US$M): Sector Board : (US$M US$M): Cofinancing (US$M US$M): ICR Review

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1 Public Disclosure Authorized IEG ICR Review Independent Evaluation Group Report Number : ICRR Project Data: Date Posted : 11/07/2014 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Country: Mali Project ID : P Project Name : Mali- Growth Support Project Appraisal Actual Project Costs (US$M US$M): L/C Number: C4033; CH145 Loan/Credit (US$M US$M): Sector Board : Cofinancing (US$M US$M): Cofinanciers : Board Approval Date : 02/15/2005 Closing Date : 09/30/ /30/2012 Sector(s): General industry and trade sector (40%); Central government administration (33%); Aviation (13%); Mining and other extractive (7%); Micro- and SME finance (7%) Theme(s): Regulation and competition policy (33% - P); Trade facilitation and market access (17% - S); Micro; Small and Medium Enterprise support (17% - S); Infrastructure services for private sector development (17% - S); Other financial and private sector development (16% - S) Prepared by : Reviewed by : ICR Review Group: Coordinator : Chad Leechor Prem C. Garg Lourdes N. Pagaran IEGPS2 2. Project Objectives and Components: a. Objectives: According to the Development Finance Agreement (DFA 2005, p. 19), the objective of the Project is to improve the investment climate, with a focus on reducing the cost of doing business and on fostering growth contribution from high potential sectors, including mining, tourism and crafts, and telecommunications. The project development objectives (PDO) in the Project Appraisal Document (PAD; page 16) are: To stimulate private sector investment and performance by increasing total factor productivity and targeting sectoral sources of growth. The revised Board approved PDOs in the Project Paper (2009) were: To create the conditions for increased private investment through investment climate reforms, improved financial services and the provision of non-financial services to private enterprises. This Review is based on the DFA and the revised PDOs. Following IEG/OPCS harmonized guidelines, a split evaluation will be undertaken as a result of the revision of objectives and /or key target indicators. b.were the project objectives/key associated outcome targets revised during implementation? Yes If yes, did the Board approve the revised objectives /key associated outcome targets? Yes

2 Date of Board Approval: 07/20/2009 c. Components: Under the original project, there were three components, which were subdivided into nine components under the 2009 restructuring. Most activities were carried over from the PAD except that some of the infrastructure activities were eliminated. Original components : Component 1: Investment Climate and Institutional Strengthening (Cost estimate at appraisal US$15.92 million; actual US$ 10.6 million). The aim of this component was to help: (i) implement the key recommendations from the Investment Climate Assessment of 2004 and Doing Business Reports; and (ii) strengthen both policymaking and operational capabilities in key sectors with high growth potential. Component 2: Infrastructure Support (Cost estimate at appraisal US$24.49 million; actual US$ 0 million). This component was designed to improve economy -wide total factor productivity by enhancing available infrastructure. This was to encompass: (i) development of an industrial zone; (ii) the improvement of the Bamako airport; (iii) support to the expansion of the telecommunications network; and (iv) support to infrastructure improvement for tourism and mining. Component 3: Financial and Nonfinancial Services for Innovation and Development (Cost estimate at appraisal US$8.83 million; actual US$ 2.10 million). The aim of this component was to increase term financing for micro, small and medium scale enterprises (MSMEs) and business development services (BDS). The term financing sub-component aimed to provide a technical assistance in credit enhancement facility, a trade finance enhancement facility and a standby liquidity facility. The BDS subcomponent aimed at providing business development services to MSMEs, including supply chains, so that they can innovate, develop and increase their output and productivity. Component 4: Project Implementation, Monitoring, and Evaluation (Cost estimate at appraisal US$3.02 million; actual US$ 2.40 million). The project was to be implemented primarily by technical ministries and agencies with the technical support of a Project Coordination Unit (PCU). The PCU was accountable to the project steering committee and oversaw procurement, financial management, reporting, audits, monitoring and evaluation for the project. In addition, the PCU was to hire, as needed, technical assistance to help implement specific activities. Revised components : Component 1: Investment Climate (Estimate at restructuring US$ 4.42 million; Actual US$ 1.37 million). This component focused on priority activities to strengthen and support (i) the legal and regulatory framework for private investments through the preparation of an investment code, in line with best international practice; (ii) the establishment and strengthening of capacity of the Investment Promotion Agency - Mali, including the implementation and management of