Document of The World Bank Report No: ICR00002211 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA- IDA-H3630 IDA- IDA-3499A IDA- 34990) ON A CREDIT IN THE AMOUNT OF SDR 35.6 MILLION (US$40.83 MILLION EQUIVALENT) TO THE REPUBLIC OF RWANDA FOR A COMPETITIVENESS & ENTERPRISE DEVELOPMENT PROJECT February 27, 2012 Finance and Private Sector Development AFTFE Africa Region 1 CURRENCY EQUIVALENTS (Exchange Rate Effective February 2012) Currency Unit = Rwandan Franc (RWF) US$1 = RWF 601.95 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ACCA Association of Chartered Certified Accountants ACH Automated Clearing House AMIR Association of Micro Finance Institutions of Rwanda ATM Automated Teller Machine BDS Business Development Services BPC Business Plan Competition BPI Business Partners International CAPMER Centre d'Appui aux PME du Rwanda/Centre for Assistance to SME CAS Country Assistance Strategy ELECTROGAZ Water and Electric Utility Company ERC Economic Recovery Credits EWSA Electricity, Water and Sanitation Authority FM Financial Manager FMS Financial Management Specialist FSDP Financial Sector Development Plan GDP Gross Domestic Product GoR Government of Rwanda GPN General Procurement Notice ICPAR Institute of Certified Public Accountants of Rwanda IDA International Development Association IDF Institutional Development Fund IFC International Finance Corporation IFRS International Financial Reporting Standards ILDP Institute of Legal Practice and Development IMF International Monetary Fund KIST Kigali Institute of Sciences and Technology MIJESPOC Ministry of Youth, Sports and Culture MINICOM Ministry of Trade and Industry MINECOFIN Ministry of Finance and Economic Planning MINIJUST Ministry of Justice MININFRA Ministry of Infrastructures NAEB National Agricultural and Export Board NBR National Bank of Rwanda NPO National Post Office NPL Non-Performing Loans NTB National Tender Board OCIR-THE Office des Cultures Industrielles du Rwanda pour le The PAD Project Appraisal Document PCU Project Coordination Unit 2 PIP Project Implementation Plan PMR Project Monitoring Reports POS Point of Sales PRSP Poverty Reduction Strategy Paper PSD Private Sector Development PU Privatization Unit RBS Rwanda Bureau of Standards RDB Rwanda Development Board REIC Rwanda Enterprise Investment Corporation RHB Rwanda Housing Bank RIEPA Rwanda Investment and Export Promotion Agency RIPA Rwanda Investment Promotion Agency RPPA Rwanda Public Procurement Authority RPSF Rwanda Private Sector Federation RURA Rwanda Utility Regulatory Authority RWANDATEL Rwanda Telecommunication RWF Rwandan Francs SBF School of Banking and Finance SME Small and Medium Enterprises UBPR Union des Banques Populaires du Rwanda Vice President: Obiageli Katryn Ezekwesili Country Director: Johannes Zutt Sector Manager: Irina Astrakhan Project Team Leader: Lucy Fye ICR Team Leader: Khoudijah Maudarbocus-Boodoo 3 REPUBLIC OF RWANDA Competitiveness & Enterprise Development Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ............................................................ 13 2. Key Factors Affecting Implementation and Outcomes ........................................................... 18 3. Assessment of Outcomes ......................................................................................................... 25 4. Assessment of Risk to Development Outcome ........................................................................ 29 5. Assessment of Bank and Borrower Performance .................................................................... 30 6. Lessons Learned....................................................................................................................... 32 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners.......................... 33 Annex 1: Project Costs and Financing ............................................................................................ 34 Annex 2: Outputs by Component ................................................................................................... 36 Annex 3. Economic and Financial Analysis .................................................................................... 43 Annex 4. Bank Lending and Implementation Support/Supervision Processes................................ 45 Annex 5. Beneficiary Survey Results .............................................................................................. 48 Annex 6. Stakeholder Workshop Report and Results ...................................................................... 49 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ........................................ 50 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders .......................................... 55 Annex 9. List of Supporting Documents ......................................................................................... 56 Annex 10. Map of Rwanda .............................................................................................................. 57 4 DATA SHEET A. Basic Information RW-Competitiveness & Country: Rwanda Project Name: Enterprise Development Project (FY01) IDA-34990,IDA- Project ID: P057295 L/C/TF Number(s): 3499A,IDA-H3630 ICR Date: 12/23/2011 ICR Type: Core ICR REPUBLIC OF Lending Instrument: SIL Borrower: RWANDA Original Total XDR 31.80M Disbursed Amount: XDR 34.91M Commitment: Revised Amount: XDR 35.52M Environmental Category: B Implementing Agencies: Association of Microfinance Institution of Rwanda (AMIR) Centre for Support to Small and Medium Enterprises (CAPMER, now merged with RDB) ELECTROGAZ/ Energy, Water and Sanitation Authority (ESWA) Financial Services Development Plan Unit, MINECOFIN Institute of Certified Public Accountant for Rwanda (ICPAR) Investment Promotion Centre (now under RDB) Kigali Institute of Technology (KIST) Kigali International Arbitration Centre Ministry of Trade and Industry (MINICOM) Ministry of Justice (MINIJUST) Ministry of Infrastructure (MINIFRA) National Bank of Rwanda (NBR) National Post Office (NPO) OCIR THE (now NAEB) Privatization Secretariat (now under RDB) Rwanda Bureau of Standards (RBS) Rwanda Development Board (RDB) Rwanda Enterprise and Investment Company (REIC) Rwanda Investment Promotion Agency (now under RDB) Rwanda Office for Tourism and National Parks Rwanda Private Sector Federation Rwanda Social Security Board Rwanda Utility Regulatory Authority (RURA) School of Finance and Banking (SFB) Union des Banques Populaires de Rwanda (UBPR) Cofinanciers and Other External Partners: None 5 B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 10/12/2000 Effectiveness: 12/07/2001 12/07/2001 Appraisal: 02/15/2001 Restructuring(s): 04/24/2008 04/24/2008 Approval: 04/19/2001 Mid-term Review: 02/28/2005 02/28/2005 Restructuring(s): 07/19/2011 07/19/2011 Closing: 07/31/2007 07/31/2011 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Quality at Entry: Government: Satisfactory Satisfactory Moderately Implementing Quality of Supervision: Moderately Satisfactory Satisfactory Agency/Agencies: Overall Bank Moderately Overall Borrower Satisfactory Performance: Satisfactory Performance: C.3 Quality at Entry and Implementation Performance Indicators QAG Assessments Implementation Performance Indicators Rating (if any) Potential Problem Project at any Quality at Entry No None time (Yes/No): (QEA): Problem Project at any time Quality of No None (Yes/No): Supervision (QSA): DO rating before Closing/ Inactive Satisfactory status: 6 D. Sector and Theme Codes Original Actual Sector Code (as percent of total Bank financing) General finance sector 39 39 General public administration sector 25 25 Power 22 22 General industry and trade sector 9 9 General information and communications sector 5 5 Theme Code (as percent of total Bank financing) Regulation and competition policy 29 29 Other financial and private sector development 29 29 Legal institutions for a market economy 14 14 Micro, Small and Medium Enterprise support 14 14 State-owned enterprise restructuring and privatization 14 14 E. Bank Staff Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Callisto Madavo Country Director: Johannes Zutt Emmanuel Mbi Sector Manager: Irina Astrakhan Demba Ba/Gerard Byam Project Team Leader: Lucy Fye Aubert Zohore ICR Author: Khoudijah Maudarbocus-Boodoo F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project objective was to establish an enabling environment for growth and development of the private sector that would help reduce poverty in Rwanda. The project focused on promoting a competitive climate by (i) streamlining the business environment; (ii) reducing costs and increasing the efficiency of telecommunication, water and electricity utilities, and the tea industry; and (iii) improving access to financial and support services to local entrepreneurs . Revised Project Objectives as approved by original approving authority Project objectives were not revised. 7 (a) PDO Indicators Project Formally Original Target Values Actual Value Achieved Development Revised Target Baseline Value (from approval at Completion or Target Objectives Values documents) Years (PDO) Indicator 1: Increase private investment as share of GDP Value 3.4 percent of GDP 7.0 percent of GDP 14.0 percent of GDP (Qualitative or Quantitative) Date achieved 06/30/2000 07/30/2008 07/31/2011 Comments Achieved. (incl. % It should be noted that the achievement of this indicator cannot be totally attributed to the Project as achievement) the Government of Rwanda took additional initiatives on its own to increase private investment in the country and as from 2008, IFC was also active in developing and implementing a strategy for promoting and facilitating private sector investment. Indicator 2: Increase in export volumes Value US$ 87.3 US$ 170.00 US$ 234.00 (Qualitative or Quantitative) Date achieved 06/30/2000 07/30/2008 12/31/2010 Comments Achieved. (incl. % The increase in value does not necessarily imply an increase in volume as the cost per unit might achievement) have increased. In this case, the actual volume did increase however it was difficult to determine the impact of the increase that could be solely attributed to the project. (b) Intermediate Outcome Indicators Original Target Intermediate Formally Revised Actual Value Achieved Values Outcome Baseline Value Target Values at Completion or Target (from approval Indicator Years documents) Indicator 1 Commercial court established and fully operational Value No commercial court 4 Commercial courts Commercial court (Qualitative or created and established and fully Quantitative) operational operational Date achieved 06/30/2000 07/30/2008 07/31/2011 Comments Achieved. (incl. % According to Doing Business report 2012, the time to enforce contracts in Rwanda was reduced achievement) from 394 days in 2003 to 310 in 2007 and 230 in 2011. Indicator 2 All necessary adjustments to legal and regulatory framework enacted. Value Outdated commercial All commercial laws 13 laws have been (Qualitative or laws are adopted revised/drafted to improve Quantitative) the ease of doing business in Rwanda Date achieved 06/30/2000 07/30/2008 07/31/2011 Comments Partially achieved. (incl. % An in-depth review of the legal and regulatory framework was carried out to allow the creation of achievement) a secure economic business climate. IFC also supported the review, as from 2008, on areas that focused specifically on the Doing Business indicators. As a consequence, the time and cost to set up a business significantly decreased and Rwanda was ranked 8th globally in the 2012 Doing Business Report in the ‘Starting a Business’ indicator. Indicator 3 Improved financial sector 8 Original Target Intermediate Formally Revised Actual Value Achieved Values Outcome Baseline Value Target Values at Completion or Target (from approval Indicator Years documents) Value High level of Banks are privatized. NPL reduced to an (Qualitative or nonperforming loans Capital adequacy average of 11 percent Quantitative) at Union des Banques ratios are sound. with most banks being Populaires de Most banks are less than that. Rwanda. Most of the privately owned and banks are public all meet capital ratio adequacy. UBPR transformed into a commercial bank. Date achieved 06/30/2000 07/30/2008 07/31/2011 Comments Partially achieved. (incl. % UBPR was recapitalized in 2003 and was granted the status of a commercial bank in 2008 after its achievement) solvency ratio was improved from -9.8 percent in 2001 to 25 percent in 2010. According to the NBR Annual Report 2010, the capital adequacy ratio of the Banking sector increased to 22.3 percent in 2011 against the minimum requirement of 15 percent. The NPL ratio of the Banking sector was reduced to 8.0 percent in December 2011 compared to 37 percent in 2001 and 26.5 percent in December 2004. The number of banks increased from 3 in 2001 to 9 in 2011 and access to banking services were expanded. The number of deposit accounts increased by 40.5 percent between 2009 and 2010. According to the FSAP update carried out in 2011, significant progress has made to reform the financial sector but challenges remain in terms of improving access to finance and providing more long-term financing to the economy. Indicator 4 Privatization of RWANDATEL completed through a competitive and transparent bidding process Value The telecom Rwandatel privatized Rwandatel privatized (Qualitative or company Rwandatel, Quantitative) is publicly owned Date achieved 06/30/2000 07/30/2008 07/31/2011 Comments Partly achieved. (incl. % During the lifetime of the project, Rwandatel was privatized twice but in both cases GoR achievement) terminated the contract due to breach of contract by both private investors: Terracom, the first successful bidder, did not respect the commitment in the business plan, particularly the installation of telecom equipment and there were mismanagement issues with Lab Green Ltd, the second bidder, which showed consistent negative results while the other private telecom companies were making profits. The target set at the design stage was achieved but the privatization process could not be achieved due to reasons outside the scope of the project. Indicator 5 Private Sector Federation operates efficiently Value PSF does not operate PSF is efficient PSF is recognized as focal (Qualitative or efficiently point for private sector Quantitative) and operates efficiently. Date achieved 06/30/2000 07/30/2008 07/31/2011 Comments Partly achieved. (incl. % The number of associations that are members of the PSF increased from 14 in 2001 to 23 achievement) associations representing 17 specific business associations and six provincial business associations in 2010. However according to the 2011 Establishment Census published by the National Institute of Statistics of Rwanda, only 4.64 percent out of a total of 123,526 enterprises surveyed are registered with PSF in Rwanda. PSF is still trying to position itself as the voice of the private sector. Indicator 6 Multi-sector regulatory agency is fully operational Value There is no RURA is fully RURA is fully (Qualitative or regulatory agency independent and has independent and has Quantitative) required capacity achieved capacity Date achieved 06/30/2000 07/30/2008 07/31/2011 9 Original Target Intermediate Formally Revised Actual Value Achieved Values Outcome Baseline Value Target Values at Completion or Target (from approval Indicator Years documents) Comments Partially Achieved. (incl. % RURA was established to promote fair competition, improve quality of services, and create an achievement) enabling environment to attract investors in the telecom, water and power sectors. The three sectors were liberalized and private participation increased in the telecom and power sectors with three licensed private telecom operators and seven licensed Independent Power Producers (IPPs). RURA developed guidelines to set quality standards in the water and sanitation sector and was working on the legal framework to allow private participation in the water and sanitation sector as well. RURA still needs greater technical capacity to manage the regulated sectors. Indicator 7 9 Tea estates offered for sale by end of 2001 Value Tea estates are public 9 tea estates are 9 tea estates privatized. (Qualitative or privatized Quantitative) Date achieved 06/30/2000 07/30/2008 07/31/2011 Comments Achieved. (incl. % The privatization of 9 tea estates were completed with 2 more being offered for privatization in achievement) 2011. The exports earning from the tea sector increased from US$ 22.71 million in 2001to US$ 31.86 million in 2006 and reached US$ 55.71 million in 2010. Indicator 8 National Bank of Rwanda supervisory staff able to undertake on-site and off-site supervision of non-Bank financial institutions Value 0 7 trained staff 12 trained staff (Qualitative or Quantitative) Date achieved 06/30/2008 07/31/2011 07/31/2011 Comments Achieved. (incl. % NBR had a team of 12 supervisors who are trained to undertake on and off site supervision. achievement) Off-site analysis for all eight insurers and on-site inspection for three insurers were carried in 2010. Off site surveillance was carried out for the pension sector. Indicator 9 Regulated MFIs are supervised regularly by NBR and NBR able to maintain reliable indicators Value 0 10 MFIs supervised 21 MFIs supervised (Qualitative or Quantitative) Date achieved 07/30/2008 07/31/2011 07/31/2011 Comments Partially achieved. (incl. % Off-site and on-site examinations were performed to improve the efficiency of MFI’s operations achievement) and assess their level of compliance with microfinance law and regulations. The number of licensed MFIs increased from 98 in 2009 to 103 in 2010. In order to improve the efficiency of MFI’s operations, full scope inspections were conducted in 21 MFIs in 2010. Regarding the supervision and monitoring of SACCOs, a Technical Control Unit was set up in May 2011 in each district and their mandate was extended to all MFIs and SACCOs. In addition, the analysis of the financial situation of MFIs was regularly performed to assess their level of compliance with the microfinance law and regulations. The supervision of MFIs was confronted with several challenges due to the fact that the majority of them are not computerized, and therefore do not have an effective management and information system; and the low capacity of MFIs managers. There was a low level of reporting and low reliability of information transmitted by the MFIs. With the help of GCAP, intense training was given to MFIs for them to comply with NBR regulations. 