• FR!CA Regional I Integration REGIONAL INTEGRATION AND COOPERATION ASSISTANCE STRATEGY UPDATE This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization. Document of The World Bank Group FOR OFFICIAL USE ONLY Report No. 154458-AFR INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION MULTILATERAL INVESTMENT GUARANTEE AGENCY SUPPORTING AFRICA’S RECOVERY AND TRANSFORMATION: REGIONAL INTEGRATION AND COOPERATION ASSISTANCE STRATEGY UPDATE FOR THE PERIOD FY21–FY23 December 7, 2020 Africa Eastern and Southern, Africa Western and Central, and Middle East and North Africa Regions, World Bank Africa and Middle East and North Africa Regions, International Finance Corporation The Multilateral Investment Guarantee Agency This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization. The date of the last Africa Regional Integration and Cooperation Assistance Strategy was June 5, 2018 Abbreviations and Acronyms ACE Africa Centers for Excellence ADM Accountability and Decision Making (ADM) AF Additional Financing (WB) AfCFTA African Continental Free Trade Area AFCRI Africa Regional Integration Unit (WB) AFD Agence Française de Développement AFE Africa Eastern and Southern Region (WB) AFR Africa Region (WB) AFW Africa Western and Central Region (WB) AMU Arab Maghreb Union ARII Africa Regional Integration Index ASEAN Association of Southeast Asian Nations AU African Union AUC African Union Commission BCEAO Bank of Central African States (Banque des Etats de l’Afrique Centrale) BCP Banque Centrale Populaire BOAD West African Development Bank (Banque Ouest-Africaine de Développement) CAPP Central Africa Power Pool CAS Country Assistance Strategy CDC Africa Centers for Disease Control and Prevention Central African Economic and Monetary Community (Communauté Économique CEMAC des États de l'Afrique Centrale) CEO Chief Executive Officer CGIAR Consultative Group on International Agricultural Research CIWA Cooperation on International Waters in Africa CMU Country Management Unit (WB) COMESA Common Market for Eastern and Southern Africa COVID19 Coronavirus disease 2019 CPF Country Partnership Framework (WB) CPSD Country Private Sector Diagnostics (WBG) DBSA Development Bank of Southern Africa DFID Department for International Development (now FCDO) DP Development Partner DPO Development Policy Operation (WB) DRC Democratic Republic of Congo EAC East African Community EAPP Eastern Africa Power Pool ECCAS Economic Community of Central African States ECOWAS Economic Community of West African States EFI Equitable Growth, Finance and Institutions (WB) EU European Union FCS Fragile and Conflict-Affected States FCV Fragility, Conflict and Violence FDI Foreign Direct Investment FY Fiscal Year GBV Gender-Based Violence GDP Gross Domestic Product German Agency for International Cooperation (Deutsche Gesellschaft fur GIZ Internationale Zusammenarbeit) GP Global Practice (WB) GW Giga Watt HCI Human Capital Index HD Human Development HIV Human Immunodeficiency Virus HQ Head Quarters IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results Report (WB) ICT Information and Communication Technology ID4D Identity for Development IDA International Development Association IDP Internally Displaced Person IEG Independent Evaluation Group (WBG) IFC International Finance Corporation IGAD Intergovernmental Authority on Development IMF International Monetary Fund IPP Independent Power Producer ISR Implementation Status and Results (WB) ITS Information and Technology Solutions (WB) JCAP Joint Capital Market Program JET Jobs and Economic Transformation LCBC Lake Chad Basin Commission MCRP Multi-Sectoral Crisis Recovery Project MFD Maximizing Finance for Development MIGA Multilateral Investment Guarantee Agency MNA Middle East and North Africa Region (WB) MPA Multiphase Programmatic Approach MSME Micro, Small and Medium-Sized Enterprise MTR Mid-term Review MW Mega Watt NTB Non-Tariff Barriers OHADA Organization for the Harmonization of Business Law in Africa OPCS Operations Policy and Country Services (WB) PBA Performance-Based Allocation of IDA (WB) PIU Project Implementation Units PPA Project Preparation Advance (WB) PPP Public Private Partnerships PRAPS Regional Sahel Pastoralism Support Project PROLAC Lake Chad Region Recovery and Development Project PSCF Peace, Security, and Cooperation Framework for DRC and Great Lakes region PSW Private Sector Window of IDA (WB) RDB Regional Development Banks REC Regional Economic Communities REDISSE Regional Disease Surveillance Systems Enhancement RI Regional Integration RICAS Regional Integration and Cooperation Assistance Strategy (WBG) RRA Risk and Resilience Assessment RVC Regional Value Chains SADC Southern African Development Community SAPP Southern African Power Pool SD Sustainable Development Practice Group (WB) SLGP Small Loan Guarantee Program SME Small and Medium-sized Enterprises SSA Sub-Saharan Africa SWEDD Sahel Women's Empowerment and Demographic Dividend Project TA Technical Assistance TDB Trade and Development Bank TFWA Trade Facilitation Project West Africa TTL Task Team Leader (WB) UN United Nations US United States VPU Vice Presidential Unit (WB) WACA West Africa Coastal Areas Management Program WAEMU West African Economic and Monetary Union WAPP West African Power Pool WB World Bank WBG World Bank Group WHO World Health Organization WURI West Africa Unique Identification for Regional Integration and Inclusion Project Acknowledgement The following World Bank Group (WBG) staff members were involved in different aspects of developing the Strategy Update: Abdoul Ganiou Mijiyawa, Abebe Zerihun Yicheneku, Adamou Labara, Aileen Marshall, Alain Tienmfoltien Traore, Alejandro S Alvarez de la Campa, Amara Konneh, Amir Maged Boutros, Anne Odic, Antonio Nucifora, Armel Jean-Louis Castets, Besma Saadi Refai, Charlotte Ndaw, Cheick-Oumar Sylla, Cheikh T. Diagne, Chris Richards, Christian Bodewig, Claire Kfouri, Deo Ndikumana, Devon Natasha Maylie, Eme Essien, Frank Armand Douamba, Frederic Wandey, Gabriel Sensenbrenner, Georges Joseph Ghorra, German Cufre, Ghadir Mohamed Sultan, Hayat Taleb Al-Harazi, Helene Z. Ehoue, Hoda A. Mustafa, Ifeoma Grace Mba, Issa Diaw, Jakob Engel, Jacqueline Omoke, Jessica C. Wade, Josiane Kwenda, Julian Bernard Moreaux, Julien Manyong Wakubang, Ke Yuan, Kei Sakamoto, Kevin Kwendo Ndori, Kofi Nouve, Kristina Ifeoma Nwazota, Lawrence Henri Christian Mensah, Lisa Kaestner, Luisa Felino, Luiza Alexander, Malick Fall, Manuel Moses, Marianne Grosclaude, Martin Habel, Mena Cammett, Michel M. Botzung, Meskerem Brhane, Mona Luisa Niebuhr, Monthe Biyoudi, Mupwaya Mutakwa, Nestor Coffi, Obiajulu Ihonor, Olasupo Olusi, Olena Harmash, Olivier Buyoya, Olivier Michel Jean Michel Monnier, Nicolas Peltier, Pelagie Agbemebia, Preeti Arora, Rachita Daga, Ram Akers, Robert Bou Jaoude, Senait Mekete Ayele, Sherif Bahig Hamdy, Shobhna Decloitre, Sufyan Abed Alhameed M. Al Issa, Sylvia Zulu, Sylvie Nenonene, Thomas Buckley, Thomas M. Kouadio, Vijay Pillai, Walid Labadi, Xavier Furtado, Xavier Reille and Yasser Charafi. The peer reviewers for the WBG corporate review of the Update were: Albert Zeufack and Cecile Fruman from the World Bank; Issa Faye from International Finance Corporation (IFC); and Kwesi Quartey, Deputy Chairperson, African Union Commission (external peer reviewer). The Task Team Leaders for the Strategy Update worked under the overall guidance of Deborah Wetzel, Jumoke Jagun-Dokunmu, Beatrice Maser and Merli Baroudi. World Bank IFC MIGA Vice President: Hafez M.H. Ghanem Sergio Pimenta Ethiopis Tafara Ousmane Diagana Ferid Belhaj Director: Deborah L. Wetzel Jumoke Jagun-Dokunmu Merli M. Baroudi Beatrice Maser Task Team Leader: Vijay Pillai Frank Armand Douamba Moritz N. Nebe Manuel Moses Nkemjika I. Cheick Oumar Sylla Onwuamaegbu Table of Contents EXECUTIVE SUMMARY .................................................................................................................................. i I. INTRODUCTION AND CONTEXT ................................................................................................................ 1 II. SIGNIFICANT CHANGES SINCE 2018 SHAPE THE CONTEXT FOR REGIONAL INTEGRATION IN AFRICA .. 3 III. STRATEGY IMPLEMENTATION IS ADVANCING WELL ............................................................................. 5 IV. PROPOSED PRIORITIES FOR FY21-FY23 AND ALIGNMENT WITH WBG APPROACH PAPER.................. 9 V. KEY CONSIDERATIONS DURING IMPLEMENTATION ............................................................................. 27 VI. RESULTS AND RISKS .............................................................................................................................. 31 ANNEXES ..................................................................................................................................................... 34 Annex I: Regional Integration Strategy Results Framework ................................................................. 35 Annex II: Implementing the 2018 RICAS: Progress Report ................................................................... 38 Annex III: Regional Integration Portfolio Review.................................................................................. 41 Annex IV: Lessons Learned, IEG Evaluation Recommendations and Follow-up Actions Taken .......... 50 Annex V: RI Engagement in FCV Sub-Regional Priority Areas .............................................................. 54 Annex VI: WBG Collective Undertaking with Private Sector on Regional Integration ........................ 62 Annex VII: Approach to WBG Convening and Engaging RECs to Foster Regional Integration in Africa ................................................................................................................................................................ 70 Annex VIII: Map of Continental Africa ................................................................................................... 75 List of Figures Figure1: Africa’s Score on Integration Dimensions ....................................................................................... 4 Figure 2: Theory of Change ........................................................................................................................ 14 Figure 3: WBG Regional Integration Strategic Framework ........................................................................ 16 Figure 4: Map of Four FCV Sub-regional Priorities – Horn, Sahel, Lake Chad and Great Lakes .................. 23 List of Tables Table 1: Active portfolio of WBG RI projects (as of end-FY20) ..................................................................... 5 Table 2: Strategic Pillars of the RI Strategy Update and Alignment with WBG Recovery Response .......... 22 Table 3: Indicative IDA Lending Program for FY21-FY23............................................................................. 28 Table 4: Key Expected Results at the End of Strategy Period ..................................................................... 32 List of Boxes Box 1: Regional Integration in Africa’s Crisis Recovery ................................................................................. 3 Box 2: Two to Tango – IEG Evaluation of WBG’s Regional Integration Program – Key Highlights ............... 8 Box 3: Delivering Results and Impact – On the Frontlines of Women’s Empowerment .............................. 9 Box 4: IDA19 - Scaling Up and Innovating for the Next Generation of Interventions………………………………10 Box 5: WBG Working Together to Facilitate the Private Sector’s Contribution to Regional Integration ... 11 Box 6: Intra-African Trade : Mobilizing Private Sector and South-South Knowledge Exchange................. 17 Box 7: Initiatives to Strengthen Financial Market Integration .................................................................... 18 Box 8: Addressing the FCV Agenda – A Sharper Focus on Regional Dimensions of Fragility...................... 23 Box 9: A Continental Strategy – Bringing North Africa and IBRD Countries into the Equation .................. 30 EXECUTIVE SUMMARY 1. This World Bank Group Africa Regional Integration and Cooperation Strategy Update assesses progress with implementing the 2018 Strategy and sets out the course for the remainder of the strategy period (FY21-FY23). In June 2018, the Board considered the WBG Regional Integration and Cooperation Assistance Strategy (RICAS) which included a provision for an Update to be presented at the start of FY21 to reflect early implementation experiences. The timing of this Update is important to position the WBG’s Regional Integration (RI) program within the context of the overall Covid19 recovery efforts and in line with the recent WBG Approach Paper1. The Update coincides with the start of IDA19 period and builds upon the important findings of the Independent Evaluation Group (IEG) evaluation of the WBG’s RI program2 completed in 2019. 2. Regional integration is a key element to aid continental Africa’s recovery efforts and the WBG’s RI program is building upon success and is ready to take on the next set of challenges. The WBG’s RI commitments are sizeable at US$17.5 billion at end-FY20, representing a 50 percent increase over the Strategy period. This includes a three-fold increase in World Bank’s commitments during the past 10 years to reach US$13.6 billion at end FY20, International Finance Corporation (IFC) commitments of US$1.7 billion and an increase in Multilateral Investment Guarantee Agency (MIGA) commitments from US$1.4 billion in FY18 to US$2.2 billion at end-FY20. The recent IEG evaluation confirmed that this scale-up has taken place while ensuring there are clear development impacts of the program. The trend of recent years in improving the portfolio quality is also sustained. This Update sets out actions for further strengthening the quality and increasing the regional spillover impacts of the WBG’s RI program. 3. The priorities in the RI Strategy Update have been realigned to fully embrace WBG support to the Covid19 crisis recovery efforts set out in the recent Approach Paper. The RI program has made important contributions to the Covid19 relief stage as the ongoing regional disease surveillance projects in 20 countries have formed the basis for mounting national-level emergency relief efforts and addressing food insecurity. During the next three years of the Strategy implementation, the RI program will complement country programs in specific areas of support to the restructuring stage (especially with regard to pandemic preparedness, protecting trade flows and strengthening regional markets for priority goods and services) and the resilient recovery stage (especially in terms of deepening integration for creating more jobs and laying the ground for private sector growth and economic transformation). The mantra for the remainder of the Strategy period consists of: scaling-up well-performing regional programs with an increased fragility focus; front-loading support in IDA19; and incentivizing actions by groupings of countries for building regional markets and regional solutions to aid the recovery. 4. The ongoing pandemic and global economic crisis have considerably affected the context for delivering the Strategy and could impact the extent of deepening of integration efforts in Africa. The pandemic is a stark reminder that certain development challenges require coordinated actions across countries and this remains the raison d’etre for regional integration efforts. While Africa has so far remained committed to the RI agenda, the crisis is likely to trigger global debates on the extent of global integration that should define the upcoming period. Africa may not be immune to these global debates. 1 WBG Covid19 Crisis Approach Paper, 2020 2 IEG: Two to Tango – An Evaluation of WBG’s Support for Regional Integration , 2019 i Notwithstanding, the added value of the WBG’s RI program remains strong, although the wider context at the time of this Update highlights significant downside risks not envisaged at the time of the 2018 Strategy. 5. The implementation record of the first two years of the RI Strategy is quite strong . Several priority actions set out in the 2018 RI Strategy are being implemented. These include progress towards greater selectivity, use of ‘development diplomacy’, combination of support for ‘hard’ and ‘soft’ issues and pursuing transformative efforts in priority areas. This Update identifies areas where further efforts will be made in strengthening implementation performance and in measuring results. There is a strong focus on lesson learning in the RI program and this is spelt out further in the report. 6. IDA19 provides a strong basis to intensify delivery of results and impact of the RI program. The scaled-up regional window in IDA19, the introduction of use of regional Development Policy Operations (DPOs) and the prospects for delivery on the IDA19 policy commitments all make the remainder of the Strategy period an interesting and challenging one. Five changes are proposed for the remainder of the RICAS period. First, the thematic pillars are being adjusted to highlight more clearly the substantive areas of focus: (i) connectivity; (ii) trade and market development; (iii) human capital and (iv) resilience. (In the 2018 RICAS these were: corridors, regional markets, services & platforms, and global public goods). Second, in a post-Covid19 context, more emphasis will be placed on human capital and resilience aspects than had been anticipated in the 2018 Strategy. Third, there will be a more explicit focus and importance attached to the fragility, conflict and violence (FCV) agenda than was the case in the 2018 Strategy. Under IDA19, the WBG has committed to develop and implement regional programs in three FCV priority sub- regions. At least one-half of the IDA19 lending for RI is planned for these priority FCV sub-regions. Fourth, the Update now encompasses a continental approach also covering North Africa (the 2018 Strategy was only for Sub-Saharan Africa). Finally, a more calibrated and strategic engagement with the Regional Economic Communities (RECs) and private sector is proposed. Efforts are being made to improve the effectiveness and impact of resources granted to RECs. 7. The Update also ensures alignment of the RI program with the twin goals of the WBG – reducing extreme poverty and promoting shared prosperity. The proposed pillars of the Update will work to RI’s comparative advantage of addressing diseconomies of scale of small and fragmented markets, promoting trade and economic diversification across countries, tackling global public goods and ‘bads’ that know no boundaries, and providing effective platforms for promoting regional cooperation. Under the Building Regional Connectivity theme, the program will focus on access to energy, Digital Economy for Africa and selective financing for regional corridors. Through the Promoting Trade and Market Integration pillar, the program will support trade facilitation and implementation of the Africa Continental Free Trade Area (AfCFTA) Agreement, strengthening of regional value chains, and financial market integration. The Human Capital Development pillar will focus on the pandemic response and disease surveillance, skills and capacity building, harmonized statistics, Identification for Development, and demographics and women’s empowerment. Finally, the Reinforcing Resilience pillar will selectively support work in: agro-pastoralism; food security and climate change; conflict and forced displacement; and transboundary waters and natural resource management. Priority FCV regions are the Horn of Africa (HoA), Lake Chad and the Sahel, as well as continued efforts to advance the Great Lakes program. 8. Going forward, the RI program will draw more on the private sector as an engine of integration. The private sector has played a role in regional integration, but has been constrained by the challenging ii business environment and the lack of coordinated policies. To ensure a greater role for the private sector in regional integration, addressing country and sub-regional investment climate issues, harmonizing policies at the regional level and supporting enabling sectors such as infrastructure (physical, financial and social) and human capital and skills will be crucial. This Update takes a pragmatic approach in identifying select areas where WBG combined strengths can demonstrate success. These can hopefully open up other pathways for the future. 9. The Update is a Continental Strategy covering 55 members of the African Union (AU). Until now, the Africa Region’s RI program has largely been synonymous with the regional IDA program in Sub-Saharan Africa. However, this Update takes the first steps towards a continental strategy by including North Africa and flagging the need to engage with the larger IDA and IBRD countries that do not currently borrow a lot for RI from the WB. Engaging with the larger economies is important given the likely outsize influence they could have on the continent’s progress on regional integration. This is more challenging in the crisis recovery period, but this Update signals an intent to take the initial steps in that direction. 10. The Update proposes to strategically ramp up WBG efforts at convening countries to find regional solutions in key areas relevant to crisis recovery and beyond which respond to the context in different sub-regions. This is an important way of engaging with political economy factors which would influence the pace and direction of integration in the continent. The convening function has been an important part of the RI program, but it has evolved organically over the past decade. The remainder of the Strategy period provides an opportunity to take a carefully calibrated approach at convening groupings of countries to enhance the regional spillover impacts of all the physical investments made over the years by countries, the WBG and partners. Such an approach will be carried out when possible in close collaboration with the regional institutions/RECs. 11. Given the strong resonance of the priorities with clients, the remaining period of the Strategy will focus on delivery and impact. The establishment of a dedicated WB RI Unit led by a Director working across the two Africa regions and Middle East and North Africa (MNA) region, and Directors at the IFC responsible for RI is expected to provide a stronger focus on the ‘how’ of Strategy implementation and ensure a clear line of sight between strategic priorities and delivery of operational results. The analytical, lending, guarantee support and convening roles will be taken forward as part of an overall approach of ‘development diplomacy’ to deliver on the continent’s full potential of regional integration. iii I. INTRODUCTION AND CONTEXT 1. The world is currently confronting a ‘once-in-a-century’ crisis. A raging pandemic and the resulting economic crisis have wrought unimaginable damage and misery with considerable loss of life, upending economic systems, disrupting social lives, and reversing gains in poverty reduction. In response to globally shifting epicenters of the pandemic, countries across the world imposed lockdowns to control the spread of the virus and save lives, requiring difficult tradeoffs with protecting livelihoods and jobs. While the lockdown has been eased in many parts of the world during the summer, the subsequent rise in cases could force authorities to reinstate some degree of lockdown. Global economic activity is expected to only partly recover during 2020-21. The progress in developing reliable vaccines is playing through against the risks of continued virus outbreaks. The International Monetary Fund (IMF) is projecting a negative 4.4 percent global growth in 20203 - the sharpest global contraction since the Great Depression. In 2021, growth is projected to strengthen to 5.2 percent, though with significant downside risks related to success in controlling the pandemic. There will be debates on the continuity of and adjustments to the global systems of interdependence, cooperation and trade that have been built over many decades. Thus, this is a period of considerable global uncertainty over policy choices to be made. The world has nonetheless emerged stronger from previous crises. Following the Great Depression and Second World War, the world embraced unprecedented collective action measures that laid down the foundations for global cooperation and economic growth during the 20th century. A similar challenge now confronts the global community. 2. The coronavirus disease 2019 (Covid19) fallout will have deep impacts on the continent of Africa. The year 2020 started with a modest growth projection of 3.1 percent – not enough to make a rapid dent in poverty even in the pre-Covid19 era. Going into the pandemic the continent also had other vulnerabilities – rising debt levels, lack of structural transformation, unmet needs for quality basic services and jobs, rising fragility risks and shallow economic integration. These vulnerabilities have been exposed to considerable additional risks from the economic crisis. For several countries, the pandemic effects are now intertwined with falling commodity prices and rising food insecurity due to pest outbreaks and weather shocks. The World Bank projects that economic growth in Sub-Saharan Africa (SSA) could see a contraction of 3.34 percent while Middle East & North Africa (MNA) could contract by 4 percent in 2020. This would be among the sharpest contractions ever recorded on the continent. Governments will face a painful cocktail of dropping revenues and rising expenditures. There will be considerable impacts on the livelihoods of millions of low wage earners and informal economy workers along with rising levels of food insecurity. The latest projections point to an additional 26 to 40 million people falling into extreme poverty in Africa as a result of the crisis5. Businesses, small and large, are witnessing the drying up of finances and consumer demand and ‘flight to safety’ in movement of global capital flows. Medium, Small and Micro-enterprises (MSMEs), which are the key drivers of jobs in Africa, will be most affected due to liquidity challenges and disruptions to supply chains and are likely to least qualify for government relief programs. Most African countries are implementing emergency measures to stem the spread of the pandemic and its economic fallout and preparing for large-scale immunization program as vaccines are 3 IMF: World Economic Outlook, October 2020 4 WB: Africa Pulse, October 2020 5 WB: Poverty and Shared Prosperity 2020: Reversals of Fortune 1 tested and cleared for use. At this time, it is difficult to predict when the economic crisis will bottom-out and how soon growth in Africa can rebound. 3. Africa has an opportunity to ensure that regional integration (RI) is woven into its short and medium-term recovery efforts to help it build back better. Even though the continent had shallow levels of economic integration, the crisis is raising the risks of further unraveling of integration efforts with border closures. However, recent years also signaled that the continent was on the cusp of making a leap forward in promoting integration with the speedy ratification of the agreement on African Continental Free Trade Area (AfCFTA) to create the largest common market in the world, progress in reversing a history of tensions between states in some parts of the continent, and likely fruition of years of investments in regional infrastructure connectivity in energy, digital and other sectors. Consultations with stakeholders in Africa have confirmed that there is continued political commitment to RI as a key element of the continent’s approach to recovery. However, one of the emerging risks from Covid19 is the rise in nationalist sentiments, random border closures and disruptions to trade flows. African think tanks and thought leaders have called for more resolute actions by countries to build integration efforts into the core of crisis recovery plans6. The challenge, equally valid in a pre-Covid19 and post-Covid19 context, is in translating commitments into tangible actions and results. The pandemic serves as a grim reminder that certain problems know no borders – the responses that countries put in place should also not be defined in purely domestic terms. In parallel with a focus on recovery efforts. African countries need to have a strong voice in shaping the post-Covid19 global system and strong solidarity and regional cooperation within the continent could amplify its global voice. 4. The World Bank Group (WBG) has prepared a comprehensive approach to support recovery from the ongoing crisis that is exceptional in speed, scale and selectivity and regional integration can make a significant contribution. The Approach Paper titled ‘Saving Lives, Scaling-Up Impact and Getting Back on Track’7 sets out four priority pillars for WBG response: (i) saving lives; (ii) protecting the poor and vulnerable; (iii) ensuring sustainable business growth and job creation; and (iv) strengthening policies; institutions and investments for building back better. The RI agenda is well placed to support Africa’s recovery efforts across these priority pillars, especially in the ‘restructuring’ and ‘resilient recovery’ stages of the WBG Approach Paper. For example, by building pandemic-ready regional health systems, protecting the vulnerable in fragile zones and helping overcome diseconomies of small markets as a foundation for job creation and improvements in productivity. Similarly, supporting the expansion of digital financial services and making them interoperable could provide a foundation for increasing access to formal financial services. When groupings of countries come together to formulate regional solutions and address longstanding barriers toward economic integration, they are likely to strengthen the sustainability of recovery from crisis and complementarity with domestic efforts (Box 1). 6 Afrochampions Initiative: Will Covid19 Derail AfCFTA Start of Trading? April 2020 7 WBG: Saving Lives, Scaling-Up Impact and Getting Back on Track, June 2020 2 Box 1: Regional Integration in Africa’s Crisis Recovery Anatomy of the crisis: Covid19 reached Africa some weeks after it had been circulating in other continents. In early-March, there were 40 identified cases in the continent. Governments soon started putting in place social distancing and lockdown measures. It took 98 days for Africa to record its first 100,000 infections but it took only another 18 days for the numbers to double. As of November 10, 2020 the total number of infections in Africa was over 1.4 million with 29,000 deaths. With just 5 percent of current global infections, the continent has so far belied some of the early worst-case projections, but countries need to continue to be vigilant until the global infection curve has been flattened. While pandemic risks continue, the resulting social, economic and food crises are likely to be acute, putting at risk Africa’s economic and poverty reduction achievements. Regional integration as part of the solution: There is understandable focus on actions to be taken by countries to address the health, social and economic effects of the crisis. Complementing those important national measures with well-formulated regional responses will be key to ensuring Africa’s sustainable recovery. Regional efforts revolve around the following elements: (i) implementing regionally coordinated pandemic preparedness and response plans, since the strength of any surveillance system is only as good as the weakest link in the chain; (ii) keeping trade flows open, including for essential supplies and food products; (iii) placing specific attention on zones with chronic fragility risks as any flaring up of risks could quickly spill over across borders; (iv) addressing diseconomies of scale in financial sector response efforts to support private sector recovery, trade finance and jobs; and (v) continuing to push ahead on the agenda of Jobs and Economic Transformation (JET) by promoting intra-regional trade, strengthening regional value chains, building regional energy markets, supporting skills for a mobile workforce and transitioning to a greener and resilient future. 5. This WBG Africa Regional Integration Strategy Update assesses progress with implementing the 2018 Strategy and sets out the course for the remainder of the strategy period (FY21-FY23). In June 2018, the Board considered the WBG Regional Integration and Cooperation Assistance Strategy (RICAS), which included a provision for an Update to be presented at the start of FY21 to reflect early implementation experiences. The timing of this Update is important to position the WBG’s R I program within the context of the overall recovery efforts and in line with the new WBG Approach Paper. The Update coincides with the start of IDA19 period and builds upon lessons learned over the years and the important findings of the Independent Evaluation Group (IEG) evaluation of the WBG’s RI program completed in 2019. II. SIGNIFICANT CHANGES SINCE 2018 SHAPE THE CONTEXT FOR REGIONAL INTEGRATION IN AFRICA 6. Several aspects of the overall context for integration remain similar to the detailed assessment contained in the 2018 RI Strategy8. These include concentration of extreme poverty in Africa, low poverty elasticity of growth, rapid population growth and high youth unemployment, slow structural transformation, rising levels of public debt, challenging business environment, large infrastructure gaps, climatic shocks, weak institutions and service delivery and shallow levels of integration. The recently released Africa Regional Integration Index (ARII) 20199 has undergone some methodological changes 8 WBG: Regional Integration and Cooperation Assistance Strategy (RICAS) 2018 9 AU et al: Africa Regional Integration Index 2019 3 compared to the ARII 2016, so it is difficult to assess trends over time. Nonetheless, the ARII 2019 reinforces the prevailing assessment of a continent not fully realizing its potential for integration – a ‘glass half-full’ as mentioned in the 2018 RICAS. The East African Community (EAC) remains relatively the most integrated sub-region while the Southern Africa Development Community (SADC) is now ranked as the least integrated sub-region10. The continent has made most progress in ensuring free movement of people across countries, while it continues to struggle on integration of production of goods and regional infrastructure connectivity. It is also noteworthy that ARII 2019 lists three of the five most populous countries11 (representing one-third of the continent’s population) and four of the eight largest economies in the group of ‘least integrated countries’. For the continent to make progress on integration, it is important that its largest economies play their part. 7. Four notable changes in the development context are relevant for this Update and these were confirmed through external consultations. First, as noted above, the pandemic and economic crisis have upended prospects of the continent recovering from the low growth trajectory it had fallen into since 2015. This has considerably reduced the prospects of two drivers - strong economic growth and deepening of integration - feeding off each other and creating a virtuous cycle during the upcoming period. While the crisis could spur action by countries to pursue integration as a key part of the recovery efforts, it could run into some countervailing political pressures of rising nationalism and protectionism in the continent. In an upside scenario, the global crisis could also spur African countries to look for possibilities of regional value chains to restart growth as global value chains face considerable strains from the economic crisis and ongoing global trade tensions12. Second, the record has been mixed on progress with addressing the fragility issues across the continent – while there has been notable progress in reducing fragility in certain sub-regions, it has been accompanied by rising insecurity, political challenges and conflict in other parts of Africa. The ongoing health and economic crises could exacerbate these existing vulnerabilities and make poverty reduction more intractable in these settings. Third, on the positive side, since 2018 there has been greater political momentum on deepening integration as evidenced by the speedy ratification of the AfCFTA Treaty and reforms in the operations of the African Union Commission (AUC) and the Regional Economic Communities (RECs)13. While Covid19 has delayed the start of trading under the AfCFTA, there remains strong political commitment to move to the next phase of creation of a continental market of 1.3 billion people. Finally, there had been an increase in investor interest in the region as shown by increases in bilateral and multilateral investment summits across Africa before Covid19. However, even as some governments become more open to private sector participation, in other places there continues to be a crowding out effect. 