the One-Stop-Shop for investors (Guichet Unique); (iii) the coordinating activities of the Presidential Council of Investments; and (iv) the establishment and implementation of the Business and Commercial Credit Registry. Component 2: Airports of Mali (Estimate at restructuring US$ 0.53 million; Actual US$ 0.70 million). This component supported development and implementation of a Public -Private Partnership (PPP) for Airports of Mali. Component 3: Industrial Zone (Estimate at restructuring US$ 4.95 million; Actual US$ 0.01 million). This component was to support (i) preparation of the legal and regulatory framework for the establishment and development of industrial zones; (ii) infrastructure investments for the establishment of the industrial zone of Bamako-Senou. Component 4: Telecommunications (Estimate at restructuring US$ 6.9 million; Actual US$ 0.8 million). This component supported the continuation of already planned activities : (i) improving the legal and regulatory framework for the telecommunications sector; (ii) developing the telecommunications sector through (a) provision of support for the privatization and post privatization of Soci été des Télécommunications du Mali (SOTELMA); (b) provision of frequency spectrum management and control equipment, computer equipment and software; (c) strengthening the Telecommunication Regulatory Authority (CRT)'s operational and regulatory capacities; (d) carrying out training and dissemination activities; and (iii) supporting the expansion of the

3 telecommunications network in rural areas. Component 5: Tourism (Estimate at restructuring US$ 1.96 million; Actual US$ 0.6 million). This component supported the World Tourism Organization and the Office of Tourism of Mali (OMATHO) to: (i) implement priority activities including promotion of tourism activities and the development of statistics and impact studies related to tourism; and (ii) the physical rehabilitation of cultural monuments and investments in campgrounds and touristic trails. Component 6: Handicraft (Estimate at restructuring US$ 1.73 million; Actual US$ 0.64 million). This component supported the continuation of already planned activities : (i) rehabilitation of weaving workshop (Tissuthèque) facilities; (ii) promotion of handicraft export activities through the preparation of legal and regulatory framework for handicraft marketing activities; (iii) provision of technical assistance for the establishment of the Economic Interest Group to market large-scale handicraft production; and (iv) carrying out of promotional activities of the National Artisan Center. Component 7: Development of Financial Services (Estimate at restructuring US$ 6.81 million; Actual US$ 0.5 million). This component included: (i) the provision of technical assistance for the privatization of the Banque internationale pour le Mali (BIM) and the restructuring of Bank for Housing of Mali (BHM); (ii) supporting the development of electronic payment system, in particular through the development of mobile banking; (iii) strengthening the supervision mechanisms of micro -finance institutions; (iv) provision of technical assistance for the preparation of legal and regulatory framework for the establishment of an asset management corporation for the recovery of bank loans; and (v) strengthening the capacities of commercial banks to provide medium and long-term financing for small and medium enterprises through establishing a Risk Sharing Facility for qualifying banks and the provision of technical advisory services and training to participating banks in relation to small and medium enterprises and /or microfinance institution lending. Component 8: Enterprises Support Services (Estimate at restructuring US$ 3.66 million; Actual US$ 0.66 million). This component assisted in the establishment of the Enterprise Support Services Fund (ESSF) to strengthen business development services (BDS) through the provision of ESSF/BDS grants and technical assistance. Those BDS services were to include training, advisory services, and business advisory services to : (i) small and medium enterprises with a particular focus on sectors with high potential for growth such as tourism, craft, leather and textile products, mining and telecom in order to improve their competitiveness; and (ii) business development service providers to improve their services to small and medium enterprises, including (a) support for the preparation and implementation of an accreditation program for consultants; and (b) carrying out activities designed to improve the targeting of business development services to microenterprises. Component 9: Mining (Estimate at restructuring US$ 5.9 million; Actual US$ 1.42 million). This component focused on four key activities: (i) carrying out studies on the diversification of non -gold mining; (ii) provision of technical assistance in the area of mining research; (iii) developing small and medium-scale mining activities; and (iv) supporting the improvement in transparency of financial flows in the sector, in line with Extractive Industry Transparency Initiative (EITI). Project Coordination Unit: (Estimate at restructuring US$ 2.85 million; Actual US$ 2.40 million). d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost: Appraisal estimate was US$65.03 million; actual cost was US$26.67 million. Financing: Total Bank financing was for US$ 55 million of which US$ 35.5 million was an IDA grant and the rest was a credit. Borrower Contribution: The contribution from the Government of Mali was expected at appraisal to be US$ million; the actual was US$1.74 million. Dates: The DFA was amended three times on October 20, 2005, June 25, 2008 and June 30, A first level restructuring was done on July, 20, 2009, including an extension of the closing date by another year to September 30, Relevance of Objectives & Design: a. Relevance of Objectives:

4 The objectives of the project are rated substantially relevant both before and after the restructuring. Before the restructuring, the objective of the project was well aligned with the Government s Poverty Reduction Strategy Paper, which called for equitable growth through private investment (ICR, para. 7, p. 2). It was also consistent with the Bank s country assistance strategy (CAS, July 2003) for the period , which highlighted the need to promote growth through private investment and diversification of the sources of growth. At restructuring, the objectives served to advance the Government s Growth and Poverty Reduction Strategy Framework (GPRSF, 2006), which sought to achieve rapid private -sector-led growth. It was also consistent with the Bank s CAS for the period , which identifies the objectives of the project as its priorities in promoting private sector development. At completion, the objectives of raising private investment remained relevant to Mali, and perhaps even more so, as the country experienced a setback in investor s perception due to political instability. The Government s continued support of project activities (particularly in investment promotion and tourism ) after the project closed was also an indication of their relevance. In addition, the 2011 World Bank report Mali s SME, Growth and Diversification identified access to finance (one of the main objectives) as the single most important constraint to investment. b. Relevance of Design: Before restructuring, the relevance of design was negligible. The objective was clearly stated, but the outcomes selected (an increase in formally registered firms and new jobs created ) would not have measured the progress towards the objectives (including an increase in private investment, total factor productivity and growth in selected sectors). The results framework was also weak. The causal chains meant to show the progression of project inputs to outputs and outcomes were not fully spelled out. While many of the activities were likely to be beneficial, if implemented, it was not apparent from the results framework how they would contribute to the intermediate outcomes (such as more term credit and more tourist arrivals ), let alone how these intermediate outcomes would lead to final outcomes. After the restructuring, the relevance of design was modest. The key outcomes (as presented in Annex 1 of the Project Paper, June 2009) would have corresponded to some extent to the objective envisaged. This represented an improvement in design over the pre -restructuring period. In addition, the outcome indicators were measurable and observable. The results framework, however, was not convincing. There were no indications of the project outputs and intermediate outcomes that would lead to the outcomes sought. It was not clear how project inputs would operate through the causal chain to the final outcomes, including reducing the time it took to obtain investment approval, to encouraging banks to lend more to SME and increasing new jobs in private firms. 4. Achievement of Objectives (Efficacy): The assessment of efficacy is rendered complex by the significant shortcomings in the results framework. For one thing, the outcomes envisaged did not measure the objectives well, as discussed in Section 3 (relevance of objectives and design) above. For example, even if the required number of registered firms and the number of jobs created before restructuring were to reach the target levels, it would still not be possible to determine whether private investment, total factor productivity and growth in targeted sectors rose as envisaged in the objectives. Similarly, even if the outcome targets were to be fully met after the restructuring, it would still not be possible to say whether private investment and non-financial services expanded as described in the statement of objectives. For another, the question of attribution arose throughout the causal chain. Even if the objectives had been considered met through independent surveys or through expert opinions, it would still not have been possible to say whether the project contributed to the achievements. As discussed in Section 3 above, there was a wide gap between project activities on the one hand and the expected outputs or intermediate outcomes on the other. In addition, the requisite data were not consistently collected and reported. Furthermore, the restructuring modified the PDO and introduced a different set of outcome indicators, making it necessary to split the evaluation. Table 1 below provides a summary of the achievement of the various outcome targets, both before and after restructuring.