3 of the MFIs have graduated to commercial bank status and 2011,139 SACCOs were fully licensed. The NPL ratio remained high at 11.3 percent in 2010 compared to the generally acceptable limit of 5 percent in microfinance best practice. Indicator 10 IFRS implemented by all financial institutions Value 0 15 9 (Qualitative or Quantitative) Date achieved 07/30/2008 07/31/2011 07/31/2011 10 Original Target Intermediate Formally Revised Actual Value Achieved Values Outcome Baseline Value Target Values at Completion or Target (from approval Indicator Years documents) Comments Partly achieved. (incl. % IFRS were implemented by all banks and under implementation phase in the non banking achievement) financial sector. Indicator 11 Automated clearing house and real time gross settlement implemented Value No RTGS RTGS and ACH RTGS and ACH (Qualitative or and ACH operational operational Quantitative) Date achieved 06/30/2008 07/31/2011 07/31/2011 Comments Achieved. (incl. % A real time settlement system (Rwanda Integrated Payments Processing System -RIPPS), achievement) encompassing the Automated Clearing House (ACH), the Real Time Gross Settlement (RTGS) and the Central Securities Depository was implemented and went live in February 2011. G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 11/02/2001 Satisfactory Satisfactory 0.00 2 03/28/2002 Satisfactory Satisfactory 1.25 3 09/30/2002 Satisfactory Satisfactory 1.57 4 12/20/2002 Satisfactory Satisfactory 1.89 5 05/30/2003 Satisfactory Highly Satisfactory 8.56 6 12/02/2003 Satisfactory Highly Satisfactory 10.98 7 04/11/2004 Satisfactory Highly Satisfactory 12.04 8 09/01/2004 Satisfactory Highly Satisfactory 15.49 9 12/06/2004 Satisfactory Highly Satisfactory 17.52 10 06/23/2005 Satisfactory Highly Satisfactory 27.40 11 11/10/2005 Satisfactory Highly Satisfactory 30.31 12 06/13/2006 Satisfactory Highly Satisfactory 34.07 13 12/18/2006 Satisfactory Moderately Satisfactory 35.24 14 02/15/2007 Satisfactory Moderately Satisfactory 35.86 15 06/26/2007 Satisfactory Satisfactory 37.60 16 12/27/2007 Satisfactory Satisfactory 40.01 17 06/26/2008 Satisfactory Moderately Satisfactory 41.97 18 12/30/2008 Moderately Satisfactory Satisfactory 43.66 19 06/28/2009 Moderately Satisfactory Satisfactory 45.82 20 12/29/2009 Moderately Satisfactory Moderately Satisfactory 47.01 21 06/30/2010 Satisfactory Satisfactory 48.05 22 04/09/2011 Satisfactory Satisfactory 49.38 11 H. Restructuring (if any) Board ISR Ratings at Amount Disbursed Restructuring Reason for Restructuring & Key Approved Restructuring at Restructuring Date(s) Changes Made PDO Change DO IP in USD millions At the request of the government, to finance additional activities under component one of the project to deepen 4/24/2008 S S 40.001 the financial sector reform program plan following recommendations of the FSAP carried out in 2007. To enable the PCU to have sufficient funds to meet operational costs to continue to effectively monitor and support project activities up to the end of the project. The legal agreement was amended to 07/27/2011 S S 49.64 allow the reallocation of SDR 56,911.89 from two categories to one category (Category 4: Incremental Operation Costs) to enable a smooth preparation for the closure of the project. I. Disbursement Profile 1 Due to dollar depreciation against the SDR, the project had gained about US$ 7 million. The total credit proceeds at the time of the restructuring were about US$ 48 million instead of US$ 40 million. 12 1. Project Context, Development Objectives and Design 1.1 Project Description 1. The Competitiveness and Enterprise Development Project (CEDP) was designed in 2000 as a response of the Bank Group to the request of the client for creating a better climate for private sector development in Rwanda. The project was designed to support the strategic CAS objective of creating an enabling environment for private investment in Rwanda to sustain economic growth in the range of 5 to 8 percent per year. The project followed the closed Rwanda Private Sector Development Project and aimed to help provide the enabling financial, legal, business and infrastructure environment necessary to foster the development of a dynamic private sector leading to poverty reduction. The project focused on the following three areas: (i) strengthening the business environment; (ii) reducing the cost and improving the efficiency of utility services and (iii) liberalizing the tea industry. 2. CEDP was designed as a hybrid project with two single tranches of US$ 5 million each under the first component (Improving the business and legal environment) and an investment part. The tranches were disbursed to set up a start-up fund of US$ 5 million2 and recapitalize the Union des Banques Populaires de Rwanda (UBPR). The project was appraised in February 2001, taken to the Board on April 19, 2001, and became effective on December 7, 2001. The project’s closing date was July 31, 2007 but the Government of Rwanda (GoR) requested a budget reallocation and extension of the closing date, as it needed additional time to complete several activities deemed important for the project to reach its development obje ctives. The extension of the closing date to July 31, 2008 was approved in March 2007. Following the 2006 Financial Sector Assessment Program (FSAP) and 2007 Financial Sector Development Plan (FSDP), GoR requested assistance from the Bank to scale up the reforms in the financial sector undertaken under component one of CEDP. The project was restructured in 2008 with an additional financing of US$6.0 million to enable the government deepen ongoing reforms of the microfinance sector, aid development of auditing and accounting standards as well as strengthen regulation and supervision of Non-Bank Financial Institutions. 1.2 Context at Appraisal 3. After the war and genocide in 1994, the GoR issued its Declaration of Principles, spelling out its medium term agenda to move to a liberal, market-based economy, with a reduced role for the state as a means of achieving the transition from conflict and emergency to peace and sustainable development. In 1998, the Government, with the assistance of the World Bank and the International Monetary Fund, adopted the first policy framework paper, which provided the basis for a reform program that focused on measures to establish an enabling environment for economic growth and poverty alleviation. Specific reforms covered the following areas: (i) establishment of a framework of regulations and institutions favoring private sector development; (ii) trade liberalization and improvement of taxation; (iii) liberalization of domestic prices and marketing for commodities; (iv) public enterprise reform, including the privatization of about 60 state-owned companies; (v) opening up the water, energy, telecommunications and tea sectors to competition; (vi) liberalization of the exchange 2 The tranche was split in two funds at the request of Government in 2003: Rwanda Small Loan Fund (US$ 1 million) and Rwanda Risk Capital Fund (US$ 4 million). 13 regime; (vii) financial sector strengthening, including the Central Bank, and (viii) improvement of the policy and social security system. Most of these reforms were implemented with the support of a number of Bank-financed projects, including the Private Sector Development Credit (PSD, Cr. 2541-RW), three economic recovery credits and two sectoral operations (the Energy and Telecommunications projects. The GoR also completed an interim Poverty Reduction Strategy Paper (I-PRSP) which emphasized the role of the state in the promotion of the private sector, lowering factor costs and increasing efficiency and promoting market-based agriculture. 4. Rationale for Bank involvement: The GoR recognized the fact that strong growth, led by private sector investment, was a key to helping the Rwandese population improve their living conditions and build a solid foundation to reconciliation. The GOR had addressed certain impediments to improve its legal and regulatory framework; however, a number of additional measures were needed to remove barriers to entry and growth of private businesses and to overcome the perception of Rwanda as a high risk market and an unattractive place to do business. These included: (i) easing administrative and regulatory constraints limiting business creation; (ii) addressing, systematically, legal and judicial impediments for private sector development; (iii) reinforcing the financial sector; (iv) strengthening SME institutions to independently and effectively provide support to SMEs; and (v) easing Rwanda's transformation by creating prosperity through innovation and competitiveness. The CEDP was intended to establish an enabling environment for growth and development of the private sector that would help reduce poverty in Rwanda. The project was designed to create an investment climate conducive to doing business, provide financial and non-financial services to emerging or existing SMEs, improve the legal environment and stimulate efficiency in utilities and tea sectors by lowering costs through privatization. The private sector in Rwanda was characterized as thin and dominated by informal activities and was not structured as a strong partner to lead the dialogue on private sector development issues with the Government. 5. Infrastructure: The war and institutional weaknesses had deeply affected the functioning of the telecommunications, postal, water and power services. With the assistance provided by the donor community, Rwanda had managed to recover and re-establish almost the pre-war capacity of the networks. However, the cost of the services was still high, and efficiency was below industry standards due to the monopolistic power of government-owned Rwandatel and ELECTROGAZ. To improve sector efficiency, private sector participation and privatization over the medium-term were considered to be the most viable solution. The project intended to provide support to privatize Rwandatel and ELECTROGAZ to improve their operational and financial performance and set up a multi sector utility regulator. To consolidate the results already achieved under the previous IDA-financed project, the focus under this project was to ensure financial self-sufficiency of the National Post Office (NPO) for sustained delivery of affordable services. 6. Tea Sector. Tea was one of the two main export crops in Rwanda, contributing to about 30-40 percent of total exports at the start of the project. It was also one of the few crops which provided regular cash income to farmers. There were ten tea factories in Rwanda with nine of them owned and managed by the state through OCIR-The. At that time, yields of the tea estates were low and costs high; price level for tea growers were too low to attract growers to increase production and the industry lacked factory capacity to process increases in tea 14 production. The Government was committed to the liberalization of the industry and privatization of state-owned assets. To this end, the GoR prepared and adopted a strategy that addressed, inter alia, (i) the participation of nationals and key stakeholders (cooperatives, small-holders, factory employees) in the ownership of tea factories and estates through privatization; and (ii) accompanying measures, including the empowerment of farmers to take over management of all commercial and technical activities that were under the responsibility of OCIR-The; and (iii) the establishment of an independent Tea Board. The focus under this operation was the completion of the privatization of the tea factories and the establishment of an independent Tea Board. 1.3 Original Project Development Objectives (PDO) and Key Indicators (as approved) 7. The project objective was to establish an enabling environment for growth and development of the private sector that would help reduce poverty in Rwanda. The project was focused on promoting a competitive business climate by (i) streamlining the business environment; (ii) reducing costs and increasing the efficiency of telecommunications, water and electricity utilities, and the tea industry; and (iii) improving access to financial and support services to local entrepreneurs. 8. The project key outcome indicators were as follows: (i) improved perception of the investment climate; (ii) growth of local Small and Medium Enterprises (SMEs); (iii) reduced cost and increased efficiency of utility services; and (iv) returns on tea industry. These outcome indicators were to be achieved through the following output indicators: Improved perception of investment climate by private investors measured by share of private investment to GDP; Increase in export volumes; Commercial court established and fully operational; All necessary adjustments to legal and regulatory framework enacted; Improved financial sector; Privatization of Government owned telecom company, RWANDATEL, completed through a competitive and transparent bidding process; Private Sector Federation (PSF) operating efficiently; Multi-sector regulatory agency fully operational; 9 tea estates offered for sale by end of 2001. 1.4 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 9. The PDO remained unchanged throughout the project. Two restructurings were carried out; the first one in 2006 to extend the duration of the project by one year and the second in 2008 with an additional financing of US$ 6.0 million to support the strengthening of the financial sector. 10. At the design stage, several indicators did not have baseline data. A baseline survey was carried out in 2006 which set the base data for some of the indicators. It was difficult to determine in retrospect, 5 years after the start of the project, what the baseline data for some of 15 the indicators would have been. 11. At the time of the Additional Financing, the project was extended for an additional three years but the initial targets were not revised to take into consideration the additional time. The reason was that disbursement reached 90 percent of the credit amount and some activities were completed3. The additional financing was not intended to finance activities under the initial project. The following new performance indicators were added for the additional financing: (i) NBR Supervisory staff able to undertake on-site and off-site supervision of Non Bank Financial Institutions; (ii) Regulated MFIs are supervised regularly by NBR (once a year for large MFIs) and NBR is able to maintain reliable indicators; (iii) International Financial and Reporting Standards (IFRS) implemented by all financial institutions; and (iv) Automated clearing house (ACH) and Real Time Gross Settlement (RTGS) implemented. 