Document of The World Bank Report No: ICR2501 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-44000, TF-99140) ON A CREDIT IN THE AMOUNT OF SDR 1.2 MILLION (US$ 1.9 MILLION EQUIVALENT) TO THE GOVERNMENT OF GRENADA FOR A GRENADA TECHNICAL ASSISTANCE PROJECT (GD TAC) December 19, 2012 Poverty Reduction and Economic Management Department (LCSPR) Caribbean Country Management Unit (LCC3C) Latin America and Caribbean Region (LCR) CURRENCY EQUIVALENTS (Exchange Rate Effective 31 October 2012) Currency Unit = Eastern Caribbean Dollar EC$1.00 = US$0.37 US$ 1.00 = EC$2.70 FISCAL YEAR January 1- December 31 ABBREVIATIONS AND ACRONYMS ASYCUDA Automated System for Customs Data BOS Bureau of Standards of Grenada CARTAC Caribbean Regional Technical Assistance Center CAS Country Assistance Strategy EU The European Union FIAS Foreign Investment Advisory Service GDP Gross Domestic Product GIDC Grenada Industrial Development Corporation GOG Government of Grenada IDA International Development Association IMF International Monetary Fund IRD Inland Revenue Department ISR Implementation Status Report M&E Monitoring and Evaluation MOF Ministry of Finance OECS Organization of Eastern Caribbean States PAD Project Appraisal Document PCU Project Coordination Unit PDO Project Development Objective SEMCAR Supporting Economic Management in the Caribbean, project SIGTAS Standard Integrated Government Tax Administration System GDTAC Grenada Technical Assistance Credit TTL Task Team Leader UNCTAD United Nations Conference on Trade and Development VAT Value Added Tax Vice President: Hasan Tuluy Country Director: Rodrigo Chaves Sector Manager: Arturo Herrera Project Team Leader: Kathy Lalazarian ICR Team Leader: Svetlana Proskurovska GRENADA Grenada Technical Assistance Credit (GDTAC) CONTENTS Data Sheet A. Basic Information………………………………………………………………………i B. Key Dates………………………………………………………………………………i C. Ratings Summary………………………………………………………………………i D. Sector and Theme Codes ……………………………………………………………..ii E. Bank Staff ……………………………………………………………………………..ii F. Results Framework Analysis ………………………………………………………… ii G. Ratings of Project Performance in ISRs …………………………………………… viii H. Restructuring ………………………………………………………………………. viii I. Disbursement Graph ………………………………………………………………… .x 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 7 3. Assessment of Outcomes .......................................................................................... 13 4. Assessment of Risk to Development Outcome......................................................... 19 5. Assessment of Bank and Borrower Performance ..................................................... 19 6. Lessons Learned ....................................................................................................... 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 24 Annex 1. Project Costs and Financing .......................................................................... 26 Annex 2. Outputs by Component ................................................................................. 27 Annex 3. Economic and Financial Analysis ................................................................. 30 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 31 Annex 5. Beneficiary Survey Results…………………………………………………32 Annex 6. Stakeholder Workshop Report and Results................................................... 35 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 36 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 37 Annex 9. List of Supporting Documents ...................................................................... 39 MAP ………………………………………………………………………………….40 A. Basic Information Country: Grenada Project Name: GD TAC Project ID: P101322 L/C/TF Number(s): IDA-44000,TF-99140 ICR Date: 12/18/2012 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: TAL Borrower: GRENADA Original Total XDR 1.20M Disbursed Amount: XDR 1.15M Commitment: Revised Amount: XDR 1.20M Environmental Category: C Implementing Agencies: Ministry of Finance Co-financiers and Other External Partners: EUROPEAN UNION B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 04/23/2007 Effectiveness: 01/29/2009 01/29/2009 Appraisal: 01/31/2008 Restructuring(s): 10/07/2011 Approval: 03/13/2008 Mid-term Review: 11/08/2010 Closing: 10/31/2011 06/30/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Quality