5 Table 1: Key outcome indicators : Targets and results before and after restructuring Original PDO : to improve the investment climate, with a focus on reducing the cost of doing business and on fostering growth contribution from high potential sectors, including mining, tourism and crafts, and telecommunications Baseline Target Result Number of firms formally registered New jobs created in sectors supported by the project Unknown 10% Increase Data not available None 4,300 Jobs Data not available Revised PDO : To create the conditions for increased private investment through investment climate reforms, improved financial services and the provision of non -financial services to private enterprises Key outcome indicator Baseline Target Result Days taken to approve a new investment 45days 15days 26days Bank credit to SMEs 24.6% 30% of total loans Date not available Long-term jobs created in firms supported by the project Jobs Data not available Before restructuring, no data was available for the achievement of the two key outcome indicators. According to IEG Guidelines, the rating of efficacy is to be downgraded. Thus, efficacy before the restructuring is rated negligible. After the restructuring, data was available for one of the three key outcome indicators : The number of days taken to approve a new investment was reduced from 45 days to 26 days. Although the target was not met, clearly some progress was made. No data was available for the other two indicators. Thus, none of the targets were met. Efficacy after the restructuring is rated modest, on account of the progress made on reducing the time it takes to get investment approval. 5. Efficiency: The ex-ante economic analysis estimated an economic rate of return of 26.1 % at appraisal. During the implementation phase, however, no data was collected in order to validate /revise the ex-ante assumptions or to conduct an ex-post cost-benefit analysis with the exception of the Enterprise Take -off Strategies and Techniques program (STEP). According to an impact study of the STEP program that included 427 beneficiaries (out of 1,234 SMEs ) and 100 control group firms, the operating profits of the SME supported by the program for at least three months grew by 60 percent, whereas the control group grew by 40 percent. Based on the annual operating profit provided by the impact study, a rough calculation suggested an IRR of at least 75 percent. However, this component was only a small part of the entire project totaling US$1.2 million. Moreover, the ex -ante financial analysis is not applicable ex -post, since it was based on infrastructure and activities which were not implemented. Infrastructure at the Bamako Airport, the industrial zone at the airport, rehabilitation works in tourist sites and procurement of different equipment were all dropped. The rest of the project consisted of capacity building and provision of technical assistance, for which no quantitative analysis of efficiency was attempted at appraisal. Nonetheless, there are indications of the extent to which the resources were efficiently utilized. The project

6 disbursed just below 50 percent over a six and half years, including the extension period, with the remainder cancelled. In addition, the costs for the Project Coordination Unit were a high proportion of disbursements (US$ 4.4 million out of US$25 million)), pointing to inefficiency in the use of project resources. Efficiency is rated modest. a. If available, enter the Economic Rate of Return (ERR ERR)/Financial Rate of Return (FRR FRR) at appraisal and the re-estimated estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 26.1% 70% ICR estimate Yes 75% 4.8% * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome: Before restructuring, the relevance of objectives was substantial, but the relevance of design was negligible. Efficacy was also negligible, since no data was available on any of the outcome indicators. Efficiency was modest. Thus, the outcome is rated unsatisfactory, with a rating score of 2 or unsatisfactory. After restructuring, the relevance of objectives was substantial, but the relevance of design was modest. Efficacy was modest and efficiency was also modest. Thus, the outcome is rated unsatisfactory, with a rating score of 2. Overall, the outcome rating is to be the weighted average of the outcomes before and after restructuring, with the weights be the shares of disbursement before and