1.5 Main Beneficiaries 12. The main beneficiaries of the program were the private sector, the population at large and the Government. For the local private sector, benefits were expected to be significant, as the project focused on completing reforms in key sectors and providing support that would encourage efficient private sector activities, particularly with respect to reduced transaction costs and lower entry barriers. The private sector would also benefit from new investment opportunities created by the divestiture program, and higher competitiveness resulting from lower cost of electricity, water, and telecommunications. Tea producers would benefit from higher productivity and share of profits. The consumers were expected to benefit from easier access to products and services at more affordable prices induced by increased competition, and be more protected by regulatory and competition institutions from the misuse of monopoly power. The project was intended to help make the Rwandese business environment more competitive. The project, would also permit the inclusion of the rural population into the economy and public services, and allow better social and business communications at lower costs; and the restructuring of ELECTROGAZ was expected to lower production costs and improve service availability and delivery. The local population was expected to benefit from the creation of job opportunities as well as acquire improved skills and mobility within the labor force. As for the GoR, it expected substantial revenue from the privatization of RWANDATEL and the nine tea factories and estates, a reduction in financial burden of these institutions and that of NPO and an increase in tax collection base. T he project was also expected to attract a flow of Foreign Direct Investment (FDI) that would create direct and indirect new jobs, as well as transfer technology and know-how. 3 The following activities were completed: 3 commercial courts were created in 2004, UBPR was recapitalized and became a commercial bank in 2008, CAPMER provided support to 60 SMEs, Rwandatel was privatized for the second time in 2007, Private management contract for ELECTROGAZ was signed in 2003 but revoked in 2005 due to poor performance of private operator; multi sector utility regulatory authority was set up; Tea Board was created and 4 tea estates were privatized. 16 1.6 Original components 13. The project consisted of 4 components: (i) improving the business and legal environment of Rwanda; (ii) improving efficiency and cost effectiveness through the privatization of the two main public utility companies and the Postal sector; (iii) reducing costs and improving returns by promoting a market-based tea industry through the privatization of the nine tea factories and estates; and (iv) providing assistance to the newly-established institutions, the Private Sector Federation and the PCU. Thus, the project addressed the following issues that mutually supported each other and were complementary to the results already achieved: 14. Strengthening the business environment (US$22.38 million): Further reduction of business transaction costs was to be sought through streamlining business and administrative procedures to facilitate private enterprise creation. To this end, the project aimed at (i) improving the legal environment affecting private sector development through the implementation of an action plan to remove legal impediments to private sector and the strengthening of the Arbitration Center; (ii) reducing bottlenecks in the investment implementation process and improving investor assistance by strengthening the operational capacity of the newly-established Investment Promotion Center, (iii) supporting emerging business by strengthening the newly established CAPMER combined with an SME start-up fund to help remedy the lack of sustainable long-term financing resources; and (iv) laying the ground work to address limited access of finance to the economy. The project was designed to provide technical assistance to (a) carry out a comprehensive review of the legal and regulatory framework to do business; (b) undertake a financial sector assessment; (b) support bankers' training through assistance to the School of Banking and Finance (SBF) and (c) restructure the Union des Banques Populaires du Rwanda (UBPR) to enable it to fulfill its function as the central pillar of the micro-finance sector in Rwanda and participate in its recapitalization. Furthermore, IFC intended to start due diligence in eligible banks with a view of possible equity investments, as well as the provision of credit lines. 15. Reducing the cost and improving the efficiency of utility services (US$14.25 million): To enhance competition in the telecommunication, water and energy sectors, ongoing reforms in these sectors were to be completed to encourage entry of private operators, lower factor costs and improve accessibility. To this end, the project, through its support to the privatization of the utility companies for water, electricity and telecommunication, intended to improve the delivery and cost of services to business and individual users. Furthermore, the project would help establish and build capacity of a multi-sector regulatory agency to effectively deal with a multi-operator market environment. The project also included a subcomponent on the postal sector to provide technical assistance for a feasibility study of current and new service provision on a commercial basis, implementation of a mode rn financial management system and tariff rebalancing; and corporate structure building and training of Rwanda Post staff. 16. Promoting a market based tea industry (US$2.36 million): It intended to instill competition for higher sector efficiency, contribution to economic growth and returns to owners and farmers, through the privatization of tea factories and estates. The GoR was to establish and build the capacity of an independent Tea Board for a better stakeholder consultation on issues pertaining to the marketing, pricing and commercialization of tea. 17 17. Support to Private Sector Federation and Project Coordination Unit (US$1.55 million): The project planned to (a) provide technical assistance to the information dissemination campaigns on HIV/AIDS, in collaboration with the Private Sector Federation, and (b) support the Project Coordinating Unit (PCU). 1.7 Revised components 18. The project components were not revised but four subcomponents to strengthen the financial services sector were added to the first component when the project was restructured for additional financing. The four subcomponents were: (i) improving access to credit and financial services; (ii) improving accounting and auditing standards; (iii) enhancing NBFI regulation and supervision; (iv) strengthening the national pension fund, Caisse Sociale du Rwanda (CSR); and (v) modernizing payments systems. 1.8 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) 19. Some modifications were brought to the activities initially included at the design of the project. Some activities were cancelled while others were added. Under component one, support to RBS, Kigali International Arbitration Centre, Masaka Business Incubation Centre and the leasing program was added. The HIV/AIDS sensitization campaign under component two was dropped as the activity was financed by several other donors. Under component four, several institutions were also supported: Rwanda Housing Bank, National Tender Board, Kigali Institute of Science, Technology and Management (KIST), MIJESPOC, Rwanda Office of Tourism and National Parks and National Insurance Commission. The support was mainly in the provision of equipment and staff capacity building. 20. The implementation time was also extended, spanning over a period of ten years as a result of two consecutive extensions of the closing date. The first one was in 2007 for a period of one year to allow for the successful completion of project activities that were not yet implemented. The second extension was in 2008 for a period of three years due to the additional financing to support the strengthening of the financial sector. The supervision of the project was originally under the Ministry of Finance and Economic Planning (MINECOFIN) and was transferred to the MINICOM in 2005 following recommendations of the Mid-Term Review. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 21. The project was requested by the Rwandan government to support the achievement of governmental goals and be complementary to the Government's economic reform program at that time. In particular, it aimed at achieving macroeconomic stability, improving the competitiveness of the economy and stimulating economic recovery. The project was also consistent with the CAS dated June 17, 1992, which gave high priority to: (i) supporting the country's adjustment process; (ii) developing an incentive structure for private sector 18 investment; (iii) reducing the role of the state and improving public resource management; (iv) developing human resources, building local capacity, and alleviating poverty; and (v) fostering improved management of natural resources, while protecting the environment. 22. The project design was based on lessons learned from prior work and major risks were identified. The project was designed specifically to support Rwanda in its reconstruction phase after the war. At the time of project design, research and experience wit h prior projects pointed to broad cross-sector approach to increasing competitiveness. The need to improve the business environment for private sector growth was also acknowledged. The Government's strategy for private sector growth was spelled out in its Letter of Development Policy of April 1999 and National Vision 2020. Project design benefitted from a series of studies funded under the project preparation facility, which effectively helped the PCU meet conditions of effectiveness and advance different technical components of the project. 23. Assessment of risk by project team was adequate at project preparation. The team properly identified risks related to the appropriateness of reforms and adequacy of training being offered. The design was cognizant of the risks associated with poor institutional and absorption capacity of key stakeholders to implement reforms. The design embedded intensive technical assistance and capacity building in the core components of the project to mitigate these risks. One of the outstanding design features was the emphasis on institutional and capacity development; and legal and regulatory reforms as a foundation for building a sound and sustainable business environment in the country. 24. Quality at Entry: The project’s overall concept was sound and conformed to the Vision 2020, I-PRSP and the CAS of 1992. The project did not undergo quality at entry assessment. There was adequate level of analytical work undertaken including participatory discussions with key stakeholders. However, the results framework was not adequately designed with the PDO and intermediate indicators too broad to be able to directly attribute achievements specifically to the project. In this regard, quality at entry is rated as moderately satisfactory. 2.2 Implementation 25. The project was implemented over a period of ten years, from effectiveness in December 2001 until closing on July 31, 2011. It was extended two times to ensure activities were completed on time and additional financing provided to the project were afforded adequate time for implementation. The amount of additional financing of US$6 .0 million equivalent was added to finance activities to deepen financial sector reforms. Four new performance indicators were added to the results framework under the first component of the project. The project was designed as a hybrid project with the disbursement of two single tranche of US$ 5 million each and the remaining funds utilized for an investment lending operation. The first tranche of US$ 5 million was used to recapitalize UBPR. The second tranche was further split in two funds: Rwanda Small Loan Fund (US$ 1 million) that financed SMEs requiring funds ranging from US$5,000 to US$35,000 through the Business Plan Competition; and a Risk Capital Fund (US$ 4 million) to provide finance in the range of US$100,000 to US$400,000 to SMEs that have a potential to grow and become competitive in 19 the export market. This contribution was later made to the Rwanda Enterprise Investment Company (REIC) that was designed to operate like an equity fund for more promising SMEs. REIC was restructured in a new SME fund in 2011 4 and signed a management contract with Business Partners International. 26. Project implementation was managed by a Project Coordinating Unit (PCU), known as the Competitiveness and Enterprise Development (CEDP) Unit, under the Ministry of Finance and Economic Planning. The CEDP Unit had overall responsibility for project implementation at various periods. The daily management of the project was carried out by the PCU under the supervision of the Steering Committee. The project activities were implemented by the institutions considered to be project implementing agencies. Having the Project Coordinating Unit set up as an autonomous body with fully dedicated staff ensured proper coordination with close to twenty five beneficiary agencies. Throughout the implementation of the project, the commitment from the Government was very strong. 27. A high-level Steering Committee, whose composition was spelled out in the PIP, was set up to ensure coordination of all project activities at the Government policy level. It was chaired by the Permanent Secretary, Ministry of Finance and Economic Planning and comprised the Heads of Implementing Agencies. In 2005, the CEDP Unit was transferred to MINICOM with the Steering Committee chaired by the PS of MINICOM. The Steering Committee met on a regular basis to assess implementation progress, provide strategic orientation to the project and approve annual budgets of the project. 28. During the first years of project implementation, a small staff composed of a Project Coordinator, a Financial Manager and a team assistant formed the PCU which was advocated as a supporting body to the implementing agencies. The procurement and monitoring/evaluation positions were filled in November 2004 when the number of requests from implementing agencies to fund activities increased substantially. The project faced a number of challenges due to the high turnover of focal points in the implementing agencies and replacing them took some time, with the new staff further needing more time to familiarize themselves with and master World Bank procedures. The majority of implementing agencies did not have enough capacity to deal with some aspects of their respective sub-components, in particular with procurement. This resulted in the plurality of incompatible jobs for the team and for the smooth running of the project. It was difficult for the PCU to properly plan and manage activities to be disbursed and monthly reports were also not submitted in time. Continuity in the PCU and World Bank task management function, especially with a ground presence, seemed to have contributed significantly to keeping the project on course. 