at Entry: Government: Moderately Satisfactory Unsatisfactory Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Unsatisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 100 100 Theme Code (as % of total Bank financing) Export development and competitiveness 17 23 Other Private Sector Development 17 13 Tax policy and administration 33 25 Trade facilitation and market access 33 39 E. Bank Staff Positions At ICR At Approval Vice President: Hasan A. Tuluy Pamela Cox Country Director: Francoise Clottes Yvonne M. Tsikata Sector Manager: Arturo Herrera Gutierrez Mauricio Carrizosa Project Team Leader: Kathy Lalazarian Errol George Graham ICR Team Leader: Svetlana I. Proskurovska ICR Primary Author: Svetlana I. Proskurovska F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project development objectives are: (i) to improve the efficiency and effectiveness of Customs; (ii) to improve the efficiency of tax administration and decrease transaction costs of paying taxes and consequently increase tax compliance; (iii) to enhance the Government's support for exports through improving access to trade information and the strengthening the capacity of the Bureau of Standards to provide conformity assessment and quality assurance; and (iv) to modernize investment promotion. ii Revised Project Development Objectives (as approved by original approving authority) The project development objectives are: (i) to improve the efficiency and effectiveness of Customs; (ii) to improve the efficiency of tax administration and decrease transaction costs of paying taxes and consequently increase tax compliance; (iii) to enhance the Government's support for exports through improving access to trade information and the strengthening the capacity of the Bureau of Standards to provide conformity assessment and quality assurance; and (iv) to modernize investment promotion. (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Improved Client perception of Customs Operations Above the baseline Not established at entry. Value Improvement of values for Introduced at Perception - 3.34; quantitative or Perception Above Perception - restructuring Perception - Servqual - 1.376 Qualitative) the Baseline 3.25; and 3.25, Servqual - 1.328 Servsqual - 1.328 Date achieved 10/07/2011 10/30/2011 06/30/2012 06/30/2012 Both customer perception and Servqual score increased above the baseline Comments indicating the growing satisfaction with the Customs services provided. The (incl. % perceptions improved by 3% in the short time after ASYCUDA World system achievement) was made operational. Indicator 2 : The average time for customs clearance reduced from 4 days to 1.5 days Value quantitative or 4 days 1.5 days 1.5 days Qualitative) Date achieved 03/13/2008 10/30/2011 06/29/2012 Comments (incl. % Achieved achievement) Indicator 3 : Improved Client perception of tax administration Improved score above Introduced at the baseline Value Improved client Client Perception - restructuring: Client for Client quantitative or perception above 3.386; Perception - 3.322, Perception - Qualitative) the baseline Servqual - 1.33 Servqual - 1.256 3.322; Servqual score - 1.256 Date achieved 10/07/2011 10/30/2011 06/30/2012 06/29/2012 Comments Perceptions of Inland Revenue Department improved, while expectations of the (incl. % service quality increased, resulting in a higher gap between the expectation and achievement) perception. iii Indicator 4 : Time taken to pay all taxes reduced from 140 to 100 hours Value 140 hours, as measured quantitative or by Doing Business Report 50 hours 100 140 hours Qualitative) (DBR) Date achieved 03/13/2008 10/30/2011 06/30/2012 06/29/2012 Comments The target value not achieved, judging by the DBR 2013. This indicator at (incl. % approval was an intermediate indicator. During the restructuring the indicator achievement) was moved to the PDO indicators. Indicator 5 : Percent of non-filer in the corporate tax category reduced from 59% to 20% Value 41% for corporate quantitative or 59% 20% tax Qualitative) Date achieved 03/13/2008 10/30/2011 03/30/2012 Comments Partially achieved: The project could not meet the targeted value due to the weak (incl. % enforcement; the project did not directly support improvement of tax achievement) enforcement mechanisms. Indicator 6 : Improved investors' perception of service delivery from GIDC Perception of service quality Perception of Perception of service increased Value service quality - quality - 3.685 (out of above - 3.685 quantitative or Above the baseline 3.617 (out of 5.00); 5.00); Servqual score - (out of 5.00); Qualitative) Servqual score - 0.944 Servqual score 1.132 increased above- 0.944 Date achieved 10/07/2011 10/30/2011 06/30/2012 06/29/2012 Comments Overall, the perception deteriorated, as the client expectations increased from (incl. % 4.629 (2011) to 4. 