10 The Africa Regional Integration Index 2016 had ranked SADC as the second best performer amongst all the RECs. There are no obvious reasons for SADC to have slipped from the 2nd to the 8th position in the 2019 index, and perhaps methodological changes in ARII 2019 could explain this change. 11 DRC, Ethiopia and Nigeria. 12 WB: Global Economic Prospects 2020 13 AU: 11th Extraordinary Summit of Heads of State, November 2018 4 8. The overall assessment of the 2018 RICAS on what it will take to deepen integration in Africa remains largely valid. Africa is likely to see a continuation of multi-speed and variable geometry approaches in the progress it makes on integration. The ongoing crisis is likely to create a willingness among countries to cooperate more intensively in areas such as health preparedness and developing regional digital, energy and financial markets (given the critical role these sectors play in the recovery agenda). The need to combine financing of ‘hard’ infrastructure with ‘soft’ policy and trade reforms to create regional markets and address diseconomies of scale remains the sine qua non of regional integration in Africa. The importance of closing the ‘implementation gap’ between the rhetoric and reality of integration is doubly reinforced during a period of crisis. Demonstrating tangible results can help ensure continued strong public support for integration across Africa. III. STRATEGY IMPLEMENTATION IS ADVANCING WELL 9. The first two years of Strategy implementation have seen strong overall performance for the WBG in terms of growth in commitments, quality and results-orientation (see Table 1). The RICAS strategic framework has been relevant and has guided the overall program with new initiatives taken forward in at least 12 of the 16 focus areas set out in 2018. As shown in Table 1, the combined WBG commitments for RI at the end of FY20 are at US$17.5 billion – signaling the importance attached to the agenda. The total WBG financial commitments have grown by 50 percent since the RICAS was developed in 2018. Table 1: Active Portfolio of WBG RI projects (as of end-FY20) RI Projects in Africa Portfolio (% Active Number of Financial Commitment of total exposure/commitment) Projects (US$ billion) WB 16 77 13.6 IFC 18 106 1.614 MIGA 31 33 2.2 WBG 17.5 10. The WB’s Sub-Saharan Africa RI portfolio continues to grow, rising from US$9.2 billion at the end of FY18 to US$13.6 billion at the end of FY20 (a net increase of 47 percent in commitments, while largely keeping the number of active projects steady). During IDA18, the RI program delivered a solid performance with new commitments of US$6.3 billion, fully utilizing the Regional Window and accessing resources from the Scale-Up Window. A robust review of the RI lending pipeline was undertaken in FY19 to strengthen the line of sight to priorities and to reduce the proliferation in the portfolio (see Annex III for details). Selectivity continues to be a challenge for the RI program with the largest number of active projects in Africa. The RI portfolio in the MNA region is small with two active regional operations with Djibouti (the only active IDA borrower in North Africa) as part of the Horn of Africa Initiative work. 11. The main emphasis of WB lending in the past two years has been on scaling-up well performing regional operations. In the energy sector, efforts to increase power trade as well scaling up energy access have been supported across all four regional power pools, with a recently approved project Chad – Cameroon Interconnection being the first financing by the WB in the Central Africa Power Pool (CAPP). 14 IFC portfolio updated to May 31, 2020. IFC also has advisory program worth $126m focusing on RI. 5 On epidemic preparedness, support has been scaled-up to cover additional countries and support provided to continental and sub-regional institutions, notably the Africa Center for Disease Control and Prevention (CDC), which has hit the ground running in dealing with the Covid19 pandemic. On higher technical education and vocational skills, new operations are expected to train hundreds of PhDs and technical graduates. Another pipeline priority during this period has been to support vulnerable communities and address fragility risks and food insecurity. Together with ongoing operations, these additions to the portfolio are expected to amplify the overall impact of the WB’s RI program. The average project size of the portfolio has increased from US$111 million at end-FY18 to US$177million at end-FY20 (a 60 percent increase). The sectoral composition of portfolio has witnessed an increase in the relative size of the human development (HD) portfolio along with a relative decline in the infrastructure commitments between FY18 and FY20. These reflect cyclical changes as recent project exits have mostly been in infrastructure, as well as strategic changes made in building up the human capital aspects in the portfolio. The increase in HD commitments has been driven by three strategically important areas – skills development, epidemic preparedness and women’s empowerment – all of which are highly relevant in the post-Covid19 context. At the end of FY20, RI commitments for the newly configured WB Vice Presidential Units (VPUs) of Eastern and Southern Africa and Western and Central Africa were at US$6.25 billion and US$7.3 billion respectively. The priority on FCV countries continues to be maintained with one- third of active RI commitments going to FCV countries. 12. The RI portfolio quality has shown improvement and now compares well with Africa-wide indicators and further measures are being put in place to address remaining challenges. During the past three years there has been a steady improvement in disbursement performance – the 2018 Strategy had noted that the disbursement ratio of RI was lower than the Africa average and lower than the five largest country programs in Africa (the ‘big five’15, which constitute 50 percent of total Africa commitments). This trend has started to reverse with a disbursement ratio of 19 percent achieved in FY19, comparable with Africa averages. A disbursement rate of 18.4 percent maintains this improvement in FY20, despite the global pandemic. There has also been a reduction in the number of problem projects and improvements in proactivity indicators in the RI program. A detailed portfolio review was undertaken as part of preparing this Update and the main findings and recommendations are provided in Annex III. 13. IFC is contributing to RI in Africa by promoting trade and investment integration. The three focus areas in the Africa region are: (i) support to regional connectivity and sub-regional infrastructure; (ii) development of regional value chains and support to regional champions; and (iii) dissemination of inclusive private sector solutions across Africa, fostering partnerships, trade, and capital flows. The cross-cutting themes underlying these areas include: scaling-up disruptive technologies and expanding regional partnerships. About 18 percent of IFC’s total investment portfolio of US$9.1 billion in Sub- Saharan Africa, is in regional projects. By industry area, the largest commitment in regional projects is for disruptive technologies (43 percent) followed by regional infrastructure (24 percent), manufacturing and agribusiness (22 percent) and the financial sector (11 percent). In the MNA region, IFC is also developing an important pipeline on RI, especially in the financial and manufacturing sectors. Key regional projects include mortgage refinancing in West Africa to support access to affordable housing, SME and microfinance credit growth, warehouse financing, healthcare, regional funds to support the development 15 ‘Big Five’ in WB’s Africa portfolio refer to the following with end -FY20 commitment figures: RI (US$13.6 billion), Nigeria (US$11.2 billion), Ethiopia (US$10.3 billion), Kenya (US$5.5 billion) and Tanzania (US$4.6 billion). 6 of the private sector in the targeted regions, and regional power development. IFC’s strategy for investment through Private Equity (PE) funds focuses on partnering with quality local fund managers in multiple geographies that also complement IFC’s efforts to mobilize additional institutional capital to fund critical high-growth sectors primarily by attracting institutional equity to fund the needs of fast-growing small and mid-market companies. IFC is building a diverse and complementary PE portfolio for Africa. The portfolio is varied with funds ranging from SME Ventures funds that have average fund sizes smaller than US$50 million to larger growth equity funds targeting mid-to-large capital investments across the region. In addition, 28 percent (US$126 million) of the total Sub-Saharan Africa (SSA) Advisory portfolio (US$437.5 million) was made up of multi-country projects. Projects are aligned with the RI strategy and include investment climate reform, trade facilitation, competitiveness, Joint Capital Market Program (J-CAP), microfinance, digital financial services, energy access, regional power projects, and gas-to-power projects. 14. Given MIGA’s mandate to promote cross-border investments, RI is an integral feature of its core business model. MIGA focuses on the following three key areas in the context of RI: (i) Intra-regional cross-border investments: supporting investors from the Africa region who operate and invest across national borders into one or more regional markets, evident in the ICT sector and the financial sector. This includes support to Senegal’s largest telecommunications provider, Sonatel, in its expansion into West Africa, support to Eastern and Southern Africa Trade Development Bank (TDB) a regional development bank to expand its trade finance activities within its IDA and FCV markets, support to Development Bank of Southern Africa (DBSA) as a development bank for the Southern African sub-region and issuing guarantees to Absa Bank and First Rand Group, both of South Africa for investments in 15 of their respective subsidiaries across the region; (ii) Multiple-country cooperation on specific issues: supporting interregional projects with developmental benefits across a number of stakeholder host countries. For example, regional energy supply projects benefited from MIGA’s support of Sasol of South Africa in the construction of a cross-border gas pipeline connecting Mozambique and South Africa -- the first cross border initiative in sub-Saharan Africa in developing regional natural gas markets; (iii) Thematic development of multiple projects across the region can benefit from replication, refinement of prudent business models, and enhancement of economies of scale16: supporting private investors that develop projects in the same or similar sector across multiple countries, building on their prior experience to enhance and introduce best practices in new countries, and achieving economies of scale. This pool of investors, including infrastructure funds such as Actis (investing in Cameroon, Senegal and South Africa) and Lekela (investing in Egypt, Senegal, and South Africa), bring their experience and lessons of earlier projects to projects in new jurisdictions that are being developed. 15. Implementation of the Strategy and this Update have been informed by a positive IEG evaluation and addressing lessons learned in the RI program. In 2019, the IEG completed a major evaluation of the WBG’s RI program17. The evaluation was largely positive about the WBG’s RI program in Sub-Saharan Africa in terms of achievement of development results and existence of overall strategic frameworks to guide the program, but raised questions about the program’s ability to monitor and report on regional spillover benefits. The evaluation has provided confirmation that the overall direction of the RI program in Africa is on the right track (see Box 2 and Annex IV). The 2018 Strategy identified some key lessons learned in the RI program and these continue to be relevant and are guiding the work going 16 MIGA has not included such projects in the RI data in Table 1 as such effects are difficult to substantiate ex-ante. 17 IEG: Two to Tango – An Evaluation of WBG’s Support for Regional Integration, 2019 7 forward (see Annex IV). Additionally, this Update sets out a reorientation in the engagement of the RI program with RECs/regional institutions. Another area where more emphasis will be placed going forward is on the ‘WBG working together’ agenda to build stronger synergies among the interventions of WBG institutions. Yet another area is on aligning WB resource allocation decisions across the national and regional IDA programs, which has been a driver for proliferation of projects in the RI portfolio. Box 2: Two to Tango – IEG Evaluation of WBG’s Regional Integration Program – Key Highlights The IEG evaluation found that the WBG’s efforts to foster regional integration have led to positive development outcomes in the Sub‐Saharan Africa Region. The evaluation welcomed the Africa Region’s leadership in preparing dedicated RI Strategies in 2008 and 2018 to guide the overall program. It noted that the WBG fostered regional integration through multiple instruments, regional institutions, and sectoral approaches. It also noted that the performance of the RI portfolio was on par with that of country programs (which is significant as RI operations are generally more complex involving multiple country clients). About 70 percent of transport operations were successful in improving regional transport infrastructure, leading to reduced transit time and user costs. In the energy sector, the WBG was more successful in improving regional energy infrastructure and service reliability, whereas developing regional energy markets for improved trade remains unfinished business (something being taken forward as outlined in subsequent sections). The evaluation, however, did not find demonstrated evidence of the spillover effects of WBG interventions and therefore, recommended strengthening the design of projects supported by the IDA Regional Window to better monitor and measure these spillover effects (Section VI makes reference to how this shortcoming is being addressed). 16. RI program activities on regional disease surveillance have been a cornerstone in IDA’s Covid19 crisis response in Africa. The RI program helped leverage regional networks and operations to catalyze an immediate, large-scale response through the US$670 million Regional Disease Surveillance Systems Enhancement Program (REDISSE), the US$128 million East Africa Public Health Laboratory Networking Project and the US$250 million Africa Center for Disease Control and Prevention Project. It also helped maximize economies of scale for scientific collaboration across borders through support to institutions such as the Africa Center of Excellence for the Genomics of Infectious Diseases and the West Africa Center for Cell Biology of Infectious Pathogens. Existing regional disease surveillance and health related projects have been the basis for countries to swiftly access the Covid19 Fast Track Facility established by the WBG. The pandemic has been interplaying with the Desert Locust challenge in several countries, and the RI program has put in place a US$500 million Emergency Locust Response Program further extending the use of Multiphase Programmatic Approach (MPA) instrument within the RI program. 17. Thus, the RI program’s added value remains very relevant, even more so, in a crisis situation. The value added of the RI program resides in working to: i) address diseconomies of scale of small and fragmented markets; ii) promote trade and economic diversification across sovereign territories; iii) address global public goods and ‘bads’ that know no boundaries; and, iv) provide effective platforms for promoting regional cooperation (see Box 3 for an example of impact). Working with Country Management Units (CMUs) and Global Practices (GPs), the RI program draws on a mix of lending to public and private sector, analytical and advisory services, policy dialogue, and convening to provide a full set of services. The WBG continues to strengthen its partnerships with countries, RECs and development partners to augment the overall impact. 18. IDA19 creates further opportunities for scaling-up RI impact. The strong replenishment of the IDA19 Regional Window allows the WB to provide around US$8.5 billion in financial support for regional 8 operations (combined projected regional and national contributions during IDA19). Given current estimates on likely project exits, the WB’s RI program could finish the Strategy period with commitments of between US$16 billion - US$17 billion. This is critical financing for the continent during a period of crisis and economic recession. The RI program will directly contribute to all five Special Themes in IDA19: JET, Gender, Climate, FCV and Governance and Institutions. The Regional Program will also contribute to implementation of the WBG FCV Strategy18 and its four pillars of engagement that are embedded in this RI Strategy Update: (i) preventing violent conflict and interpersonal violence; (ii) remaining engaged during conflicts & crisis situations; (iii) helping countries transition out of fragility; and (iv) mitigating the spillovers of FCV. Important policy changes in IDA19 allow use of a regional Development Policy Operation (DPO) instrument and provision of IDA financing on credit terms to eligible regional institutions – these changes respond to the long-standing client demand and needs and priorities of the RI program (see Box 4). Box 3: Delivering Results and Impact – On the Frontlines of Women’s Empowerment Fertility rates in Africa are among the highest in the world. In the Sahel sub-region, many adolescent girls in rural areas marry early and do not have access to quality reproductive, child and maternal health services. This leads to particularly high fertility rates, accompanied by high mortality and malnutrition, with millions of under-five children facing acute malnutrition. It is a story that repeats itself across communities in different countries – a shared problem across countries in search of a shared solution. The Sahel Women’s Empowerment and Demographic Dividend Project (SWEDD) is a flagship regional operation which was initiated in 2015. The project has so far supported thousands of women and girls to stay on in school, delay marriage, and enter ‘non-traditional’ occupations like installation of solar panels, and the project’s engagement with men’s groups has resulted in a decline in reported cases of domestic violence. The ‘spillover benefits’ are reinforced by SWEDD regional platform, which has expanded the ‘space’ for addressing sensitive issues and allowed for peer to peer learning among religious leaders and parliamentarians across Sahelian countries on child marriage and family planning. In FY20, SWEDD has been scaled-up to cover seven countries with an outlay of US$695 million. SWEDD is an important contribution to addressing some deep-seated social challenges across groupings of countries and helping to deliver on the Gender special theme in IDA. IV. PROPOSED PRIORITIES FOR FY21-FY23 AND ALIGNMENT WITH WBG APPROACH PAPER 19. The overall goal of the RI program for the remainder of the Strategy is to support the continent’s recovery from crisis and its economic transformation by promoting regional integration. Internal and external consultations over recent months have confirmed the overall importance attached to regional integration in the continent’s recovery efforts from the crisis. The WBG Approach Paper provides an important frame of reference for the RI program and this section spells out the strong alignment with the four pillars of WBG’s overall response: (i) saving lives; (ii) protecting the poor and vulnerable; (iii) ensuring sustainable business growth and job creation; and (iv) strengthening policies; institutions and investments for building back better. This Update also builds on key aspects of the 2018 RICAS, particularly its emphasis on strengthening the focus on ‘soft’ policy measures to accompany investments in ‘hard’ infrastructure; continuing to take forward ‘development diplomacy’ by ensuring country commitment to the RI agenda; 18 WBG: Strategy for Fragility, Conflict and Violence, 2020 - 2025 9 and by improving portfolio performance and delivery of results. Of the 16 focus areas in the 2018 RICAS, 12 continue for the remainder period (see Annex I for details). Box 4: IDA19 - Scaling Up and Innovating for the Next Generation of Interventions In response to strong client demand and strengthened strategic orientation and performance of the RI program, the Regional Window has been scaled-up considerably during recent IDA replenishments. It has increased from US$2.8 billion in IDA17 to US$5 billion in IDA18 to US$7 billion in IDA19. Thus, the size of the regional window has increased 250 percent over the three IDA replenishment periods. The Africa Region is fully prepared to deliver RI operations for around US$8.5 billion during IDA19 (combination of regional and national IDA and access to other IDA windows). IDA19 introduces two innovations in the Regional Window – use of regional DPOs and provision of IDA credit to creditworthy regional institutions. Both decisions respond to the growing maturity of the RI program. The first regional DPO using the IDA Regional Window was approved by the Board in FY21 end-July to support the development of the regional energy market in West Africa and help nearly double power trade between participating countries within three years. The West Africa Energy DPO addresses policy, regulatory and institutional reforms for strengthening power trade and reducing the cost of energy, building upon WBG support over the past decade of nearly US$2 billion to develop regional energy connectivity infrastructure in the West Africa Power Pool (WAPP). This operation helps support the ‘soft’ reforms and capacity building needed to optimize years of ‘hard’ investment and is a good reflection of the next generation of RI efforts to support the continent and strengthen regional markets, not to mention supporting the continent’s energy goals. 20. Five changes are proposed for the remainder of the RICAS period. First, the thematic pillars are being adjusted to highlight more clearly the substantive areas of focus: i) Connectivity; ii) Trade and Market Development; iii) Human Capital and iv) Resilience. (In the 2018 RICAS these were: corridors, regional markets, services & platforms, and global public goods). Second, in a post-Covid19 context, more emphasis will be placed on human capital and resilience aspects than had been anticipated in the 2018 Strategy. Third, there will be a more explicit focus and importance attached to the FCV agenda than was the case in the 2018 Strategy. Under IDA19, the WBG has committed to develop and implement regional programs in three FCV priority sub-regions. At least one-half of the IDA19 lending for RI is planned to be devoted to these priority FCV sub-regions. Fourth, the RI Strategy Update now encompasses a continental approach also covering North Africa (the 2018 Strategy was only for Sub-Saharan Africa) and thus aligning with the membership of the African Union. Finally, a more calibrated and strategic engagement with the RECs and private sector is proposed. Effectiveness and impact of resources granted to RECs can be improved. Also, regional platforms provided by RECs and other regional institutions can be used to strengthen sub-regional and continental level coordination. By the end of the Strategy period in FY23, it is expected that the RI program will have transitioned to greater selectivity in the engagement with the RECs in terms of both number of institutions and areas of engagement (see more on partnerships with RECs below). IFC / MIGA will work with existing clients to further strengthen regional programs. 21. A well-coordinated WBG approach will be key to ensuring that the RI program serves the post- Covid19 recovery agenda. The current crisis has further reinforced that deeper integration can be an important part of Africa’s development story going forward—it can help reignite the growth engine by promoting trade and improving competitiveness and it can address the diseconomies of scale facing the continent as well as support public goods and improve management of ‘public bads’ that cut across 10 borders (epidemics are an example of a public bad). With the onset of the crisis, efforts to connect the energy and digital markets on the continent, support value chains and expand the scale of economic activity can help the continent recover from the crisis. The disruptions in global value chains are resulting in increased attention to local and regional value chains, providing much needed impetus for regional integration. The private sector has a fundamental, but as-yet underutilized, role to play in deepening the integration process. Besides raising private financing for regional infrastructure, there is scope for a more leveraged financial sector and development of value addition possibilities to increase productivity and creation of inclusive, resilient and sustainable jobs. Each part of the WBG has a role to play in helping the continent deepen integration (see Box 5 and Annex VI). Box 5: WBG Working Together to Facilitate the Private Sector’s Contribution to Regional Integration The WBG collective effort in promoting the RI agenda will remain a strong priority going forward. The Covid-19 crisis has sharpened the need to support the private sector through leveraging the WBG’s convening power and stimulating regional coordination in tackling the pandemic, while enhancing private sector-led economic recovery. The WBG will be required to strengthen its upstream collaboration, analyze key constraints through Country Private Sector Diagnostics (CPSDs) and use IFC’s ‘If – Then’ matrix that provides key requirements and reforms to support scaling-up private sector activities. This Update proposes four priority areas for strengthening the Maximizing Finance for Development (MFD) approach. (i) Engaging the private sector engagement in FCV settings; enhancing WBG collective operations in the FCV sub-regional priorities through the platform approach that brings together the full range of WBG products as packaged solutions, (ii) Developing priority regional value chains that contribute to JET; to promote stronger private investments, help people connect to job opportunities, and increase food security in the region, (iii) Building continental markets; by enhancing regional connectivity with larger markets in Africa through developing the WBG’s continental financial and trade integration projects, and (iv) Leveraging private finance for the economic connectivity agenda; by increasing private finance mobilization through WBG RI projects. These four areas reflect the outcome of dialogue with the private sector and assessment of emerging opportunities, and the actions would be to have visible and transformative impact in these areas during the remainder of the RI Strategy period. 22. The Update has been developed with a close eye on the needs of short and medium-term recovery from the crisis, the added value of RI efforts, and the need for a more targeted approach towards FCV drivers. The proposed priorities have been strongly endorsed during internal and external stakeholder consultations undertaken during preparation of the Update. Ensuring selectivity and coherence across the priorities in the RI program continues to be of critical importance while also ensuring that the RI efforts meet and pick up on existing WBG efforts in country programs. Financing of investment programs would follow when groupings of countries have established a strong basis for regional cooperation to ensure that the spillover benefits of the RI program are being maximized. Despite the uncertainty in the wider context arising from the ongoing crisis, the proposed priorities should remain valid and important for the remainder of the Strategy period. A 4X4 Framework: Four Thematic Pillars and Four FCV Sub-regional Priorities 23. Thematic pillars: The Theory of Change set out in Figure 2 emphasizes four thematic pillars, each of which makes important contributions to advancing regional integration on its own and they together 11 lay the foundations for scaling up results. The four thematic pillars are: i) Building Regional Connectivity; ii) Promoting Trade and Market Integration; iii) Supporting Human Capital Development; and iv) Reinforcing Resilience. There will be strong synergy between the pillars – for example, between economic corridors and trade facilitation, between digital development and financial sector integration and between skills development and development of regional value chains. RI operations, analytical and convening work will actively support and develop the cross-pillar synergies. 24. This Update’s thematic pillars (Figure 3) are fully aligned with the IDA19 policy priorities of JET, gender, climate, FCV, and governance and institutions and will be the main vehicle for the WBG to take forward the regional dimensions of these priorities19. The RI program will directly contribute to the JET agenda by promoting power trade, strengthening the digital economy, building value chains, promoting intra-regional trade, promoting skills development and taking a whole of WBG approach in attracting the private sector. The program will scale-up efforts to improve women’s access to reproductive and other essential health services, enhance women’s voice and agency by building regional platforms, and create opportunities to close the large gender gap in access to jobs, finance and skills. The RI program supports the regional elements of the adaptation agenda and low-carbon economic transformation, especially by promoting power trade. The FCV agenda is an important part of the RI program and is embedded in the 4x4 approach which is elaborated in the next section. Finally, the RI program will contribute to the governance and institutions priority of IDA19 by strengthening regional platforms and evidence-based policy making through improved statistical systems. 25. Pillar 1: Building Regional Connectivity: Better regional connectivity remains a necessary, though not sufficient, requirement for promoting integration in Africa and is an overriding priority for national and regional stakeholders. Building regional connectivity will help advance two of the priorities in the WBG recovery efforts – ensuring sustainable business growth and job creation and strengthening investments for building back better. Energy and digital sectors will play a critical role in Africa’s recovery and the RI program will work in the areas of its comparative advantage. The three focus areas in this pillar are discussed below: Supporting energy access: Achieving energy access by 2030 is one of the foremost goals of the WBG in Africa. The RI program will contribute to the ‘Energy Leap’ agenda by supporting generation (hydro in transboundary waters), building interconnectors, accelerating development of the four regional power pools (WAPP, EAPP, SAPP and CAPP), and supporting policy and regulatory harmonization that can help to increase levels of cross-border power trade and bring down the cost of energy and improve affordability (see Box 4). Regional integration of the energy sector could potentially save US$40billion for African countries in terms of capital spending, demonstrating the tremendous benefits of integrating national grids into regional power pools. RI work also plays a role in off-grid solutions and renewable energy. For example, the WBG is supporting the WAPP to strengthen its regional technical capacity for preparing large-scale solar parks and integration of solar electricity into the grids. The WBG is working with ECOWAS, AfDB, BOAD and TDB to develop regional off-grid solar market in support of the stand-alone solar systems market. Cooperation within WBG is critical to mobilize the private sector into the solar energy market. Given the small size of many markets, IFC will leverage platform approaches in areas such as scaling mini- grids to further support energy access, as well as digital financial services, agri- finance, and local 19 IDA19: Ten Years to 2030: Growth, People, Resilience 12 transformation. Through its upstream platforms, IFC can support the development of the Scaling Solar type initiatives across generation, transmission and distribution. MIGA remains fully engaged in Scaling Solar initiative with its first guarantees in support of two Scaling Solar projects in Senegal executed in FY20. MIGA is also supporting investments in a vertically integrated off-grid solar company currently operating in the Great Lakes and Horn of Africa regions. Digital Economy for Africa. The RI program supports the AU’s Digital Transformation Strategy for 2020- 203020 and efforts to meet the WBG goals on digital transformation, Digital Economy for Africa (DE4A) and Identification for Development (ID4D). In addition to supporting digital hardware, the RI program will work to support Single Digital Markets as in the East Africa Single Digital Market Project and to strengthen Regional Digital Capacity and the Africa-wide payments platforms. In a post-Covid context, the criticality of using digital systems for financial transfers, e-commerce and communication across national borders cannot be overstated. IFC supported the EASSy cable in Eastern Africa and is considering support to a similar expansion on the west coast of Africa. IFC is also using its advisory services to support broadband providers, financial intermediaries and governments to roll out digital financial services. MIGA is considering supporting Sonatel in the expansion of its investments into other parts of West Africa, including the Sahel. Selective financing for regional economic corridors – such as the Dakar-Bamako Corridor, the Lome- Niamey-Ougadougou Corridor Project, Cameron-Chad Transport and the Horn of Africa Gateway project – is expected to relieve the pressures of high transportation costs on landlocked countries (many of which are FCV) and to lay the foundations for access to markets with associated reforms in trade facilitation and development of value chains that are linked to Pillar 2 below. These corridors will be critical in reducing input and transportation costs and thus increasing the productivity and competitiveness of African businesses, small and large. IFC and MIGA will support this agenda through MFD, identifying opportunities where the private sector can play a role and in which guarantees in risky environments may improve financing opportunities. 