (with the support of the SAE accountant), present in each Department, will verify information on annual revenues when no annual statement is available from the entrepreneur All beneficiary MSMEs (including local producers) will match the grants received through the Project with their own financing The percentage financed by the MSMEs will depend on their firm size and annual revenues, weighted 50/50 The SAE mobile agents will be responsible for collecting this information (firm size and annual revenue) If the entrepreneur is unable to calculate annual revenues, the SAE accountant and lawyer will help using interviews and triangulation techniques (eg verifying sales prices of various buyers) Furthermore, in cases where entrepreneurs are not formal, the SAE can provide services to the entrepreneur to receive their Professional Identification Card (Carte d Identité Professionnelle), which establishes them legally Limitations on Component 2 common services investments No investments supported from the Matching Grant would be made outside of the IDA recipient country 29

30 Box 1 Example of a Matching Grants for Business Improvement and Common Services for the Fresh Cut Flowers value chain 1 One SAE team has finalized the value chain diagnostics with the cut flower value chain in their Department The group of 30 MSMEs (including local producers) active in the value chain would like to increase their productivity and export by integrating into the global fresh cut flower value chain (ie, export to the United States) 2 The business improvement plan prepared jointly by the SAE and the MSMEs in the value chain includes the following activities: training for firms in the value chain to better treat the flowers to increase their quality; training for middle management; consulting services to certify the flower quality; and an IT system to be used by the entire value chain for management of flower exports This business improvement plan is submitted by the MCI to the PIU The Grant Selection Committee reviews the proposal for eligibility The proposal is approved The PIU procures the goods and services as Matching Grants for Business Improvement Each individual MSME will provide matching funds, as per the sliding scale in Table 1 3 The business improvement plan also identifies common services that are missing in the value chain and the investments needed to fill the gap Terms of Reference are prepared (by the SAEs with the entrepreneurs and with external consultants hired by the Project if needed) The proposal is reviewed and selected by the Grant Selection Committee The PIU, with the support of a consulting firm, launches an Expression of Interest to private sector firms to provide cold chain and ancillary services (eg refrigerated trucks to pick up flowers, a refrigerated hangar at the airport and a logistics firm to receive and distribute flowers once received in the US) to the flower value chain This will be financed by the Matching Grants for Common Services 4 The PIU receives the bids and the tender is won by an international firm, who has partnered with a local firm to provide these services The contract value is US$15 and includes payment provisions, performance requirements and other details required for the optimal functioning of the common services to be offered to the flower value chain entrepreneurs over a 3 year service period The international firm builds the cold chain and sets up all ancillary services 5 The services are ready within 6 months of signature of the contract and the cold chain is operational soon after Firms in the flower value chain pay for the use of the common services and the PIU provides matching funds for those firms that are eligible as per the sliding scale in Table 1 30

31 Annex 3 Operational Risk Assessment Framework (ORAF) Haiti: Haiti Business Development and Investment Project (P123974) Stage: Restructuring Risks 1 Project Stakeholder Risks 11 Stakeholder Risk Rating Substantial Risk Description: 1 Lack of coordination or alignment between the government and private sector on private sector growth 2 Unexpected changes in the government may delay activities and may impede attainment of outcomes This could affect both the passage and enactment of laws and regulations pertaining to the business Risk Management: 1 Through the value chain diagnostics, Business Development Services and Matching Grants, the Ministry of Commerce and Industry (MCI) will remain in contact with the private sector in various sectors, in all departments of the country Each regional MCI team will use their public meetings as an opportunity to ensure coherence with the main stakeholders Resp: Both Risk Management: Status: Not Yet Due Stage: Recurrent: Due : Frequency :

32 environment, as well as overall project implementation 3 Most of the governmental agencies the teams are working have weak institutional capacity 4 There is a risk that improvements in the business climate could be perceived to favor a relatively small number of large companies, not the society as a whole 2 The Task Team Leader (TTL) will maintain regular dialogue with the Minister of Commerce and Industry and will also rely upon the Project Coordinator to ensure continuity in implementation The project will seek management support if there are difficulties with the Client The project will continue to support various actors and remain flexible in order to keep momentum in various business environment reforms Resp: Bank Status: Not Yet Due Risk Management: Stage: Recurrent: Due : Frequency : 3 Funds within the Project will provide some budget for governmental agencies to deliver on their agreements Resp: Both Status: In Progres s Stage: Recurrent: Due : Frequency : Risk Management: 4 Business environment reforms encouraged will primarily be reforms favorable towards MSMEs Also, the objective of the Competition Policy work supported by the project will specifically focus on opening markets and spreading the benefits of reforms to all firms and consumers Resp: Status: Stage: Imple menta tion Recurrent: Due : 01-Nov-2019 Frequency : 2 Implementing Agency (IA) Risks (including Fiduciary Risks) Page 32 of 37

