ICRR 12105 Report Number : ICRR12105 ICR Review Operations Evaluation Department 1. Project Data: Date Posted : 05/12/2005 PROJ ID : P055814 Appraisal Actual Project Name : Tn-Export Development Project Costs 40.1 29.64 US$M ) (US$M) Country : Tunisia Loan/ US$M ) 35 Loan /Credit (US$M) 27.16 Sector (s): Board: PSD - Micro- and Cofinancing 5.1 2.48 SME finance (40%), US$M ) (US$M) Central government administration (38%), General industry and trade sector (21%), Other domestic and international trade (1%) L/C Number : L4475 Board Approval 99 FY ) (FY) Partners involved : Closing Date 03/31/2004 09/30/2004 Prepared by : Reviewed by : Group Manager : Group : Fareed M. A. Hassan Chad Leechor Laurie Effron OEDCR 2. Project Objectives and Components a. Objectives The overall objective was to enhance the ability of Tunisian private exporters to integrate into the global economy . The project sought to foster export competitiveness of firms by mitigating some of the disadvantages they encounter such as insufficient knowledge of export markets, inadequate export financing, and export -related transaction costs . b. Components There were three components corresponding to the above -mentioned areas of targeted reform : (1) an Export Market Access Fund (EMAF) to cover up to 50 percent of the cost of consultant services to help enterprises, especially micro and small and medium enterprises (SMEs), to penetrate export markets (48 percent of project cost); (2) a Pre-shipment Export Finance Guarantee (PEFG) to encourage financial institutions to provide pre -shipment financing to SMEs and emerging exporters with viable export contracts (19 percent); and (3) support for trade facilitation to increase the efficiency of trading activity, with special emphasis on customs procedures and electronic documentation (33 percent). c. Comments on Project Cost, Financing and Dates The adoption of the PEFG regulatory framework took more time than expected and delayed project effectiveness by three months. The project closed 6 months later than planned. 3. Achievement of Relevant Objectives: Project performance in terms of targeted indicators (ICR tables 1, 2, and 3) is satisfactory, although the PEFG scheme performs below expectations . (1) Export Market Access Fund. The EMAF program enabled 595 enterprises to become new exporters or enter new markets, surpassing by 71 percent the performance target of 350 firms. More than half of the firms assisted entered 57 new markets, 40 percent became new exporters, and 6 percent developed new export products (ICR table 1). However, the ICR does not provide information on actual export revenue generated by the EMAF program . (2) Pre-shipment Export Finance Guarantee . About US$35 million of additional exports was generated through the PEFG scheme, falling short of the planned US$ 223 million of exports (ICR table 2). The ICR listed a number of factors to explain the shortfall : weaknesses in PEFG management team, participating banks were relatively unfamiliar with lending without collateral, and the negative effect of September 11 events. (3) Trade facilitation. Indicators of customs performance improved, some dramatically . Imported goods can now be cleared in an average of 3 days, compared with an average of 8 days at appraisal. Customs clearance time is 10 minutes for a declaration not requiring controls, as opposed to 3 days in 2000. Tunisie Trade Net (TTN) was created to operate an automated network, and developed end -user interfaces among key agencies involved . Automation expedites trade document flows . 4. Significant Outcomes/Impacts: The project led to the simplification and adoption of international standards for trade documentation . The modernized customs are now more focused on trade facilitation than control . The ICR provided a preliminary estimate of the time savings for clearance time (from an average of 8 to 3 days) that is roughly equivalent to 0.2 percent of GDP. According to the survey conducted for the project, the majority of the firms supported by the project considered prospects of sustaining their export development to be good or excellent . 5. Significant Shortcomings (including non-compliance with safeguard policies): The net effect of the overall program in terms of penetration of export markets in relation to enterprises that have not benefited from such assistance is not provided; given that merchandise exports (by value) have increased dramatically during the project period (1999-2004), and that this coincided with a Free Trade Agreement with the EU, factors other than the project may have contributed to the increase in exports of the beneficiary firms . The PEFG scheme has not fully achieved its outcome of acting as a catalyst to encourage financial institutions to provide financing to firms. Lack of PEFG synergy with the EMAF program, where many of the EMAF clients did not benefit from the PEFG scheme until the last year of the project . The project Appraisal Document did not make the case that the instruments chosen for increasing exports were appropriate to achieve their objectives . Public sector cost-sharing of expenditures by private firms needs to be justified on the basis of additionality and externalities (the generation of public goods ). 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: High High Sustainability : Highly Likely Highly Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness. 7. Lessons of Broad Applicability: The project shows that a robust set of performance indicators that is adhered to provides a firm basis for assessing project achievement . Improvements in trade clearing can result when administrative /political commitment is combined with advances in information/communication technology and adoption of internationally recognized trade standards and codes . 8. Assessment Recommended? Yes No Why? Given that the export development program was supported with a follow -up project (i.e., Export Development Project II), it would be useful to evaluate the overall impact through a joint audit (PPAR) for both projects. The PPAR would also offer an opportunity to learn lessons from and document such a good practice case (section 9). 9. Comments on Quality of ICR: The ICR is satisfactory, providing a competent explanation of the project achievements and sufficient substantiation of these achievements through a set of performance indicators . The use of project performance indicators should be considered best practice for these type of projects (e.g., trade financing, matching grants, and trade logistics/facilitation). The ICR would have been exemplary if participating firms had been compared with a control group of enterprises that did not benefit from the project .