INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized I. Basic Information Date prepared/updated: 11/15/2010 INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE Report No.: AC Basic Project Data Country: Congo, Republic of Project ID: P Project Name: Congo - Support to Economic Diversification Project Task Team Leader: Amadou Dem Estimated Appraisal Date: November 2, Estimated Board Date: December 16, Managing Unit: AFTFW Lending Instrument: Specific Investment Loan Sector: Other domestic and international trade (100%) Theme: Infrastructure services for private sector development (50%);Other financial and private sector development (40%);Regulation and competition policy (10%) IBRD Amount (US$m.): 0.00 IDA Amount (US$m.): GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: BORROWER/RECIPIENT Environmental Category: B - Partial Assessment Simplified Processing Simple [] Repeater [] Is this project processed under OP 8.50 (Emergency Recovery) or OP 8.00 (Rapid Response to Crises and Emergencies) Yes [ ] No [] 2. Project Objectives The objective of the proposed project it to promote private sector growth and investment in the non-oil sectors in Congo. It will focus in particular on SMEs and the Pointe Noire- Brazzaville growth corridor, which is the most important and immediate source of economic growth and diversification. 3. Project Description Component 1: Support to Public Private Dialogue and Investment Climate Reforms Sub-Component 1.1: Support to the High Level Council for Public Private Dialogue 1. This project will support the upcoming Haut Conseil du Dialogue Public-Privé (HCDPP in three ways: (i) financing three key dedicated experts within the Secretariat of the HCDPP (a private sector development specialist; a value chain development specialist; and an infrastructure development specialist ); (ii) financing the organization of the first four meetings of the HCDPP and (iii) financing key studies needed to prepare

2 these meetings (e.g. study fund to develop specific reform action plans). The European Union and the African Development Bank are also expected to support the HCDPPP. Sub-Component 1.2: Support to investment climate reforms 2. This sub-component will provide Technical Assistance (TA) to implement key investment climate reforms. Support from the World Bank will focus on providing TA to: (i) facilitate enterprise creation through consolidation of all the related services at the existing Centre de Formalités des Entreprises (CFE) in order to reduce time, procedures and costs; (ii) rationalize the licensing and tax regime (parafiscalité) through a mechanism which will identify and systematically review and eliminate/revise the licenses; and (iii) prepare the strategic, institutional and legal frameworks for special economic zones (SEZ), with support from IFC (the project will focus in particular on supporting the development of the Pointe Noire SEZ which is both the most advanced and the most promising). Component 2: Support to Enterprise Development and Investment Promotion Sub-component 2.1: Support to the creation of the «Maison de l#entreprise du Congo» for enterprise development and investment promotion 3. This sub-component will support the creation of the #Maison de l#entreprise du Congo (MEC)# which is expected to have three main departments: (i) administrative formalities; (ii)support to entreprises; and (ii) investment promotion. Indeed, the main missions of the MEC as agreed by the Government during project preparation are to facilitate administrative procedures, provide technical support to SMEs, foster entrepreneurship and attract strategic private investors. It is destined to consolidate and reinforce key initiatives in support of MSMEs. A strategic framework and action plan for the establishment of the MEC is being prepared. The MEC is expected to play a key role in the implemenation of the reforms proposed under Component The project will provide key experienced staff including the Chief Executive Officer (CEO), an Investment Promotion specialist, and an Entreprise Development specialist to kick start the activities, and help build and professionalize the institution which is expected to catalyze resources from the Government, and other development partners including AfDB and the EU. The MEC will start in both Pointe Noire and Brazzaville. Sub-Component 2.2: Matching Grant for Enterprise Development 5. This component will support a matching grant program which will provide partial financing for training and other support services (not investments), necessary to support entrepreneurship and the development of diversified entreprises in a post conflict,

3 resources rich country where the non oil private sector is nascent or reemerging from the conflict. Under this program, grants will be provided to training providers to help them develop and administer training courses tailored to the specific needs of MSMEs. In addition, matching grants will be provided to individual or clusters of firms with a primary focus on those that operate in existing agribusiness and transport related services to strengthen and reinforce their linkages with the lead firms in their value chains. Matching grants supported by the project will only cover technical assistance activities; the financing of working capital and operating expenses, as well as physical investment will not be eligible. The Matching Grants would not finance TA with direct implications for investments (such as feasibility studies and engineering designs). Component 3 - Support to the reform of the railway company 6. This component will assist the Government in implementing a strategy to improve the operations and services of the railway company, Chemin de Fer Congo Océan (CFCO), in a more sustainable manner through the establishment of a Public Private Partnership whose scope will minimally entail a performance based management contract. This will contribute to unleashing the growth potential along the Pointe Noire- Brazzaville and also facilitate trade. 7. Under this component, the Bank will finance the short term technical assistance to the CFCO management through the recruitment of four experts for up to a year who will complement CFCO current management. These experts will take on leadership roles in the company#s human ressource department, rolling stock maintenance, operations and track infrastructure maintenance, and exploitation. The goal will be to assist CFCO management in these areas, ahead of implementing the desired form of Public Private Partnership (PPP) (through a management contract, affermage, or concession arrangement) which will be adoped by the Government in consultation with the stakeholders. The component will also finance the implementation of key recommendations of the environmental and social audit report prepared for the CFCO, including an environmental and social management framework. 4. Project Location and salient physical characteristics relevant to the safeguard analysis Republic of Congo, Pointe Noire # Brazzaville corridor 5. Environmental and Social Safeguards Specialists Mr Antoine V. Lema (AFTCS) Mr Emeran Serge M. Menang Evouna (AFTEN)