after restructuring. Since the outcome ratings are the same, the weighted average and thus the overall outcome rating is also unsatisfactory, with a rating score of 2. a. Outcome Rating : Unsatisfactory 7. Rationale for Risk to Development Outcome Rating: The recent political turmoil and violent armed conflict in the North of the country (in much of ) which adversely affected foreign investment and tourism, may have already set back some of the gains achieved under the project and put the rest at risk. Nonetheless, the risk to financial sustainability at some of the institutions is low. The ICR reports that financial sustainability is assured for the Mali Telecommunications Company (SOTELMA) and Telecommunication Regulatory Authority (CRT) which are financed from fees and sustainable. A high risk exists, however, for the Enterprise Take-off Strategies and Techniques (STEP) program which has not yet identified sources of financing. a. Risk to Development Outcome Rating : High 8. Assessment of Bank Performance: a. Quality at entry: There were major shortcomings at entry including the following : The design was complex (multi-sector activities with decentralized implementation arrangements ) and

7 incompatible with capacity limitations of the country. The small size of the PCU staff and inappropriate skill mix exacerbated the capacity issue. The contents of sub-components (business development, financial services, airport, industrial zones, mining, information technology and tourism) were not underpinned by analytical work. The modality of infrastructure development, including the public -private partnership for the airport, did not have the endorsement of the Government. Risk assessment was unrealistic, rating financial management as a moderate risk, but it turned out to be highly problematic throughout the project. There was no quality enhancement review to address the issues of limited analytical work, high risk and complexity of design. Quality-at at-entry Rating : Unsatisfactory b. Quality of supervision: The ICR reports that supervision missions were often not well equipped for implementation support; some did not include relevant specialists needed in the multi -sector operation, some relied on inexperienced staff with the wrong background and as a result many such missions failed to address the pressing issues. The collaboration between Bank and IFC staff was at times hampered by inadequate information sharing. The turnover of task team leaders was also counter -productive. In addition, three of the four TTLs were located in Washington, instead of being in the field. In June, 2008, a QAG review made seven major recommendations, of which only three were adopted. The four recommendations not followed were: 1. To simplify the project; 2. To reconsider the Business Development Service component; 3. To build the capacity in the Project Coordination Unit; and 4. To put in place a high-quality monitoring and evaluation system. In hindsight, these were also among the areas that showed the most significant shortcomings. Quality of Supervision Rating : Unsatisfactory Overall Bank Performance Rating : Unsatisfactory 9. Assessment of Borrower Performance: a. Government Performance: The ICR refers to the ministries participating in the project and the national government as the Borrower. The Borrower showed some ownership of the project, contributing counter funds to support some of the key reforms under the project. But it did not provide the institutional stability and inter -agency coordination needed for the achievement of objectives. Senior officials in key ministries were changed frequently, including four ministers of investment promotion and SME, the key counterpart of the Bank. The high turnover created delays and uncertainty to project implementation. In addition, the Steering Committee did not provide the leadership and support to overcome the fragmentation resulting from the decentralized approach adopted for project implementation. Furthermore, the Borrower did not support the involvement of communities in the rehabilitation of cultural sites which led to a failure in the implementation of important safeguards. Nonetheless, the Government became more pro -active after the project closed despite the political turmoil. It mobilized its own resources to assure the sustainability of the Investment Promotion Agency (API) Mali and the one-stop-shop for business registration.