29. The implementation of the project required some highly specialized technical experts to guide the project team. There was close collaboration between the different units of the World 4 The Fund shareholders include Rwanda Enterprise Investment Company (REIC) with equity of US$4 million, International Finance Corporation (IFC) with US$1.6 million, DOEN, a Dutch Non Governmental Organization with US$1.1 million and BPI with US$ 0.5 million. The new SME Fund, now known as Business Partners Rwanda SME Fund would be managed by Business Partners International and is expected to make equity investments of between US$50,000 and US$1 million in medium enterprises and provide business advisory services to SMEs. 20 Bank Group, IMF and other donors at different point in time. The project benefitted from the expertise of (i) a Postal Services Specialist to work on the restructuring of the National Post Office, (ii) a Telecommunications Specialist and (iii) an Insurance Specialist. The task team collaborated with the Electricity Rehabilitation Project team for the setting up of the Rwanda Regulatory Authority and institutional strengthening of ELECTROGAZ. IFC was involved as from 2008 in the reforms of the investment climate with their Rwanda Investment Climate Reform Project, by providing technical assistance to reform areas that had a direct impact on the Doing Business indicators. IFC was also involved in setting up the leasing program and investing in the REIC. Since the government program was supported by many donors, including the Bank, it was difficult to attribute some of the outcomes to the CEDP alone. Where possible, results that could be directly attributed to the project were described in the report. 30. A Mid-Term Review was carried out in February 2005, one year before the original closure of the project. At that time, implementation progress on all components was considered “highly satisfactory� except for some delays in the tea sector reform (Tea Board) and support to MININFRA and NPO. Disbursement was estimated at 52 percent of the original credit amount. The Mid-Term Review revealed that major functions such as Procurement and M & E positions were filled in end 2004, three years after the start of the project. The implementation of the project was affected by lack of appropriate technical staff at the level of the PCU to ensure proper planning, implementation and monitoring of the activities. The Steering Committee was also not fully operational as not all positions were filled. Following the Mid-term Review, the PCU was reinforced and formal training was provided to the PCU teams, focal points and fiduciary teams of implementing agencies. Implementation progressed satisfactorily once those issues were addressed. Some internal budget allocation was also carried out, after approval from IDA, whereby the funds allocated to some activities were not used due to cancellation of those activities and the funds allocated to other subcomponents. 31. The project was coordinated by two different project managers over the implementation period; and two ministries had oversight responsibilities over the project at different periods. There were three World Bank Task Team Leaders during implementation. Most components had a successful and efficient implementation, producing a large number of project outputs. The main causes for this successful implementation were the commitment of the technical staff of the PCU and close Bank supervision, with the TTL in the field. Among the other positive factors that led to successful implementation was collaboration with stakeholders. Given the various aims of the project, implementation would not have been possible without the continuous engagement of stakeholders. For example, the project worked closely with the Municipal Council of Kigali to implement the one-stop-shop to facilitate business processes. In another example, the PCU contracted local staff to work directly with private sector beneficiaries such as Centre for Assistance to SMEs (Centre d’Appui aux PME du Rwanda – CAPMER), Association of Micro Finance Institutions of Rwanda (AMIR), Private Sector Federation (PSF), National Bank of Rwanda (NBR), Union des Banques Populaires de Rwanda (UBPR), ELECTROGAZ, National Post Office (NPO), Rwanda Bureau of Standards (RBS), Rwanda Utility Regulatory Authority (RURA), Ministry of Justice (MINIJUST) and Executive Secretariat of Financial Sector Development Plan (FSDP), among others, to determine appropriate technical assistance. The project also worked with various private and public training institutes to improve training options in various sectors, one of them being the School 21 of Finance and Banking. The project funds were reallocated and the project restructured to facilitate implementation, maximize impact, and respond to Government requests consistent with the PDO. The changes were made primarily to direct project resources toward activities with the greatest potential for impact and proactively respond to changes in Government priorities. The implementation of the project is rated as moderately satisfactory. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 32. As discussed before, the M&E design of the project had weaknesses stemming from lack of clarity at the time of the design of the project and an unavailability of baseline data. The project elaborated a Results Framework that was aligned to the PDO and based on the information that existed in 2001. This Framework was prepared with the expectation of data that, although not available at that time, was supposedly going to be generated. However no surveys were carried out and the Baseline assessment was carried out in 2006, five years after the start of the project. It was difficult to reconstruct the objectives targeted by the project for some indicators as the institutions were either dismantled or merged with other structures. Other institutions were set up after the start of the project and were not included in the results framework, at any time. The detailed results framework that was developed by the consultants was not fully implemented by the PCU. A simplified version was adopted which makes it difficult at the ICR stage to have a complete picture of the achievements that could be reasonably attributed to the project. At some point during the supervision period, and with the improvements and new insights into developing and implementing an M&E framework, the Bank team should have included an M & E specialist in its supervision team. Overall, the project could have benefited if more than one impact study were conducted throughout the ten years, including one towards the last year of project implementation to measure overall increased income and employment creation impact. 33. Utilization: The monitoring indicators were the principal base for monitoring and evaluation (M&E) over the duration of the project. The primary source for implementation progress was data collection by the technical staff of the PCU. Quarterly reports from implementing agencies to PCU were used to revise work plans, including additional technical assistance to institutions based on individual strategic needs. Data was also collected from several sources including project reports, and were periodically verified by external auditors, financial management team and supervision missions. The final activity report (February 2011) from PCU and the completion report from the Government were received as input to the ICR. Based on the above, the design, implementation and utilization of the M&E framework is rated substantial. 2.4 Safeguard and Fiduciary Compliance 34. Safeguard. The project was classified as Category B. An environmental pre-audit was conducted to determine potential liabilities and rank enterprises according to the need for comprehensive environmental, partial, or no audit. The environmental pre-audit was approved by the Bank and the Borrower. It was disclosed in Rwanda and in the Bank Information Center (Infoshop) in December 2000. Based on this, the potential environmental impacts of this project are related to the privatization component. Environmental problems associated with the power utility and water treatment plant operation were not known at the time of the project 22 design. The water treatment station seemed to have sustained limited damage during the war. The waste management and occupational safety at the water treatment stations were dealt with through the contract with the private operator, which included a provision for the required personal protection equipment. Environmental audits were included in the bidding packages for the privatization of the tea estates to determine the magnitude of the environmental problems involved and identify measures to mitigate or eliminate them. There were no major social issues as the privatization did not result in any redundancies. 35. Financial Management: The PCU kept records on financial management and followed financial management guidelines as detailed in the PIP. The IFRs and financial audits were submitted on-time and issues raised by the auditors were addressed by PCU although some delays in implementation of recommendations from the audit reports were noted. The last Audited reports (ending October 2011) revealed some recurrent weaknesses in the book keeping and reporting of some expenses 5. The project financed the procurement of accounting software, SUCCESS that was used for the accounting functions of the project. However, the software was not well designed as reports for IFRs and withdrawal application of funds could not be generated automatically from SUCCESS and had to be prepared manually till the end of the project. The software was not fully utilized, as financial commitment modules, which would have enabled the follow-up of the contract implementation and monitoring and evaluation module were not used. The software did not allow the management of accounts in more than one currency and it was difficult to reconcile the expenses related to the different project fund currencies. The staff in charge of procurement, monitoring and evaluation did not use the Procurement Management module and the Monitoring and Evaluation module of the software. It was mentioned by the PCU that the software would no longer be used once CEDP was closed due to its limited functionalities. The overall performance of the financial management function is rated moderately satisfactory. 36. Procurement: At the start of the project, the procurement function was overseen by the Project Coordinator with the implementing agencies being responsible for preparing action plans, procurement plan, project proposals and procurement documents. A full time Procurement Specialist was recruited in 2004 when the implementation of the project was in full swing. The PCU ensured implementing agencies followed agreed procurement guidelines and procedures and that the documents prepared were according to World Bank standards. The PCU was also involved in all procurement process of goods and services. The PCU prepared Procurement Plan which was approved by the Steering Committee but several activities, particularly capacity building, that were not in the Procurement Plan were financed by the project. During the 2007 Implementation Support mission, it was agreed with the PCU that support to non core activities of the project (such as events, equipment, training and travel) were reduced. A new action plan with the core activities to be supported under the remaining project timeframe was discussed. These activities were considered as useful to complement core activities supported in the past, build capacity and promote the image of the beneficiaries. It was agreed with the Bank team that the PCU would prepare and get approval on annual training plans to enable the PCU to better prepare forecasted budget. The Bank’s fiduciary team undertook several post procurement reviews and two Independent Procurement Reviews (IPR) were conducted in 2005 and 2008. The 2005 review showed some 5 Advance payment guarantee was not implemented; Long outstanding creditors – some from institutions that have been merged with RDB, Monthly Procurement Report not submitted to Rwanda Public Procurement Authority, Regular stock reports were not prepared. 23 shortcomings in the procurement functions of the PCU with mis-procurement declared for three activities. After explanation provided by the PCU and a second review of the report by the Bank, mis-procurement was declared on two activities 6 . The outstanding amount of US$120,045 was refunded to the Bank. These cases arose because the PCU did not have a dedicated Procurement Officer and the procurement functions were being carried out by the Project Coordinator. Following recommendation from the World Bank team, a full time Procurement Specialist was hired and was fully trained in World Bank procurement procedures. The IPR of April 2008 also highlighted some shortcomings on the selection method, bidding documents used and evaluation process. World Bank procurement guidelines and procurement procedures as laid out in the Project Implementation Plan were not being followed 7 . The overall performance of procurement management is rated unsatisfactory. 2.5 Post-completion Operation/Next Phase 37. The project financed the establishment and strengthening of the capacity of several institutions in Rwanda, ranging from the judiciary, regulatory bodies, institutions providing support to enterprises and SMEs, banks including the Central Bank, specialized training schools, investment promotion and facilitation agencies to the Private Sector Federation. The knowledge and experience gained by the beneficiaries through CEDP should contribute to sustain the reforms and even deepen the reforms in the business environment and financial services sector. To ensure the sustainability of investment climate reforms which have contributed to Rwanda improving its ranking on the annual Doing Business survey, the Government would continue to finance the Doing Business unit which was created under RDB to oversee Rwanda’s performance with regard to the IFC-World Bank Doing Business indicators. RDB was well equipped with a strong technical team to carry out investment promotion activities. The supervision department of NBR and RURA were a few of the structures that were supported under the project and which were able to perform efficiently, with the caveat that the staff would still need regular training to keep up to date with new techniques and technology. It was expected that GoR would be able to finance highly specialized capacity building programs. For other institutions like AMIR or the Executive Secretariat of the FSDP, no transitional measures were put in place after the closure of CED P. These institutions were faced with a financing gap where the Government would have to step in to contribute to the cost or these agencies would have to reduce the scope of their activities. 6 The two contracts were procured in violation of the ''Guidelines Procurement under IBRD Loans and IDA Credits" (published by the World Bank in January 1995 and revised in January and August 1996, September 1997 and January 1999) as well as the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" published by the World Bank in January 1997 and revised in September 1997 and January 1999). 7 The following were the shortcomings identified in the IPR: poor planning of activities; cost estimated and key staff not adequate with the scope of the mission, practices which do not always allow transparent competition; a large number of national shopping procedures mostly includes the purchase of travel tickets (through travel agencies), office/computer supplies, and services such as hospitality or catering services, and conference hall rentals. Most of the procedures are conducted in a rush and with a lack of specifications or bidding conditions that would allow for actual competitive procedures. The result is that a number of them do not comply with basic procurement procedures which would ensure that the processes are transparent and conducted under economical conditions. Shopping without indication of submission deadline. Tender document not specifying quantities, award of contracts based on total of unit prices, evaluation criteria, pre- qualification not adequate, use of contract which lack essential clauses; filing system still accuse some deficiencies e.g. lack of Minutes of Negotiations, Opening Minutes, and prior reviewed documents 24 38. A follow up operation to the CEDP will be presented to Board early 2012 and would contribute to sustaining the achievements of the CEDP through continued support to selected government agencies in the areas of export diversification and competitiveness for the horticulture and tourism sectors. 39. The African Development Bank is financing CEDP II for the period 2008 to 2012 with the following components: support to RDB (support to operationalization of RDB, strategic investment promotion, and enterprise development); support to NBR (improving access to credit and financial information, strengthening banking supervision) and financing of the PCU. The Business Plan Competition that was supported by the project for the first three years, from 2004 to 2008, is being financed by the Netherlands, under a special fund and also includes support to PSF on advocacy and BDS services. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 40. The project’s development objectives continue to be highly relevant especially with Rwanda’s ambition to be a middle income country by 2020. The project components were relevant and consistent with project objectives as they were aligned to support improvements which were critical for a strong finance and private sector development. The design of the project was also relevant to the specific reform agenda that the project sought to promote , strengthening business environment, and remains relevant in the current context. The project design was relevant in terms of outcomes and activities at policy, sector and institutions levels which were practical and responsive to the immediate and long term development needs of stakeholders involved in the implementation of the CEDP project. The choice of the instrument was also appropriate as the hybrid instrument enabled the Bank to invest in two SME funds, one equity fund and an investment portion, enabled the Bank to fund specific technical assistance, capacity building, training, study tours, twinning arrangement and equipment to the beneficiaries. The relevance of this project is rated high as the project clearly identified improvements to private sector competitiveness and increased private sector participation in the economy as key to the economic transformation of Rwanda. 3.2 Achievement of Project Development Objectives 41. The project was implemented after a very difficult period in Rwanda and made an important contribution in helping the country during the transition from war to peace. In spite of the extremely adverse country circumstances after the genocide, the project had a significant positive impact on financial and private sector development. The project was a moderately large TA loan by IDA standard, covering sectors ranging from energy, telecommunication, postal services, tea and financial sectors, support to SMEs, investment promotion and generation, public private dialogue and privatization of government owned enterprises. In addition, the Project also supported institutional building and strengthening of CAPMER, RIEPA, RURA, Privatization Unit, RDB, AMIR, NBR and FSDP Secretariat. After project closure, most of the expected benefits materialized and the country experienced a higher economic growth fostered by a more efficient financial and private sector. 25 Improved perception of the investment climate 42. Under the project, a total of 13 commercial laws 8 were reviewed, finalized and enacted. The project enabled the creation of a three fully functional commercial courts and an Arbitration Centre to settle business disputes and reduce the time taken to enforce court decisions. The time taken to settle a commercial dispute in the Commercial Court was decreased from 394 days in 2003 to 230 days in 2011. The high success rate in legislative reform could not be totally attributed to the project as some of the reforms pertaining to DB indicators were also funded by the IFC Rwanda Investment Climate Reform Project (RICRP). However it is important to note that the CEDP funded the Doing Business Reform Unit and paved the way for the IFC RICRP in terms of legislative and investment promotion reforms. 43. The performance of the banking and non banking sectors was improved and access to financial services was enhanced through improved service delivery of private commercial banks, micro finance institutions and new financial products such as leasing were introduced. CEDP Initial Financing contributed to the improvement of the quality of services offered by the financial sector in Rwanda. The main achievements can be summarized as follows: (i) improvement of the portfolio management of BCR after its privatization process; (ii) a better performing UBPR after its restructuring and recapitalization; (iii) introduction of a new chart of accounts for the banking sector; (iv) a Credit Reference bureau; (v) the successful implementation of the Automated Clearing House (ACH) and Real Time Gross Settlement System (RTGS); and (iv) regular on site and off site supervision of commercial banks and MFIs, including SACOOs. All banks now comply with the minimum capital requirement of US$ 8.6 million and required minimum Capital Adequacy Ratio of 15 percent. There is now a more efficient banking system in Rwanda. The performance of the non banking sector also improved. 44. The project significantly contributed to improve the perception of Rwanda as an investment destination through the reforms in the business environment, financial sector and public utilities. The project also supported investment promotion campaigns to attract foreign investors in Rwanda. The share of private investment to GDP increased from 3.4 percent at the start of the project to 14 percent at the end of the project and is expected to grow. Export volumes increased during the lifetime of the project except for 2009 due in part to the financial crisis. Growth of local SMEs 45. The CEDP financed the Business Plan Competition (BPC) for three years whereby funding and technical assistance were provided to promising Rwandan entrepreneurs through a competition. The BPC was successful in promoting and stimulating entrepreneurship development in Rwanda through sensitization campaigns and assistance to prepare viable business plans that could attract external financing. The project helped strengthened the institutions such as CAPMER and AMIR to provide a better service to SMEs. The Rwanda Standards Bureau helped Rwandan enterprises improve their competitiveness and export 8 The legislations are: (1) Law establishing commercial courts, (2) Law on Arbitration, Mediation and Conciliation in Commercial Matters, (3) Law Establishing the Business Registration Services Agency, (4) Labor code, (5) Law on mortgages, (6) Law on securities in movable property, (7) Insolvency law, (8) Companies acts, (9) Competition and Consumer Protection Law, (10) Draft bill on Provisions applicable on Privately Financed infrastructures, (11) Contract Law, (12) Condominium Law; (13) Law on electronic transactions. The 14th which is Negotiable Instruments Law has not yet been enacted. 26 readiness through quality control and quality assurance. There was an increased access of locally manufactured goods to targeted markets, resulting in an upward trend of exports. Reduced cost and increased efficiency of utility services 46. The project financed the preliminary studies for the preparation of the privatization process of Rwandatel which led to the liberalization of the telecom sector and enabled participation of the private sector. There was an increase in the number of telecom service providers, ISPs and other internet-based services which led to a reduction in tariff of telecom services, an increase in the number of subscriptions and a diversification of the product offer. 47. Electrogaz embarked on critical reforms with the technical and financial assistance of the CEDP and the Utility Rehabilitation Project to improve its performance. The achievements of ELECTROGAZ / ESAWA were: (i) decrease in the queuing of clients to buy power due to the new management system with electricity prepayment counters, which allowed the privatization of selling electricity; (ii) significant decrease in the technical and commercial losses due to the acquisition of loss reduction equipment and privatization of some services; (iii) decrease in the lead time to water and electricity connection; (iv) decrease in the lead time to water and electricity damage repair; and (iv) increase in the number of new water and electricity connections in rural as well as in urban areas. 48. The establishment of the multi sector Utility Regulatory Authority created the appropriate environment for increased private sector participation and a more efficient supervision of telecom and utility companies. The privatization and/or liquidation of public institutions generated revenues to GoR and caused a reduction in government spending through reduced subsidies to these institutions. The privatization of state owned tea estates resulted in an increase in earnings from tea exports; from USS 22.7 million in 2001 to US$ 31.7 million in 2006 and US$ 55.7 million in 2010. Returns on tea industry 49. The project provided specialized technical assistance for the creation the Tea Board which was later incorporated under NAEB and privatization of 7 out of the 9 tea factories and estates. The selling price of tea per kg increased from US$ 1.49 in 2001 to US$ 2.59 in 2010, corresponding to a 70 percent increase. The earnings from tea exports increased from US$ 22.71 million in 2001 to US$ 44.95 million in 2008 and US$ 55.71 million in 2010. 50. Achievement of development objectives. The project had some major achievements even if not all KPIs were fully achieved. Had the indicators been better formulated, the achievement of the PDOs might conceivably have been rated Satisfactory. As it is, the project is rated as moderately satisfactory. 3.3 Efficiency 51. At the time of Appraisal, the Net Present Value (NPV) and economic rate of return was estimated for the duration of the project. The Cost Benefit Analysis carried out after project closure could not replicate the same methodologies used in the ex-ante economic analysis as the ICR team was unable to get access to the original detailed analytical working. The file was not on record. Instead, a different set of assumptions were used based on the actualized 27 benefits. Two benefits were included in the analysis: FDI and earnings from tea export. However as it was difficult to separate the project’s direct results from those of the macro economy at large, the net economic cash flow were based on a conservative assumption of 50 percent of FDI flows and tea export earnings; which might explain the lower NPV at the time of the ICR (refer to Table 1 below). Table 1: ERR and NPV at appraisal and project closure PAD ICR ERR 24 % 31% NPV US$ 31 million US$ 9 million 52. Project management was cost effective. At project closure, the actual cost of project management was 98 percent of appraisal estimates. Table 2: Project Costs at appraisal and closure Appraisal Actual / latest Percentage (US$ million) update of appraisal (US$ million) Project Cost 41.14 41.23 100.22% Additional financing 6 5.02 83.67% Total 47.14 46.25 98.11% 53. On the basis of revised assumptions, the ex-post benefits were higher than the estimates at appraisal (ERR 24 percent at appraisal compared to 31 percent at ICR). The project was economically beneficial to the country and the efficiency of the project is rated as substantial. 3.4 Justification of Overall Outcome Rating 54. The project objectives and implementation were and remain highly relevant to the country priorities. The project paved the way, through the wide range of activities that were funded, to change the perception of Rwanda from a conflict affected country to a competitive and attractive investment destination. It contributed to improving the business environment, strengthening the financial sector with a more efficient banking system, privatization of the tea estates, setting up a multi sectoral regulatory body to regulate the telecom and utility sectors and reinforcing several institutions to improve their service delivery through investment in equipment and capacity building. Furthermore, the cost benefit analysis showed that the project resources were efficiently utilized resulting in an ERR of 31 percent. The outcome of the project is rated as moderately satisfactory due to the fact that not all end -of project achievements could be attributed solely to the project. 3.5 Overarching Themes, Other Outcomes and Impacts 3.5.1 Poverty Impacts, Gender Aspects, and Social Development 55. The project was designed and implemented at a time when Rwanda was on its way to reconstruct the country after the civil war. The objective of the project was to contribute to poverty reduction by establishing an enabling environment for private sector-led economic growth. The project brought together several actors of the economy – policy makers, government officials, institutions working to reduce poverty and the private sector to create an 28 enabling environment that would lead to increased investment, job creation, efficiency in the system delivery reduction in cost of public goods and disinvestment of the state for a more efficient allocation of resources. Key performance indicators show the project had a positive impact on poverty reduction. 3.5.2 Institutional Change/Strengthening 56. The project was instrumental in fostering the development of several institutions and l strengthening of others. The project contributed to the establishment of the three Commercial Courts, Arbitration Centre, One Stop Centre, Doing Business Unit, CAPMER, REIC, ICPAR, AMIR, RURA, and Tea Authority. The project also contributed to the institutional strengthening of several agencies within ministries and governmental departments and agencies. The Drafting department of the MINIJUST, the Investment Promotion department of RDB (ex-RIEPA), supervisory and Payment Systems Department of NBR, FSDP Secretariat, SFB, RSB, NPO, RPPA, PSF, KIST, NTB, RHB, Office of Tourism and Conservation, MIJESPOC, NIC and SSFR were strengthened either through technical assistance, capacity building program, long term and short term training, study tours, twinning arrangements or through financing of equipment and software necessary for the entities to operate efficiently. 3.5.3 Other Unintended Outcomes and Impacts (positive or negative) 57. Rwanda successfully implemented a number of reforms in a relatively short period of time and was recognized as a top global reformer in implementing doing business reforms in the Doing Business report. Rwanda emerged as an exporter of knowledge and a key pl ayer in South-South exchange programs. It hosted several delegations from Africa who visited the country to learn from the experience of Rwanda in designing and implementing doing business reforms. Rwanda also confirmed the crucial role of the political economy in the reform process and how commitment from the highest level in government helps push the agenda forward. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 58. A half day workshop was held in June 2011 to discuss and validate the Implementation Completion Report prepared by GoR (refer to Annex 7 for a summary of the report). All beneficiary institutions attended and provided accurate data and status of their institutions including sustainable impact of CEDP support. 4. Assessment of Risk to Development Outcome 59. Most institutions are operational and are confident that they can sustain themselves without World Bank financial support. However, a few of them have openly declared that without the Bank’s support, it would be difficult for them to continue the same way they have been operating without the Bank’s support. These institutions would either have to get the funds from Government or review the scope of their mandate. One of the risks that faced by institutions in Rwanda was the high attrition rate of highly qualified staff. 29 60. The political situation in Rwanda was relatively stable and there was no risk of reversal policy reforms that were supported under the project. Furthermore, government showed ownership of the project and provided the leadership needed to implement the reform program. This was a strong indication that Government would continue its endorsement and the reforms would be sustained in the long run. The one risk that could impact on the development objective was the reorganization of institutions that happened in the past, particularly with several independent agencies now forming part of RDB: RIEPA, CAPMER and Privatization Unit. However, RDB has a very strong management team, enjoying support at the highest hierarchy and would continue with the reform program albeit in a somewhat different manner, depending on government priorities and response required to changes in the environment. At project closure, there were some outstanding challenges such as infrastructure and access to finance that still needed to be addressed but were beyond the scope of the project for a more vibrant private sector in Rwanda. The risk to the project development outcomes is assessed as moderate. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance 5.1.1 Bank Performance in Ensuring Quality at Entry 61. The Bank’s performance at design, appraisal and negotiation of the project was acceptable. The Project was consistent with the Government’s development priorities and the Bank’s CAS. Possible risks were identified at the preparatory phase of the project and mitigation measures were outlined. Major lessons learnt from earlier projects were taken on board and incorporated in the project design. For example there was a strong commitment and ownership of the reform agenda by the Government and participatory preparation approach involved all stakeholders. The quality could have been improved by the M&E framework to facilitate objective data collection and reporting on productivity during implementation. For example the budget for training and capacity building was substantial but there were no indicator for capacity building. The project would have gained from more communication campaigns on the substantive reforms that were carried out. Except for a couple of information campaigns, the project lacked the development of a proper communication plan that would have helped inform the targeted stakeholders and the public at large of the reform agenda and the outcome of the reforms in their daily life. Quality of entry is rated moderately satisfactory. 5.1.2 Quality of Bank Supervision 62. Supervision missions were undertaken at least twice a year during project life and were sometimes supported by sector specialists to address specific implementation issues. Throughout the ten years of project implementation, there were only three task team leaders (TTL), which was a relatively low turnover of Bank team leaders. The task team produced comprehensive aide memoires and issues were promptly brought to Management’s attention and solutions sought. Moreover, the TTL was based in the field for the latter part of the project which helped resolve issues as they arose. There was an excellent collaboration between the Bank’s team, the PCU and implementing agencies. The team should, however, have been more candid in their ISR assessments which had a “Highly satisfactory� rating for the IP from 2002 to 2006 despite some major challenges in the implementation of the project. 30 The rating was however downgraded after mis-procurement was reported. Quality of supervision is rated moderately satisfactory. 5.1.3 Justification of Rating for Overall Bank Performance 63. The overall Bank performance is rated moderately satisfactory. Adequate teams and resources were fielded during the preparation, appraisal and supervision. The task team remained pragmatic and flexible by responding positively to GoR’s requests to provide training and fund capacity building programs to staff of implementing agencies to help achieve the PDO. The continued Bank engagement and support resulted in additional financing to scale up the reforms in the financial sector. 5.2 Government Performance 5.2.1 Government Performance 64. The government was committed to the project and showed effective participation in project implementation throughout the lifetime of the project, even continuing to support some critical activities after the closure of the project. GoR showed strong commitment and ownership in implementing far reaching policy and institutional reforms in a particularly difficult political and socio-economic context. The government’s completion report of the project was prepared as requested and submitted to the Bank. The external audits were submitted to the Bank within the deadline. Government performance is rated satisfactory. 5.2.2 Implementing Agency Performance 65. The project was coordinated by the PCU with qualified staff, although at the beginning of the project, the PCU was not fully staffed. As mentioned before, there was a high turnover at the level of the implementing agencies, making it difficult for the PCU to get well prepared annual plans and inputs for the procurement plan. Furthermore, there were more than 20 beneficiary agencies during the 10-year life time of the project, rendering the tasks of the PCU very complex and time consuming. Follow up with each of these agencies, providing quality assurance in fiduciary functions, preparing IFRs, procurement plan and annual budget was not an easy task. After the Mid-Term Review, coordination activities were undertaken successfully by PCU, especially when it was properly staffed with qualified and experienced people. And PCU was able to support the implementing agencies in the preparation and implementation of activities. Submission of annual work programs, yearly budgets, external audits and other fiduciary functions proceeded in a satisfactorily manner. 66. Most of the implementing agencies did not have a proper HR plan in place to retain trained staff and there was a high attrition rate of skilled staff. With no mechanism in place for the transfer of knowledge, staff had to be retrained causing a delay in the implementation of some specific activities. Performance of implementing agencies is rated as moderately satisfactory. 5.2.3 Justification of Rating for Overall Borrower Performance 67. Overall Borrower Performance is rated satisfactory. The government contributed to the design and implementation of a program that impacted the economy as a whole. Government 31 provided counterpart funding and its performance was satisfactory. 6. Lessons Learned Several lessons emerged from this assessment of the project: 68. Strong political commitment: Aligning operations to country reforms increases the odds of political endorsement. Political commitment, support and ownership are key conditions for any operation’s success. To this end, aligning the project’s PDO to current political priorities increases the probability of securing support from having high level support from policy the operation to be supported by policy makers. The CEDP was aimed at supporting the GoR establish an enabling environment for private sector-led economic growth and poverty reduction in Rwanda. This goal was directly aligned to the priority of the government as it had embarked on the road to reconstruct Rwanda. Commitment at the highest level to the reform program provides guidance to the implementing agencies and ensures that everyone was on the same page. This tends to reduce resistance to change and facilitates dialogue at the technical level. Strong ownership of the reform program obtained though joint Bank-Government design of the program linked to the Government’s priority areas of reforms was crucial for fast and successful implementation, especially when dealing with politically sensitive reforms. 69. Clear M & E framework: Elaborating a realistic Results Framework with clear baseline data allows proper monitoring of progress towards performance. In the case of CEDP, the indicators contained in the PAD’s Results Framework were defined by the Bank team – in collaboration with the Government – based on uncertain data sources and lacked methodological clarity. Building the results framework jointly with the Government, and using Government’s own data, keeping in mind the capacity of public agencies, helps in developing the monitoring and evaluation culture, and creates the drive for benchmarking. The Doing Business report is a typical case to illustrate the point made above where everyone knows what is measured, when and what needs to be done to achieve the outcomes. It is also important to have a results framework with more tailored KPIs so as to better measure the impact of the project achievements. 70. PCU Capacity: The successful implementation of policy and institutional reforms requires adequate capacity in key areas. This factor will need special attention in the formulation of future programs. Human capital constraints were a major factor in slowing down the implementation of some of the program's components and the management of the project. The PCU also needs to be properly staffed with a trained fiduciary team. One recommendation is to identify members of the PCU and initiate training on World Bank guidelines at the design stage such that the PCU team is fully capable of kick starting the implementation phase as soon as the project is approved. 71. Decentralization of Project Supervision: In countries with limited institutional capacity, having the TTL in the field can help to resolve issues as they raise with either the PCU, Implementing agencies or Government and ensure a constant implementation pace. 72. Coordination with a wide range of task teams: The project brought together experts 32 across various sectors and units within the World Bank Group and from other donor agencies. It was challenging to coordinate technical and supervision missions from the different stakeholders. One recommendation would be to coordinate missions so as to have a common dialogue on issues to be addressed, action plans to be implemented and agreed roles and responsibilities of each team. 73. Innovative support to SMEs: The Business Plan Competition enabled potential entrepreneurs throughout Rwanda to be aware of the support services provided to SMEs to start their project. Through this competition, participating SMEs were given mentoring and hand holding services to conceptualize their business ideas and prepare bankable projects. 74. Exporter of knowledge: Rwanda was positioned as a pocket of excellence in doing business reforms and facilitated the replication of the successful reform experiences across the region through bilateral and regional South-South Exchange programs. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 7.1 Borrower/implementing agencies 75. The Borrower/Implementing agency prepared a completion report. 7.2 Cofinanciers 76. Not applicable. 7.3 Other partners and stakeholders 77. Not applicable. 33 Annex 1: Project Costs and Financing Credit Number 3499-RW (a) Project Cost by Component (in USD million equivalents) Appraisal Actual/Latest Percentage of Components Estimate (USD Estimate Appraisal millions) (USD millions) Business and Legal Environment 21.79 22.14 101.61% Reducing cost and improving efficiency 13.57 11.07 81.58% Tea industry 2.25 0.82 36.44% Support to Private Sector Federation and Project coordination 1.48 7.2 486.49% PPF 0.6 0 Total Baseline Cost 39.69 41.23 103.88% Physical Contingencies 0.00 0.00 0.00 Price Contingencies 1.45 0.00 0.00 Total Project Costs 41.14 41.23 100.22% Front-end fee PPF 0.00 0.00 0.00 Front-end fee IBRD 0.00 0.00 0.00 Total Financing Required 41.14 41.23 100.22% (b) Financing Appraisal Actual / Latest Type of Estimate Percentage of Source of Funds Estimate Cofinancing (USD Appraisal (USD millions) millions) Borrower 0.32 1.00 International Development 41.14 41.23 99.25% Association (IDA) 0.00 0.00 0.00 34 Credit N umber 3499-RW and Grant H 3630-RW (a) Project Cost by Component (in USD million equivalents) Appraisal Actual/Latest Percentage of Components Estimate (USD Estimate Appraisal millions) (USD millions) Improving access to credit and financial services 0.95 1.05 110.53% Improving Accounting and Auditing Standards. 0.60 0.35 58.33% Contractual savings and non bank financial institutions 0.90 1.21 134.44% Payment systems (ACH and RTGS) 2.95 2.22 75.25% Support to FSDP secretariat 0.35 0.19 54.29% Total Baseline Cost 5.75 5.02 87.30% Physical Contingencies 0.00 0 0.00% Price Contingencies 0.25 0 0.00% Total Project Costs 6.00 5.02 83.67% Front-end fee PPF 0.00 0 0.00% Front-end fee IBRD 0.00 0 0.00% Total Financing Required 6.00 5.02 83.67% (b) Financing Actual / Appraisal Latest Type of Estimate Percentage of Source of Funds Estimate Cofinancing (USD Appraisal (USD millions) millions) Borrower 0.00 0.00 International Development 6.00 5.02 83.67% Association (IDA) 0.00 0.00 35 Annex 2: Outputs by Component Business and legal environment The project provided technical assistance to MINIJUST to review obsolete laws in commercial matters that existed at the start time of the project, and funded legislative drafters to draft the amendments to existing laws or new laws that were needed. The TA was part funded by the IFC under their Rwanda Investment Climate Reform project. A total of 13 commercial laws9 were finalized and enacted. The change in legislative framework and implementation of the reforms allowed Rwanda to be recognized as the world’s top reformer of business regulation in the 2010 Doing Business Report when the country made it easier to start businesses, register property, protect investors, trade across borders, and access credit. Three commercial courts were established and training in commercial matters was provided to judges of commercial courts and Supreme Court, lawyers, notaries and arbitrators dealing with companies. Rwanda improved its ranking from 150th in 2008 to 139th in 2009, 67th in 2010, 50th in 2011 and 45th in 2012. IFC RICCP provided technical assistance to develop and implement a strategy for promoting and facilitating private in Rwanda. A new Investment law was enacted and new investment codes were drafted. As part of the implementation plan, funds from CEDP were transferred to five Rwanda Embassies in order to support investment promotion abroad and to Canada, China and India to finance a Rwanda Investment and Export Promotion Agency (RIEPA) Nodal Office in each of these countries. After the merger of RIEPA with RDB, it was difficult to obtain investment data that would allow to correctly assess the contribution of CEDP to private investment flows into Rwanda. However, the Nodal Offices were not very effective in sourcing investment projects into Rwanda and CEDP stopped its support to these offices although GoR took over their financing believing that it was important to maintain a presence in those countries. The project also contributed to the establishment of the Rwanda Export Investment Corporation (REIC) to support companies to access long term financing. Since its creation, the Funds granted only two loans (Kigali Cement Company and VUMA Mines) due to internal management problems. In May 2011, REIC signed a Management Contract with Business Partners International and the fund was recapitalized by the shareholders (IFC, SSFR, RHB, and Rwanda Development Bank) for an amount of US$8 millions. REIC is now expected to function effectively. The support of CEDP was critical in the start up activities and service delivery of the Rwanda Bureau of Standards, even if this activity was not in the included at the design stage. The project financed the laboratory equipment and chemicals, metrology equipment, office 9 The legislations are: (1) Law establishing commercial courts, (2) Law on Arbitration, Mediation and Conciliation in Commercial Matters, (3) Law Establishing the Business Registration Services Agency, (4) Labor code, (5) Law on mortgages, (6) Law on securities in movable property, (7) Insolvency law, (8) Companies acts, (9) Competition and Consumer Protection Law, (10) Draft bill on Provisions applicable on Privately Financed infrastructures, (11) Contract Law, (12) Condominium Law; (13) Law on electronic transactions. The 14th which is Negotiable Instruments Law has not yet been enacted. 