33 21 Capacity Rating Substantial Risk Description: Risk Management: 1 Skills to implement and oversee large and complex projects remain scarce in the country This could impede timely Project implementation Physical resources such as computer and software equipment might also be needed to achieve good implementation of the Project The transition of the PIU from the UCP at MEF to MCI may not be successful, as MCI may not establish sufficient capacity to manage complex procurement fiduciary processes Mitigation measures involve hiring of short term local and international consultants to assist with the establishment of needed procedures, technical assistance in preparing required studies, in launching and supervising the activities as well as the careful design of the process to build up capacity at MCI and to transfer fiduciary responsibility form UCP to MCI For this, an agreement, satisfactory to IDA, was signed between MEF and MCI The Project will initially be implemented by the UCP, housed at the MEF, which has already implemented Bank projects that will be further strengthened by the Project through capacity building and the hiring of experienced consultants for project management, procurement and safeguards IDA will certify the capacity of MCI before the transfer of fiduciary responsibilities can take place In addition, one of the Project TTLs will be based on the ground, while WBG advisory staff will provide technical assistance to the government in the areas of business environment and investment generation Resp: Client Status: In Progres s Stage: Recurrent: Due : 09-Jan-2017 Frequency : 22 Governance Rating High Risk Description: 1 Adequate coordination between ministries (the MEF and the MCI) is Risk Management: MCI will have a Project Coordinator, who will be tasked with ensuring that relevant public agencies are involved and that project activities are coordinated Page 33 of 37

34 required to ensure adequate implementation of the fiduciary and technical parts of the project Resp: Client Status: In Progres s Stage: Recurrent: Due : Frequency : CO NTI NU OU S 3 Project Risks 31 Design Rating Substantial Risk Description: 1 Project execution may be hampered by a fragile institutional setting 2 Given the innovative nature of the restructured project, there may be some unforeseen activities, investment or expenditures necessary (eg technical assistance to help cooperatives) Risk Management: 1 The TTL on the ground will remain attuned to the political and institutional dynamics and environment The Project design will be adjusted after mid-term review The current PIU, UCP at MEF, has a positive track record and reputation in executing private sector projects Fiduciary capacity will be built up at MCI with support from UCP and under close oversight by the IDA fiduciary specialists The Project design foresees an intensive implementation support by IDA, with frequent implementation support missions and the presence of a Project operations officer on the ground WBG technical assistance that will be provided in parallel while strengthen institutional capacity in technical aspects Resp: Bank Status: In Progres s Stage: Recurrent: Due : Frequency : Risk Management: 2 The TTL will work in close collaboration with the Project Coordinator and PIU in order to adjust the procurement plan and budget as needed in order to modify the project to ensure success Page 34 of 37

35 Resp: Both Status: In Progres s Stage: Recurrent: Due : Frequency : 32 Social and Environmental Rating High Risk Description: 1 Environment could be affected by matching grant projects Risk Management: 1 An Environmental and Social Management Framework (ESMF) has been developed that includes criteria to screen out activities of supported MSMEs that may have negative social or environmental consequences The ESMF also includes guidance on capacity building and training of the relevant agencies involved in managing the Matching Grants program Resp: Both Status: In Progres s Stage: Recurrent: Due : Frequency : 33 Program and Donor Rating Moderate Risk Description: Risk Management: The MCI will receive capacity and financing from the other donors, such as the he Inter-American Development Bank (IDB) The IDB and World Bank will need to coordinate on the strengthening of the Fiduciary Unit being set up within MCI, which will provide services to both the IDB and World Bank-financed projects Strong ongoing coordination with other donors, especially the IDB, will continue MCI has a Sector Table which should be active and been coordinating the work of donors, to ensure funding is leveraged Resp: Both 34 Delivery Monitoring and Sustainability Rating High Status: In Progres s Stage: Recurrent: Due : Frequency : CO NTI NU OU S Page 35 of 37

36 Risk Description: 1 Due to lack of training of staff, adequate monitoring and evaluation of the Project could be weak 2 Monitoring, especially impact evaluations, requires reasonably reliable data, of which there is very little available in Haiti Risk Management: Training will be available if monitoring and evaluation weaknesses are detected during implementation of the Project A Project M&E specialist will be hired and located in the PIU Resp: Both Risk Management: Status: In Progres s Stage: Recurrent: Due : 01-Dec-2016 Frequency : The Project will support the MCI regional office teams to collect primary data, including by financing tools to collect the data (hardware and software) Resp: Both Status: Stage: Recurrent: Due : Frequency : 35 Other (Optional) Rating Risk Description: Risk Management: Resp: Status: Stage: Recurrent: Due : Frequency : 36 Other (Optional) Rating Risk Description: Risk Management: Page 36 of 37

37 Resp: Status: Stage: Recurrent: Due : Frequency : 4 Overall Risk 41 Overall Implementation Risk Rating High Risk Description: The overall implementation risk of the project is High Page 37 of 37