26. Building regional connectivity will be a key contribution of the RI program to ‘Rebuilding better’ in response to the crisis and to the JET agenda. Jobs for large, small and informal firms will not be possible without energy and energy is also required for the public services necessary to support the private economy. Both public and private digital services will be even more important in a world with Covid19. While it remains to be seen how Covid19 will affect the appetite of the private sector for infrastructure financing, WBG instruments can be deployed to make it more attractive for private sector to finance regional infrastructure. De-risking investments will be key to enabling the private sector to expand regionally. IFC’s tools include blended finance (including the IDA Private Sector Window, PSW) to de-risk investments, infra-ventures funds to support early-stage project development and provision of advisory services. Another important contribution of the RI program will be through support to upstream reforms and actions at the regional level that could unlock private investments – for example, development of a regional energy market could be a trigger for private financing in large renewable energy generation projects or development of viable economic corridors could make private investments in trucking and logistics services more attractive. 20 AU: Digital Transformation Strategy for Africa (2020-2030) 13 INPUTS OUTPUTS OUTCOMES PATHWAY SPILLOVER INDICATORS SHORT-TERM OUTCOMES MEDIUM-TERM OUTCOMES LONG-TERM OUTCOMES Connectivity: Energy, Digital, Transport ASSUMPTIONS • Progress in realizing the Assumptions • Improved regional Connectivity Established Regional Markets in • Participation from • Regional Infrastructure (Energy, ICT, benefits of common market • Generated Positive Reduced Market Fragmentation. Energy, Transport and ICT. Development Partners, RECs Transport) Links Constructed or Improved. • Facilitated Intra-Regional Externalities/ Additional Impact • Increased Linkages between Increase in access to energy and and Non-State actors. • Harmonized connectivity standards, Trade. on Growth in the Region. markets across countries. digital services at lower costs • WBG Role and Comparative policies and cross-border trading • Increased economic • Mitigated Negative • Lower transit costs and time. Advantage. arrangments improved. diversification Externalities/ Additional Poverty Reduction in the Region. • Removed other NTBs to creation of regional connectivity markets. • Increased supply and quality of connectivity services. Upstream Support to RI • Leveraged private sector for infrastructure financing and • Necessary skills and incentives to utilise connectivity For Outputs (1) and (2) Enabling Environment (WBG participation in regional connectivity markets. services. * Regional Power Trade Enabling and Advisory Volume Services) Trade and Market Integration * Unit costs of energy and digital services * Cost and time of • Improved Trade and Logistics • Reduced Cost and Time for Cross- transporting goods for • Harmonized & Simplified Customs & Transit Performance. Increased Intra-Regional Trade Border Trade. landlocked countries Regulations, Procedures, Documentation. • Harmonized Frameworks in • Improved Competitiveness and Factor Flows. * Intra-regional trade in • Programs enabling Agricultural, Industrial financial sector. (Strength and Productivity) of intermediate goods and Service Producers to participate in • Increased ability of African Regional Value Chains. Downstream Investment Regional Value Chains. Enterprises to access Regional (WBG Lending and • Increased Intra-Regional Capital • Programs to strengthen Regional Financial Markets. Financing. Guarantees: IPF, DPF, IFC, IS, Markets including Capital Markets, Payment • Increased Cross-Border MIGA) Systems, Trade Finance and Financial Payments and Shared Credit Inclusion. Information. • Improved export performance of Regional Value Chain • Availability of Infrastructure services and participants. information to support access to regional markets. Human Capital For Outputs (3) and (4) * WHO's JEE country score WBG Covid19 Recovery on preparedness Improved Collaboration of Promoted Cross-Border Approach Paper; IDA19 Epidemic Readiness, Workforce Trained and Improved Regional Convergence * Proportion of foreign Regional/ national Actors Movement, Integration of Priorities; FCV Strategy through Coherent and Similar students and faculty 14 Skilled, Interoperable Systems Deployed, regarding diseases surveillance, Skilled Labor, Improved Learning Networks and Infrastructure Approaches by sharing country ID trained Skills specialization, crossborder ID Regional Pandemic Prevention Completed, Vulnerable Groups Reached. systems interoperability, and system, regional one health * Statistical Capacity , facilitated Demographic platform, regional specialized Indicator Women's Empowerment. Transition. universities, regional legal framework to facilitate women empowerment. Institutional Capacity and Knowledge Development Convening (Champions • governance improvement • Availability of Infrastructure, services and Process, Development • capacity technology Coordination, REC • donors coordination to reach scale • cross border management in place engagement) Figure 2: Theory of Change Resilience Other Indicators: Increased prevention, * Regional platforms Improved resilience and output of Increased Collective Action to Adaptation and Resilience to established Improved food security, agricultural agriculture. Improved regional Prevent and Address Risks Shocks, Decreased Regional * Improved capacity of Capacity Building and Policy value addition, Improved community collaboration to Identify, Prevent Associated with Crisis and conflict, Conflicts, Political Risk and regional institutions Advice (Regional Programs, livelihoods, access to services, risk and Address Regional drivers of food insecurity, Income Loss, Climate Cross-Border Constraints. * National policies Country Programs, GPs, ASA, management of weather and other Fragility , Risks and Conflict. Change, Transboundary Waters, influenced for promoting IFC) shocks. Natural Resource Management. integration • regional institution capacity and governance • actors coordination and investments at scale • countries interest in regional action • countries governance improvement • donors coordination • no other regions destabilisation impact • military interventions Risks to be Managed : Macro crisis, Perecieved Loss of Sovereignty, Asymmetry in Knowledge and Information Flows, Delays in National Reform Agenda Exogenous Macro Factors: Global Interests, Trade Policies, Political Economy, Polarization, Capital and Labor Market Interactions 27. Pillar 2: Promoting Trade and Market Integration: Realizing the full potential of integration requires increasing intra-regional trade, using the benefits of scale economies to increase the value addition of agricultural and allied products, and promoting harmonization of standards and regulations that are currently atomizing the markets for inputs and outputs. This pillar is critical for the RI program to ensure strong regional spillover benefits. Promoting trade and market integration will help advance two of the priorities in the WBG recovery efforts – ensuring sustainable business growth and job creation and strengthening policies, institutions and investments for building back better. The comparative advantage of the RI program in dealing with trade, regional value chains and financial market diseconomies provides a strong rationale for the proposals below. The focus areas under this strategic pillar are discussed below: Trade facilitation and support to the implementation of the AfCFTA Treaty. Support to trade facilitation will complement the work on corridors highlighted above, including efforts to support border crossings, logistics and informal traders, who are often women. This work is particularly important for essential goods and foodstuffs in light of the COVID pandemic. Projects such as the Great Lakes Trade Facilitation Project II, Trade Facilitation in West Africa Project (TWFA) and the Southern Africa Trade and Connectivity Project will build on existing programs to advance this agenda. The continent has a historic opportunity to advance trade integration with the implementation of the AfCFTA. The WB’s Global Trade and Investment Unit, in coordination with the Africa Chief Economist’s Office and the RI team, has so far provided TA under the ongoing AUC Support Project and specific analytical work at the request of the AUC. These will be supplemented by dedicated TA support for the newly-created AfCFTA Secretariat and for first-mover countries upon request to help roll out the AfCTFA trade regime. Opportunities to promote South-South cooperation, especially for Africa to tap into East Asia’s trade experience, will be explored (see Box 6). IFC’s trade facilitation windows (GTFF) can leverage trade finance and MIGA’s support of TDB’s regional trade finance activities contributes to facilitating intra-regional trade. 15 Figure 3: WBG Strategic Framework for Regional Integration 16 Box 6: Intra-African Trade: Mobilizing the Private Sector and South-South Knowledge Exchange Supporting intra-regional trade is an integral part of advancing the RI agenda in Africa. To facilitate the goal of increasing intra-regional trade in Africa, the WBG is supporting the Trade Facilitation in West Africa Project (TFWA), a multi-donor trust-funded project to reduce time and cost of trade borne by the private sector. The project prioritizes interventions along six key corridors covering nine countries21, addressing challenges by improving adherence to regional and international protocols, with special consideration of the needs of small-scale cross border traders, especially women. There is also much to learn from the East Asian experience, where the private sector played a key role in strengthening trade and investments. Studies indicate that exports from Africa to Asia are positively correlated with exports to the rest of the world, as well as intra-regional trade.22 23 South-south global knowledge exchange efforts have potential to leverage knowledge and boost trade and investment across the region, as well as enhance intra-African trade. The WBG, including the Global Knowledge Research Hub in Malaysia, is currently developing an Africa-ASEAN policy platform to enhance South-South knowledge exchange and partnership with the aim of boosting trade and investment, including intra- African trade. Areas of knowledge exchange in trade could include strengthening institutional structures, understanding political economy issues, and developing pragmatic economic policies. To concretely operationalize learning derived from this partnership, priorities identified, as well as lessons learned, will feed into the design of projects and programs supported through the IDA-19 Regional Window. Strengthening of selective regional value chains (RVCs). A consistent request from the RECs and private sector is for support to the development of regional value chains, especially in agriculture. Given the growing risks of disruption to global value chains due to the crisis, there is an opportunity and an imperative for Africa to further intensify development of regional value chains. This will help improve productivity of agriculture and other sectors and create jobs. Sub-regions see the possibilities for adding value to basic agricultural crops and for creating jobs in SMEs that are vital for economic dynamism. Given the priority of IDA 19’s JET Agenda, stronger collaboration across the WBG to develop regional value chains, especially in agriculture and food, will help make faster inroads and will contribute to building a stronger private sector, connecting people to job opportunities, and increasing food security in the region. Under the Covid19 pandemic, the importance of focusing on regional value chains and JET has become more apparent and it requires a comprehensive approach to include skills development, utilizing innovation and technology, and focusing on female entrepreneurship drawing on the development of platforms for specific value chains. Possible WBG support will consist of (i) undertaking gap analysis on value chain links, (ii) improving market access to processors, (iii) harmonizing regulations and trade facilitation, (iv) improving financial access, and (v) reducing potential risks. The WBG teams will work together to accelerate creation of regional value chains and support improvements in quality through a combination of trade facilitation policies, lines of credit, advisory services and risk mitigation arrangements. 21 The 6 corridors include: Tema-Ouagadougou, Lome-Ouagadougou, Abidjhan-Ouagadougou, Cotonou-Niamey, Dakar-Bamako, Lagos-Niamey, and the 9 countries covered are: Benin, Burkina Faso, Cote d’Ivoire, Ghana, Mali, Niger, Nigeria, Senegal and Togo. 22 Tang, Heiwai & Zeng, Douglas Zhihua & Zeufack, Albert G., 2020. "Assessing Asia - Sub-Saharan Africa global value chain linkages," Kiel Working Papers 2159, Kiel Institute for the World Economy (IfW) 23 Douglas Zeng, “How will COVID-19 impact Africa’s trade and market opportunities?”, World Bank Blogs, June 2020, https://blogs.worldbank.org/africacan/how-will-covid-19-impact-africas-trade-and-market-opportunities 17 Box 7: Initiatives to Strengthen Financial Market Integration Building on the findings of the Capital Markets Review conducted by the IEG, the IFC’s J-CAP coordinates capital markets and sectoral experts of the WBG to provide country tailored development of capital markets. Current priority areas and countries in Africa include the West African Economic and Monetary Union (WAEMU), Kenya, and Morocco. Since the launch, there has been over US$460 million of IFC investment projects and over US$150 million of IFC local currency bond issuances involving products and asset classes that are priorities for capital market development. J-CAP also provides knowledge management to support the WBG’s ‘thought leadership’ on capital market development, including a flagship conference “JCAP 2020” in Abidjan in February 2020, which attracted participation of over 350 government, industry and WBG leaders from across five different continents. IFC has also developed a sponsored eight-month post graduate program, supporting capacity building on regional capital market development. Participants are mid-career professionals from Ministries of Finance, Central Banks, Capital Markets Authorities, and Stock Exchanges. The program aims to build a strong network of qualified capital market practitioners, within key regulatory and policy making institutions, to help address capacity issues and bring about regulatory reforms that can modernize the financial sector in their countries and regional spaces, create well-functioning domestic capital markets and increase access to long-term local currency financing. In addition to the graduate program, active follow-ups including alumni networks, biennial events, and a web portal are developed to facilitate continued consultations. Financial market integration: Financial market integration plays a fundamental role in attaining the WBG’s financial inclusion goals, as well as supporting the financial digital services and payments that have proven essential in the response to Covid19. This work involves development of stronger regional digital systems, promoting financial inclusion measures at scale, and development of long-term financial markets for infrastructure, housing and SMEs (see Box 7). Work with the BCEAO in West Africa on a regional DPO will focus on policy and regulatory harmonization that will improve access to financial accounts beyond traditional banking mechanisms and will help modernize financial infrastructure across West Africa. The Africa-Wide Payments Platform will work with the Association of African Central Bank Governors to help ensure that financial systems are taking full advantage of digital payments, while at the same time maintaining privacy and security of these systems. A regional MSME IDA project is expected to support private sector recovery efforts. IFC supports the development of digital financial services through its advisory services, capacity building, implementation and roll-outs, which have led to a significant increase in adoption and use of digital financial services. IFC also invests in regional fintech players. To support the development of disruptive technologies and digital financial services, a holistic approach will be crucial, including regulatory engagement across the WBG, upstream engagement, advisory services and investments. MIGA supports regional financial market integration through its support of financial institutions such as Absa Bank and FirstRand Group with their extensive networks across the continent, promoting good practice and access to credit in underbanked markets. 26. Pillar 3: Supporting Human Capital Development: Since 2018, the AUC, RECs and African countries have embraced the Human Capital Project and its importance for the progress of Africa. The Covid19 pandemic has only reinforced the importance of this agenda. While many areas of the Human Capital Project are best dealt with at a country level, there are some that require a regional response and where the RI program can add value. This pillar will help advance two of the priorities in the WBG recovery efforts – saving lives through stronger and regionally coordinated epidemic preparedness and protecting 18 the poor and vulnerable, especially those living in fragile areas. The specific focus areas include: (i) preparing for pandemics and disease surveillance; (ii) specialized skills and capacity building; (iv) statistics and ID4D; and (iv) women’s empowerment. Preparing for pandemics and disease surveillance: with years of work on HIV/AIDs and Ebola, there is a strong set of ongoing regional projects (REDISSE) aimed to strengthen disease surveillance/pandemic preparedness systems that, as noted in the previous sections, have been vital to the Bank’s response to Covid19. The Covid19 pandemic provides a strong trigger to ensure that the epidemic preparedness agenda in the continent is strengthened and scaled-up due to the huge costs of outbreak in terms of loss of lives and economic and social hardships. There is strong political commitment for this agenda and the remainder of the Strategy period allows the RI program to galvanize efforts across the continent. Building on country responses, the regional program will scale up and deepen the ongoing preparedness operations based on client demand and the WB’s overall Covid19 approach. Support to Africa CDC will be reinforced through Additional Financing. Additionally, scope for using regional scale benefits in vaccine procurement and immunization programs would be explored as part of the WB’s comprehensive Covid19 response program. Skills and capacity building: The strengthening of skills and capacity have long been recognized as critical inputs to Africa’s economic transformation and ability to sustain job creation. The regional programs in education, have established African Centers of Excellence (ACE) that serve sub-regions of the continent in developing specialized skills. For example, in the health sector, the ACEs being supported under the RI program are promoting cutting-edge research and education in areas like cell biology of infectious and non-communicable diseases, genomics of infectious diseases, neglected tropical diseases, maternal and infant health, biotech for eliminating vector borne diseases and genetic medicine. These centers are a regional endeavor because it is not possible for every country to have high quality centers in every specialized discipline and the ACEs bring together students and faculty from across the continent to pursue common goals. These and associated projects will help to build a pipeline of skilled workers that private sector employers across the continent can tap into. Regional approaches in such areas allow countries to obtain scale benefits and undertake specialization and building comparative advantages – which could be a positive trigger for deepening integration. In addition to implementation of on-going projects, the current pipeline includes an Additional Financing for ACE, with a focus on agriculture higher education. Statistics and ID4D: The RI program provides value added by supporting critical public goods. While there are many possible public goods to support, two that are critical for Human Capital Development, and for building equity and inclusiveness into government and WB programs more broadly, are projects on statistics and to support Identification for Development (ID4D). The RI program is working with the AUC, EAC, ECOWAS, and other regional bodies on the Program to Harmonize and Modernize Statistics with the goal of improving the consistency of data as well as updating and improving data collection systems to support evidence-based policy making. The West Africa Unique Identification for Regional Integration and Inclusion (WURI) Project is an innovative program to support West African countries in strengthening the movement of people and more effective public services through the provision of digital identification that is a foundational component to a digital economy. The RI program will expand the scale of this program in the coming years. The overall intent in this area is to strengthen the provision of high-quality and high- frequency data to inform formulation of policies and to put in place better targeting systems for welfare 19 programs and provision of basic services especially for women and vulnerable groups. There are also opportunities for using high frequency and ‘big data’ to inform public and private sector actions. The scale, reach and powerful demonstration effects of these regional efforts are designed to have impact across multiple national jurisdictions while ensuring that each country is able to benefit from peer to peer learning, especially during a period of crisis recovery. Demographics and women’s empowerment: High fertility rates and young girls being removed from school are fundamental challenges to reaching development goals in Africa, which are likely to come under more stress during a crisis period. As noted in Box 3, SWEDD is a flagship regional operation and there are plans to further scale up SWEDD programs in the coming years. Although the interventions occur at a community level, the SWEDD regional platform has expanded the space for addressing sensitive issues and allowed for peer to peer learning among religious leaders and parliamentarians on child marriage and family planning (this includes exchanges between SWEDD countries and also with countries in other regions). Experience with regional programs shows that developing cross-country platforms to address such challenges often serves an important purpose of peer learning and peer pressure and creating more virtuous cycles for social change and facilitating policy actions. 27. Pillar 4: Reinforcing Resilience: In addition to pandemics, Africa faces other cross-border risks such as climate change, drought, pest invasions (locusts and Fall army worm, among others), food insecurity, management of trans-boundary resources and displaced populations. This pillar of the RI program is meant to focus on reinforcing resilience to shocks and to promote effective management of challenges that cut across boundaries. In particular, the RI program will directly contribute to the WB’s Africa Climate Business Plan24 priorities of addressing food security, water security (especially trans- boundary surface and ground water resources), and low-Carbon energy systems. It will help advance two of the priorities in the WBG crisis recovery efforts – protecting the poor and vulnerable, especially those living in fragile areas, and strengthening policies, institutions and investments for ‘Rebuilding Better’. This pillar has four focus areas which are discussed below: Agro-pastoralism: Pastoralism remains a key employment source for many million vulnerable people in various parts of the continent. It is currently under pressure on various fronts due to rising conflicts between pastoralists – who follow traditional cross-country routes – and settled farming communities, from weather shocks and animal health issues to loss of pasturelands. Regional cooperation helps address these issues and can facilitate unlocking of opportunities for value addition in the livestock sector thus creating jobs and increasing household incomes while better managing vulnerabilities. Programs such as the Regional Sahel Pastoralism Project (PRAPS) and the Regional Pastoral Livelihoods and Resilience Project in the HoA help countries to coordinate the management of livestock and their grazing routes, as well as supporting measures for animal health and for livelihoods. PRAPS II in the Sahel will move forward under the Update period as will approaches to livestock insurance in the Horn. IFC will explore the development of a platform to support the livestock / meat value chain. Food security and climate change: There are risks of rising food insecurity in Africa due to stagnant productivity, increased food demand due to population growth and urbanization, lagging value chain development, trade barriers, degrading resource base and shocks due to climate, weather and pests. 24 WB: Africa Climate Business Plan (2020) 20 These risks are likely to increase during the ongoing crisis. Some of these challenges require regional solutions in conjunction with local interventions. The recently approved Emergency Locust Response Program will help to control Locust infestations, as well as support safety nets in the face of agricultural damage. Additional support for locust control will be provided in the Update period under the MPA. Support to Consultative Group on International Agricultural Research (CGIAR) will help to connect the lessons of international research to African Institutions to improve agricultural productivity. A West Africa Resilient Food Systems Program will complement already approved programs focused on resilient agriculture and food security in East and Central Africa, the Great Lakes and Southern Africa. As noted above, IFC will support these efforts through the development of platforms to build agricultural value chains, agribusiness, while also supporting the processing of agricultural commodities. IFC will also support the development of climate-smart agriculture, agricultural value chains and agribusiness. MIGA will endeavor to include climate change and climate adaptation features into its regional projects in the financial sector. Conflict and forced displacement: Rising fragility and its regional dimensions -- especially as it affects refugees / IDPs, host communities and vulnerable groups in border areas -- has been a key area of focus for the RI program during IDA18 and this will be continued during IDA19. The ongoing crisis risks increasing the stress in these vulnerable communities. On-going programs such as the Horn of Africa Support to Forced Displacement and the Lake Chad Region Recovery Economic Recovery Program (PROLAC) have brought together multisector teams across countries to innovate in addressing displacement across borders and to support the needs of people subject to shocks, as well as aiming to address the drivers that led to the shocks in the first place. The IFC FCV Unit will be key to mainstreaming FCV issues across private sector interventions. Given the increasingly cross-border nature of FCV issues, IFC will create dedicated sub-regional initiatives to expand the role of the private sector in physical, social and financial infrastructure in each of the priority FCV sub-regions. The next section highlights spatial areas of special focus in addressing FCV issues. Transboundary water and natural resource management: Africa has several dozen trans-boundary surface and ground water resources and their sustainable management will be critical in improving agricultural productivity and managing drought and weather shocks, as well as in some cases contributing to hydropower generation. The RI program selectively supports dams in transboundary waters, such as on the Niger River Basin, the Senegal River Basin, the Kariba Dam and Rusumo hydro projects. In addition, the program supports an on-going program on irrigation in the Sahel. The Cooperation in International Waters in Africa (CIWA) -- a donor supported program led by the Water GP – provides technical support to transboundary water issues across the continent, including in the Nile River Basin. The West Africa Coastal Areas (WACA) program supports coastal management issues. The RI program may continue to support a selective number of transboundary river basins based on clear commitment of riparian countries to set up effective shared management arrangements of the resource. The WBG is working together to advance the Mpatamanga hydro project drawing on private participation. 28. The four RI Strategy Update pillars of Building Regional Connectivity, Promoting Trade and Market Integration, Supporting Human Capital Development and Reinforcing Resilience, will help advance the RI agenda using all of the WBG’s tools. Table 2 also shows how the pillars fit in with and contribute to the WBG’s Approach Paper on COVID19 Recovery. 21 Table 2: Strategic Pillars of the RI Strategy Update and Alignment with WBG Recovery Response Strategic Pillars Focus Areas Alignment with WBG Approach Paper to Supporting Recovery Building Regional 1. Supporting Energy Access This pillar directly responds to the WBG priority Connectivity and Regional Power Pools of ‘Ensuring Sustainable Business Growth and 2. Digital Economy for Africa Job Creation’ and “Investments for Rebuilding 3. Corridors Better” by addressing key regional binding constraints. Improved energy provision, digital services and access to bigger markets is key for driving productivity, creating jobs and allowing the private sector to thrive. Promoting Trade and 1. Trade facilitation/AfCFTA This pillar directly responds to the WBG Market Integration 2. Regional value chains priorities of ‘Ensuring Sustainable Business 3. Financial Market integration Growth and Job Creation’ and of ‘Strengthening Policies, Institutions and Investments for Rebuilding Better’. Accelerating intra-regional trade, developing regional value chains and addressing diseconomies of small financial markets is a critical contribution that the RI program can make for overall recovery efforts. Supporting Human 1. Preparing for pandemics This pillar directly responds to the WBG priority Capital Development and disease surveillance of ‘Saving Lives’ and the health preparedness 2. Skills and capacity building agenda. It also makes a contribution to the 3. Statistics and ID4D priority of ‘Protecting Poor and Vulnerable’, 4. Demographics and women’s especially women in FCV settings, including by empowerment provision of high frequency comparable data across countries and developing interoperable ID systems. Reinforcing Resilience 1. Agro-pastoralism. This pillar directly responds to the WBG 2. Food security and climate priorities for Protecting the Poor and change Vulnerable and Strengthening Policies and 3. Conflict and forced Institutions. It would specifically address the displacement vulnerabilities of mobile and forcibly displaced 4. Transboundary water and people, addressing climate resilience and risks natural resource management of weather and other shocks. A 4X4 Framework: Four Thematic Pillars and Four Sub-regional FCV Focus Areas 29. FCV Sub-regional Priorities: While the RI program will support efforts in all sub-regions and across the continent as a whole, special attention during the remainder of the Strategy period will be given to four FCV priority sub-regions in alignment with the scale up of focus on FCV issues in IDA19. 22 This recognizes the importance of addressing the regional Figure 4: Map of Four FCV fragility drivers that remain a persistent challenge on the Sub-regional Priorities – continent. The RI program, like the rest of the WBG program, is Horn, Sahel, Lake Chad and most tested in FCV settings. The active RI portfolio currently has Great Lakes 35 percent of its commitments in FCV contexts, higher than the WB’s overall share of commitments for FCV countries in Africa. The renewed emphasis on FCV issues recognizes that many of the drivers of conflict cut across borders and that regional approaches will be a key component of conflict prevention (see Box 8). Implementation of regional operations in FCV contexts will pose significant challenges and risk management measures Sahel will be fully embedded with approaches being taken forward in Lake Chad Horn of Africa managing national operations in each context. Grate Lakes Box 8: Addressing the FCV Agenda – A Sharper Focus on Regional Dimensions of Fragility The four priority FCV sub-regions proposed in this Update (Horn of Africa, Lake Chad, Sahel and Great Lakes) consist of 18 countries with a combined population of over 300 million. Poverty is overpowering with over 60 percent of the population in these sub-regions living in extreme poverty. Some countries are rich in natural resources, while others are facing conflicts due to a shrinking resource base. Some have been theaters of slow but long-drawn-out, low-intensity chronic conflicts, while others have seen more recent flashpoints of violence and extremism. History and the dynamics of more recent geopolitics have left their imprint on the sub-regions and these have often been left unresolved in the post-independence period. Some sub-regions have experienced more pronounced inter-state tensions while others have experienced intensive intra-state conflicts and related FCV drivers. Whatever be the origins of the FCV drivers, it is clear that these problems have quickly spilled over national borders. They often feed off FCV drivers in neighboring countries and thus expose countries to each other’s vulnerabilities. National-level actions remain critical in addressing them. But often national actions in the absence of decisive steps on promoting regional cooperation will not suffice. Thus, this Update puts a sharper emphasis on the FCV agenda and bringing the countries together to collectively tackle the challenges. This part of the RI program truly requires patient capital. While there are no silver bullets, the RI program will customize the actions in each sub-region in collaboration with national and regional stakeholders and international partners. As global experience shows, deepening economic integration may be an antidote to conflict thus creating a more virtuous cycle for investments, growth and prosperity. The RI efforts in this regard would be guided by the framework proposed in the recent WBG FCV Strategy: (i) preventing violent conflict and interpersonal violence; (ii) remaining engaged during conflicts & crisis situations; (iii) helping countries transition out of fragility; and (iv) mitigating the spillovers of FCV. 30. The Horn of Africa: Five countries constitute the small Horn that are at the center of the Horn of Africa Initiative (see Figure 4). The key fragility challenges in the Horn are: intra- and inter-state conflicts; center-periphery issues within states; ethnic and geographic fault lines; competing global strategic interests; localized insecurity zones; and chronic poverty and forced displacement driven by periodic weather and other shocks (see Annex V for details). In 2018, countries started to decisively reverse 23 decades of tensions and started a process of rapprochement that is being sustained during the ongoing crisis. The leadership of the countries approached the WB and other partners to help build upon these positive moves by supporting a set of policy and investment priorities to deepen integration. Over the past 18 months, the WB, AfDB and EU have been supporting a country-driven process that has allowed development of a platform for Djibouti, Ethiopia, Kenya and Somalia (Eritrea has participated in some sessions) to discuss and agree priorities at the Ministerial and technical levels. IGAD has also participated in these discussions. The countries have come together to agree on a set of priority regional investments that are meant to address the underlying fragility drivers in the subregion by opening up trade and investment opportunities in lagging and border lands, fostering integration as a key pillar of economic recovery and poverty reduction, and promoting incentives for countries to collaborate on shared challenges and common risks to resilience. The HoA Initiative is built upon the premise that sustaining progress is dependent on four principles based on experiences from similar efforts in the past: countries remain committed to continuing political momentum on cooperation; countries have agreed upon and are implementing a set of prioritized regional investments to tackle the fragility drivers; countries are willing to collectively tackle policy harmonization to deepen integration; and partners are committed to provide support over the medium-term based on demonstration of results and impacts. 