36 equipment and necessary software. Four staff members were trained in India and Kenya Bureau of Standards and consultancy services were financed for in-house mentoring of RBS staff. At the end of the project, RBS had granted 36 quality certifications (17 Standard Mark and 19 Excellence Mark) to producers in the area of food processing/agri-business; 480 technical training sessions have been organized in Quality Management System, Food Safety Management System, and Food Processing for the staff of enterprises. RBS helped Rwandan enterprises improve their competitiveness and become export oriented. The CEDP supported the development of a new tariff strategy and a business plan for the period 2008-2012 with the help of a World Bank Specialist of the Postal Sector. The action plan was not fully implemented due to lack of funds from NPO. The project provided support to firm level capacity-building through the Private Sector Federation and CAPMER (Centre d’Appui aux Petites et Moyennes Entreprises), the Small and Medium Enterprises support center. Training in entrepreneurship, preparation of feasibility studies and business plans, marketing and management, Credit Management, organizational audit and SME diagnosis were funded. The project also supported the setting up of the Masaka Business Incubation Centre and financing of equipment. In 2008, CAPMER was merged with RDB, which makes it difficult to assess the impact of the support provided to CAPMER. Financial Sector Under the initial financing, the following activities were undertaken: (i) assist NBR in setting up a Chart of Accountants for the banking sector and a Credit Reference for all business sectors; (ii) provide technical support to NBR in setting up modern payment system; (iii) strength the technical capacity of NBR to carry out effective supervision of the banking and non banking financial institutions; (iv) support the establishment of the School of Finance and Banking (SFB); and (v) provided US$ 5 million to recapitalize the Union des Banques Populaires du Rwanda (UBPR) and improve its operational and financial performance. The recapitalization of UBPR to allow it to write off the portfolio of unrecoverable non performing loans was a success as it had a net revenue increase to over RWF 900 million in 2005. UBPR graduated to the status of a commercial bank in 2008 when Rabobank became its strategic partner. With some 500,000 members, the Bank is now the largest financial institution in Rwanda in terms of market penetration and the third largest in terms of assets (approximately US$80 million). In addition, the adequacy ratio of the Bank at 19.6 percent in 2010 was higher than the minimum requirement of 15 percent. Two majority government- owned banks, Commercial Bank of Rwanda and African Continental Bank in Rwanda (now FINA Bank) were successfully privatized under the project in 2005 through their sale to strategic foreign investors. The project provided a fund of US$ 500,000 for the creation of a Leasing Program with the objective of improving the leasing environment in Rwanda and easing access to finance for SMEs at reduced interest rates. The Leasing Program was implemented by the International Finance Corporation (IFC) and by June 2008 there were seven financial institutions providing leasing finance in Rwanda and the leasing transactions were over US$ 20 million. 37 Technical assistance and equipment were provided to the School of Finance and Banking (SFB), established in June 2002. Scholarships for lecturers and study tours aiming at enhancing their capacity, provision of vehicles and all of the equipments required allowed the new institution to start its activities were funded by CEDP. The SFB started its training mandate in January 2004 with Bachelors’ and Masters’ degree in Accounting, Finance, Marketing and Human Resources Management; and ACCA programs. The MBA graduates have tremendously contributed to enhance quality services in different sector of activities in the country and the ACCA training have allowed the country to have highly qualified auditors, accountants and finance managers. Many other tailor-made short courses have also been given to employees in the financial sector. In addition, the School established a Centre for Entrepreneurship Development (CED) with a view to foster entrepreneurial skill develo pment among Rwandans. Under the Additional Financing, five components were supported by CEDP: (i) improving access to credit and financial services, (ii) improving accounting and auditing standards, (iii) contractual savings and non bank financial institutions, (iv) payment systems (ACH and RTGS), (v) support to the FSDP Secretariat. Activities carried out under the first item were: (i) support training to Microfinance Supervision Department at NBR; (ii) training MFIs in best practices (Management, Accounting, Governance, etc); (iii) Accounting and Portfolio Management Software for selected MFIs; and (iv) institutional capacity building to AMIR (Secretary General, equipment, software, etc). The project funded the purchase of office equipment and IT equipment of AMIR, its accounting software, training and study tours for AMIR’s staff and Board members in Ghana, Kenya, Ethiopia, Uganda and Burundi. Capacity building of MFIs was carried out with the support of AMIR and the “Consultative Group to Assist the Poor� (CGAP) prior to the installation of a Management Information System. The Accounting and Portfolio Management Software system was implemented in five selected MFI so far and training in the remaining ones is underway. 468 persons were trained and 35 MFIs staff was certified as trainers to scale up the training process. There were a total of 103 licensed MFIs at the end of the project and three reached the status of Micro Finance Banks (Urwego Opportunities Bank, Centre Financier des Entreprises CFE Agaseke, and IMF UNGUKA). Licensing of new MFIs as well as off-site and on-site examinations was performed on an ongoing basis. The inefficiency and lack of soundness of the payment system in Rwanda was contributing to high transaction costs for businesses. The project supported the NBR in modernizing the payment systems of the banking sector by putting systems in place to (i) reduce liquidity paid in cash; (ii) decrease cheques transactions and fraud; (iii) ensure that critical payments are settled in real time; and (iv) enhance liquidity of banks. More specifically, the following activities were financed by CEDP: (i) training of NBR staff, including facilitation of staff participation in local and international seminars; (ii) drafting of a new legal framework for electronic payments (Automated Clearing House (ACH) and Real Time Gross Settlement System (RTGS)); and (iii) technical certifications, equipment, software and installation of the ACH and RTGS system in NBR. 38 Reducing cost and improving efficiency The project assisted the GoR in increasing efficiency and cost-effectiveness in the utilities sector through private corporate management and investment. The project was instrumental in setting up the Rwanda Utilities Regulatory Authority by financing (i) consultancy studies to elaborate strategic plan, laws and regulations, ELECTROGAZ measures and tariff; (ii) capacity building of RURA in specific areas of ICT, Energy, Water, Sanitation and Transport Sector regulations, short terms courses and participation in seminars; (iii) operational cost and overhead for office equipment and vehicles. To further strengthen the capacity of RURA, the Urgent Electricity Rehabilitation Project provided additional resources to the regulator by financing additional training for an entire class of RURA and sector staff, led by the Public Utility Research Center (PURC), at the University of Florida. RURA is now fully able to carry out its mandate. The project supported the privatization of Rwandatel in 2005, which was sold for US$15 million which led to an increase of competition in the sector and a greater access to the internet. In July 2007, the Government, following negotiations with the investor, bought the company back due to non-compliance with contractual obligations. Rwandatel was once again put up for sale in November 2008 and was acquired by Lab Green. Rwandatel became the third largest mobile operator with over 535,000 subscribers, behind rivals MTN Rwanda and Tigo Rwanda, with 2.3 million and 685,000 users respectively. In April 2011, the mobile license of Rwandatel was revoked by the Rwanda Utilities Regulatory Authority (RURA) due to its failure to meet license obligations, such as quality of service, fulfilling its investment plan, and increasing its coverage area. In October 2011, the Commercial Court ruled in favour of the request of Registrar General that Rwandatel be liquidated as it was technically bankrupt and could not pay off creditors. The support provided to ELECTROGAZ was as follows: (i) water and electricity production and distribution equipments; (ii) equipment and expertise in management and communication systems and for electric pre-payment counters; (iii) training and seminars of staff in water transport and distribution, quality and standard of hydraulic equipment, human resources development, power system transmission planning and analysis, study tours in Uganda and Tanzania Utilities Companies, capacity building hands on in Geographic Information System (GIS). The project also financed various office equipments and office supplies and a Customer Information System billing software. ELECTROGAZ (now EWSA) was placed under a five- year management contract in 2003 to restructure the company prior to partial or full privatization. The Government terminated the contract in 2005 due to non compliance with contractual commitments. 39 Table 1: ELECTROGAZ key indicators 2001-2010 Indicators 2001 2004 2006 2008 2009 2010 Financial results (in RWF billions) -20.1 -11.2 0.6 2.4 0.07 n/a Solvency rate (%) 0,24 0,44 14 21 45 n/a Technical and commercial water losses (%) 49 n/a 27 30 30 31 Technical and commercial electricity losses (%) 27 n/a 22 19 18 19 Number of water connections 28,150 37,989 42,073 59,287 69,000 82,181 Evolution of new connections in % (water) n/a n/a n/a n/a 16% 19% Number of electricity connections 48,581 68,314 77,181 109,502 142,000 187,624 Evolution of new connections in % (electricity) n/a n/a n/a n/a 30% 32% Number of connections (water & electricity) 76,731 106,303 119,254 168,789 211,000 269,805 Number of employees 1,324 1,143 1,410 1,657 1,700 1,788 Staff productivity in connect°/employee (No.) 58 93 85 102 124 151 Evolution in % (connections/employee) n/a n/a n/a n/a 22% 22% Price of electricity (RWF/Kwh) 42 42 112 112 112 112 Price of water (RWF/m3) 200-350 200-350 200-350 200-350 200-350 200-350 Level of satisfaction of electricity consumers 68% Level of satisfaction of water consumers 63% Source: Electrogaz reports 2001-2010 The National Post Office prepared an Action Plan to promote, revitalize and modernize postal services; improve the NPO image and management; and strengthen the management process (operations, finances, mailings and new products). The project team benefitted from the expertise of a World Bank specialist of the Postal Sector in 2006 to improve the effectiveness and efficiency of the NPO. After the reforms were carried out, the image of NPO among its clients tremendously improved with the last opinion poll made by postal services in 2009 showing an 88 percent satisfaction rate of post users. A website was created and the financial and management system was upgraded through the acquisition of an NPO accounting software. Since 2007, the income before tax for three successive years is positive: + 17.1 million RWF in 2007, + 125.8 million RWF in 2008, and 238.6 million RWF in 2009. CEDP financed capacity building of the Privatization Secretariat in Privatization Strategy, Asset Evaluation, Financial Audit, Monitoring and Evaluation, Communication, and Management of International Contracts. The project also financed consultancy services in privatization strategy, audits and asset evaluation for privatization or liquidation. An expert for advising the Privatization Secretariat was also recruited and financed by the project. CEDP contributed to improve Rwanda’s ability to effectively implement a privatization program. The privatization program generated aggregate revenues of RWF 115 Billions, and over of 97.7 percent of the amount was collected. According to a recent study on evaluation of performances of the Privatization Secretariat carried out by RDB, 57 percent are successfully operational, complying with their business plan while 43 percent are hardly operating and a few of them are not operational at all. The Secretariat is now under RDB after a restructuring in 2008. The CEDP supported the Private Sector Federation by financing training and study tours to 40 staff, business association leaders, entrepreneurs and trainers. The project funded an accounting software package, office supplies and stationary. The number of member associations increased from 14 in 2001 to 23 in 2010. The project stimulated entrepreneurship in Rwanda through the establishment of a Guarantee Fund of US$ 400,000 which was used to reward project developers through a Business Plan Competition (BPC). The BPC contributed to the creation of 57 SMEs and approximately 285 jobs between 2005 and 2008. Promotion of a market based tea sector The project provided specialized technical assistance for the privatization of the tea factories and estate. The Tea Board was created, composed of the Director General of OCIR Thé, the Coordinator of RSSP, Representatives of Tea Cooperatives and Representatives of Private Business Investors in the Tea Sector. In 2010, the privatization of state owned tea factories were successfully completed for 7 factories out of the 9 originally selected and the process is expected to be completed by early 2012 for the remaining two. The price per kilo for the tea producer increased from RWF 57 in 2001 to RWF 97 in 2010, corresponding to a 70 percent increase. In 2006, when the first privatized tea units became operational, the export sales increased by 52 percent when compared to 2001. A new body, the National Agricultural Export Development Board (NAEB) was created in 2009 to oversee the tea sector. Table 2: Evolution of tea sector indicators Key indicators Unit 2001 2006 2010 Increase of export volume Tons 14 000 17 500 22 249 Increase of export sales US$ million 21. 53 34.78 55. 71 Increase of selling price US$/kg 1.49 1.99 2.59 Increase of the producer price RWF/kg 57 86.6 96.6 Evolution of export sales % 52% 12% Tea states owned for sale Number 1 4 7 Source: OCIR Annual reports 2001-2010 41 Annex 3. Economic and Financial Analysis This annex presents the results and methodology followed in the ex-post economic analysis of the project. It was difficult to correctly estimate the economic benefits derived from the CEDP as the direct causal link between the activities funded and the outcomes could not be established. The project covered a whole range of support to develop a dynamic financial and private sector that would attract private investment and create jobs with the ultimate objective of reducing poverty. Two types of benefits accruing to the country were estimated: foreign direct investment flows and earnings from tea exports. As already mentioned above, the benefits cannot be totally attributed to the project and for the sake of the analysis and using a conservative approach, 50 percent of FDI and tea export earnings were used. The rationale is that there were 3 main counterparts involved in achieving the results: the project, GoR and other donors / WB projects. Furthermore, data weaknesses preclude a more detailed analysis of other benefits to the project. The financial cost of the project was US$ 46.45 million and was discounted by 10 percent to estimate the economic cost, which is US$ 41.81 million. The project benefits resulted in an EIRR of 31.25 percent with an NPV of US$ 8.58 million, indicating that the project is economically viable and has generated economic benefits to the country. 