4 6. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts: An Environmental and Social Audit for the railway, CFCO, has been carried out by the Government to identify all the key risks which need to be addressed, including: degraded infrastructure (trains and buildings); lack of healthy and safety guidelines; encroachment on the right-of-way; impact of HIV/AIDS on workers and local communities; environmental impacts (air pollution, solid and liquid waste, etc.); certification of timber; and, impacts on Indigenous Peoples and other vulnerable populations. The audit report proposes a series of recommendations to be implemented in the short, medium and long term to mitigate the identified risks, including preparation of an Environmental and Social Management Framework to guide CFCO in its management of all environmental and social issues. The main social risk is related to the restructuring of the CFCO in which the Government will have to pay CFCO social arrears to workers. The payment of the CFCO social arrears by the Government is a legal covenant for this project. Full settlement of CFCO#s Social Arrears will be preceded by: (1) an initial independent audit to determine scope and amount of CFCO#s arrears, (2) preparation and adoption in consultation with CFCO#s Unions of a detailed time bound action plan for the full payment of all of CFCO#s Social Arrears based on this audit; (c) and a satisfactory legal opinion confirming the validity and binding effect of this plan (in accordance with Congolese law, regulations and collective bargaining agreements with CFCO#s Unions. Future investments related to the development of CFCO will also likely lead to land acquisition and involuntary resettlement. In those areas where there is encroachment on the right-of-way, the Government would either have to acquire the land and resettle people on the land or, if it is government land, resettle people occupying the land. This could result in local conflict if the resettlement process, including compensation for loss of shelter, assets (or access to assets) and loss if income or means of livelihood, is not transparent, equitable, and effectively carried out in a timely manner. To address these issues, CFCO will prepare a Resettlment Policy Framework acceptable to the Bank.

5 Also, it is unclear if Indigenous Peoples (mainly pygmies) are affected by the project or future investments arising from the project. The CFCO rail line runs nearby some pygmy communities. To this end, CFCO will prepare, adopt and implement an Indigenous People Planning Framework for addressing concerns related to these peoples, acceptable to the Bank. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: The proposed Program is limited to the provision of technical assistance, and is not expected to directly result in any direct negative environmental impacts. However, its successful implementation may induce future investments in key industries and locations by improving the investment climate. For that reason, the potential impact on follow-on investments into these sectors and locations should be considered. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. NA 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. Through its investment promotion function, the #Maison de l#entreprise# will play a key role in ensuring that private sector investments which results from its investment promotion activities adequately take into account the need to identify and mitigate environmental risks. The Manual of procedures for the matching grant will spell out all how environmental risks should be addressed by the beneficiaries. An Environmental and Social Audit for the railway, CFCO, has been prepared and propose a series of recommendations to be implemented in the short, medium and long term to mitigate the risks. The recommendations include: creation of an Environment unit within CFCO to ensure that all environmental issues are properly addressed and mainstreamed into the organization and functioning of the company; preparation of an environmental and social management framework to guide CFCO in its management of all environmental and social issues; cleanup and decontamination of affected areas; sensitization campaigns targeting passengers and populations on risks of accidents; and Construction of protection/wall in areas with high population density around the railway including in the train stations around Pointe Noire and Brazzaville; 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. Key stakeholders are private enterprises which will benefit from the project and their surrounding population and environment. The main private sector associations (UNICONGO, UNOC, COGEPACO, COPEMECO) have been consulted during project preparation and are part of the task force established to guide the preparation of the component 2, #Support to Enterprise Development and Investment Promotion#. They have been informed about the need to take into account social and environmental aspects

6 in projects supported by the matching grant. The manual of procedures for the matching grant will spell out the mechanisms for consultations. The Government has also been consulted and officially informed that social arrears to CFCO should be paid prior to considering to privatize the company. B. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Yes Date of receipt by the Bank 10/26/2010 Date of "in-country" disclosure 10/26/2010 Date of submission to InfoShop 10/26/2010 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Resettlement Action Plan/Framework/Policy Process: Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Indigenous Peoples Plan/Planning Framework: Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Pest Management Plan: Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop * If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why: C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP/GP Environment Assessment Does the project require a stand-alone EA (including EMP) report? If yes, then did the Regional Environment Unit or Sector Manager (SM) review and approve the EA report? Are the cost and the accountabilities for the EMP incorporated in the Yes Yes

7 credit/loan? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank s Infoshop? Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project cost? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? D. Approvals Signed and submitted by: Name Date Task Team Leader: Mr Amadou Dem 10/29/2010 Environmental Specialist: Mr Emeran Serge M. Menang Evouna 11/04/2010 Social Development Specialist Mr Antoine V. Lema 11/04/2010 Additional Environmental and/or Social Development Specialist(s): Ms Alexandra C. Bezeredi 11/04/2010 Approved by: Sector Manager: Mr Paul Noumba Um 11/10/2010 Comments:

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