31. On this basis, the WB has announced support of US$2 billion to the HoA Initiative during IDA19. The lending program under IDA19 in the Horn is expected to focus on financing rehabilitation of sections of two economic corridors linking Ethiopia to the coastal countries, improving energy access through promoting power trade, supporting agro-pastoralism and food security due to shocks, and pandemic preparedness. The joint WBG strategy and sector-wise implementation plan being implemented in the Sahel will be replicated in the Horn to create private finance opportunities in connectivity and regional infrastructure, productive real sectors through value chain linkages, replicable business models, inclusive approaches, and cross-cutting themes such as an enabling business environment. Investing in key value chains, will include unlocking the potential of the livestock value chain in the Horn of Africa region. Work is also under way on a Horn of Africa Regional Economic Memorandum as well as analysis of groundwater and a Risk and Resilience Assessment (RRA) to better understand the political and other factors influencing fragility drivers and integration efforts. The WBG, working with partners, will continue to play a facilitative role in convening and advancing this important initiative. Over time we expect that the initiative may be extended to the broader Horn of Africa, including Sudan should the arrears clearance process advance there. 32. Lake Chad: The Lake Chad region comprises a set of administrative areas across Cameroon, Chad, Niger and Nigeria. The subregion is fragile and is experiencing a protracted and high intensity conflict. Boko Haram launched an armed insurrection in the Borno state in Nigeria in 2009, which then spilled over the borders to affect Cameroon, Chad and Niger. The key fragility challenges in Lake Chad are: neglected borderlands; competition for natural resources exacerbated by weather shocks; weak governance and service delivery; and rise of violent extremism (see Annex V for details). The political alignment of the four countries on the need for a regional approach supported by the WBG creates a momentum. The WBG has been engaged, along with other partners, to support the emergency response to the crisis provoked by the ongoing conflict. In parallel with the emergency response, the regional portfolio consists of projects aimed at better connecting the Lake Chad region to other parts of the sub-region and enhancing resilience and human capital, so as to create the conditions for more sustained and inclusive growth as security conditions allow. Two recently approved projects, the Lake Chad Region Recovery and Development 24 Project (PROLAC) and MCRP in north-eastern Nigeria, will lay the foundation for a gradual step-up of the WBG’s regional engagement. Under IDA19, the RI program will contribute to efforts to transition from an emergency response to early recovery and development. The regional program will focus on four main dimensions to support the shift toward recovery and development: supporting an enhanced regional dialogue and filling existing knowledge gaps; restoring resilient livelihoods and developing regional value chains to generate additional economic opportunities; better connecting the Lake Chad region to the broader region, notably to improve energy access; and enhancing social cohesion and restoration of trust through mainstreamed citizen engagement mechanisms. The IDA19 pipeline for Lake Chad includes, scaling-up of SWEDD, the Chad-Cameroon Corridor Project and an AF for PROLAC. Work on a Regional Economic Memorandum for the Lake Chad Region is also under way as also is an RRA. 33. The Sahel: The G5 Sahel is comprised of Burkina Faso, Chad, Mali, Mauritania and Niger. The recent RRA identified a number of fragility challenges in the Sahel, including: exclusion, perceptions of injustice, marginalization and inequalities; resource scarcity and competition over natural resources; and lagging demographic transition (see Annex V for details). Since 2012, the Sahel has experienced insecurity from spillovers from the conflict in Libya, the rebellion and political crisis in Mali, and the Boko Haram insurgency in Nigeria, contributing to the spread of violent extremism throughout the region. An estimated 15,000 lives have been lost so far due to the conflict and 1.9 million people have faced forced displacement. Other consequences are disruption of agro-pastoral activities, trade and food supplies; disruptions in education and health centers; and human, drug and arms trafficking. 34. Ongoing RI programs in the Sahel include support for pastoralism, women’s empowerment, irrigation, energy trade and disease surveillance. During IDA19, the following priorities will be taken forward as part of the G5 Sahel Initiative: regional energy through the Regional Electricity Access Project; transport corridor development to the coast to underpin trade facilitation and market development (Dakar-Bamako and Lomé-Niamey-Ouga); scaling-up of SWEDD to continue focus on women’s empowerment and to facilitate the demographic transition; improvement in resilience by supporting agro-pastoralism activities (PRAPS2), food security in relation to climate change (West Africa Resilient Food Systems); and development of a spatial approach to target cross-border hot spots of fragility through an integrated, multi-sectoral intervention in the Three Frontiers area. The WB’s RI program is committed to providing at least US$2 billion during IDA19 to take forward priority regional initiatives in the Sahel. The WB Program also supports a range of analytical work, most notably an Analysis of Security Expenditure in the Sahel at the request of the G5. Under the G5 Sahel Initiative, IFC plans to invest around US$1 billion to support the development of regional financial infrastructure (scale-up trade finance and liquidity support to MSMEs and build SME lending capabilities), develop regional infrastructure (support the development of renewable energy transmission and distribution, support development of PPPs for airport and railway infrastructure, ICT infrastructure) and build regional value chains (export-oriented value chains like cotton, cashew, mango and shea nuts and local value chains for food security like maize and livestock and increase access to agri-finance). The exercise to develop joint strategy, and sector-wise joint implementation plan in the Sahel G5 region has been a fruitful exercise, and it is laying the groundwork to replicate it for the 3 other hotspot sub-regions. The RI program will continue to coordinate closely with the CMUs, IFC and MIGA as we move ahead with implementation of the program. 35. The Great Lakes: For the RI Program, the Great Lakes region is defined as Eastern DRC, Burundi, Rwanda, and Uganda. The key fragility challenges in the Great Lakes are: the challenge in DRC of ensuring 25 state authority over all of its territory including provision of basic services and business enabling environment; absence of a ‘social contract’ between the State and its citizens; lack of clarity on land ownership and resulting insecurity; high demographic pressures; rich natural resources and their poor management; violent conflict and existence of armed groups and forced displacement; and porous borders (see Annex V for details). Political instability, violence and poverty continue to affect the lives of many people, including over 11 million forcibly displaced people. Over more than two decades of conflict and political instability, some level of regional collaboration and economic integration has persisted in the region, but it has been limited. There has been some progress in implementing the Great Lakes Peace, Security and Cooperation Framework for the DRC and the region (PSCF) reached in 2014. The RI program has existing financial commitments of US$1 billion which were prepared soon after the 2014 peace accord and successful implementation of these projects remains a priority. These include agriculture development, support for informal cross-border traders and trade facilitation. The Great Lakes remains a strategic priority for the WBG, but evidence of positive movement on regional cooperation between the stakeholders will strengthen the rationale for providing scaled-up financial support in the RI program. The IDA19 pipeline includes scaling up the trade and market development work. MIGA is also supporting investments in a vertically integrated off-grid solar company currently operating in the Great Lakes and HoA regions. 36. Overall, in line with IDA19 commitments, the RI Strategy Update is proposing to step up efforts in supporting countries with regional fragility challenges and to draw on regional approaches to address key drivers of fragility. This is an area where the WBG will be tested further, especially during an economic crisis and likely flaring up of national / regional tensions, and will require using some of the pragmatic operational approaches laid out in the WBG FCV Strategy. Progress is unlikely to be linear, but the RI program working with country programs offers the best chance for the WBG to support countries dealing with some exceptionally difficult challenges. External Consultations Endorsed the Proposed Pillars and FCV Areas 37. The proposed RI Strategy Update priorities were discussed and confirmed during external stakeholder consultations. During May to July 2020, the WBG undertook extensive external consultations with stakeholders on the RI Strategy Update (see also Annex VII). These consultations had originally been planned as face to face events, but the global lockdown resulted in the consultations being held virtually by video conference. Separate consultations were organized with the leadership of the AUC and seven major RECs (AMU, CEMAC, COMESA, EAC, ECOWAS, IGAD and SADC). There have also been consultations with selected country clients in the FCV sub-regional priority areas, as well as a set of Consultations with the private sector led by IFC and MIGA. These consultations were rich and substantive and build upon the more extensive external stakeholder consultations carried out during the preparation of the 2018 RICAS. The main feedback and messages from the recent round of consultations are as follows: stakeholders were unanimous that regional integration needs to be an integral part of Africa’s recovery from the ongoing health and economic crisis; strong resonance with the priorities set out in the WBG Update as they directly complement the established priorities of all sub-regions and RECs; agreement on RECs and the WBG working more closely and strategically on the agreed and more focused priorities for each REC; shared commitment toward ensuring that the ongoing and planned support for the RECs under the RI program delivers strong results; and deepening of the REC – WBG dialogue and partnerships during the 26 remainder of the Strategy period based on support for identified areas for capacity building of regional institutions. 38. During the private sector consultations, the participants articulated a strong rationale for the private sector to benefit from deepening of integration – in terms of reaching larger markets and lowering input and transportation costs. The main messages from the private sector consultations were the following: (i) there is a need for strong analytical foundations to identify opportunities for developing value chains; (ii) an opportunity to refocus on resilient regional value chains to ensure global competitiveness and developing ‘one Africa’ mindset in light of Covid19 pandemic; (iii) focus on scaling- up digital solutions for regional integration; (iv) support the growth of local champions given their higher risk-taking ability; (v) develop frameworks to redistribute gains from trade to address concerns of possible ‘losers’; (vi) use innovative tools to re-risk investments to permit private sector players to expand to more challenging contexts; and (vii) develop a strong implementation plan and identify RI projects that WBG can co-develop. V. KEY CONSIDERATIONS DURING IMPLEMENTATION 39. Indicative Pipeline for Remainder of Strategy: Based on consultations for this Update, three selectivity filters have been used to identify the priority lending pipeline for IDA19: (i) importance in supporting the overall crisis recovery efforts; (ii) scaling-up of what is working well and deepening the efforts through the next generation of programs; and (iii) assessment of depth of country commitment to promoting specific RI agenda. The intention is to add about 35 new operations to the RI portfolio during IDA19 while ensuring full IDA19 delivery of around US$8.5 billion in new RI commitments. If the program can successfully exit a similar number of operations during the period, it would allow the number of projects in the portfolio to be kept steady while significantly increasing the total volume of financial commitments. There will be priority attached to frontloading the IDA19 delivery (Table 3), with about 50 percent of the regional window expected to be committed in FY21 / early-FY22 – this is an important source of support for the continent’s recovery agenda. 40. Indicative Analytical Program: The RI program will continue to advance both analytical and advisory work under the Strategy update pillars in key areas, including informing crisis recovery efforts. To support the Connectivity agenda, work on Geospatial Electrification planning and Solar Power Resource Mapping are on-going and a West Africa INFRASAP will inform future needs for more effective infrastructure in West Africa. There are a range of activities to support the Digital agenda, including advisory services on ID4D, digital payments, support on regulatory issues, digital governance and South- South exchanges. On Trade, the RI team will continue to work closely with the Africa Chief Economist’s Office and the Global Trade Group on implementation of the AfCFTA, on the flagship West Africa Trade Facilitation program and work to support Trade, Jobs and Industrialization in SADC. The RI program will also continue to provide analytical focus on structural reforms, as well as development of the capital market and long-term finance in CEMAC. In the Human Capital pillar, the program will continue to support analytical and advisory work on advancing disease surveillance and will work with the relevant CMUs on scaling up the Sahel Adaptive Social Protection Program. As noted, the RI group also works with the Sustainable Development PG to support several flagship initiatives under the Resilience Pillar. These include Disaster Risk Management in several sub-regions (ECCAS, ECOWAS, Southern Africa), support to 27 the transboundary water agenda as in the Nile River Basin Support program through the Cooperation in International Waters in Africa Program (CIWA), and the West Africa Coastal Areas Program (WACA). Work on food security and climate change will also be stepped up under IDA19. 41. Recent work has also highlighted the importance of analysis in key spatial areas . On FCV sub- regions, the Sahel RRA is a good example of where regional approaches can help to improving effectiveness and RRAs will be undertaken, building on existing work, in Lake Chad and in the Horn of Africa. The G5 has requested an analysis of Security Expenditure in the Sahel to be completed in FY21. Work is also underway on Regional Economic Memorandums for the Horn of Africa and Lake Chad Regions. During the remaining period of this Update, analytical work will also explore: the benefits and opportunities of regional integration for larger African economies and their interactions within sub- regions; opportunities for the private sector to drive the integration efforts between Sub-Saharan Africa and North Africa; and the role that urbanization may play in strengthening RI efforts, especially along key corridors. Table 3: Indicative IDA Lending Program for FY21-FY2325 Regional Integration Pillars FY21 $M FY22/23 $M Connectivity *Horn of Africa Gateway Development Project (approved) 750 Lome-Ouagadougou-Niamey Economic Corridor ECOWAS Regional Electricity Access and Battery Storage Project 465 Dakar-Bamako Intermodal Corridor Project Cameroon-Chad Transport Corridor 345 Mpatamanga Hydropower Project Second Djibouti-Ethiopia Power System Interconnection Project 45 Tanzania-Uganda Interconnector Djibouti-Addis Road Corridor 70 HoA Sustainable Energy - Somalia-Ethiopia Interconnector HoA Regional Economic Corridor Project 491 Regional Energy Trade and Decarbonisation Project (Southern Africa) West Africa Digital Total 2166 Total 2390 Trade and Market Integration Southern Africa Trade and Connectivity Project 380 Great Lakes Trade Facilitation Project *West Africa Energy DPO (approved) 300 Digital Governance Capacity for Africa East Africa Single Digital Market WAEMU Financial Inclusion Eastern Africa: Africa Facility for Resilience and MSME Growth (Scale Up Facility) Africa -Wide Regional Payments Platform Phase 1 West Africa Energy DPO Phase 2 Total 680 Total 1500 Human Capital WAHO - REDISSE AF 25 SWEDD Scale Up East Africa Disease Surveillance/Africa CDC Project 250 West Africa Unique Identification for Regional Integration - Phase 3 SADC Statistics Project Digital Skills/RAISE Total 275 Total 600 Resilience CGIAR Climate Research for Africa 60 West Africa Food Resilience MPA - Phase 2 West Africa Food System Resilience Program - Phase 1 390 Regional Locust Project - Phase 3 Regional Sahel Pastoralism Support Project II 360 Pastoral Resilience in HOA Community-Based Recovery and Stabilization Project for the Sahel 352.5 Groundwater/Resilience in HoA West Africa Coastal Areas Resilience Investment Project - Phase 2 Gulf of Guinea Operation Total 1163 Total 815 4,284 5,305 42. Indicative Convening Work: High-level convening will be given greater prominence in the program. There will be opportunities to support the AUC and other regional entities in ensuring that Africa has strong platforms to discuss and share experiences with the recovery efforts. The sub-regional priority areas would allow customized approaches to convening of countries to strengthen integration and cooperation based on an assessment of the drivers and impediments to integration. Additionally, the WBG will support high-level engagements in two power pools to strengthen the basis for developing regional markets and on digital, working with the PGs to undertake continental convening of public and private 25 Note: MIGA does not have a lending program. MIGA’s guarantee volumes are substantially driven by investor demand for which visibility beyond six months is limited. 28 stakeholders to follow through on implementation of AU Continental Digital Strategy. In trade and market integration, the focus of convening work will be to develop sub-regional action plans for implementing the AfCFTA and in developing regional value chains. In human capital, the priority would be attached to continental and sub-regional convening on the health preparedness agenda. And under the resilience pillar, the focus of convening will be on continental and sub-regional platforms on food security issues. 43. Strategy Duration: This Strategy is expected to run its full course of five years from FY18-FY23. The end date of the Strategy coincides with the end of the IDA19 cycle. It is planned that a comprehensive Strategy Completion Review (similar to a CAS Completion Report) be undertaken towards the end of FY23 to assess the overall performance. That Review should inform the preparation of the next RI Strategy for Africa from FY24 onwards. 44. ‘Development Diplomacy’ and AUC/REC engagement: Bringing countries together to act collectively for tackling challenges is the central objective of the WBG’s RI program. The extent to which countries come to agreement and how well they follow-through on implementation of agreements determines the pace of progress on integration. For the purposes of the WBG RI program, ‘Development Diplomacy’ can be defined as using financing, convening and TA to align the incentives for stakeholders to pursue important RI initiatives. The incentives for countries to act in a collective manner vary across sectors and sub-regions. The extent of collective and coordinated actions is dependent on perceptions of ‘gains and losses’ from integration, political and diplomatic factors, national sovereignty considerations and the relative influence of different stakeholders within and across countries. It is not the WBG’s direct remit to address all these issues, but ‘development diplomacy’ entails being aware of these factors and appropriately calibrating the WBG engagement approach. This Update proposes to strategically ramp up WBG efforts at convening countries to find regional solutions in key areas relevant to crisis recovery and deepening integration. The convening function has been a key part of the RI program and has evolved organically over the past decade. The remainder of the Strategy period provides an opportunity to take a carefully calibrated approach at convening groupings of countries to enhance the regional spillover impacts of all the physical investments made over the years by countries, WBG and partners (see para 42 above and Annex VII for details). 45. The development diplomacy work will involve engagement with country clients (in close consultation and coordination with WB Country Directors, IFC Regional Directors and WBG Country Managers) to discuss their perspectives on the specific area of integration and then bringing together a grouping of countries that are interested in advancing RI objectives. Such an approach will work directly with groupings of countries and with the regional institutions / RECs. Engagement and support for AUC / RECs would be an important vehicle for promoting collective action. The WB currently has about US$300 million in grant resource support to RECs and other regional institutions for capacity building, regional coordination and convening and building of strong regional platforms. In addition, there are lines of credits in place with two regional development banks for US$700 million - with the West Africa Development Bank (BOAD) and Trade and Development Bank (TDB). Based on recent dialogue with RECs, there is agreement to identify two / three strategic areas of engagement with each of them in line with the RI Program’s strategic priorities. These strategic partnerships are expected to allow more senior management attention to the engagement on both sides and ensure that all parties are collaborating well and bringing their respective comparative advantages to the partnership. The overall intent of the ‘development diplomacy’ work is to ensure that the incentives for regional engagement are well 29 established and clear, and that WBG programs are more strategic and effective in producing results. While 90 percent of the WB’s RI program funding will continue to flow to country clients, the RECs have a fundamental role in convening countries to deepen the integration process. Though convening has been an important element of the RI program, the goal is a more strategic focus going forward. Good examples during recent years are the active convening of Finance Ministers in the Horn of Africa countries to decide and build commitment to the HoA Initiative and the recent convening of Energy and Finance Ministers along with ECOWAS to prepare the first regional DPO on promoting energy trade in the WAPP. 46. Engaging across the continent and with larger IDA and IBRD countries: The continent’s largest economies are highly relevant to the RI agenda. The added value of a continental Africa RI strategy is to facilitate greater interaction between North Africa and Sub-Saharan Africa in mutually advantageous ways. For example, IFC’s first Small Loan Guarantee Program was implemented with Banque Atlantique, a subsidiary of Morocco's BCP Group, to grow its small business lending in eight West African countries, all of which are FCV or low-income IDA countries. Also, it is critical that the larger economies in the continent play an important part in deepening integration in Africa, as they could have an outsized influence on the trajectory and pace of integration. The WB is currently constrained in engaging with IBRD countries as they do not borrow much for RI and it is unlikely that during an economic crisis the IBRD countries would borrow from the WB for the RI agenda. This Update proposes to start making some initial attempts at engaging with IBRD and large IDA borrowers to identify areas of interest on regional integration, including initial exploration of some innovative financing arrangements to create incentives for IBRD countries. It is difficult to predict at this time how these discussions could evolve, but the Update is flagging this as a possible future phase of the RI program (see also Box 9). Box 9: A Continental Strategy – Bringing North Africa and IBRD into the Equation The origins of the WB’s RI program in Africa go back to the start of the regional window in IDA13. Since that time, the WB’s RI program has come to be synonymous with the regional IDA program. Only one IBRD country, Angola, has borrowed for the RI program during the period of the current Strategy. The ongoing economic crisis is likely to place additional demands on IBRD resources to address national priorities. The larger IDA countries also tend to borrow relatively less for RI programs (e.g. over IDA17 and IDA18, the larger client countries have used only 1-2 percent of their national PBA allocations for leveraging the regional IDA window). However, the larger economies could have an outsized influence on the direction, speed and depth of economic integration in the continent. They have bigger markets, more financial muscle power, and their firms are looking for newer markets. For instance, the COVID- 19 outbreak is expected to disrupt manufacturing and global food supply chains. This could lead to supply chain reconfiguration presenting both, the challenge of potentially losing market access or alternatively gaining new market access, including those within Africa. In other words, laying the groundwork needed to develop regional value chains in manufacturing and food supply or strengthening financial institutions focusing on regional capital flows, notwithstanding the current circumstances, could position the continent competitively in the recovery phase. Since this is a new area of work in the RI program, it is important to set some modest expectations for the remaining 2-3 years of the strategy period. The focus of efforts would be in two areas: first, selectively strengthening upstream dialogue with the North African and southern African countries on the RI policy agenda, and second, selectively engaging more with the private sector in these countries to assess opportunities for scaling-up the investments they are making in other parts of the continent. 30 47. Partnerships: Several development partners have been engaging with the WBG on the RI agenda in Africa. There is strong recognition of the benefits of greater regional cooperation and integration in addressing the continent’s challenges, including in helping with the recovery efforts from the crisis. There could be a variety of entry points for stepped up engagement with other partners, which will differ according to the context. The increased focus on regional initiatives to address development challenges in the Sahel, Lake Chad, and HoA under IDA 19 is one entry point. In particular, the long-standing partnerships with Alliance Sahel on G5 Sahel and the more recent Horn of Africa Initiative provide good opportunities to deepen the partnership and bring some of the comparative advantages of the WBG. Strategies and priorities of development partners, including EU, AFD, GIZ/KfW, DFID, IsDB and non- traditional partners offer another entry point. The World Bank and AfDB have a close partnership on regional integration in part because regional integration is one of the AfDB’s “High Fives”. The new EU strategy for Africa offers a similar gateway. The partnerships with several bilateral organizations also provides opportunities for deepening the engagement and supporting the continent’s efforts. For example, the Trade Facilitation West Africa Project is a multi-donor initiative and plays a key role in supporting integration. This Update is proposing to stay the course in strengthening these partnerships. 48. Internal WBG Coordination: Since the 2018 RICAS, two significant internal developments have helped put the management and oversight of the RI program on a stronger footing. Since May 2019, the RI program in the WB is managed by a dedicated Director supported by a Unit covering continental Africa. The recent realignment in the WB have led to the GPs and CMUs being more integrated within the regional management structures and the appointment of PG Regional Directors is expected to strengthen the coherence of the RI program on the GP side. The recent bifurcation of the Africa Region into two Vice Presidential Units (VPUs) still retains the RI Unit as a single Unit across three VPUs and provides a continental perspective for the agenda. The RI Director will continue to engage closely with Country Directors and Regional Directors in managing the RI program and ensuring close complementarity with the country programs. There are also Director-level ongoing coordination systems in place for coordination across WB / IFC /MIGA. The following actions are planned to strengthen WBG collaboration: (i) joint IFC / WB analytical private sector diagnostics (CPSDs); (ii) IFC country strategies developed in close collaboration with WB / MIGA; (iii) WB/IFC collaboration on DPOs; and (iv) WBG coordination to scale-up platforms. VI. RESULTS AND RISKS 47. The main expected result areas for the RI Strategy are derived from the Theory of Change (ToC) (Figure 2) and are set out in Table 4 and Annex 1. The ToC sets out the outputs and short and medium- term outcomes of the WBG’s RI program. Table 4 presents a snapshot of expected results from active and pipeline RI operations and knowledge and convening work being supported during the period of this Strategy – i.e. FY18 to FY23. The Result Areas have been presented at two levels: (i) indicators to measure achievement of development objectives of this Strategy Update; and (ii) the quality of the RI portfolio. These result areas broadly align with the 2018 Strategy with some adjustments. Annex I sets out a more detailed Results Framework and shows the progress made since the 2018 Strategy in better capturing the impact and spillover indicators for measuring the results of the RI program. The targets reflect the expected outcome of the active WB RI operations during FY19-21 period. As noted above, the IEG 31 evaluation had recommended that the RI program develop a set of indicators to measure the regional spillover impacts of the RI program, and Annex 1 goes in the direction of starting to build aggregate result indicators across the pillars of the RI Strategy Update. During the remainder of the Strategy, work would continue in further articulating these spillover indicators in close consultation with the GPs. An indicative list of indicators for measuring spillover benefits for RI operations is provided in Annex IV. These will be used in helping task teams to track the results of active operations and to prepare new RI lending operations. Table 4: Key Expected Results from Active Regional Integration Program Tier 1: Strategy Pillars Key Expected Result Areas Regional Connectivity i. Developed regional interconnections in WAPP, EAPP, SAPP, CAPP connecting 20 countries with an 15% increase in power trade. ii. Developed regional hydro and other renewable energy generation in 6-8 countries with 500MW capacity, including via leveraging private financing. iii. Developed frameworks to facilitate regional power trade in two power pools resulting in a 15% increase in power trade over 2015 baseline. iv. Developed regional ICT connectivity in 10 countries leading to at least 50% reduction in unit costs and developed regional frameworks for creating telecom/digital regional markets, including via leveraging private financing. v. Regional transport infrastructure with trade facilitation elements completed or in advanced stage in 12 countries with 20% reduction in travel time / costs for landlocked countries from ports. Trade and Market i. Increased regional trade along 6-8 priority economic corridors. Integration ii. 3 regional value chains developed, including via leveraging private financing leading to increase in productivity and incomes for producers. iii. Supported regional lines of credit/long-term financing solutions, including via leveraging private financing, in housing, SME, infrastructure. Human Capital i. Coordinated disease surveillance systems established in 15-20 countries. Development ii. Promoted regional skills development with sharing of faculty and students and country-level specialization. iii. Achieved universal ID coverage in 6-8 countries through coordinated interoperable regional efforts. iv. Harmonized statistical survey arrangements in two sub-regions. v. Enhanced women’s empowerment regional programs to reduce fertility rates and promote girls education. Reinforcing Resilience i. Scaling-up pastoralism efforts to address weather and livelihood risks reaching 5 million people. ii. Risks to regional food insecurity addressed. iii. Productivity and incomes of producers of priority crops increased. iv. Active support for managing coastal erosion in 6 countries and sustainable management of transboundary water resources in 6 basins/lakes. v. Support communities affected by regional conflicts/ forced displacement in 6-8 countries and help address underlying fragility risks. Tier 2: Portfolio Quality 1. Full commitment of regional IDA19 resources in line with strategy. 2. Portfolio quality indicators are at least on par with Africa-region averages. 3. Average Bank project size increases to US$177 million by end of IDA18 and to US$200 million by end of IDA19. 4. List of analytical products is streamlined. 5. IEG exits for RI are at least on par with Africa-region averages. 