43 44 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Lending Abdul I. A. Haji Consultant Alice Dubiwa Zanza Sr Financial Sector Spec. FFIFI Amadou Dem Senior Economist AFTFW Amadou Tidiane Toure Consultant SARPS Aminetou Tidiani Junior Professional Associate Amy Champion Operations Analyst MNSHH Ann Christine Rennie Lead Financial Sector Specialist SASFP Aubert Zohore Sr Financial Analyst Carl Aaron Invest. Policy Off. Chantal Kajangwe Procurement Specialist AFTPC Charles E. Schlumberger Lead Air Transport Specialist TWITR Didier Romuald Babindamana Driver/Messenger AFMCG Edward K. Brown Consultant Emmanuel Tchoukou Financial Management Specialist Erika L. Rhoades Senior Risk Officer CPMDR Ernestina Attafuah Senior Program Assistant AFTUW Eugene Nyambal Consultant Fatiha Amar Program Assistant MNSSD Fatou C. Assah Sr Financial Sector Spec. FCMNB Francesco Sarno Consultant MIGOP Francois Kanimba Sr Economist Gerard A. Byam Director ECSOQ Ghada Youness Senior Counsel LEGEM Guido Rurangwa Senior Country Officer MNCA3 Henri A. Aka Operations Officer SASHN Herminia Martinez Consultant AFMBJ Isabelle Caillat Private Sector Development Analyst Isabelle Huynh Senior Operations Officer TWICT John Michael Graglia Projects Officer Joseph Areu Operations Officer CAFJ5 Luc Cardinal Sr Financial Management Specialist Senior Private Sector Development Lucy M. Fye Specialist AFTFE Marie-Chantal Uwanyiligira Asst. to the President EXC Maureen P. Blassou Information Officer ISGIS Michael Hamaide Senior Operations Officer MNADE Senior Private Sector Development Moses K. Kibirige Specialist AFTFE Muriel A. Prah Language Program Assistant 45 Ndiritu Muriithi Operations Officer Onno Ruhl Director SARSQ Otieno Ayany Financial Management Specialist AFTFM Senior Private Sector Development Papa Demba Thiam Specialist AFTFW Paul Lignieres Sr Private Sector Development Spec. Paul Murgatroyd Consultant AFTFW Pauline Aranda Consultant Peter J. Mousley Lead Private Sector Development Spec. AFTFW Peter R. Kyle Consultant LEGPS Pierre Morin Senior Procurement Specialist Pin Foon K. F. Ah-Kee Procurement Analyst Prosper Nindorera Senior Procurement Specialist AFTPC Ramiro Jose Iturrioz Senior Insurance Specialist FCMNB Remi Kini Senior Environmental Economist ENV Rolande Simone Pryce Senior Country Officer LCC3C Ronald J. Kopicki Consultant AFTPM Svetoslav K. Tintchev Consultant Taye Alemu Mengistae Senior Economist AFTFE Tesfaalem Gebreiyesus Lead Procurement Specialist SARPS Thorsten Beck Consultant MNSF1 Tyler S. Biggs Consultant ECSP3 V. S. Krishnakumar Manager AFTPC Willem Zijp Consultant ECCKZ William F. Steel Consultant ENVGC Yuriko Sakairi Senior Economist Zhihua Zeng Senior Economist AFTFE Supervision/ICR Amadou Dem Senior Economist AFTFW Aminetou Tidiani Junior Professional Associate AFTPS-HIS Ann Christine Rennie Lead Financial Sector Speciali SASFP Chantal Kajangwe Procurement Specialist AFTPC Davorka Rzehak Senior Operations Officer CAISM Emmanuel Tchoukou Financial Management Specialis AFTFM Fatiha Amar Program Assistant MNSSD Guido Rurangwa Senior Country Officer MNCA3 Isabelle Huynh Senior Operations Officer TWICT Jerome Bezzina Senior Regulatory Economist TWICT Joseph Areu Operations Officer CAFJ5 Josiane Niyonkuru Receptionist AFMRW Kaliope Azzi-Huck Senior Operations Officer AFTHD Khoudijah Maudarbocus-Boodoo Private Sector Development Specialist AFTFE Lucy M. Fye Senior Private Sector Developm AFTFE Marie Jeanne Uwanyarwaya Senior Executive Assistant AFRVP 46 Mary Urujeni Kamari Consultant AFMRW Melissa B. Ingber Consultant AFTFP Otieno Ayany Financial Management Specialis AFTFM Rachel Freeman Senior Operations Officer CEUKZ Ronald J. Kopicki Consultant AFTPM Sameena Dost Senior Counsel LEGES Tonle Josephine Ngou Mawamba Senior Executive Assistant AFTHD (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY00 46 252.24 FY01 16 38.42 FY02 0.00 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00 FY08 29 82.40 Total: 91 373.06 Supervision/ICR FY00 0.10 FY01 3.05 FY02 26 127.21 FY03 39 158.06 FY04 47 141.65 FY05 39 125.65 FY06 28 118.32 FY07 37 170.47 FY08 29 155.19 FY09 35 181.35 FY10 25 155.28 FY11 28.5 137.01 FY12 3 11.88 Total: 336.5 1,485.22 47 Annex 5. Beneficiary Survey Results N/A 48 Annex 6. Stakeholder Workshop Report and Results N/A 49 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR MINISTRY OF COMMERCE AND INDUSTRY COMPETITIVENESS AND ENTERPRISE DEVELOPMENT PROJECT (CEDP) FINAL EVALUATION FINAL REPORT July 2011 50 The Executive Summary of the Evaluation Report submitted by the Project Coordinating Unit: 1. The Purpose of the Mission The purpose of the current mission is to carry out a Final Evaluation of Competitiveness Enterprise Development Project (CEDP) which is expected to be closed on 31/07/2011. The CEDP is a 10-year project whose goal is to establish an enabling environment for private sector led economic growth and poverty reduction in Rwanda. Considering the Additional Financing received from IDA, the project has supported 26 institutional partners involved in improving the legal, efficiency and business environment affecting private sector development. The objective of the final evaluation is to review the support of the CEDP and to carry out an assessment of the impact of the Project on targets defined under the initial and additional budget. Specifically, the tasks of the consultant are as follow: i) certify that project implementation will be completed as scheduled; ii) assess the achievements of the project in terms of quality and quantity, iii) evaluate the efficiency and effectiveness of the means used to achieve the project goal; iv) estimate the impact of the project on the reduction of poverty, as well as the project’s expected contribution to development and sustainability; v) identify key operational lessons learnt relevant for on-going or future operations both for the Government and the World Bank; vi) Re-calculate the economic and financial rates of return to determine the ratio costs/benefits of the investments. 2. The Core Findings of the Evaluation 2.1. The Project Implementation The project design was in line with poverty reduction and development objectives defined by the government. The required supports to implementing agencies were planned and provided, covering many areas: (i) capacity building through technical assistance and training, (ii) consultancy services, (iii) equipment and office supplies, (iv) Specific Funds for direct loan or guarantee, etc. The planned activities were smoothly implemented due to a good collaboration between the PCU and the implementing agencies on one hand, and the Government of Rwanda Commitment to accelerate economic reforms toward a more business conductive environment in Rwanda. 2.2. Main Achievements and Performances The project attained its mission and is globally rated satisfactory. At the end of the CEDP, the project reached the main targets by more than 100 percent compared to the quantified expectations. All implementing agencies are included in different four (4) levels of performances: i. The former RIEPA is rated highly satisfactory and, due to the performances of services offered by RDB investment department, the indicators of “doing business in Rwanda� were well ranked in 2010 compared to 2009. ii. Most of the project’s sub-components are rated satisfactory: the implementing agencies involved in legal framework, emerging business, financial services, 51 regulation of public utilities, efficiency in delivering energy and water, privatization & private sector, and tea sector. iii. The National Post Office reached its objectives moderately, the limitation encored seems to be the financial constraint. The institution did not achieve its objectives related to implementation of the business plan and the starting up the integration of the financial sector (national and international transfers). The high turnover of Managing Directors up to 2006 was also a factor that contributed to the delay of implementation of NPO activities. iv. Rwanda Enterprise Investment Corporation is rated unsatisfactory: due to the inefficiency in the management. 2.3. Efficiency and Effectiveness of PCU Despite some constraints such as high turnover of PCU staff and CEDP representatives in implementing agencies, the good performances of the project are due to the competence of the PCU Team, mainly after the project Mid-Term Review. The high level of the disbursement rate under the Initial Budget (99.9 percent in foreign currency and 106 percent in RWF) indicates the performance and expertise of the project coordination team in procurement management, financial management and the good collaboration with implementing agencies. 2.4. Contribution to poverty reduction, development and sustainability The project has highly contributed to the economic growth and poverty reduction by establishing a business environment that contributes to private sector development. The benefits are more in terms of efficiency, productivity and creation of employment opportunities in the private sector than the expected reduction of prices. The project support covered many economic activity sectors and the value of key performance indicators is beyond planned targets: more SMEs created annually, water and electricity distributed in urban and rural areas with more rhythm than before CEDP support, financial benefits from privatization of public enterprises to private investors, etc. In addition to the economic productivity, the population health was safeguarded through RBS setting standards on food stuff produced or imported. The project contributed to the economic development of the Country. It effectively contributed to the global development objectives, particularly within three macro-economic indicators during the cycle of project: (i) Average of GDP rate per annum is 9.2 percent (2001-2010), (ii) Average annual export increment is 13.8 percent during the project period. Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 GDP rate (%) 8.5 13.2 2.2 7.4 9.4 9.2 7.7 11.6 6 7.4 Average of GDP rate per annum is 9.2 % Source: NBR reports 52 3. Keys Lessons and Recommendations The following recommendations aim at enhancing the results already achieved, or to reduce some factors of risks during the sub-components implementation: 3.1. World Bank/IDA The closing of the project is scheduled by July 2011. However, by this time, not all components will have disbursed 100 percent of their allotted budget from the Additional Financing as the disbursement rate of some sub-components is still low. For instance, the disbursement rate of “Improving access to credit and financial services� is only 42 percent as of 31/05/2011. According to CEDP Finance department, the Funds available on 08/06/2011 are RWF 3.12 Billions. As a recommendation, funds reallocation authorization or project extension period should be granted for the completion of planned activities because some beneficiaries such as SACCOs, ICPAR, etc are still young and need to be sustained. 3.2. Government. Because the project is closing on July 31, 2011, and due to the weaknesses of SACCOs operating at sector level, the Government should negotiate a reallocation of available funds under the Additional Financing in order to strengthen their capacity. The National Bank of Rwanda does not have enough capacity to supervise all 416 SACCOs operating in all administrative sectors of the country. Another structure should be created for that purpose. The implementation of the NPO’s Business Plan requires more support from government because its resources are limited. The main challenge is the integration of the National Post Office in the financial sector. The Government should closely monitor how the contract signed between Business Partners International (BPI) and International Finance Corporation (IFC) is implemented. The financial resources lie under REIC and are not used for the intended purpose up to now (only two credits granted in 5 years) due to the inefficiency in funds management. Appropriate loan Funds management tools should be developed to allow managers fulfill their tasks. 3.3. Implementing Agencies: MINIJUST: Three activity areas need to be reinforced: (i) public sensitization on new commercial laws, (ii) dynamic harmonization of laws with East African Community and continuous training on the new laws, (iii) financing of the Documentation Centre to enable all legal institutions access to updated legal information, business information and case laws. INVESTMENT PROMOTION (RDB): To accelerate drafting of the law on protection of intellectual and industrial rights of investors in order to reduce the risk of fraud or piracy in the East Africa Community manufacturing sector. 53 National Bank of Rwanda (NBR): In order to fulfill its supervision responsibility over the Non Banking Financial Institutions, the National Bank of Rwanda needs to reinforce its MFIs Supervision Department. The current structure of NBR has limited capacity given the nationwide expansion of MFIs. Association of Microfinance Institutions of Rwanda (AMIR): To request more funding from Additional Financing in order to undertake the training program and installing software in others MFIs not primarily selected. Rwanda Bureau of Standards (RBS): In view to enlarge the standard control to other areas with a wide range of products, the RBS should seek more financial support to procure standard equipment, build the capacity of its staff and continuously keep them updated on the new technology. Energy, Water and Sanitation Authority (EWSA): This Institution needs to address the challenge of high cost of energy utility which affects local enterprises competitiveness in the context of the East African Community. In this regard, EWSA should get more financing and invest in (i) reducing technical losses of water; (ii) carry out work extension on existing hydro power plants or build new ones to increase electricity production aiming at price reduction. Rwanda Private Sector Federation (RPSF): To get financing of the permanent advisor under the Guarantee Fund managed by Rwanda Development Bank (Monitoring & Evaluation department). The BPC winners need more sensitization, advice and follow up before and after starting their businesses. 54 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders N/A 55 Annex 9. List of Supporting Documents 1. Competitiveness and Enterprise Development Project, Project Appraisal Document and Credit Agreement, 2001 2. Mid Term Review Report, 2005 3. Baseline Survey, 2006 4. Competitiveness and Enterprise Development Project, Project Paper on Additional Financing Grant and Credit Agreement, 2008 5. Competitiveness and Enterprise Development Project, Restructuring Paper on Proposed Project Restructuring, 2011 6. Missions Aide Memoires, 2001-2011 7. Project Status Reports and Implementation Status and Results Reports, 2001-2011 8. Progress Report from PCU – Project Implementing Agency (2008-2011) 9. Annual reports of Association of Micro Finance Institutions of Rwanda 10. Annual reports of National Bank of Rwanda 11. Annual reports of OCIR-The 12. Annual reports of Private Sector Federation 13. Annual reports of Rwanda Development Board 14. Annual reports of Rwanda Utility Regulatory Authority 15. Annual reports of Union des Banques Populaires de Rwanda (UBPR) 16. Monetary Policy and Financial Stability Statement, National Bank of Rwanda (2008- 2011) 17. National Accounts reports, National Institute of Statistics of Rwanda 18. Establishment Census 2011, National Institute of Statistics of Rwanda, 2011 19. Doing Business 2012, Economic Profile of Rwanda, 2011 56 29°30'E 30°00'E 30°30'E 31°00'E RWAN D A To Kafunzo 1°00'S Kagitumba SELECTED CITIES AND TOWNS AKARERE (DISTRICT) CAPITALS UGANDA To Kikagati INTARA (PROVINCE) CAPITALS Kag NATIONAL CAPITAL era To 0 10 20 30 40 Kilometers RIVERS Kisoro Nyagatare MAIN ROADS gitumba 0 10 20 30 Miles AKARERE (DISTRICT) BOUNDARIES To Muvumba Kidaho Butaro Kabale N YA G A T A R E Ka INTARA (PROVINCE) BOUNDARIES Lac Burera Lac Volcan Burera Rwanyakizinga INTERNATIONAL BOUNDARIES Karisimbi MUSANZA BURERA Mulindi Gatunda 1°30'S (4519 m) Muhoza Lac Kirambo 1°30'S Ruhondo Cyeru Lac Busogo G ICUMBI Gabiro Mikindi Kinihira 29°00'E G AT S I B O To Mukamira NORTH Byumba Gatsibo Rutshuru RUBAVU N YA B I H U Nemba Gakenke EAST Vir To Rubavu Kagali Lac Sake Karago PROVINCE Kinyami Kabarore Hago Gisenyi Nyondo un Tare Kiziguru PROVINCE ga Muramba GAKENKE Lac RULINDO Kivumba D E M . R E P. Kabaya Ngaru Muhura Rukara Lac To Bugene M Mbogo Lac Ihema Ny OF ts. Ngororero Muhazi ab RUTSIRO Shyorongi K AY O N Z A ar CONGO La c K ivu NGORORERO go GASABO TA N Z A N I A no Murunda WEST KIGALI CITY Mukarange Gihingo Ndera Gikoro Rwamagana OV P RRutsiro I N C E Bulinga Rugenge KIGALI Rukoma Kicuro Bicumbi Kigabiro Lac 2°00'S MUHANGA Nasho 2°00'S Mabanza NYARUGENGE KICUKIRO RWAMAGANA Kibuye Nyamabuye Rubengera KAMONYI Lac Gitarama Lac Kigarama Lac Mpanga KARONGI Mugesera Cywambwe Bugesera Nyamata Kibungo Gishyita RUHANGO Rilima Bwakira NGOMA KIREHE Ngoma Gashora Sake Masango Ruhango Kirehe BUGESERA Gatagara N YA N Z A Kagano SOUTH Nyanza Busasamana Lac Cyohoha Ka g era Rwesero N YA M A G A B E Sud Lac To Kamembe N Y A M A S H E K E PROVINCE Rusatira Rweru Lusahanga Gasaka Karaba Cyangugu HUYE To 2°30'S To Kitabi Gikongoro Karama Walangu Rwumba Kirundo GISAGARA RUSIZI To Ngoma Nyya-Ghezi Ruramba Butare Ndora Kibeho RWANDA This map was produced by yaru the Map Design Unit of The N YA R U G U R U Kanzi an World Bank. The boundaries, Bugarama Munini Kigembe To BURUNDI Ak colors, denominations and Cibitoke any other information shown To IBRD 33471R2 on this map do not imply, on the part of The World Bank Cibitoke Group, any judgment on the To To legal status of any territory, JUNE 2008 Kayanza Ngozi or any endorsement or acceptance of such boundaries. 29°00'E 29°30'E 30°00'E 30°30'E