8 Government Performance Rating Unsatisfactory b. Implementing Agency Performance: Like the Government to which it reports, the PCU suffered from a high turnover of senior staff, including the project coordinator, and a lack of technical expertise, including the absence of a monitoring a evaluation specialists in the first four years of the project. It was unable to provide the expected assistance to the line ministries in financial management and procurement. Nor did it ensure the implementation or utilization of the M&E system. Implementing Agency Performance Rating : Unsatisfactory Overall Borrower Performance Rating : Unsatisfactory 10. M&E Design, Implementation, & Utilization: a. M&E Design: Both the PAD and the restructuring paper foresaw an elaborate system of monitoring and evaluation, including many surveys. Yet these surveys were not budgeted for, and the system was not put in place during the life of the project. Moreover, the preparation team did not include an M&E specialist. As indicated in Section 3 b (Relevance of design), the results framework was weak. Within this framework, the original performance indicators were not well defined (including job creation and access to information technology ) and lacked the baseline values. Sources of information and data collection methods were not spelled out or documented. In 2008, the Quality Assurance Group (QAG recommended an improved monitoring and evaluation system, but the advice was not implemented. b. M&E Implementation: Roles and responsibilities for monitoring were not clearly defined. Most of the implementing agencies were unable to submit regular reports on a timely basis. Neither the Project Implementation Unit (PCU) nor focal points monitored the progress made or quality of implementation for most of the components. Exceptions were the Enterprise Take-off Strategies and Techniques (STEP) and the Risk Sharing Facility (RSF) programs, which submitted regular reports. After the restructuring in 2009, efforts were made to assemble basic monitoring data in tabular forms, but many gaps remained in the tables. c. M&E Utilization: M&E Quality Rating : Negligible 11. Other Issues

9 a. Safeguards: The project was classified as category B under the environmental safeguard policy (OP/BP/GP 4.01), and a strategic environmental and social assessment (SESA) was carried out. This assessment identified the potential environmental and social impact pertaining to the degradation of water, land resources and biodiversity. It was expected that the effects on environment and natural resources would be moderate with proper mitigation and management. The environmental impact was linked mostly to the planned infrastructure, which was dropped at the restructuring. The ICR mentions one safeguard policy which should have been applied more rigorously : the cultural property under OP (or, since 2006, OP 4.11 on Physical Cultural Resources). The PAD mistakenly stated that this policy was not triggered, when in fact the SESA clearly stated that the project would trigger the Cultural Property operational policy (OP 4.11) due to the rehabilitation of historical monuments, some of them UNESCO World Heritage sites, in Timbuktu and Mopti. b. Fiduciary Compliance: Financial Management : The ICR reports that 2008 Bank missions unearthed a few fiduciary issues as : a. Counterpart funds were used for ineligible expenditures; b. There were large discrepancies of disbursement figures as reported by the Administration director and the project accountant; and c. Several audit reports were issued with qualifications. According to the ICR, about a third or US$500,000 of the counterpart funds of the years were misused. Some of the expenses incurred by the Telecommunication Regulatory Authority (CRT) were deemed ineligible under the project and reimbursable to the Bank. The ICR team found it difficult to account for the shares of disbursements before and after project restructuring, as the Project Coordination Unit (PCU) did not keep adequate records. The figures assembled by the ICR team differed from those provided by the PCU by US$ 2 million. Procurement : The process was slow and fraught with irregularities. Two contracts for the total amount of US$185,000 (or six percent of the total contract amount) were considered not in compliance with World Bank procurement procedures. Nonetheless, an in-depth procurement audit was performed and rated moderately satisfactory. c. Unintended Impacts (positive or negative): d. Other: 12. Ratings: ICR IEG Review Outcome: Unsatisfactory Unsatisfactory Risk to Development High High Outcome: Reason for Disagreement /Comments Bank Performance : Unsatisfactory Borrower Performance : Unsatisfactory Quality of ICR : Unsatisfactory Unsatisfactory Satisfactory

10 NOTES: - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate. 13. Lessons: Among the lessons drawn by the ICR: Too wide a scope of project activities, as was the case here in this project, could lead to an organizational fragmentation with poor coordination and rivalry of sector groups. A strong system of monitoring and evaluation is crucial. Specialists are needed to design and supervise the implementation. Moreover, the budget for this task needs to be realistic. Early restructuring of the project and cancellation of IDA funds is essential when progress cannot be made in a timely manner. In the case here, the IDA resources earmarked for two large infrastructure sub-projects could have been cancelled or reallocated after two years of fruitless efforts. 14. Assessment Recommended? Yes No 15. Comments on Quality of ICR: The ICR is candid and clearly written. It presents good evidence and analysis, as well as detailed arguments of the key dimensions required to evaluate the project. Its length, however, could have been trimmed significantly, from the 38 pages of text to something approaching 15 pages as suggested by Bank guidelines. a.quality of ICR Rating : Satisfactory