48. The following are some of the key risks for successful implementation of the strategy: 32 (a) Prolonged pandemic / economic crisis. If the current pandemic is not controlled and if its impacts on the financial sector and macroeconomic situation is sustained, there is a risk that attention for the regional integration agenda may decline. Such a risk is difficult to predict at this time, but it could affect achievement of overall results. A prolonged crisis could be a big risk for the WBG’s overall program in Africa and will be closely monitored at management level. (b) Regional/sub-regional cooperation failures. The risk that domestic considerations could overshadow wider regional cooperation continues to be a key risk in deepening the integration agenda during the upcoming period of recovery to Covid19. Such a risk could be significant in specific areas, but if it is more widespread it might affect achievement of the stated objectives. Part of the mitigation effort focuses on more effective use of the WBG’s convening power alongside other partners, support for RECs and regional institutions, greater use of private sector platforms for advocacy, use of appropriate instruments to support the formulation and implementation of ‘soft’ reforms, and a greater examination of strategic pros and cons before identifying individual lending operations. (c) Regional fragility risks. Domestic and cross-border fragility risks, either due to epidemics, national conflict, or large-scale disasters, could set back the appetite for closer integration (for example, erecting barriers to food exports during severe droughts or the pandemic). The WBG’s overall policy and country dialogue with Africa will be critical in addressing such risks. (d) The deepening of the integration agenda does not materialize and the RI program remains largely focused on financing a regional public infrastructure program with limited leveraging of the private sector. There is a risk that the ‘new generation’ of regional projects envisaged in this strategy do not materialize, and the focus remains mainly on supporting regional infrastructure. A low level of ambition of reforms in unlocking policy and regulatory barriers is also a potential risk particularly for the private sector. Managing this risk would require high-level WBG engagement at the country and regional level, demonstrating what can be accomplished when these steps are taken and to continue to articulate the case for private sector as a key driver of market integration and sustainable growth. (e) Ability to implement the portfolio given Covid19 shut-downs. As with all of the World Bank Group’s programs, the effects may influence the speed with which the RI portfolio can be implemented. To date, teams have been able to advance project preparation effectively and there will be a need to closely monitor the impact of Covid19 on counterpart capacity. To the extent possible, the RI program will draw on technology and the new tools available to mitigate these risks. 33 ANNEXES 34 Annex I: Regional Integration Strategy Results Framework Outcomes for Sub-Pillars Output Indicators Target26 Sub-Pillars Pillar 1: Regional Connectivity Energy Access • Regional energy transmission network i. Regional transmission lines constructed or i. 8,000kms of transmission lines constructed or and Markets expanded. rehabilitated (km). rehabilitated. • Increased power trade between ii. Energy generated through regional projects ii. 480MW of renewable energy generated. countries and increased energy access. (GW). iii. 8,500 Gwh of power traded across borders when • Regional power pools show stronger iii. Energy traded between countries (Gwh). ongoing transmission lines completed. iv. Decline in unit cost of electricity in the power iv. 25% to 50% reduction in unit costs of imports capacity and performance. pools (US$). when compared to domestic energy costs in • Stable and reliable supply increased v. Implementation of business plans by power importing countries. with lower unit cost of imports. pools. v. Three of the regional power pools show good • Renewable energy generation vi. Private investments in energy generation, progress in delivering on their business plans. increased. transmission and/or distribution (US$) • Private investments in generation increased. Digital • Improved coverage/access to the digital i. Additional people provided with access to the i. 20 million additional people provided with access Economy and Internet services. Internet (number). to internet. • Reduced cost and better quality of ii. Retail price of Internet services (per Mbit/s per ii. 35% to 80% reduction in retail price of internet digital/Internet services. Month, reduction in %). services. • Increased use of digital platforms. iii. Number of regional harmonization of data policies and protocols (#), volume of digital cross- border payments and e-trade (US$). Regional • Improved functioning of regional i. Corridors constructed or rehabilitated (km). i. 1,250km of regional corridors constructed / Economic corridors. ii. Travel time/cost reduction (%). rehabilitated. Corridors • Enhanced regional transport service iii. Amount of trade facilitated by transport ii. Travel time reduced between 35% to 50% markets. corridors (US$). compared to baseline. • Increased private sector leveraging for iv. Total WBG leveraging of private financing for iii. At least $1bn leveraged from private sector for regional infrastructure. regional infrastructure (US$). regional infrastructure. Pillar 2: Trade and Market Integration Trade • Enhanced harmonization and simplified • Number of regulations and policies decreasing Facilitation customs and border crossing. trade gaps (#). • Identified Nontariff Barriers (NTB) • NTBs removed (#). addressed in coordinated manner. • Cross-border trade volume (% increase). 26 The target indicators are based on aggregation of expected results at project closure of WB RI active operations during FY19-FY21. These relate to project areas / regions. 35 • Reduced cost and time for regional • Trade Logistics Performance Index. trade. Regional Value • Increase in levels of value addition and • Producer incomes and/or sales associated with Chains commercialization of selected primary value addition (US$). products. • Established and supported regional value chains • Increased access to external markets. (#), policy coordination and harmonization of • Increased private investment in regional value chains. standards (#). • Private investment in regional value chains (% of total financing). Financial • Increased cross-border payments. • Volume of regional cross-border payment Market • Available financing in SME and housing efforts (% increase). Integration finance. • SME and housing beneficiaries accessing formal • Private financing mobilized for long- financial services (% increase). term financing. • Private finance mobilized for long-term financing (US$). Pillar 3: Human Capital Development Pandemics and • Development and regional i. Countries adopting and implementing agreed i. 14 countries achieve a score of 4+ in JEE for disease harmonization of treatment protocols regional treatment protocols for epidemics (#). interoperable cross-border reporting systems for surveillance for selected diseases/conditions. ii. Progress towards establishing an active, information exchange and laboratory capacity. • Improved regional health networks. functional regional One Health platform (score). ii. At least 14 countries have stronger One Health • Lower human and financial cost of iii. Functioning regional health platforms taking platforms. epidemics. forward preparedness agenda (number of iii. 25 million people benefit from direct access to beneficiaries). stronger disease surveillance services. Skills and • Increased regional networks for skills i. Amount of additional externally generated i. $150m of additional external revenue generated Capacity development. revenue by supported centers ($m). by the ACEs. Development • Increase in trained graduates from ii. Supply of trained skilled labor from technical ii. 75,000 students trained in STEM higher education regional technical and vocational and vocational institutions (#). universities and in TVETs, with one-third being institutions. iii. Number of new business, products associated regional students. • Cross-country spread of skills. with newly adopted technologies (#). Statistics and • Harmonized ‘basic package’ of statistics i. Quality and comparability of statistics – key i. 12 countries have adopted harmonized systems ID4D with cross-country comparisons. parameters comparable across country systems for national statistical surveys and collected two • Increase in coverage of national ID (GDP, poverty etc.). rounds of core surveys. systems resulting in better targeting of ii. Number of countries sharing common systems, ii. 100 million people provided with improved basic services. coverage of people with IDs (#). unique IDs facilitating improved access to basic services. Demographics • Improved knowledge generation, i. Number of women and girls benefiting from i. 10 million women and girls benefiting from access and Women’s sharing, regional capacity and regional platforms for women’s empowerment. to women’s empowerment services. Empowerment coordination. 36 • Improved women’s empowerment. ii. Number of national and regional legal ii. 30 national / regional legal and other frameworks frameworks that support enrolling and in use for promoting women’s empowerment. maintaining girls in school, adolescent reproductive health, and the elimination of GBV and harmful practices (#). Pillar 4: Building Resilience Agro- • Enhanced regional risk-reduction i. Number of regional risk-reduction initiatives (#). i. Doubling of specific pastoral indicators included in pastoralism systems. ii. Beneficiaries covered by improved animal national early warning systems. • Cross-border pastoral systems have health and grazing arrangements (#). ii. 5 million pastoralists have access to improved access to coordinated grazing lands, animal health and grazing arrangements. animal health & value addition systems. Food security • Improved regional collaboration to i. Number of farmers benefiting from improved i. 4 million farmers across several countries and climate address food insecurity. technology and value addition (#). benefiting from access to improved plant protection change • Improved technology adoption, trade ii. Number of regional early warning systems and yield improvements. facilitation for inputs and produce and extended or improved (#). ii. Increase in yields of between 50% and 100% for value addition. iii. Number of countries actively facilitating trade key staples. in agriculture inputs and produce. iii. 1 million farmers using improved seeds / technology from another country. Conflict and • Improved coordination of conflict i. Increased numbers and quality of dialogue on i. 8 countries are undertaking coordination and forced prevention measures across countries. the security-humanitarian-development axis (#). dialogue on addressing forced displacement. displacement • Improved support to those affected by ii. Number of IDPs, refugees and/or host ii. 3 million refugees and host community forced displacement (displaced and host communities supported (#). populations directly report improvements in communities). economic and social status. Transboundary • Broader efforts to address coastal i. Number of regional platforms for enhancing i. At least 3 strong regional platforms exist to discuss water and management. dialogue to deal with coastal management and transboundary waters. natural • Improved coordination systems for river basins (#). ii. 12 countries implementing improved coastal / off identified river basins and groundwater ii. Number of countries implementing coastal / shore and river basin plans. resource aquifers. offshore management plans and river basin management coordination (#). 37 Annex II: Implementing the 2018 RICAS: Progress Report The 2018 Africa Regional Integration and Cooperation Assistance Strategy (RICAS) had included several commitments (specifically paragraph 95), to be undertaken as immediate follow-up to the Board discussion of the Strategy. There is good progress to report on these commitments. Actions taken so far on these commitments are summarized below. This serves as a report back to the Board on what has happened in FY19 and FY20 on the specific commitments made. Commitments Actions taken made in 2018 RICAS 1 Continue • The client engagement model in the RI strategy mentions three major implementing / types of clients. Country clients: during the reporting period there has deepening the RI been a stepping up of efforts to bring countries together at Ministerial client engagement and technical levels to pursue specific regional integration priorities. model. These have happened in the FCV sub-regional priorities and at sector level. For example, in the Horn of Africa, an active cross-country dialogue facilitated by WB and other DPs has resulted in a country-led comprehensive package of policy and investments to promote integration. With regard to regional institutions, a review of strategic partnership with RECs is underway. With the AUC, for example, the WB is engaged in four continental strategic priorities with noteworthy achievements – AfCFTA, digital economy, statistics and women’s empowerment. WBG is strengthening its engagement with the private sector through further collaboration among WB, IFC, and MIGA. Some regional projects have been prepared to address the Maximizing Finance for Development (MFD) agenda through leveraging private finance in infrastructure development (e.g. the recently approved Regional Infrastructure Finance Facility). • For RI Program Management, a new unit with a dedicated Director has been established in the WB in mid-2019, which has resulted in stronger oversight and management of the program and is contributing to mainstreaming RI and facilitating the implementation of RI projects. IFC is enhancing upstream operations together with increased exposure for regional operations. 2 Undertake a pilot • Sub-regional assessments (titled Regional Economic Memorandums) sectoral or sub- are currently underway in the FCV sub-regional priorities: Horn of regional diagnostic Africa, Sahel, and Lake Chad. These sub-regional diagnostics are assessment. expected to facilitate collective action among countries, inform country dialogue and planning, and help identify RI priorities in each sub-region. In addition, the recently completed Regional Risk Assessment (RRA) for Sahel has provided assessment of regional fragility drivers which is influencing dialogue and lending priorities. 3 Prepare WBG • Projects in six economic corridors are currently under preparation corridor across the continent. These next generation corridor projects will development plans include, in varying degrees, focus on physical infrastructure plus trade for two to three facilitation plus development of value chains. In Sahel, the Dakar- Bamako Intermodal Corridor, would include logistics and transit 38 corridors (Strategic facilitation reforms conceived under a regional intermodal (rail and Priority 1). road as both complementary and competitive modes) approach, including the rehabilitation of existing 1,288 km metric gauge rail infrastructure between Senegal and landlocked Mali. 4 Prepare WBG sector • In the energy sector, the WBG has worked with the regional power plans for identified pools to develop engagement plans for WAPP, EAPP and SAPP. These sectors to allow plans are informing WBG’s pipeline and policy priorities for IDA19, deepening of including the first proposed regional DPO to create a regional energy integration market in WAPP. (Strategic Priority 2). • As part of the DE4A work, the WB has worked with AUC in preparing a continental strategy on digital economy comprising of actions needed at the regional and national levels. This is also informing WBG’s overall plan across GPs. IFC is supporting the development of digital financial services through its advisory services. 5 Prepare for a pilot • There are ongoing efforts to use more of ‘development diplomacy’ in of using ‘sector / the FCV sub-regional priorities for the RI program. Over the past year, development this has been increasingly used in bringing together the five countries diplomacy’ to in the Horn, countries of G5 Sahel and four countries in the Lake Chad facilitate collective and to strengthen the respective incentives for countries to deepen action among integration and cooperation efforts. countries where • These efforts have been used to inform the 50 percent increase in RI such action has commitments for the FCV priority sub-regions since the preparation been proving of RICAS. difficult. • With the diversification of instruments available for RI program in IDA19, regional DPOs could help strengthen incentives for countries to harmonize and coordinate policies. 6 Finalize the World • Soon after the IDA18 MTR, a fundamental review of the lending Bank’s RI lending pipeline was undertaken and several projects were dropped to pipeline for the strengthen focus and selectivity in the RI program. IDA18 regional remainder of IDA18. window for Africa has been fully delivered with over US$6 billion in RI lending being approved during IDA18. In preparation for IDA19, work is quite advanced in firming up the lending pipeline. 7 Undertake a • The quality of the RI portfolio has significantly improved between portfolio review to FY17 and FY20 as measured by a reduction in problem projects, look at the ‘fit’ of improvement in disbursement ratio and IEG ratings of closed projects. the current RI Portfolio reviews (summarized in Annex III) have been undertaken portfolio with the frequently and a newly assigned operations manager and operations strategic objectives team is on board. laid out here. 8 Take forward • The Africa Region led the work during IDA 19 replenishment for RI discussions on IDA programs to strongly align with the IDA19 policy commitments on Jobs policy issues in the and Economic Transformation (JET), gender, fragility (FCV), climate regional program. change and capacity building. This also resulted in opening up Regional DPO instrument and possibility of giving credit to regional organizations. Work is underway to implement these new provisions in early-IDA19. 39 9 Use the M&E • In order to strengthen M&E of regional projects, the RI unit has begun framework to the process of identifying regional integration indicators that can inform the result demonstrate the positive economic outcomes and spillovers (Annex I). indicators for new This updated Results Framework and Theory of Change will be utilized pipeline projects. to effectively measure the progress and impacts of RI Projects. 10 Take forward • The RI unit has worked with OPCS, ITS, WFA and others in ensuring operational the portal and other information requirements for RI program are now simplification available and on par with what is available for country programs. measures to benefit Efforts are ongoing in making RI projects more ‘agile’. Through the RI task teams. portfolio reviews, implementation challenges (including fiduciary, social, and environmental issues) are being discussed and addressed in a timely manner. 11 Ensure greater • The RI unit is participating and providing necessary input to all CPF mainstreaming of discussions in order to strengthen alignment between country and the RI program with regional programs. Close engagement with the CMUs is also being country programs in undertaken in improving RI portfolio performance. two selected CMUs. 40 Annex III: Regional Integration Portfolio Review World Bank Portfolio Commitments At the end of FY20, the active RI portfolio comprises 77 projects with total financial commitments of US$13.6 billion. This represents the single largest program in the Africa region with a share of 16 percent of the total portfolio commitments of two regions AFE and AFW. Of the US$13.6 billion RI commitments, US$13.4 billion is IDA financing and the rest is IBRD27. During the RICAS period, there continues to be strong growth in overall commitments, which have increased from US$8.8 billion at end-FY17 to $13.4 billion at end-FY20 – a 52 percent increase in net commitments during IDA18. The RI program in MNA has a commitment of US$55 million at end-FY20 for two projects in Djibouti. The RI portfolio spans 14 Global Practices with Infrastructure (Energy, Transport, Digital) representing the major share of IDA investments at 44 percent. Human Development and Sustainable Development shares of the RI portfolio stand at 27 percent and 20 Figure 3.1: Evolution of IDA commitments percent respectively. EFI commitments are around 9 during FY16-FY20 Period (US$million) percent. In recent years, there have been two notable 15,000 75 shifts in the relative share of different sectors in the RI 13,000 71 70 portfolio – a doubling of commitments in HD and a 11,000 65 65 decline in the relative share of infrastructure. This 9,000 60 rebalance reflects two factors: natural project cycles as 59 60 59 7,000 55 the older projects in the portfolio, which were mostly 5,000 50 FY16 FY17 FY18 FY19 FY20 infrastructure and SD projects, have exited the portfolio and a strategic shift initiated several years ago in adding IDA Comm # Projects lending for HD issues which have a regional dimension. However, infrastructure retains the single largest Figure 3.2: IDA Total Lending Portfolio by GP end of commitment in the portfolio as has been the case FY20 ($mn) through the history of the RI program. This reflects the 9% 20% large investments in transport corridors and energy interconnectors – major prerequisites to support 27% Africa’s integration priorities. The sustainable development portfolio includes investments across the 44% water, environment, agriculture and social resilience with a particular focus on the Sahel, Lake Chad and SD INFRA HD EFI Horn of Africa FCV sub-regions. The EFI portfolio has grown in recent years with inclusion of major financial intermediation operations and scaling-up of statistics / data work. In human development, the focus 27 The review is based on RI portfolio data as of end-FY20. The 77 projects include 71 IDA projects for US$13.4 billion, with TF co-financing of US$41.3 million, 5 standalone TF projects for US$84.02 million, 1 IBRD standalone project (Seychelles) that is part of IDA supported SWIOFish program for US$5.0 million and 2 IDA projects involving an IBRD country (Angola) for US$85.0 million. 41 includes epidemic preparedness, women’s empowerment, identification for development and skills development with focus on tertiary education and vocational education and training. Thirty five countries, including Djibouti (in MNA) and two IBRD countries (Angola and Seychelles), participate in regional operations. The RI commitments for the two new WB Africa regions are as follows: Eastern and Southern Africa at US$6.25 billion; Western and Central Africa at US$7.3 billion. Within these regions, the relative shares of Southern Africa and Central Africa are small as these sub-regions are comprised of several IBRD countries, which currently do not borrow much for RI. The RI portfolio is widely present across FCV countries28 including in the priority sub-regions of the Sahel, Lake Chad Horn of Africa, and the Great Lakes. Figure 3.3: IDA Geographique Distribution end of FY20 Current commitments in FCV countries29 amount to 7% 10% US$4.5 billion, approximately 34 percent of the RI portfolio – a slight increase in relative terms from the 30 percent share at the time of RICAS preparation, although the absolute RI commitments to FCV countries have 25% increased by 50 percent during the same period. This 45% support is expected to further increase during IDA19. In Sahel, the RI portfolio comprises projects mainly in infrastructure, health, education, and water sectors for a 13% total commitment of US$2.53 billion. Assistance to Central Eastern Southern Western Cross-region countries in Lake Chad amounts to US$2.34 billion to support implementation of projects in energy, transport, health and resilience. In the Horn of the Africa, the RI portfolio commitment is US$2.12 billion and comprises of projects in transport, energy, health, Table 3.1: RI Commitments for Countries in FCV sub-regional priorities skills and resilience. Net Comm Amt (US$ billion) Region Current commitments in countries involved with the Sahel 2.53 Great Lakes Initiative, Lake Chad 2.3430 which seeks to increase Horn of Africa 2.12 resilience of communities Great Lakes 1.30 affected by the conflict in Eastern DRC and promote economic integration and cooperation in the region - amounts to US$1.30 billion. The active RI portfolio is distributed across the 4 RI Strategy Pillars broadly in line with the GP-level distribution. Support to 26 infrastructure projects to connect the continent represent 44 percent of the total IDA commitments and focuses on interconnection of national grids and improvement in key 28 As per the definition in FY20, FCV countries in the Africa Region include Burundi, Burkina Faso, Cameroon, Central Africa, Chad, Comoros, DRC, Eritrea, Guinea-Bissau, Mali, Niger, Nigeria, Republic of Congo, Somalia, Sudan, South Sudan, The Gambia, and Zimbabwe. 29 Not all countries included in the FCV sub-regional priorities are categorized as FCV, but they exhibit several FCV drivers (see also Annex V). 30 Chad and Niger are part of both Sahel and Lake Chad regions, so there is double-counting in the figures. 42 transport corridors. In addition to supporting physical connectivity, the current active portfolio provides support to financial sector integration, harmonization of business law in the continent, reduction of non- tariff barriers to cross-border trade all of which will help increase trade and market integration. The portfolio also is supporting resilience to shocks through 23 projects (for a total amount of about US$2.8 billion) that (i) contribute to the strengthening of resilience of communities in West Africa coastal area, (ii) support sustainable management of shared water and marine resources in West Africa and Indian Ocean, (iii) support communities affected by regional forced displacement in the Horn of Africa and contribute to the recovery in the Lake Chad region, (iv) and help strengthen the resilience of pastoral livelihoods in Sahel and the Horn of Africa and increase agriculture productivity. Support to human capital has grown rapidly, through 18 projects in the health, education and social protection sectors amounting to almost US$3.6 billion. This includes support for collaborative disease surveillance and epidemic preparedness and response, improve the relevance and quality of both tertiary education and technical and vocational training and to facilitate access to public services in West Africa by increasing the number of people who have government-recognized proof of unique identity. Table 3.2 Distribution of RI Portfolio by Strategy Pillars Net Comm Amt Strategic Pillar # of projects (US$billion) Connectivity 26 5.8 Trade and Market Integration 10 1.2 Human Capital Development 18 3.6 Resilience 23 2.8 Total 13.4 Portfolio Performance The Disbursement Ratio for the RI portfolio reached a high of 19.1 percent in FY19 and 18.3 percent in FY20, notwithstanding the impacts of the Covid-19 pandemic and associated suspension of work across operations. This reflects a steady increase in disbursement performance of the RI program from 15.5 percent in FY17. For FY19 and FY20, the performance of the RI portfolio is relatively healthy across key portfolio metrics when compared to Africa average and that of the ‘big five’ portfolios in Africa, i.e. the five portfolios with largest commitments in Africa (see table). Steady improvement in portfolio quality is another noteworthy achievement during the last two years of implementation of RICAS. 43 Table 3.3: Portfolio Quality Indicators for the Largest Programs in Africa (FY19-FY20) Commitment High / Subs Disb ratio Prob Proj - Commit at Candor (US$ billion) Risk Projects Proactiv (%) Amt (%) Risk (%) Gap Country / (%) Index (%) Program FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 89.41 79.91 Africa 19.9 19.3 79.1 76.0 12.9 18.7 21.7 29.2 22.5 26 73.6 87 Regional 13.59 10.85 Integration 18.3 19.1 79.2 79.2 11.8 13.2 14.1 24.1 42.5 23 77.8 93.8 11.24 9.87 Nigeria 21.5 23.0 78.8 100.0 4.3 6.9 11.8 20.7 50.0 29 100 100 10.28 11.35 Ethiopia 18.6 17.8 80.6 85.7 3.1 14.3 6.0 17.9 19.0 30 80.0 57.1 5.51 6.15 Kenya 22.1 16.0 82.8 86.7 10.3 23.3 17.4 42.5 10.0 -11 87.5 100 4.57 4.06 Tanzania 30.1 14.3 95.0 85.7 12.6 23.8 12.6 21.2 57.0 36 80.0 83.3 The quality of the RI portfolio has improved significantly since FY17 as measured by a reduction in problem projects and IEG ratings of projects which closed during FY17-FY19 period largely due to enhanced monitoring of the portfolio in close collaboration with CMUs. The number of problem projects was reduced from 19 (representing 28.7 percent of total net commitments) in FY17 to 7 projects (15.3 percent of total net commitments) by end of FY20. Of the 16 projects that exited the portfolio over the last 3 FYs and whose ICRs were reviewed by IEG, the outcome of 12 of them (75 percent) was rated either Satisfactory or Moderately Satisfactory. However, it is expected that the impact of Covid-19 will significantly impact the pace of project implementation in Africa, thereby leading to delays and need for possible project restructurings, including extensions of closing date. However, there are some remaining areas for improvement in portfolio quality along with staying the course on sustaining recent improvements. Average disbursement at 36 percent is low relative to the average age of the portfolio of 4.4 years at end of June 2020 (weighted by the size of the projects). The RI Unit is continuing to undertake several measures to increase disbursement rates across the portfolio, including enhancing preparedness levels, expanded utilization of Project Preparation Advances (PPAs) to accelerate preparation; regular reviews of progress on large contracts, and partnering with CMUs and country-based staff in the monitoring of RI portfolio. Nine projects that entered the portfolio in FY17 which are 3.2 years old on average are only 26 percent disbursed as of end of June 2020. A further nine projects approved in FY18 also have low disbursement at 16 percent. Delays in procurement readiness and award of contracts, together with delays in the establishment of PIUs and Land acquisition and implementation of resettlement action plans are recurring factors contributing to delays in project implementation across the portfolio. Going forward, the RI program will implement a readiness filter to reduce the risks that project implementation does not start at effectiveness by listing key activities that have to be implemented during project preparation and approval. Infrastructure projects have an outsize influence on the aggregate disbursement levels in the RI portfolio, as they constitute a significant share of the commitments. There has been slow pace of implementation of large-scale infrastructure contracts for a variety of reasons, including delays in execution of contracts in compliance with Bank’s safeguards requirements. These delays are an important reason for two-thirds of the infrastructure portfolio remaining undisbursed after 5.2 years of project implementation on average. Another important factor across all sectors is the complex and difficult 44 operating environment due to multi-country context that brings together countries with varying implementation capacity and RECs and other regional institutions that face implementation capacity constraints in some cases. A particularly noteworthy feature behind the improvements in portfolio quality is the important efforts being made by RI task teams. In general, RI task teams are much bigger than typical Bank task teams, often requiring skilled coordination across sector and fiduciary teams working across multiple participating countries in projects. More importantly, it requires bringing countries together and building alignment on the expected outcomes of operations, sequencing of actions, and steps for effective implementation of operations. A cross-cutting priority during the remainder of the RI Strategy period will be to further strengthen management support provided to RI task teams. Key Implementation Challenges and Actions to Improve Portfolio Performance While regional projects are exposed to and affected by the same risks and challenges as national projects in the same sector, there are a number of challenges that are specific to them. These include but are not limited to: • Varying levels of capacity at regional, national and local institutions/implementing agencies, which could amplify the overall capacity constraints facing regional projects; • Complex coordination challenges due to multiple stakeholders; • Lack of alignment between country M&E systems and regional M&E system to measure how projects contribute to the desired regional outcomes; • Inadequate reporting and communication tools for regional projects; • Need of clarity on roles and responsibility for the oversight of regional projects. A portfolio review undertaken in FY20 recommended a number of remedial actions to address key implementation issues to improve the RI portfolio performance. These actions aim to improve both the quality and pace of implementation of active projects and the quality at entry of pipeline projects that will enter the portfolio and enhance portfolio management and oversight. The proposed actions emerging from the Portfolio Review are summarized in the Action Plan below. Key Implementation Challenge Proposed Mitigation Actions I. Strengthening Quality at Entry • Country participation in a Regional Operation • Front-load IDA19 pipeline of operations and Enhance is dependent on National PBA allocations, the outreach and communications with CMUs to align project commitment of which may fluctuate given objectives with client demand. Undertake upfront competing demands; convening of countries to discuss and get share agreement on priority areas for project. • Results indicators are not aligned among • Ensure that all RI operations incorporate a set of “core” RI countries and with RI Strategy Pillars; indicators to measure regional spillover impact, as proposed by the updated RI Strategy • Regional spillover benefits are not adequately • Require all RI operations to describe – as part of the quantified economic analysis of the operation – the expected 45 regional spillover effect and economic impact. Undertake M&E review for all active projects. This Update has outlined possible core indicators. • Large contracts are not advanced in • Proactively collaborate with task teams during preparation preparation for tendering to ensure that procurement of large/ critical contracts is advanced prior to Board submission. • PIU staff not recruited by launch of project • Ensure that terms of reference for key PIU functions are developed by appraisal and that recruitment is advanced by Board submission. • Time lost awaiting declaration of effectiveness • Work with teams / CMUs and counterparts to increase the use of retroactive financing arrangements in legal agreements, PPAs and advance tendering as possible to utilize time required for declaration of effectiveness. II. Strengthening Implementation • Inadequate capacity in PIUs and RECs to • Develop a targeted capacity strengthening program prepare quality bidding documents and customized to the needs of regional organizations evaluate bids and to manage safeguards issues involved in the implementation of regional operations. • Gaps in PIU capacity to manage and monitor • Partner with CMUs and country-based staff to include RI execution of contracts; environmental and PIU’s in local training opportunities/ workshops social risks and mitigation measures; • Security restrictions – in FCV sub-regions and • Intensify use of alternative supervision methods including beyond – does not allow for full and regular third party monitoring, geo-enabled supervision, satellite supervision functions imagery and local partnerships. Incorporate these arrangements into project design • Delays in the flow of funds and protracted • Strengthen “Regional Coordinators” functions for follow up on issues pertaining to ineligible procurement, financial management and safeguards, who expenditure, audits etc. are responsible for coordinating country-specific support on a RI operation for swift and prompt action • Potential for improved collaboration between • Preparation of new business procedures for RI projects RI and various CMUs involved in RI operations that clarify the division of roles and responsibilities between AFCRI and CMUs in the portfolio management • Inadequate management, reporting and • Continue collaboration with OPCS/ITS to design an ISR that communications tools that are designed for provide detailed information on project performance at single country projects (i.e ISR, ADM, RI the country and aggregate levels. Reach out to corporate projects are not included in portfolio functions to consider how to increase agility of RI information by each country) operations including issues relating to standardizing environmental and social documentation 46 World Bank Africa RI Portfolio (end-FY20) Sector Project ID Project Name (ALL RI)1 Board Approval Closing Date Total Cum. Disb. % Disb. FCI P121611 Financial Sector Development & Regionalization Project I (FSDRP I) 1/31/2011 12/31/2020 26M 24.38M 88% P126663 Improved Investment Climate within OHADA 6/26/2012 12/30/2022 30M 16.33M 53% P161368 Strengthening the Capacity of Regional Financial Institutions in the CEMAC Region 5/4/2018 7/4/2023 35M 8.31M 24% P161658 WAEMU Affordable Housing Finance 9/28/2017 12/31/2022 155M 66.66M 41% P173228 Regional Infra. Financing Facility in East/South Africa 6/30/2020 425M GOV P126848 Support for Capacity Dev't of the AUC and other African Union Organs 5/6/2014 6/30/2021 40M 21.82M 54% MTI P151083 AFR RI-Great Lakes Trade Facilitation 9/25/2015 12/31/2020 79M 37.21M 47% POV P153702 REGIONAL PROGRAM TO HARMONIZE AND MODERNIZE LIVING CONDITIONS SURVEYS 4/6/2016 12/31/2021 41M 23.18M 56% P164243 EAC Statistics Development and Harmonization Regional Project 7/27/2018 12/29/2023 20M 1.25M 6% P169265 Harmonizing and Improving Statistics in West Africa 3/26/2020 12/31/2025 379M 0.00M 0% EDU P126974 Africa Higher Education Centers of Excellence Project 4/15/2014 9/30/2020 163M 141.31M 85% P151847 Eastern and Southern Africa Higher Education Centers of Excellence 5/26/2016 12/31/2022 148M 67.42M 45% P163399 East Africa Skills for Transformation and Regional Integration Project (EASTRIP) 10/30/2018 12/31/2024 293M 80.53M 28% P164546 First Africa Higher Education Centers of Excellence for Development Impact Project 3/27/2019 12/31/2023 143M 17.26M 12% P165581 Africa Regional Scholarship and Innovation Fund for Applied Sciences, Engineering and Technology 7/5/2018 6/30/2024 15M 3.86M 19% P169064 Second Africa Higher Education Centers of Excellence for Development Impact 11/26/2019 6/30/2024 131M 0.20M 0% HNP P111556 AFR RI-East Africa Public Health Laboratory Networking Project 5/25/2010 3/30/2021 128M 125.09M 93% P147489 AFR RI- Great Lakes Emergency Sexual and Gender Based Violence & Women's Health Project 26-Jun-2014 31-Dec-2019 107M 84.90M P149526 Sahel Malaria and Neglected Tropical Diseases 6/11/2015 12/31/2020 121M 104.30M 85% P150080 Sahel Women's Empowerment and Demographics Project 12/18/2014 12/31/2024 542M 181.70M 33% P152359 Ebola Emergency Response Project 9/16/2014 3/31/2021 390M 365.66M 90% P154807 Regional Disease Surveillance Systems Enhancement (REDISSE) 6/28/2016 1/31/2023 110M 60.77M 54% P155658 AFR RI-Southern Africa Tuberculosis and Health Systems Support Project 5/26/2016 12/31/2023 178M 89.52M 50% P159040 Regional Disease Surveillance Systems Enhancement (REDISSE) Phase II 3/2/2017 8/31/2023 147M 47.36M 32% P161163 Regional Disease Surveillance Systems Enhancement (REDISSE) Phase III 5/7/2018 3/31/2024 120M 36.94M 31% P167817 Regional Disease Surveillance Systems Enhancement Project (REDISSE) Phase IV 10/1/2019 7/31/2024 280M 2.53M 1% P167916 Africa CDC Regional Investment Financing Project 12/10/2019 12/31/2025 250M 0.00M 0% SPJ P161329 West Africa Unique Identification for Regional Integration and Inclusion (WURI) Program 6/5/2018 7/3/2024 122M 7.80M 6% P169594 West Africa Unique Identification for Regional Integration and Inclusion - Phase 2 4/28/2020 7/30/2026 273M 0.00M 0% DD P118213 RCIP4 - Regional Communications Infrastructure Program - APL 4 (RI) 9/10/2013 6/30/2021 32M 24.78M 76% P122402 West Africa Regional Communications Infrastructure Project - APL-1B 6/21/2011 6/30/2021 112M 86.57M 72% P123093 West Africa Regional Communications Infrastructure Project - APL 2 5/30/2013 11/29/2020 60M 32.31M 53% P130871 Regional Communications Infrastructure Program Phase 5 - Uganda 5/22/2015 2/28/2022 75M 50.45M 67% P132821 AFR RI-Central African Backbone SOP5 7/16/2014 12/31/2020 92M 25.08M 27% P155876 West Africa Regional Communications Infrastructure Project - SOP3 3/24/2017 5/31/2022 35M 29.99M 84% ENE P075941 AFR RI-Regional Rusumo Falls Hydroelectric Project 8/6/2013 12/31/2020 340M 187.86M 55% P113266 5/31/2012 WAPP APL4 (Phase 1) - Côte d'Ivoire, Sierra Leone, Liberia, and Guinea Power System Re-development 12/15/2020 298M 200.90M 66% P126579 7/12/2012 Eastern Electricity Highway Project under the First Phase of the Eastern Africa Power Integration Program 12/31/2020 684M 354.98M 52% P126661 AFR RI-SAPP-Program for Accelerating Regional Energy/Transformational Projects 11/11/2014 11/30/2022 20M 11.41M 46% P146830 OMVG Interconnection Project 4/29/2015 6/30/2022 200M 65.26M 32% P147921 OMVS - TRANSMISSION EXPANSION PROJECT 5/12/2017 12/31/2020 97M 29.40M 30% P160427 Temane Regional Electricity Project 6/20/2019 9/30/2025 420M 0.00M 1% P160708 Regional Off-Grid Electrification Project 4/17/2019 6/30/2024 150M 0.00M 0% P162580 Solar Development in Sub-Saharan Africa - Phase 1 (Sahel) 7/6/2018 10/31/2023 21M 1.93M 9% P162933 North Core/Dorsale Nord Regional Power Interconnector Project 10/31/2018 12/15/2024 466M 3.26M 1% P163752 AFR RI-3A Tanzania-Zambia Transmission Interconnector 6/18/2018 6/28/2024 465M 12.10M 3% P164044 ECOWAS-Regional Electricity Access Project 12/13/2018 12/31/2025 225M 13.46M 6% P164354 Mozambique - Malawi Regional Interconnector Project 9/17/2019 12/31/2023 57M 0.00M 5% P166042 Guinea – Mali Interconnection Project 7/13/2018 6/30/2024 84M 5.82M 7% P168185 Cameroon - Chad Power Interconnection Project 6/16/2020 12/31/2027 385M 0.00M 0% TRA P079736 CEMAC - Transport-Transit Facilitation 6/26/2007 6/30/2020 655M 488.16M 69% P120370 Southern Africa Trade and Transport Facilitation Project 5/21/2013 6/30/2020 213M 193.31M 90% P145566 Southern Africa Trade and Transport Facilitation Program - SOP2 4/29/2015 12/31/2021 69M 41.49M 60% P148853 EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) 6/11/2015 12/31/2021 500M 210.21M 41% P160488 LAKE VICTORIA TRANSPORT PROGRAM - SOP1, RWANDA 5/25/2017 12/31/2023 81M 12.24M 14% P129408 RI-Regional Pastoral Livelihoods Resilience Project 3/18/2014 3/31/2021 197M 155.74M 78% P143307 AFR RI-Regional Great Lakes Integrated Agriculture Development Project 6/21/2016 12/31/2021 150M 30.62M 20% P147674 Regional Sahel Pastoralism Support Project 5/26/2015 12/31/2021 248M 193.67M 77% P161781 Great Lakes Regional Integrated Agriculture Development Project 5/5/2017 11/30/2022 75M 21.25M 28% P164486 Agricultural Productivity Program for Southern Africa - Angola & Lesotho 12/18/2018 1/31/2025 50M 2.72M 5% P173702 Emergency Locust Response Program 5/20/2020 5/25/2023 160M 0.00M 0% ENR P126773 West Africa Region Fisheries Program AF Guinea, Sierra Leone & Liberia 3/16/2015 12/15/2020 22M 16.36M 74% P131327 West Africa - Mauritania Fish. APL 3/16/2015 12/15/2020 7M 5.11M 73% P132029 AFCC2/RI-South West Indian Ocean Fisheries Governance and Shared Growth Project 1 2/27/2015 9/30/2021 16M 10.56M 68% P132123 AFCC2/RI-South West Indian Ocean Fisheries Governance and Shared Growth Project 1 2/27/2015 9/30/2021 76M 57.15M 75% P153370 Second South West Indian Ocean Fisheries Governance and Shared Growth Project - Madagascar 3/28/2017 9/29/2023 74M 12.54M 16% P155642 Third South West Indian Ocean Fisheries Governance and Shared Growth Project (SWIOFish3) 9/29/2017 6/30/2023 5M 1.65M 33% P156759 West Africa Region Fisheries Program AF Guinea, Sierra Leone & Liberia 1/5/2017 3/1/2021 10M 7.31M 70% P158137 Third South West Indian Ocean Fisheries Governance and Shared Growth Project (SWIOFish3) 9/29/2017 6/30/2023 10M 5.40M 52% P159562 Second South West Indian Ocean Fisheries Governance and Shared Growth Project - Madagascar 3/28/2017 9/29/2023 6M 1.37M 21% P162337 West Africa Coastal Areas Resilience Investment Project 4/9/2018 12/31/2023 190M 22.10M 11% SOC P152822 Development Response to Displacement Impacts Project in the HoA 5/31/2016 12/31/2023 335M 125.66M 37% P161067 Development Response to Displacement Impacts Project (DRDIP) in the Horn of Africa 4/26/2017 4/29/2022 103M 10.24M 15% P161706 Lake Chad Region Recovery and Development Project 5/26/2020 12/31/2025 170M 0.00M 1% SUR P154403 27-Sep-15 IGAD Building Disaster Resilience to Disasters through Risk Management and Climate Change Adaptation 31-Aug-20 5M 4.61M 92% P156774 STRENGTHENING DRR COORDINATION, PLANNING AND POLICY ADVISORY CAPACITY OF ECOWAS 16-Jun-16 31-Aug-20 3M 1.90M 76% P163486 STRENGTHENING DRR COORDINATION, PLANNING AND POLICY ADVISORY CAPACITY OF SADC 2-Nov-2017 31-Aug-2020 3M 1.35M 66% P166648 Strengthening DRM Capacity in ECCAS 22-Jun-2018 31-Aug-2020 3M 1.85M 82% P169078 Horn of Africa - Groundwater Initiative 11-Jul-2019 30-Nov-2021 3M 0.25M 9% WAT P127086 AFCRI-Sustainable Groundwater Management in SADC Member States 4/24/2014 12/31/2020 10M 9.98M 81% P130174 10/2/2012 First Part of the Second Phase of the Niger Basin Water Resources Development and Sustainable Ecosystems Management 3/31/2027 Program - APL 2A 408M 35.35M 8% P130694 AFCRI-Nile Cooperation for Results Project 12/26/2012 11/30/2020 39M 39.27M 99% P131323 Senegal River Basin Multipurpose Water Resources Development Project 2 12/5/2013 6/30/2021 213M 139.40M 65% P131353 Senegal River Basin Climate Change Resilience Development Project 12/5/2013 6/30/2021 16M 9.13M 57% P146515 Kariba Dam Rehabilitation Project (RI) P149714 Niger River Basin Management Project 47 28-Jan-2015 12/9/2014 2/28/2025 31-Dec-2019 75M 4M 8.55M 1.70M 17% P149969 Volta River Basin Strategic Action Programme Implementation 21-May-2015 31-Aug-2019 11M 4.20M P153863 Senegal River Basin Integrated Water Resources Management Project 6/23/2016 12/31/2020 11M 8.71M 72% P154482 Sahel Irrigation Initiative Support Project 12/5/2017 3/31/2024 170M 32.51M 19% IFC Portfolio (Investments) Country (Portfolio) Client Product Type Industry Group Sector COMMITTED_PORTFOLIO Africa Region 8 Miles Equity Collective Investment Vehicles $29.88 Africa Region Actis ARE Fund 2 Equity Tourism, Retail, Construction & Real Estates (TRP) $35.00 Africa Region Actis ARE Fund 3 Equity Tourism, Retail, Construction & Real Estates (TRP) $39.97 Africa Region Actis Energy 4 Equity Other Infra Sectors $50.00 Africa Region Adenia II Equity Collective Investment Vehicles $0.37 Africa Region Adenia IV Equity Collective Investment Vehicles $22.61 Africa Region Adjuvant Equity Other MAS Sectors $24.96 Africa Region Advans Holding Equity Financial Markets $2.14 Africa Region Advans Holding Equity Financial Markets $3.66 Africa Region Advans Holding Equity Financial Markets $6.87 Africa Region AFIG Fund II Equity Collective Investment Vehicles $13.99 Africa Region Africa Dvpt I Equity Collective Investment Vehicles $3.28 Africa Region Africa Dvpt II Equity Collective Investment Vehicles $38.97 Africa Region Africa Dvpt III Equity Collective Investment Vehicles $20.00 Africa Region Africa Dvpt III Equity Collective Investment Vehicles $30.00 Africa Region Africap Equity Collective Investment Vehicles $1.02 Africa Region AfricInvest II Equity Collective Investment Vehicles $0.42 Africa Region Africinvest III Equity Collective Investment Vehicles $20.10 Africa Region ALCB Fund Ltd Debt Financial Markets $20.00 Africa Region Amethis II Equity Collective Investment Vehicles $16.66 Africa Region AREP Equity Tourism, Retail, Construction & Real Estates (TRP) $0.50 Africa Region AREP Equity Tourism, Retail, Construction & Real Estates (TRP) $40.00 Africa Region Aureos Afr Healt Equity Collective Investment Vehicles $9.77 Africa Region Barak TF Facility Debt Financial Markets $45.00 Africa Region BIX Capital BV Debt Funds $3.50 Africa Region Brait IV LP Equity Collective Investment Vehicles $15.92 Africa Region Branch Equity Financial Markets $2.85 Africa Region CAPE II Equity Collective Investment Vehicles $0.86 Africa Region CIEL Healthcare Limited Equity Health, Education, Life Sciences $0.54 Africa Region CIEL Healthcare Limited Equity Health, Education, Life Sciences $6.75 Africa Region Convergence Fund Equity Other Infra Sectors $28.25 Africa Region CSquared Holdings Equity Telecom, Media, and Technology $3.50 Africa Region CSquared Holdings Equity Telecom, Media, and Technology $15.00 Africa Region DARP SPV Nimble SA Debt Financial Markets $24.86 Africa Region Delonex Energy Equity Oil, Gas & Mining $60.00 Africa Region ECP Africa III Equity Collective Investment Vehicles $20.71 Africa Region ETC Group Debt Agribusiness & Forestry $10.00 Africa Region ETC Group Debt Agribusiness & Forestry $35.00 Africa Region Ethos VI Equity Collective Investment Vehicles $25.70 Africa Region Gaia HoldCo Debt Infrastructure $2.44 Africa Region GEF Africa Fund Equity Other MAS Sectors $19.94 Africa Region GroFin AF Equity Collective Investment Vehicles $17.43 Africa Region Helios Fund I Equity Collective Investment Vehicles $0.83 Africa Region Helios Fund II Equity Collective Investment Vehicles $18.69 Africa Region Helios Fund III Equity Collective Investment Vehicles $24.59 Africa Region Helios Fund IV Equity Collective Investment Vehicles $50.00 Africa Region Helios Towers PLC Equity Telecom, Media, and Technology $41.09 Africa Region IFHA Equity Other MAS Sectors $0.66 Africa Region IFHA II Equity Health, Education, Life Sciences $24.00 Africa Region IHS Holding Ltd Equity Telecom, Media, and Technology $5.00 Africa Region IHS Holding Ltd Equity Telecom, Media, and Technology $10.00 Africa Region IHS Holding Ltd Equity Telecom, Media, and Technology $25.00 Africa Region IHS Holding Ltd Equity Telecom, Media, and Technology $84.00 Africa Region IHS II SSA Equity Tourism, Retail, Construction & Real Estates (TRP) $3.75 Africa Region Investec II Equity Collective Investment Vehicles $26.81 Africa Region IPAE II Equity Collective Investment Vehicles $14.16 Africa Region Macquarie Africa Equity Other Infra Sectors $42.02 Africa Region Mahyco International Equity Agribusiness & Forestry $10.00 Africa Region MRPAH Equity Infrastructure $22.50 Africa Region Neoma Africa Equity Collective Investment Vehicles $3.28 Africa Region Neoma Africa III Equity Collective Investment Vehicles $50.00 Africa Region Netafim Israel Debt Agribusiness & Forestry $21.33 Africa Region Partech Africa Equity Collective Investment Vehicles $16.88 Africa Region Red Co-Invest Equity Collective Investment Vehicles $15.50 Africa Region RMB Westport II Equity Tourism, Retail, Construction & Real Estates (TRP) $6.83 Africa Region SAHARA ENERGY Guarantee/RM Other MAS Sectors $25.00 Africa Region TerraPay Equity Financial Markets $4.65 Africa Region TIDE Africa Fund Equity Collective Investment Vehicles $4.96 Africa Region Trivitron Africa Debt Health, Education, Life Sciences $2.75 Central Africa RegionAfrican Rivers Equity Collective Investment Vehicles $9.60 Central Africa RegionVentures CASF Equity Collective Investment Vehicles $2.79 Eastern Africa RegionAureos East Afri Equity Collective Investment Vehicles $0.04 Eastern Africa RegionBPI EA Equity Financial Markets $6.00 Eastern Africa RegionCatalyst Afr I Equity Collective Investment Vehicles $8.75 Eastern Africa RegionCatalyst Afr II Equity Collective Investment Vehicles $14.90 Eastern Africa RegionEASSy SPV Debt Telecom, Media, and Technology $10.18 Eastern Africa RegionFanisi Fund I Equity Collective Investment Vehicles $5.94 Eastern Africa RegionFanisi Fund II Equity Collective Investment Vehicles $7.50 Eastern Africa RegionGoodlife Debt Health, Education, Life Sciences $2.00 Eastern Africa RegionHHI Equity Health, Education, Life Sciences $22.00 Eastern Africa RegionIPS K Equity Other MAS Sectors $0.55 Eastern Africa RegionIPS K Equity Other MAS Sectors $0.66 Eastern Africa RegionIPS K Equity Other MAS Sectors $0.69 Eastern Africa RegionIPS K Equity Other MAS Sectors $3.00 Eastern Africa RegionKibo Fund II Equity Collective Investment Vehicles $11.26 Eastern Africa RegionUCL Debt Health, Education, Life Sciences $10.00 Southern Africa Region Agri-Vie Equity Other MAS Sectors $5.74 Southern Africa Region BFSL Equity Financial Markets $19.39 Southern Africa Region BP Southern Afri Equity Collective Investment Vehicles $6.96 Southern Africa Region Evolution One Equity Collective Investment Vehicles $5.36 Southern Africa Region Lereko Metier Equity Collective Investment Vehicles $11.39 Western Africa RegionACTIVA. Equity Financial Markets $2.00 Western Africa RegionACTIVA. Equity Financial Markets $5.70 Western Africa RegionAFIG Fund I Equity Collective Investment Vehicles $12.84 Western Africa RegionCAPE III Equity Collective Investment Vehicles $18.98 Western Africa RegionCardinal Stone Equity Collective Investment Vehicles $10.00 Western Africa RegionCauris II Equity Collective Investment Vehicles $4.41 Western Africa RegionCRRH-UEMOA Debt Financial Markets $14.64 Western Africa RegionCRRH-UEMOA Equity Financial Markets $2.00 Western Africa RegionGASELIA Debt Agribusiness & Forestry $2.23 Western Africa RegionInsta Debt Health, Education, Life Sciences $6.00 Western Africa RegionOasis AfricaFund Equity Collective Investment Vehicles $7.00 Western Africa RegionSynergy Equity Collective Investment Vehicles $7.50 Western Africa RegionSynergy II Equity Collective Investment Vehicles $20.00 Western Africa RegionVentures WAVF Equity Collective Investment Vehicles $12.77 Western Africa RegionVerod III Equity Collective Investment Vehicles $15.00 Grand Total 48 MIGA Portfolio MIGA RI PORTFOLIO Effective Expiry Investor Contract Investor Business Maximum Project ID Host Country Date Date Name Enterprise Country Sector ($USD) 14561 06/30/2020 06/29/2035 FirstRand EMA Holdings (Pty) Limited First National Bank of Botswana Limited Botswana South Africa Financial 81,147,972 11756 06/27/2014 06/26/2022 Cotecna Inspection S.A. Cotecna Inspection, S.A., Burundi Switzerland Services 6,960,479 7147 03/17/2016 03/16/2026 Bartrac Equipment GBL Congo Equipment SARL Congo, Democratic Republic Mauritius of Services 67,500,000 14564 06/30/2020 06/29/2035 FirstRand EMA Holdings (Pty) Limited First National Bank of Eswatini Limited Eswatini South Africa Financial 20,456,625 13255 04/20/2017 04/19/2027 Mr. Dirieh Ali Mawel Alvima Foods Complex PLC Ethiopia Djibouti Manufacturing 5,409,468 9692 06/27/2013 06/26/2023 Cotecna Inspection S.A. Societe de Scanning du Gabon Gabon Switzerland Services 5,296,016 4437 12/31/2004 12/30/2024 West African Gas Pipeline Company Ltd. West African Gas Pipeline Company Ltd, Ghana Ghana Ghana Oil and Gas 56,250,000 14384 12/06/2019 12/05/2034 ABSA Group LTD Barclays Bank of Ghana Limited Ghana South Africa Financial 84,540,000 14568 06/30/2020 06/29/2035 FirstRand EMA Holdings (Pty) Limited FirstRand National Bank Ghana Limited Ghana South Africa Financial 39,735,994 9722 05/24/2012 05/23/2027 Absa Capital Thika Power Ltd. Kenya South Africa Infrastructure 22,792,657 10646 06/16/2014 01/15/2028 Standard Bank of South Africa Limited Gulf Power Limited Kenya South Africa Infrastructure 13,146,277 9993 06/28/2013 06/30/2025 The Standard Bank of South Africa Limited Triumph Power Generating Company Limited Kenya South Africa Infrastructure 101,596,853 14385 12/06/2019 12/05/2034 ABSA Group LTD Barclays Bank Kenya Limited Kenya South Africa Financial 109,725,000 14563 06/30/2020 06/29/2035 FirstRand EMA Holdings (Pty) Limited First National Bank of Lesotho Limited Lesotho South Africa Financial 5,153,120 14391 12/06/2019 12/05/2034 ABSA Group LTD Barclays Bank Mauritius Limited Mauritius South Africa Financial 94,050,000 14662 06/29/2020 06/28/2030 Standard Chartered Bank Eastern and Southern African Trade and Development Bank Mauritius United Kingdom Financial 402,305,569 12300 12/03/2015 06/30/2026 The Standard Bank of South Africa Limited Gigawatt Mocambique SA Mozambique South Africa Infrastructure 86,070,994 14386 12/06/2019 12/05/2034 ABSA Group LTD ABSA Bank Mocambique Mozambique South Africa Financial 88,552,776 14566 06/30/2020 06/29/2035 FirstRand EMA Holdings (Pty) Limited FNB Moçambique, S.A. Mozambique South Africa Financial 29,704,758 13755 04/05/2018 03/31/2033 Investec Bank Limited Ejuva One Solar Energy (Pty) Limited Namibia South Africa Infrastructure 8,527,796 13756 04/05/2018 03/31/2033 Investec Bank Limited Ejuva Two Solar Energy (Pty) Limited Namibia South Africa Infrastructure 8,527,796 14317 06/28/2019 06/27/2034 Mettle Solar Investments Proprietary Limited Metdecci Energy Investments (Proprietary) Limited Namibia South Africa Infrastructure 2,217,174 14293 06/28/2019 06/27/2034 Mettle Solar Investments Proprietary Limited NCF Energy (Proprietary) Limited Namibia South Africa Infrastructure 567,000 14292 06/28/2019 06/27/2034 Mettle Solar Investments Proprietary Limited Tandii Investments (Proprietary) Ltd Namibia South Africa Infrastructure 567,000 14567 06/30/2020 06/29/2035 FirstRand EMA Holdings (Pty) Limited Rand Merchant Bank Nigeria Limited Nigeria South Africa Financial 25,594,211 14387 12/06/2019 12/05/2034 ABSA Group LTD Barclays Bank (Seychelles) Limited Seychelles South Africa Financial 40,175,061 10886 08/08/2014 08/07/2024 Groupe Europe Handling S.A.S. Sky Handling Partner Sierra Leone Limited Sierra Leone France Services 4,035,060 13516 06/29/2018 06/28/2033 Sonatel Orange (SL) Limited Sierra Leone Senegal Infrastructure 94,148,037 13335 04/04/2017 03/31/2027 Standard Chartered Bank Plc Development Bank of Southern Africa Limited South Africa United Kingdom Financial 198,583,408 6732 08/27/2014 11/30/2023 Absa Bank Limited Bujagali Energy Limited Uganda South Africa Infrastructure 383,916,178 14389 12/06/2019 12/05/2034 ABSA Group LTD ABSA Bank Uganda Limited Uganda South Africa Financial 41,800,000 14390 12/06/2019 12/05/2034 ABSA Group LTD Barclays Bank Zambia Plc Zambia South Africa Financial 38,070,000 14565 06/30/2020 06/29/2035 FirstRand EMA Holdings (Pty) Limited First National Bank Zambia Limited Zambia South Africa Financial 33,164,854 49 Annex IV: Lessons Learned, IEG Evaluation Recommendations and Follow-up Actions Taken The Bank’s regional integration program has been operational over the past 15 years and the program has evolved to take on new challenges and incorporate lessons learned. Several of the lessons learned that were included in the 2018 RICAS continue to be relevant and are being acted upon. In particular, this Update has embraced the following key lessons identified in the RICAS: o the need for an overall WBG strategy to drive the support provided to the continent’s integration efforts – the delivery of this Update two-years into the RICAS period is continuing evidence of the importance of overall strategy in shaping the RI program; o WBG’s support through financing, analytics and technical assistance needs to intertwined with efforts on ‘development diplomacy’ recognizing the importance of political economy factors in shaping integration efforts – the focus on priority FCV sub-regions, the reorientation in engagement with the RECs and use of regional policy operations are important avenues for taking forward a stronger focus on ‘development diplomacy’; o need to strike a better balance between ‘hard’ investments, including in regional infrastructure, with support for the ‘soft’ policy and regulatory harmonization issues – the use of regional DPOs, and MPA instrument are important ways in which the ‘soft’ elements of the RI agenda are being taken forward; o step-change in the management of the quality of RI portfolio – efforts will be continued to sustain the improvements in portfolio quality achieved in FY19 and FY20; o strengthening the results-orientation in the RI program – there is now an increased focus on using indicators of regional spillover benefits in RI operations; and o deepening the WBG collaboration efforts on the RI program – this Update spells out some specific and tangible areas for strengthening the WBG collaboration and establishment of Director-level regular coordination mechanisms. The RICAS had flagged that this Update will take on board the messages from an upcoming IEG evaluation of the regional integration program. The Independent Evaluation Group (IEG) report31 on the RI program completed in FY19 described the role of the WBG in fostering regional integration in the following terms: (i) enabler of “upstream” support creating an enabling environment; (ii) financier of “downstream” investments (such as World Bank financing, International Finance Corporation investment services); and (iii) convener32 to engage key stakeholders in dialogue to find solutions that support regional integration. The IEG evaluation found WBG “support for regional integration has been mostly successful in enhancing regional connectivity and in the Sub-Saharan Africa region,” but identified the need for stronger measurement of impact of regional spillover benefits of the program . This Annex summarizes the main findings of recommendations of the IEG evaluation and actions taken or proposed to be taken. 1. IEG Recommendation: Initiate high-level, strategic commitments to regional integration in all operational regions, in addition to the Sub-Saharan Africa region, with tailored approaches. Actions Taken: 31 Two to Tango: An Evaluation of World Bank Group Support to Fostering Regional Integration (April 2019) 32 Data from Uppsala Conflict Database and definitions of Peace Institute Oslo 50 It is worthwhile noting the IEG report commended the Sub-Saharan Africa region for regularly preparing regional integration strategies (in 2008 and 2018). In anticipation of the increased envelop for the IDA-19 Regional Window and to respond to the ongoing economic and health crisis, the Bank is updating its regional integration strategy. This Update covers continental Africa working across three WB regions of AFE, AFW and MNA and reflect a WBG approach. This Update also covers the remainder period of RICAS until FY23. It is proposed that a review of RICAS be undertaken in FY23 (similar to a CAS Completion Review) which should feed into the development of the next RI Strategy for continental Africa. The WBG remains committed to ensuring that a robust strategy continues to guide the overall RI program in Africa. 2. IEG Recommendation: Realign the WBG’s business model to achieve managerial accountability, both at CMU and GP levels, and create incentives for project teams. Actions Taken: A new WB unit with a Director has been established and similar efforts have been taken to clarify the Director-level responsibilities in IFC for the RI program. The enhanced leadership and management of the RI program working with CMU and GP colleagues is key to improving the overall results and impacts of the program. Furthermore, the WB is expanding the use of different instruments in the RI program with the approval to use regional DPOs in the regional IDA window and to allow provision of IDA credits to creditworthy regional institutions. The use of DPOs, although the amount allocated is capped at 10 percent of the IDA Regional Window, is expected to increase the incentives for countries to move ahead with harmonization of policies and regulations to create regional markets and address diseconomies of scale of domestic markets. This along with planned new analytical products, such as Regional Economic Memorandum, are expected to shed light on the interests of different countries in regional cooperation and facilitate dialogue and flow of benefits to different stakeholders. To ensure client countries receive requisite support in real time, particularly in the context of complex regional projects, the Bank is increasing its presence on the ground, including in FCV situations. The Bank’s internal processing systems for regional integration projects have also been expanded to allow multiple co-TTLs in different countries to support regional project implementation, while simultaneously ensuring central coordination at the level of task teams is maintained. 3. IEG Recommendation: Rebalance the WBG’s regional integration projects emphasizing regions with high integration potential and regional public goods. Actions Taken: In the Africa region, the Bank has adopted a dual approach to regional integration emphasizing regions with high integration potential, while also addressing regional public goods which involve a wider grouping of countries. Sustained political ownership and commitment are key levers to unlock and deliver on the promise of regional integration. In sub-regions that have demonstrated these essential elements, the Bank is more actively focusing on facilitating integration. For instance, positive developments in the HoA sub-region during 2018—political and economic progress in Somalia and rapprochement between Eritrea and Ethiopia—opened opportunities for greater regional cooperation and integration which in turn would bolster security and stability in the sub-region. To take advantage of these developments, the Bank is working with other development partners to facilitate development of agreed investment and policy 51 priorities. The WBG will be financing some of the agreed HoA priorities. Similarly, in the Sahel, active collaboration with the Sahel Alliance is a key element of the RI program to support the G5 countries. Meanwhile, as current global and cross-regional events demonstrate, i.e. the outbreak of Covid-19 and the locust infestation across South Asia, East and West Africa as well as parts of the Arabian Peninsula, the need to address global and regional public ‘bads’ remains a key priority. 4. IEG Recommendation: Intensify partnerships with traditional and non-traditional regional stakeholders to promote collective action, knowledge sharing within and across regions to foster regional integration. Actions Taken: Regional integration remains a strategic priority for the Africa region. This means increased focus is paid by the Bank to crowd-in partnerships and financing to support the regional integration agenda. The partnerships with other multilateral and bilateral partners is critical in developing several sectoral and sub-regional initiatives. The WBG plays a key role bringing in technical, global and policy experience along with other partners, who among others bring in skills to tackle security and diplomatic issues. There is a strong emphasis across the RI program in ensuring that countries are supported to lead and collaborate on the regional initiatives with partners backstopping the efforts. The WBG is also working closer together to identify reform areas that can be streamlined to help leverage the role of private sector and risk arms to enable and convene efforts in co-financing and de-risking market integration efforts. The other important partnership in the RI program is with regional institutions / RECs in Africa. The Bank’s commitments for regional institutions has grown considerably to reach US$1 billion consisting of about US$300 million of grant support to regional institutions and US$700 million of credits to two financially viable regional institutions (BOAD and TDB). This Update proposes to strengthen the partnership with regional institutions and work to each other’s comparative advantages in ensuring that the impact of WBG support is optimized. The Bank will continue its collaboration with regional institutions including to strengthen institutional capacity to support the effective implementation of regional projects and programs (see Annex VII). 5. IEG Recommendation: Strengthen the design of IDA Regional Window supported projects to improve the assessment of spillover effects and to generate evidence based on robust indicators. Actions Taken: In order to strengthen the design and monitoring and evaluation (M&E) of regional projects, this Update proposes a Theory of Change and use of indicators to measure regional spillover benefits. However, as noted in management’s response to the IEG evaluation, and based on feedback from a number of ICRs, the measurement of spillover effects and especially the attribution of particular interventions to these effects is a challenge. Spillover effects often occurs after a time lag and are rarely observable at project completion. Therefore, the guidance on ‘spillover effects’ in the RI program will be strengthened by introducing selectivity filters and a results framework that will include regional integration indicators to measure and quantify outcomes at project closing, expected medium-term outcome and long-term impact. For example, in the power sector an indicator at project closing could measure number of MW of electricity traded between countries, at the medium-term it would lead to enhanced security of power supply and improved access and over the long-term this could lead to increased investments in new and cleaner generation projects by the private sector. In order to inform the preparation of project-level 52 indicators in upcoming RI operations, this Update has developed a menu of indicators at output and short- term outcome levels (see Annex Table 4.1). These are indicative and task teams would need to adapt to the specifics of each project. Table 4.1: Illustrative List of Indicators to Measure Regional Spillover Benefits for Projects Sector Possible Indicators for Measuring Regional Spillovers Energy i. Electricity trade (export/import) between countries ii. Wheeling capacity enabled by the project iii. Revenue from electricity exports iv. Difference between the annual weighted average cost of electricity imported and the annual weighted average cost of local utilities Transport & Trade i. Reduction in travel time along corridor between port and destination. ii. Time take to pass through the named Border Crossing Point. iii. Number of countries in a given region enforcing the regionally applicable Trade Facilitation Agreement iv. Increase in cross-border Trade Volumes Human Capital i. Harmonization of disease testing norms and sharing of information amongst labs in a sub-region ii. Cross-country coordination plans for epidemic preparedness and response iii. Number of countries having interoperable foundational ID system Resilience i. National and regional early warning systems extended or improved ii. Number of people reached through multi-country efforts on food insecurity iii. Progress in sustainably managing trans-boundary water resources. 53 Annex V: RI Engagement in FCV Sub-Regional Priority Areas While regional integration is often approached primarily through a macroeconomic lens of cross-border integration of factor and goods market, there is a growing realization that fragility, conflict and violence are often deeply rooted in regional development. Weak capacity, porous borders, and familial ties across countries makes cross-border activities and regional cooperation unavoidable and yet complex. Hence, a regional dimension is central in the WBG’s comprehensive approach to fragility and conflict, with an aim to support efforts to tackle the root causes of fragility and conflict and respond to the fallout of such developments. In practical terms, this RI Strategy Update commits that under IDA19, the WBG will implement regional programs in the FCV sub-regional priority areas where the intensity of cross-border connections and the regional nature of ongoing crises warrant a regionally coordinated response: the Sahel, Lake Chad, and Horn of Africa sub-regions, and as conditions allow, a similar approach will be developed for the Great Lakes region, where the same criteria of intense cross-border interlinkages exist but where willingness to cooperate has been uneven so far. This annex sets out the guiding principles and main features of the upcoming regional programs for each of the priority areas, focusing on how they will contribute to the broader WBG effort to tackle some of the root causes of fragility, conflict and violence. In many regions characterized by strong cross-border linkages and spillovers, a purely national response is often insufficient to tackle drivers of fragility. This is even more true in fragile countries, where the extent of control of borders is often dictated by limited capacity and where active conflicts limit border patrol. Several current developments in the continent exemplify how shocks and conflict spill-over national borders to impact neighboring regions and countries, be it through forced displacement, widening of areas facing active conflict and violence, and disruptions in trade and movement of people. This is the rationale underpinning the explicit focus on FCV in this RI Strategy Update. In order to be impactful, regional programs in such settings depend heavily on the will of national authorities to effectively coordinate and address jointly shared challenges. Therefore, a regional approach cannot be a substitute for coordinated actions at the national level. The rapid spread of the coronavirus disease is symptomatic of the challenge, where strong national efforts must coincide with cross-border collaboration in order to stamp out the pandemic. Ensuring a strong complementarity between regional and national programs is key and the RI program is increasingly embracing such an approach. As a guiding principle, regional projects focus on where the regional approach adds more value in fostering regional public goods and tackling regional public bads in fragile environments. While being cognizant of the complexity of the task, there are valuable lessons from ongoing regional operations supporting the generation of regional public goods (such as women empowerment with the SWEDD project) or tackling regional public bads (such as forced displacement within the Horn of Africa region). The RI program will draw upon the WBG Strategy for Fragility, Conflict, and Violence (FCV). It will notably follow the objectives set by the four pillars of engagement under the FCV strategy: i) Preventing conflict and interpersonal violence, with an emphasis on scaling up efforts to identify risks and engage with partners, mitigating risks and strengthening resilience, and adopting a holistic approach to prevention that encompasses security, peacebuilding, and development; ii) Remaining engaged during conflicts and crisis situations; iii) Helping countries transition out of fragility; and iv) Mitigating the spillovers of FCV. As the potential for private sector engagement expands as countries emerge from fragility, and as, on some occasions, the private sector is more vibrant than the public sector in FCV settings, the RI program will follow an approach of ‘Maximizing Finance for Development’ in which the World Bank, IFC, and MIGA 54 operate in a complementary manner to bring their comparative advantages to help unlock the private sector potential. To deal with FCV circumstances, de-risking investments, long-term commitment, focusing on client capacity building, and proactive implementation support are some of the approaches that are being increasingly embraced in Africa. The RI program will build upon these efforts. The regional drivers of fragility in the four FCV priority regions show some common traits revolving around three main dimensions: • Center-periphery tensions within each state. These are reflected in large parts of territories, and consequently, populations in the periphery / borderlands feel neglected or do not receive adequate provision of basic services from the center, resulting in some level of distrust. • Heightened vulnerability to exogenous shocks, such as pandemics and climate-weather related disasters. The vulnerability derives from: i) the large population share that remains directly dependent on subsistence livelihood activities; ii) the insufficient development of tools in ensuring resilience (early warning mechanisms, insurance and risk pooling and weak governance); and iii) the specific hydrological and agrarian environment which increase vulnerability to shocks. • Limited ability to offer opportunities to the young and rapidly growing population. The FCV priority sub-regions are all having strong demographic growth driven by high fertility rates making it extremely challenging to generate enough basic services (health, education) and job opportunities in sufficient numbers. It also exacerbates tensions and conflicts around resource management, notably land and water. These fragility drivers particularly impede the living conditions and opportunities of the most vulnerable, notably the youth and the women, who have fewer chances to make their voices heard in weak governance environments. While the above broad characteristics are evident in the four FCV priority sub-regions, but the root causes of fragility are specific to each region and there is no one size fits all approach. Each region requires a tailored program building on existing engagements at the national and sub-national levels and that is the bedrock of this Strategy Update (see below for specifics of each FCV sub-region). The RI program will adopt a three-dimensional approach aimed at mobilizing the WBG’s tools and comparative advantages in a sustainable manner. The objective of the proposed approach is to make sure that regional programs for priority areas will mobilize all the WBG’s relevant tools, knowledge and development diplomacy capacity while adopting a multiyear horizon. Indeed, it is widely recognized that tackling the root causes of fragility warrants a long-term engagement. Regional programs for priority areas will increasingly demonstrate three dimensions: a. Mobilizing the convening power of the WBG to support enhanced regional dialogue and cooperation. Strong, high-level political impetus by national authorities is an important factor in effective implementation of regional programs, as competing priorities and domestic sovereignty considerations can overshadow regional cooperation. Moreover, gathering the support of national authorities and other relevant stakeholders, notably at local levels, around shared priorities and joint action plans often necessitates intense and lengthy dialogue. The WBG will therefore fully mobilize its convening power to maintain momentum and support the articulation of a shared regional agenda and its implementation. Particular attention will also be paid to coordination with other development partners, but also with humanitarian, peace and security actors, from the programing phase by ensuring complementarity with regional strategies where they exist, notably those supported by the 55 African Union and United Nations agencies. The regional dialogue initiated by HoA countries with support from the World Bank, the African Development Bank and the European Union constitutes a reference point in this regard as also the ongoing engagement with the Sahel Alliance on G5 countries. b. Supporting knowledge and data gathering through targeted analytical work to guide future engagement and investment prioritization. Regional programs will entail high quality analytical work, notably through Resilience and Risk Assessments (RRAs) such as the one already done for the Sahel region, that will support the identification of the main fragility and conflict drivers as well as resilience factors. The proposed regional analytical pieces will highlight the potential benefits and costs of regional cooperation and integration while taking into consideration the specific fragility dimensions of the priority areas. Access to data and knowledge production and dissemination can indeed be particularly challenging in fragile environments, and even more so at the regional level due to lack of harmonization, time inconsistencies of data collection exercises or absence of focus on the regional dimension. Therefore, regional programs will specifically cover this dimension, by mobilizing existing literature but also supporting the generation of new data and knowledge at the regional level to ensure FCV risk monitoring and to feed into the regional dialogue on joint mitigation actions. As an example, a dedicated regional program will support the creation of a knowledge platform for the Lake Chad region, while an upcoming Regional Economic Memorandum will inform the opportunities for sustainable and more inclusive economic growth in the Lake Chad region. c. Designing multi-year regional programs of investments to tackle the root-causes of fragility and conflicts in a sustainable way, as well as capacity building for relevant regional organizations as needed. The regional window of IDA19 will be mobilized to fund the priority actions identified through regional dialogue and based on robust analysis. The emphasis put on the four pillars in this RI Strategy Update (Connectivity, Trade and Markets, Human Capital and Resilience) will vary from one sub- region to another, depending on the specific development needs and client demands, drivers of fragility and engagement of other development partners. As the needs are immense in the FCV priority subregions, the RI lending pipeline will be sequenced so as to focus on the most pressing needs and structural challenges better addressed at the regional level, such as strengthening coordinated disease surveillance systems. There will be continuity on the emphasis placed in the 2018 RI Strategy on ensuring a good balance between investments and accompanying “soft” reforms where the latter is needed to demonstrate the impact of enhanced regional cooperation. For example, in the Sahel region, the regional and national programs will focus on a 3 steps approach: i) Preparing new emergency multisectoral operations focusing on fragile areas, ii) Developing integrated intervention packages (small infrastructures and jobs, basic services and state presence) to facilitate consolidation, and iii) Putting a strong emphasis on prevention of conflict and resilience through medium-term investments and policy changes (human development, regional connectivity). Such an approach could face some risks that will be addressed upfront while developing new regional programs: • Impact of COVID-19. The COVID-19 pandemic and the resulting economic crisis will have a significant impact on Africa. It will likely focus the attention of policymakers on urgent domestic issues and could, in an adverse scenario, further exacerbate distrust among countries and communities. To mitigate this risk, dedicated support will be provided through regional dialogue and platforms to create the conditions for sustained regional dialogue and the identification of joint solutions to the most pressing aspects of the continent’s recovery process. 56 • Further degradation of security conditions and intensification of existing conflicts . The FCV sub- regions are facing protracted medium to high intensity conflicts, as well as an hybridization of the various forms of violence (community self-defense, banditry, rebellion, violent extremism). This risk will be addressed by being realistic and adaptative in the design, geography and sequence of RI projects, as well as through the systematic inclusion of security costs during project preparation, to ensure their effective and successful implementation. Third party monitoring and digital tools for monitoring and evaluation will also be mobilized as needed to allow for supervision of projects in inaccessible areas. • Disagreement among the main stakeholders on the priorities for regional cooperation and integration. Cementing a durable compromise among the national authorities and the local stakeholders on the priorities of the regional program and the accompanying reforms to be implemented might prove to be challenging. The regional investment and joint action plans will be carefully crafted to ensure a durable commitment of the countries involved. They will be regularly reviewed and adapted to take into consideration changing developments on the ground. • Decline in support among the humanitarian and development partners. The WBG will continue to work in close coordination with the main humanitarian and development partners active in each of the FCV priority sub-regions along the humanitarian-development nexus. This will aim at optimizing the use of concessional resources through an effective division of labor based on comparative advantages and avoiding duplication and overburdening of local partners. FCV Priority Sub-Region: Great Lakes For the purpose of this Strategy Update, the Great Lakes region includes the Eastern DRC, Burundi, Rwanda, and Uganda. This sub-region has been the main theater for threats to the stability of the whole region and where the population has suffered from recurrent cycles of conflicts. The countries of the region face significant development challenges, but their magnitude differs greatly. The 2015 political crisis in Burundi interrupted a decade of growth and development. DRC also displays weak economic and social indicators. Poverty remains pervasive with 73 percent of the population living in extreme poverty. Although they also face challenges, Uganda and Rwanda are relatively better off with higher GDP per capita levels and poverty rates of 35 percent and 55 percent respectively. Political instability, violence and poverty continue to affect the lives of many, including over 11 million forcibly displaced people. The on-going conflicts across much of Eastern DRC, as well as intercommunal violence, continue to cause internal and external displacement of population, loss of human life and disruption of livelihoods. Although a peaceful transition of power followed the presidential elections in DRC in 2018, concerns remain over the deterioration of the security and humanitarian situation, mainly in the eastern part of the country. The outbreak of Ebola since August 2018 has been another humanitarian challenge. More than 300,000 Burundians have taken refuge in neighboring countries and an additional 100,000 are internally displaced. The root causes of conflict in the Great Lakes Region are multiple and interdependent: (i) State authority is limited and contested in DRC given the country’s size and its many porous borders shared with nine other countries. State-delivered services are very limited beyond provincial capitals. (ii) Lack of clarity and insecurity over land ownership is recognized as a structural cause of conflict, and this new competition for land is part of a wider renegotiation of the local economic space and re-drawing of ethnic, class, and other “boundaries” between groups. (iii) Rapid demographic growth is increasing the pressure on scarce 57 natural resources, as does massive forced displacement (iv) Mineral and non-mineral resources are abundant and it poor management. Despite more than two decades of conflict, some degree of regional collaboration and economic integration has persisted in the region. The border areas of region have a long history of exchanges based both on proximity and strong intercultural relations of the neighboring populations. Exchanges, cross- border trade and movements of population have remained intense, including during conflict periods. The World Bank, along with other development partners, supported the implementation of the Peace, Security and Cooperation Framework for the DRC and the region (PSCF) initiated in 2013. The support program rests on a foundation of strengthening the capability of the DRC state to govern effectively in Eastern Congo and has two inter-related pillars: (i) vulnerability and resilience, and (ii) economic cooperation and trade integration. WBG support to DRC state capability is provided through the DRC national program by helping improve service delivery at the provincial and local levels and enhancing the governance of the extractive sector. In addition, US$1.07 billion has been committed under the regional integration program to help address vulnerability and improve community resilience in Eastern DRC and support regional connectivity, cross-border trade and integrated agriculture to develop regional value chains. Additional financial support for the RI agenda during IDA19 would be based on efforts made to improve the implementation performance of the existing portfolio and commitment of member countries for meaningful regional collaboration. Overall, the pace of implementation of the current active RI portfolio in the Great Lakes region is slow and the focus will be on accelerating the pace of implementation of the existing program before considering additional support. The IDA19 pipeline includes scaling up the trade facilitation work. MIGA is also supporting investments in a vertically integrated off-grid solar company currently operating in the Great Lakes and HoA regions. FCV Priority Sub-Region: Horn of Africa Five countries constitute what is called the ‘small’ Horn - Djibouti, Eritrea, Ethiopia, Kenya and Somalia. With a total area of around 2.5 million square kilometers, it includes some of the largest as well as the smallest countries in Africa. The sub-region has a population of around 180 million and is expected to grow to around 250 million by 2030. The combined GDP amounts to around US$170 billion and was growing rapidly before COVID-19. Over 70 percent of the population lives in rural areas, where poverty is concentrated. There has been a protracted period of tensions between states in the sub-region. However, in an unprecedented set of developments in 2018, Ethiopia and Eritrea arrived at a rapprochement thus turning back the clock on the era of ‘no war and no peace’. If this political and diplomatic progress is sustained, then the Horn may start to rewrite the narrative on drivers of fragility in the sub-region. Although the levels of fragility in the Horn vary across different geographic pockets, the following are some of the key fragility drivers that have affected the level of stability in the sub-region: (i) Intra- and inter-state conflicts have historically assumed regional proportions. The region’s borders are among the most contested in the world and it continues to serve as a theater for varying strategic global interests. (ii) The topography of the Horn has given rise to various forms of center-periphery tensions within each state. These are reflected in parts of states being neglected and resulting in some level of distrust. (iii) Ethnic and communal tensions playing out in social and political spheres, including in recent elections in some of the states. (iv) Contested national resource sharing arrangements between states, including on transboundary rivers and maritime territories. (v) There are pockets of insecurity and terrorism, sometimes fueled by wider geopolitical influences. These have often led to forced displacement of populations both within and across states. (vi) Chronic poverty and limited capacity to buffer the impact of weather-related events have affected communities and livelihoods and formal employment is rare and the private sector underdeveloped. 58 In 2018, the leaders of the Horn requested the WB to help bolster the recent diplomatic progress with a package of investments and policies to deepen integration, thus creating both dividends from the recent rapprochement between states and making it harder to turn back the clock in future. The Horn of Africa Initiative is fully owned and driven by the five countries that are part of it. The WB along with AfDB and EU have helped the countries develop a set of priority regional investments covering four key pillars: i.) regional infrastructure connectivity; ii.) trade and economic integration; iii.) human capital development and, iv.) resilience to climate and other shocks. The countries have agreed a package of priority regional reform and investment interventions to take forward the economic integration and cooperation agenda. The WB has committed US$2 billion in IDA-19 financing for a subset of projects from the bigger package. The lending program under IDA19 in the Horn is expected to focus on financing rehabilitation of sections of two economic corridors linking Ethiopia to the coastal countries, improving energy access through promoting power trade, supporting agro-pastoralism and food security due to shocks, and pandemic preparedness. The IFC will leverage IDA and will work to create private finance opportunities in connectivity and regional infrastructure and productive real sectors through value chain linkages including unlocking the potential of the livestock sector using replicable business models, inclusive approaches, and cross-cutting themes such as an enabling business environment. FCV Priority Sub-Region: Lake Chad The Lake Chad region comprises a set of administrative areas across Cameroon, Chad, Niger and Nigeria. The estimated population amounts to around 20 million inhabitants and is growing rapidly. A large share of the population lives in rural areas and agriculture and fishing are the main livelihoods. The region is characterized by one of the highest concentrations of extreme poverty in the world and is lagging on almost all development indicators. The Lake Chad region is also extremely fragile and is experiencing a protracted and high intensity conflict. Boko Haram, a religious sect, turned into an armed insurrection in 2009. Since Summer 2019, a resurgence of attacks have been observed and security conditions remain very fluid. The ongoing conflict has provoked an acute humanitarian crisis, marked by large-scale forced displacement, food insecurity and a further reduction of access to basic services. The drivers of fragility and conflict in the region are mutually reinforcing, creating the risk of a lasting conflict trap. The borderland regions have historically suffered from underinvestment and limited attention, consequently experiencing severe gaps in infrastructure and basic services access. Competition for natural resources is exacerbated by weather-related events, impact of climate change and rapid population growth. In the context of pervasive poverty, limited local capacity and weak early warning mechanisms, the magnitude of the impact of weather-related events and climate change is dramatically amplified. Weak governance has led to distrust of national authorities while local and traditional authorities have been weakened and displaced by the ongoing conflict. Violent extremism mobilizes people’s perception of exclusion, which are rooted in inequalities, excessive and indiscriminate use of violence by armed forces and corruption. Finally, the Lake Chad region is one of the most violent in Africa. As observed in the broader Sahel region, the boundaries between the various forms of violence (banditry, community self-defense, rebellion and violent extremism) are increasingly porous. While formal regional integration efforts have been limited until recently, intense and informal cross- border connections characterize the region. Regional integration in the Lake Chad region is mostly the fruit of everyday activities since the inhabitants of the region are strongly bound by cross-border linguistic, trade, ethnic, cultural, and political ties. The political alignment of the four countries, 59 expressed at the Ministerial Roundtable that took place on the margins of the WBG 2019 Annual Meetings, on the need for a regional approach supported by the WBG and other partners creates a momentum. In this context, the recently approved regional project, the Lake Chad Region Recovery and Development Project (PROLAC - P161706), will lay the foundation for a gradual step-up of the WBG’s regional engagement. In North-Eastern Nigeria, the MCRP Project has been restructured through an additional financing to align its components with the regional project, so the two projects work together to support the region. Under IDA19, the regional program in Lake Chad will focus on four main dimensions: i. Supporting enhanced regional dialogue and filling existing knowledge gaps, notably through a) support to regular engagement of relevant national and local stakeholders, b) building capacity within the Lake Chad Basin Commission (LCBC) and c) the creation of a regional knowledge platform to support data collection and treatment; ii. Enhancing social cohesion and restoring trust through mainstreamed citizen engagement mechanism in the project preparation and implementation; iii. Restoring resilient livelihoods and developing regional value chains to generate additional economic opportunities, notably for the youth and women, in the predominant agricultural sector while enhancing resilience to weather-related events and climate change; iv. Better connecting the Lake Chad region to the broader region, notably to improve energy access. The IDA19 pipeline for Lake Chad includes, scaling-up of SWEDD, Chad-Cameroon Corridor Project and AF for PROLAC. FCV Priority Sub-Region: The G5 Sahel Burkina Faso, Chad, Mali, Mauritania and Niger constitute the G5 Sahel (referred to as Sahel here). The Sahel span over 7 million square kilometers and has a population close to 80 million inhabitants. It is characterized by predominantly arid and semi-arid land, high temperatures, and fluctuating rainfalls. Mobility of populations has been key for people to adapt, through many trade routes along which towns and markets are situated. The West African coastal countries are the main destination markets for Sahelian produce, especially in agriculture and related sectors. Poverty remains extremely high at 41 percent in 2015 and the decline in poverty levels has been slow. According to the human capital index (HCI), the G5 countries are at the bottom in the areas of health, education and other measures of non- monetary poverty. Since 2012, the Sahel region has experienced adverse spillovers from the conflict in Libya, the rebellion and the political crisis in Mali and the Boko Haram insurgency in Nigeria, contributing to the spread of violent extremism throughout the region. Agro-pastoral activities, trade and food supplies have been disrupted and access to basic services has declined further. According to the Sahel Risk and Resilience Assessment, the main drivers of fragility in the Sahel are (i) dynamics of exclusion and perceived or real injustice; (ii) a crisis of confidence in state institutions, especially from groups feeling marginalized; and (iii) increased competition around natural resource, aggravated by limited capacity to deal with the impact of climate change and population growth. A hybridization of different types of violence is also currently being observed. The current RI portfolio in Sahel has been partly initiated through the 2013 joint WBG/UN/EU Sahel initiative that aimed at offering a more integrated regional response to the Sahel crisis. It led to several projects in the resilience, human development and connectivity sectors. Some of these projects have become flagships, such as the Sahel Women's Empowerment and Demographics Project (SWEDD), addressing the needs of Sahelian women and adolescent girls to facilitate demographic transition, and the Regional Sahel Pastoralism Support Project (PRAPS) focusing on pastoralist communities in trans- border areas and along transhumance axes. However, the Sahel countries continue to face huge social 60 and development challenges. Spillovers of conflicts, poor governance, insufficient regional coordination between countries and among donors and lack of scale have been identified as major constraints. To support G5 countries’ efforts to tackle this difficult situation, the IDA allocation for G5-Sahel countries is expected to increase significantly under IDA19. Around US$5.6 billion of national IDA will support the five countries and an additional US$2 billion in RI programs. In line with the Sahel RRA, priority will be given to prevention of violent conflict through a spatial approach focusing on fragile areas that can still be accessed and through integrated phased multi-sectoral interventions. This approach will apply first in the ‘’three frontiers area”. The WB regional integration program takes a twin-track approach in delivering the four RI strategic priorities considering the Sahel region’s main drivers of conflicts: (i) addressing the immediate challenges of fragility and resilience, especially when they have regional spillover risks and in coherence with WB’s country program efforts, and (ii) helping the G5 countries address some challenges where regional integration could have an important impact on economic diversification and regional connectivity. In close coordination with the CMUs, the Sahel Alliance, development partners and humanitarian organizations, the Sahel RI program will focus on: i) improving regional connectivity and mobility, focusing on energy and digital infrastructure as well as transport corridors; ii) promoting women’s empowerment to facilitate their integration and demographic transition in the next decades, which means effectively implementing and building upon the SWEDD program; and iii) Enhancing resilience by facilitating a multi-donor engagement integrating national, regional and private sector programs supporting agro-pastoralism activities, food security and agriculture value chains, as well as complementing country programs in a spatial approach to target cross-border hot spots of fragility through an integrated, multi-sectoral interventions in the Three Frontiers area. The program for IDA19 proposes to include a project on Regional Electricity Access, Dakar- Bamako Corridor, the Lome, Ougadougou- Niamey Corridor; PRAPS 2 and an Additional Finance for SWEDD. Sahel Countries will also be part of the West Africa Resilient Food Systems Program and the West Africa Energy DPO and the WAEMU DPO. Under the Sahel G5 initiative, IFC plans to support the development of regional infrastructure, build regional value chains in the productive real sector, and lead regional inclusive business approaches. On the analytical front work is under way on a study of Security Expenditures in the Sahel at the request of the G5. 61 Annex VI: WBG Collective Undertaking with Private Sector on Regional Integration Overview of the Private Sector and WBG Collaboration on RI The private sector could potentially be a significant beneficiary of regional integration but has not fully realized this potential in Africa. While the public sector sets up policy frameworks and provides basic infrastructure, it is the private sector that engages in cross-border trade, financing, and investment for regional integration. The attraction of larger markets, cheaper inputs and lower transportation costs resulting from deepening of integration could hold tremendous opportunities for boosting private enterprise and creation of jobs – both of which would be critical in the recovery from the current economic crisis. Given the common cross-border risks and spillovers, and the landlocked nature with relatively small size economy of many countries, RI is essential to realize the full potential across African economies. Yet, the activities of the private sector in Africa are still limited and dominated by the informal sector. Africa’s intra-regional trade made up only 16.6 percent of total trade in 2017, compared to 59.4 percent in Asia and 68.1 percent for intra-European trade33. To increase investment, trade, and economic development, it is vital that the private sector has a more influential role in the region in setting the pace and direction of integration. The ratification of the African Continental Free Trade Agreement (AfCFTA) provides an opportunity to create a continental market of 1.3 billion people – the realization of this opportunity is crucially dependent on the private sector being given the space and opportunity to drive the process. In these challenging times of the COVID-19 crisis, supporting the private sector, which is the main driver of employment, has become more crucial than ever. The COVID-19 pandemic has brought long-lasting challenges to economies, putting people’s livelihoods and jobs at risk. With a very severe global recession, restrictions on people’s movements and pressure on commodity prices, trade volume is being significantly impacted, and manufacturers connected to global and regional supply chains are experiencing severe disruptions. Affected industries are seeing a steep drop in demand and production, leading some companies to face cash shortages and forcing them to scale back operations and lay off employees. The stress is especially high on MSMEs, which often have less capital for their operations and are highly vulnerable to global shocks. Experience from previous shocks shows that keeping companies solvent is key to saving jobs and limiting the economic damage. WBG has responded with a fast-track global financing package, including US$8 billion from IFC and US$6.5 billion from MIGA, to help the private sector to maintain economic activities, keep goods and services moving, and to protect jobs. There is a growing practical need for leveraging the WBG’s convening power, stimulating regional coordination in tackling the pandemic while enhancing private sector-led economic recovery. There are opportunities to help Africa’s recovery by enhancing WBG collaboration on regional integration. Under the current WBG RI strategy, WB, IFC, and MIGA have been positioned to synthesize their programs and instruments to contribute to enhancing private sector activities for RI. While the overall strategic approach and commitments in the current RI Strategy remain relevant, further collaboration is required to streamline WBG’s priorities and operations. Recent developments in the WBG have brought wider opportunities for greater collaboration. IDA19 has seen a 50 percent increase in the allocation for the regional window. Through the IFC 3.0 Strategy as well as IFC’s strategy for Africa, IFC is enhancing upstream operations together with increased exposure in the Africa Region. IFC has also developed a “platform approach” that brings together the range of WBG products and services to scale - up engagements across the region. During MIGA’s new Strategy cycle (FY21-23), MIGA will continue to increase its proportion of guarantees in lower income and fragile states to about one-third of its portfolio, 33 UNCTAD, Economic Development in Africa Report 2019 62 the majority of which will be in Africa and may have regional linkages. The US$2.5 billion Private Sector Window in IDA 19 provides larger opportunities for the IFC and MIGA to invest in lower-income and fragile states in Africa, including possible opportunities to take regional approaches. The existing commitment of the WBG for regional integration in Africa amounts to US$17.5 billion. These cover the four thematic areas proposed in this Strategy Update: regional connectivity; trade and market integration; human capital; and resilience. The respective commitments of WB, IFC and MIGA are provided in Table 6.1. Table 6.1: Active portfolio of WBG RI projects (end-FY20) RI Projects in Africa portfolio (% Active number Financial of total exposure/commitment) of projects commitment WB 16 77 US$13.6 billion IFC 18 106 US$1.6 billion MIGA 31 33 US$2.2 billion WBG US$17.5 billion IFC and MIGA’s Strategic Priorities and Progress on WBG’s Private Sector agenda IFC is contributing to RI in Africa by promoting trade and investment integration. Three key focus areas in the Africa region include: (i) support regional connectivity and develop sub-regional infrastructure, (ii) develop regional value chains and support regional champions, and (iii) disseminate inclusive private sector solutions across Africa, foster partnerships, trade, and capital flows. The cross-cutting themes underlying these focus areas are: Scaling-up disruptive technologies across priority areas, supporting reforms for regional integration, and building and expanding regional partnerships. Of IFC’s total investment portfolio of US$9.1 billion in Sub-Saharan Africa, approx. 18 percent is in regional projects (US$1.6 billion). 43 percent of this is in disruptive technologies and funds, 24 percent in regional infrastructure projects, 22 percent in regional manufacturing, agribusiness and services projects, and the remaining 11 percent in regional financial projects34. Key regional projects include mortgage refinancing in West Africa to support access to affordable housing, SME and microfinance credit growth, warehouse financing, healthcare financing, regional funds to support the development of the private sector in the targeted regions, and regional power development. IFC’s strategy for investment through Private Equity (PE) funds focuses on partnering with quality local fund managers in multiple geographies that also complement IFC’s efforts to mobilize additional institutional capital to fund critical high-growth sectors primarily on attracting institutional equity to fund the needs of fast-growing small and mid-market companies. IFC is building a diverse and complementary Private Equity portfolio for Africa. The portfolio is varied with funds ranging from SME Ventures funds that have average fund sizes smaller than US$50 million to larger growth equity funds targeting mid-to-large cap investments across the region. In addition to this, as at end-FY20, 28 percent (US$126 million) of the total SSA Advisory portfolio (US$437.5 million) was made up of multi-country/regional projects. Projects are aligned with the RI strategy and include 34 Note: IFC has supported the expansion of a large number of financial players across the region, supporting the development of regional financial infrastructure. This is not captured in the numbers above as the projects are disaggregated by country for reporting purposes. The data on all the regional financial projects is being collated by portfolio teams. 63 investment climate reform, trade facilitation, competitiveness, J-CAP, microfinance, digital financial services, energy access, regional power projects, and gas-to-power projects. Given MIGA’s mandate to promote cross-border investments, RI is an integral feature of its core business model. MIGA focuses on the following three key areas in its RI work: (i) Intra-regional cross- border investments: supporting investors from the Africa region who operate and invest across national borders into one or more regional markets, evident mostly in the ICT sector and the financial sector. This includes support to Senegal’s largest telecommunications provider, Sonatel, in its expansion into West Africa, support to Eastern and Southern African Trade and Development Bank (TDB) a regional development bank to expand its trade finance activities within its regional IDA and FCS markets, support to Development Bank of South Africa (DBSA) as a development bank for the Southern African sub-region and issuing guarantees to Absa Bank and First Rand Group both of South Africa for investments in 15 of their respective subsidiaries across the region. (ii) Multiple country cooperation on specific issues: supporting interregional projects with developmental benefits across a number of stakeholder host countries. For example, regional energy supply benefited from MIGA’s support to Sasol of South Africa in the construction of a cross-border gas pipeline connecting Mozambique and South Africa, the first cross border initiative in sub-Saharan Africa to develop regional natural gas markets. (iii) Thematic development of multiple projects across the region can support regional integration, to the extent that such projects benefit from replication, refinement of prudent business models, and enhancement of economies of scale35: supporting private investors that develop projects in the same or similar sectors across multiple countries, building on their prior experience to enhance and introduce best practices in new countries, and achieving economies of scale. This pool of investors, including infrastructure funds such as Actis (investing in Cameroon, Senegal and South Africa) and Lekela (investing in Egypt, Senegal, and South Africa), build on their experience and lessons of earlier projects to new projects in new jurisdictions which are being developed. Priority areas and actions committed in the 2018 RI Strategy remain active and relevant, but greater WBG collaboration is needed to Maximize Finance for Development (MFD) 36 in the RI agenda. The 2018 RI strategy emphasizes the importance of the private sector in energy, transport, trade, agriculture and ICT sectors, preparation and financing of sub-regional and cross-country infrastructure, harmonization of policies, and developing regulation for PPPs and private sector participation. Table 6.2 shows the detailed progress on the commitments from the RI Strategy. Although, there is clear progress in each institution’s RI related activities, this Update underscores the need for collective WBG approaches in addressing all aspects of binding constraints for economic integration in identified priority areas. In order to have the right mix of appropriate WBG instruments, MFD in the regional integration agenda will include a combination of (i) Upstream interventions including policy and regulatory reforms, policy harmonization, market development institutional support, and convening/coordinating multiple host country governments; (ii) Risk Mitigation Instruments including political risk insurance and credit enhancement guarantees to facilitate private investments (risk sharing guarantees) for RI projects (including guarantees for loans to Financial Institutions ), IFC’s blended finance tools (including IDA-PSW) as well as infraventures funds to support early stage project development for infrastructure, to promote regional connectivity and trade; and (iii) Investments to mobilize private sector including regional 35 MIGA has not included such projects in the RI data in Table 1 as such effects are difficult to substantiate ex-ante. 36 WBG, Maximizing Finance for Development (MFD) Brief (Jan. 2018) 64 investment projects and advisory services to the public and private sector. This framework will be applied in selective areas during the remainder of this strategy period as outlined below. WBG’s RI strategic priority adjustments Consultations were carried out with private sector leaders in Africa for preparing this Update and these consultations have guided the proposed priorities. In July 2020, over 50 private sector leaders (CEOs, Vice Presidents and other senior management of large and medium-sized companies) participated in IFC- led consultations to inform this Strategy Update. There was strong support for WBG continuing to play a significant role in promoting economic integration in Africa and the proposed WBG priorities in this Update were broadly endorsed. The participants articulated a strong rationale for the private sector to benefit from deepening of integration – in terms of reaching larger markets and lowering of input and transportation costs. They noted the opportunities for Africa to tap into opportunities emerging from the current pressures on existing global value chains. They identified the main barriers for integration as lack of harmonization of policies and norms, scarcity of skilled workforce and political economy factors resulting from perceptions of ‘winners and losers’ from integration and the risk of emergence of nationalistic sentiments during the ongoing crisis. The COVID-19 outbreak provided an opportunity to re- strategize and focus on sub-regional value chains to increase competitiveness and enhance regional trade flows and integration. They advised the WBG to develop specific proposals and projects which would be supported going forward. The RI Strategy Update offers an opportunity for the WBG to further focus on the following priority areas for strengthening the MFD approach. These four areas reflect the outcome of dialogue and assessment of emerging opportunities. The objective would be to have visible and transformative impact in these areas during the remainder of the RI Strategy period. (1) Private sector engagement in FCV settings (four FCV sub-regional priorities): This Update proposes that the WBG will enhance its operations in the four FCV sub-regional priorities: Horn of Africa, Sahel, Lake Chad, and the Great Lakes. Although FCV settings could be the toughest markets for the private sector, the WBG FCV strategy stresses the importance of the WBG’s integrated MFD approach to identify and cultivate the window of opportunity to support sustainable private sector development. This is because the potential for private sector engagement expands as countries emerge from fragility, and on some occasions, the private sector is more vibrant than the public sector in FCV settings, acknowledging that the private sector in such settings may be characterized by informality. To deal with FCV circumstances, a platform approach that brings together the whole range of WBG products as packaged solutions (including investments, risk mitigation, advisory services, and enabling reforms) will allow the WBG to jointly deliver private sector led solutions to regional challenges, and bringing the countries together around common goals. The approach will include products that aim to improve the investment climate, de-risking investments, facilitating long-term commitment, focusing on client capacity building, and proactively providing implementation support. Given the unstable circumstances where the private sector is mainly informal or dominated by MSMEs, WB’s interventions to improve investment climate, IFC’s investment and advisory services operations, as well as MIGA’s guarantees (often in support of intermediaries such has financial institutions who can target and support the local informal sector), are critical elements of the WBG’s harmonized approach. Within this context, on the advisory front for IFC, a focus is on programs helping to enable market-wide interventions to improve the investment climate, supporting the private sector to improve their governance, compliance and operations, linking large investments with local value chains and facilitating financial inclusion. 65 • Regional Economic Memorandums in three FCV sub-regional priorities will provide the economic narratives of RI, which will contribute to future possible private sector engagements. (WB) • Develop a platform approach in the prioritized four FCV sub-regional priorities. (WBG) • Seek to attract new private businesses and social enterprises to the refugee hosting areas, which should lead to better employment opportunities for refugees and the host community, and increase access to products, services, and opportunities. (IFC) : Enhanced one-WBG collaboration through a platform approach, and increased private sector mobilization in four FCV sub-regional priority areas. (2) Developing priority regional value chains that contribute to Jobs and Economic Transformation (JET): Given the priority of IDA19’s JET Agenda and WBG’s RI Strategy Update prioritization in Trade and Market Integration, a stronger collaboration will be pursued to develop regional value chains, especially on agriculture and food. This will contribute to building a stronger private sector, help people to connect to job opportunities, and increase food security in the region. The COVID-19 pandemic has highlighted the importance of focusing on regional value chains and JET, which requires a comprehensive approach to include skills development, utilizing innovation and technology, and focusing on women entrepreneurship. Possible support may consist of (i) gap analysis on value chain linkages, (ii) improving market access to processors, (iii) harmonization of regulations and trade facilitation, (iv) improving financial access, and (v) reducing potential risks. • Collectively identifying at least three regional value chains including agriculture and livestock areas (in the four FCV sub-regional priorities). (WBG) • Monitor the impact of regional projects contributing to JET. (WBG) • Support the supply chain integration across countries/ sub-regions through (i) Regional champions, (ii) capacity building and product upgrading; (iii) support to regional financial institutions; (iv) financial infrastructure and capital market development; (v) trade finance; (vi) market creation, support, and scale-up of climate-resilient agricultural systems through advisory (WB, IFC) : Addressing the JET agenda through identifying and developing key regional value chains that promotes private sector investments. (3) Building continental markets: Non-IDA large economies such as South Africa, Angola, Egypt and Morocco, among others, are important to strengthen and scale regional private sector activities. Larger economies can be a source of substantial FDI into the wider region, benefiting from familiarity with the regional circumstances often reflected in upward adjustments to risk appetite. Larger economies also tend to receive larger FDI, and it is crucial to maximizing the regional benefit through spillovers from the private sector’s activities in larger economies. This will facilitate linking large investments with local value chains and promote financial inclusion at the regional level. Areas to emphasize will include financial integration. This support could have a significant but indirect impact on employment through multiplier effects by creating an enabling environment and access to urgently needed credit. For example, MIGA provides capital optimization guarantees to several South Africa banking groups, in support of their subsidiaries across sub-Saharan Africa, amongst which are several IDA and/or FCS. MIGA has supported Absa and First Rand Bank’s commitment to introduce and entrench sophisticated banking and financial services in these host countries and provides essential access to credit in mostly underbanked markets. These guarantees 66 have generated over US$700 million in new risk weighted asset (RWA) capacity across African host countries. MIGA has just launched a new product to extend MIGA’s Non-Honoring of Financial Obligations Regional Development Banks. A first project of this kind has been executed to support regional IDA and FCS markets in the African context. IFC is expanding its Small Loan Guarantee Program (SLGP) through IDA’s PSW to de-risk lending for financial institutions and combining investment with advisory services so that the private sector partners could reach more small businesses. IFC’s first SLGP implementation was with Banque Atlantique, a subsidiary of Morocco's BCP Group, to grow its small business lending in eight West African countries, all of which are FCS or low-income IDA countries. • Identify opportunities for developing continental financial and trade integration. (WBG) • Expand WBG collaboration in financial integration projects. (WBG) • Expand to ensuring access to credit in underbanked markets through supporting Financial Institutions and South African based financial institutions. (MIGA) • Support and facilitate the regional expansion of clients in larger markets. (IFC) : Enhance regional connectivity with larger markets in Africa through developing WBG’s continental financial and trade integration projects. (4) Leverage private finance for the economic connectivity agenda: WBG’s RI projects, including infrastructure development and market integration, could have more focus on mobilizing private finance. This has become more important than ever in the aftermath of the COVID-19 pandemic when governments are reallocating their resources to short-term needs, and long-term finance, in particular, is drying up. Given the increase in demand on long term concessional finance that will mobilize private finance, WBG could respond collectively through fully utilizing each institution’s financial tools effectively. This will include leveraging the Private Sector Window and Regional Window of IDA 19. IFC is also considering regional upstream platforms to support the development of regional ICT infrastructure. • Support regional development banks and other financial institutions to mobilize private finance in infrastructure development and trade finance, providing risk insurance or non-honoring guarantees to their lenders, with funds to be on-lent by the RDB into regional projects and activities. (WB, MIGA) • Support IPP regional projects in power sectors such as Ruzizi III Hydropower project, Mpatamanga Hydropower project in Malawi. (WBG) • IFC supported the development of the EASSy cable in Eastern Africa, and is considering supporting a similar expansion on the west coast of Africa. (IFC) • Develop PPP frameworks to expand the role of the private sector in infrastructure. (IFC) • Provide early stage financing for project development for large and complex infrastructure projects. (IFC) • Use upstream initiatives and platform approaches wherever applicable to develop opportunities and scale-up role of private sector. (IFC) • Investigate expansion into buyer’s credit and trade guarantees, partly in support of the AfCFTA. (MIGA) : Increased private finance mobilization through WBG RI projects. 67 Table 6.2: Progress on delivering on commitments for the private sector agenda in the 2018 RI Strategy Near term flagships committed in the 2018 RI Strategy Progress and issues to be considered Generate economic dynamism along regional economic corridors. IFC Support to regional ICT and broadband operators and IFC supported the EASSy cable in Eastern Africa and is investment in securing and increasing supply of strategic considering supporting a similar expansion on the west agricultural commodities to ensure sustainable coast of Africa. IFC is also considering regional upstream development impact through support of irrigated value platforms to support the development of regional ICT chains. infrastructure. Given the complexity of regional ICT projects, WBG collaboration will be critical mainly on the regulatory aspects. WBG Preparation and financing of sub-regional and cross- WB has initiated regional harmonization interventions in country infrastructure, harmonization of policy, and the solar energy market in West Africa. IFC is structuring regulation for PPPs and private sector participation. risk mitigation instruments. The harmonization process will have to be phased in, given that different countries within the sub-region maybe at different stages. MIGA support to lenders to provide long-term financing for regional infrastructure through political risk insurance may face challenges due to the COVID crisis. Adjustments are needed to specify priority programs to practice MFD approach. Develop functioning regional markets in four priority sectors: energy, digital and telecom markets, financial sector and technical skilled labor. IFC Support the supply chain integration across countries/ IFC is actively engaging with clients to support their sub-regions through (i) Regional champions, (ii) capacity regional expansion, developing regional financial building and product upgrading; (iii) support to regional infrastructure, and expand access to finance. Building on financial institutions; (iv) financial infrastructure and existing sub-regional blocs and reform agenda will be key capital market development; (v) trade finance; (vi) to implement the platform approach in the priority market creation, support, and scale-up of climate- sector. IFC Advisory services also target regional resilient agricultural systems through advisory. initiatives both at investment climate programs targeting conducive regional environment (harmonizing and aligning market structures) level as well as at capacity building level. Scale-up access to quality public services and entrepreneurship through complementary regional solutions. IFC Replicate regional access to finance programs and IFC is supporting the development of digital financial support the emergence of disruptive technology services through its advisory services. Activities include solutions and regionally focused investment funds for development of appropriate products and services, entrepreneurship. supporting capacity building, and implementation and roll-outs, which has led to a significant increase in adoption and usage of digital financial services. IFC is also investing in regional fintech players. In order to support the development of disruptive technologies and digital financial services, a holistic approach will be crucial, including regulatory engagement with the WBG, upstream engagement, advisory services and investments. WBG Scaling Solar, scaling wind and Sahel Irrigation Initiative. WB is supporting the WAPP to strengthen its regional technical capacity for preparing large-scale solar parks and integration of solar electricity into the grids. WB is also supporting ECOWAS and BOAD to develop regional solar markets and facilitate access to debt financing in support of the stand-alone solar systems market. Cooperation with IFC and MIGA is critical to mobilizing private sector into the solar energy market. Through its upstream platforms, IFC is supporting the development of Scaling Solar -type initiatives to develop mini-grids and off-grids. MIGA remains fully engaged in Scaling Solar initiative with its first guarantees in support of two Scaling Solar projects in Senegal executed in FY2020. Promote collective action to address risks of regional economic contagion, fragility, epidemic, and climate ‘hot spots’. IFC Build capacity at the regional level with advisory IFC is supporting regional advisory programs focusing on services; adopt conflict-sensitive and programmatic the ECOWAS/CEMAC and OHADA sub-regional blocs. approaches at the regional level; and address rural African Continental Free Trade Agreement (AfCFTA) conflict around migratory and stationary systems of presents an opportunity to expand RI, and further agriculture and livestock production through the develop sub-regional bodies like OHADA. development of fodder banks. 69 Annex VII: Approach to WBG Convening and Engaging RECs to Foster Regional Integration in Africa Realizing the potential of regional integration requires effective collective action by groupings of countries. A number of factors facilitate or hinder the interest of individual countries to undertake such collective action and influence its pace and extent. These factors include degree of alignment between regional and national interests, the relative power and influence of different interest groups within and across countries, perceptions of loss from integration, diplomatic and security considerations, and differing perceptions of time horizon for realizing benefits from integration. Such factors are not cast in stone, but evolve over time, morph into varying forms of regional dynamics and are sensitive to domestic leadership interests and domestic public perceptions. Progress on regional integration happens when there is a broad alignment of interests amongst countries and this needs to be followed by effective implementation of agreed commitments. It takes time and effort to reach that ‘sweet spot’, and when groupings of African countries have led the way in that process, they have found active support from the private sector, civil society and development partners. Convening of countries has been a key element of WBG’s RI engagement over the years. It has evolved organically during the time and currently takes place at different levels – from technical to policy, from small ‘coalition of willing’ country groupings to larger REC groupings. Given the growing maturity of WBG’s RI program, it is proposed that convening now become a more explicit part of the RI program. In this regard, the 2018 RI Strategy had called for piloting the use of various ‘development diplomacy’ tools. This involves using analytics and lending to influence and be influenced by the level of interest amongst countries to work in a collective manner and accordingly customize WBG policy and financial interventions. During the past two years, there has been a more explicit use of development diplomacy in some of the FCV priority sub-regions and in some of the ‘soft’ policy engagement areas of the RI program. Given the anticipated increase in RI lending commitments and the opportunity in helping countries to shape the recovery efforts, it is proposed that the WBG will put in more efforts at convening countries for identified RI priorities. This would be done in close collaboration with CMUs, PGs, regional institutions, private sector and development partners. This Strategy Update proposes active WBG convening to aid in the continent’s crisis recovery efforts. More explicit WBG convening of countries and stakeholders would be undertaken in four thematic areas relevant to the recovery efforts: (i) pandemic preparedness (working with AUC, Africa CDC and relevant RECs); (ii) promoting regional trade and AfCFTA (working with AUC and relevant RECs); (iii) developing regional energy markets (working with WAPP, SAPP and EAPP); and (iv) development of regional value chains (working with relevant RECs and private sector). Another form of convening would be undertaken to bring together countries and partners in some of the FCV sub-regional priority areas. The objective here would be to ensure that the regional fragility and development challenges are being systematically addressed and the impact of WBG support is being optimized. An important pathway of the convening process involves working closely with the RECs. Further developing the strategic engagement with the RECs is a policy commitment in IDA19 and this is an opportunity to build upon the existing wide-ranging engagement with the RECs in the RI program. For the WBG to be successful in carrying out this commitment, its relationships with RECs going forward must be selective and strategic, and the projects it finances to promote regional integration must be impactful. Not only do the RECs and their specialized institutions constitute key building blocks for economic 70 integration in Africa, but are also key actors for the implementation of the African Union’s (AU) 50 -year structural transformation and development plan – Agenda 2063 – for realizing the Pan-African vision of “an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena”. The partnership between the WBG and the RECs would be built upon respective comparative advantages – the WBG’s technical and financial strengths combined with the political engagement and high-level convening functions of the RECs. As the building blocks and implementing arms of the African Union’s continental integration agenda, the RECs play an important role in the implementation of the WBG’s support to Africa’s RI agenda. They also serve as convening forums for discussions among member states on matters relating to trans- boundary, socio-economic, free movement of people and security concerns. These clear political mandates are the comparative advantages of RECs, and one of the main conditions for the successful implementation of the RI agenda in Africa. The WBG has maintained multi-level engagements with the AUC, 6 RECs and 18 specialized institutions as partners in the implementation of the RI program. The WB currently has about US$300 million in grant resource commitments to RECs and other regional institutions. In addition, there are IDA lines of credits in place with two regional development banks for US$700 million - with the West Africa Development Bank (BOAD) and Trade and Development Bank (TDB). Effective implementation of the ongoing projects is a key priority. Modalities of Engagement AUC-WB Engagement: The main purpose of this partnership is to work together to make progress on key continental priorities of regional integration. The issues range from agriculture and food security to digital and infrastructure development, trade and capacity development – all aligned with the WBG RI Strategy for Africa, and importantly, with RECs and AUC priorities. High-level engagement would be maintained between the AUC and WBG supported by regular technical level engagement. The engagement will involve a range of AUC departments and WB GPs and include provision of grants by the Bank to the AUC, and sharing of information and analytics, joint advocacy and mutual support of broad policies for integration. Support to the African Continental Free Trade Area (AfCFTA) and Digital Initiative features prominently in the engagement, as it contributes to the objective of promoting intra-regional trade in continental Africa. WB-RECs Engagement: The primary focus of this partnership is on the implementation of the WBG’s RI strategy in support of RECs - CEMAC, COMESA, EAC, ECOWAS, IGAD, SADC (please see Figure 7.1 on membership of various regional groupings in Africa). WBG support to these RECs covers the development and implementation of regional policies and reforms needed to create regional markets for goods and services; regional collaboration for managing public “goods” including energy and transport connectivity and addressing the challenges and pressures they face as a result of public “bads,” such as climate change. These engagements address economic and financial integration, connectivity, disease surveillance, trade and market integration, and resilience. AFCRI manages the engagement with RECs, in collaboration with CMUs where they are headquartered and with technical input from GPs. There are, at least, structured biannual dialogue with all RECs covering policy and operational issues, including reviewing progress with implementation of ongoing projects. WB-Specialized Institutions Engagement: The partnership with sector-specific institutions supports programs such as regional power pools and river basin authorities, health, education, financial, and other 71 priority sectors, as well as support to institutional development. GPs manage these engagements, in close collaboration with ACFRI. Despite the notable progress in the WBG’s partnerships with RECs over the years, and notwithstanding the commitment of significant resources to the RI agenda, these partnerships have continued to present challenges. These include, low institutional capacity in the RECs, the ad-hoc and poorly structured nature of some of the dialogues and partnerships, and a disproportionate focus on donor-recipient relationships – as opposed to partnerships that foster collaboration for results. Proposed WBG’s New Approach to Partnerships with RECs The recent consultations with RECs on the WBG’s RI Strategy Update revealed that the four proposed pillars are broadly aligned with their priorities. Moreover, in its evaluation of WBG’s RI interventions in Sub-Saharan Africa, the Independent Evaluation Group (IEG) recommended intensified partnerships with regional stakeholders in order to promote collective action and knowledge sharing within and across regions to foster RI. To enhance collaboration and improve RI outcomes in Africa, the Bank’s partnership with the AUC and RECs must be driven by three main considerations: Streamlining partnerships with the RECs around key strategic and results-focused priorities for regional integration: Beyond requests and deployment of financial resources, this will include pursuing common goals that utilize the experiences and comparative advantages of the RECs and WBG to move a joint RI agenda forward with mutual accountability; b) Pivoting the dialogue with RECs on the RI agenda to improve the performance of the WBG’s portfolio in supporting the accelerated development of cross- border markets and regional value chains, through regular high level dialogues and knowledge sharing. This will serve as an important contribution to the post COVID-19 recovery; and c) Providing targeted capacity building support to the RECs keeping in view the support being provided by other development partners. The following three considerations will serve as a guide for the WB’s partnerships with RECs for the effective delivery of RI programs in Africa. 1. There will be focused but differentiated engagement with RECs by streamlining partnerships around key priority areas for regional integration that leverages respective comparative advantages. The main driver for this approach is the move towards greater selectivity in areas where meaningful impact is feasible. Table 7.1 sets outs an initial set of priority areas of engagement with the regional institutions / RECs, which is based on ongoing dialogue. 2. The dialogue with RECs will be strategic and focus more on the implementation of agreed projects for outcomes and the contribution of RI to post-COVID-19 recovery in Africa. Regular high-level engagements and dialogue are central to achieving this. Such dialogue will take place at the country and HQ levels. Based on overall guidance by AFCRI, designated WBG staff (Special RI Representatives) in the countries where the RECs are headquartered will engage in ongoing dialogue. AFCRI will complement these ongoing dialogues with periodic strategic engagement with the leadership of the RECs. The RECs will also play an important role in convening of countries around priority RI areas and this would remain the bedrock of meaningful change in the regional integration efforts. 72 Table 7.1: Proposed Strategic Engagement Areas with Regional Institutions Regional Institution Proposed Areas of engagement AUC Trade; Digital; Statistics. ECOWAS Regional Energy Market; Trade; Agriculture/Food security; ID4D/Statistics. CEMAC Structural Reforms; Financial Sector Development; Infrastructure SADC Regional Energy Market; Agricultural Value Chains/Market Integration. COMESA Trade; Energy; Digital EAC Food Security; Digital; Agricultural Value Chains. IGAD Resilience of Borderlands /Forced Displacement; Pastoralism; HoA Initiative engagement. 3. Selective capacity building of the RECs to complement support being provided by other partners. This approach will help to deliver an IDA19 commitment to support capacity and skills building for RECs. Two levels of capacity and skills building are envisioned under this engagement: a. Strengthen the capacities of RECs for project coordination and management of agreed projects. The RECs and Bank will strengthen collective monitoring of implementation of ongoing projects being managed by the RECs. Any institutional systemic issues would need to be addressed along with actions to improve specific challenges facing projects. b. Support RECs in convening countries to agree actions for deepening regional cooperation and in ensuring effective monitoring of implementation. The Bank will support the RECs to first address the challenges requiring a common position and once countries have agreed a common position focus will turn to implementing the agreed actions and supporting the RECs in tracking progress. c. Learning by doing in order to advance key priorities. The Bank will work with the RECs on an ongoing basis through diagnostic analysis, engagement in the development and choices of policies, coordinating and managing the processes of advancing and implementing a specific agenda. The work with ECOWAS, WAPP and other institutions in the development of the West Africa Energy Program is a good example of this approach. We will also seek to experiences across RECs in order to promote an iterative process of learning by doing. 73 Figure 7.1: Regional Economic Commissions / Regional Institutions: Membership Source: AfDB: African Economic Outlook 2019 74 Annex VIII: Map of Continental Africa 75