785 (2012). The Servqual score improved. achievement) Rate of conformity assessments and number of quality assurance certificates for Indicator 7 : exports 100% compliance. 95% of response to In three months Value No conformity request of before project quantitative or assessments conducted conformity closure 57 Qualitative) assessment conformity certificates issued Date achieved 03/13/2008 10/30/2011 06/29/2012 Comments (incl. % Achieved. Exceeded the target achievement) Indicator 8 : Number of days to process investment consents reduced from 215 to 70 days The new procedures for Value investment consent quantitative or 215 days 70 days establish various Qualitative) values below 70 days, depending on the sector iv Date achieved 02/13/2008 10/30/2011 06/29/2012 Comments The number of days to process investment consent has been reduced (incl. % considerably. Target achieved. achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years The percentage of consignments subject to physical examination reduced from Indicator 1 : 60% to 30% 18% of commercial Value 60% of consignments cargo is subject to (quantitative 30% physically examined physical or Qualitative) examination Date achieved 03/13/2008 10/30/2011 06/29/2012 Comments (incl. % The target was largely exceeded for commercial cargo consignments achievement) Indicator 2 : Customs' capacity for classification and valuation of goods improved More than 50 30 officers trained Value No capacity to perform officers trained (45 in valuation, no (quantitative classification and in valuation and 30 officers trained in or Qualitative) valuation in classification) classification Date achieved 03/13/2008 10/30/2011 06/29/2012 60% achieved. The number of officers trained reflects the reduced financing for Comments the training, as the funds were allocated to implement of the ASYCUDA World (incl. % system. Training in classification of goods was not organized; is now planned achievement) under SEMCAR Indicator 3 : Field audit capacity in Customs improved Value No professional field 12 officials trained (quantitative 8 trained auditors auditors in Customs in procedural audit or Qualitative) Date achieved 04/01/2008 10/30/2011 06/29/2012 Comments (incl. % The target exceeded by 50%. All auditors deployed achievement) Indicator 4 : Customs Information Technology upgraded to ASYCUDA World Upgrade completed. Value ASYCUDA 2.7 installed Upgrade to ASYCUDA (quantitative in 1999, operational but ASYCUDA World WORLD or Qualitative) lacking functionality operational Date achieved 03/13/2008 10/30/2011 06/29/2012 Comments The new system is operation, available for use by importers, custom brokers, etc. (incl. % on line. achievement) v Planning and Monitoring capacity within IRD/unit established and preparing a Indicator 5 : corporate plan The Planning and Planning and Monitoring Unit No substantial planning Monitoring Unit Value legally established and monitoring capacity fully functional (quantitative and will be within the Internal and preparing a or Qualitative) financed in 2013. Revenue Department three year Officers trained in corporate plan corporate planning Date achieved 03/13/2008 10/30/2011 06/29/2012 Comments Partially achieved. Is expected to be fully achieved in 2013, when the selection (incl. % of officers for the Unit will have been finalized and financing allocated. achievement) Indicator 6 : IRD Systems (SIGTAS) Upgrade Operational Upgrade of Partial upgrade income and completed: audit property tax Value SIGTAS module added. 1998 year SIGTAS modules, debt (quantitative upgrade Audit systems lacked audit module management or Qualitative) operational operational, but modules, advanced overloads the whole risk management system module Date achieved 03/13/2008 10/30/2011 06/30/2012 06/29/2012 Comments Target only partially met (30%). However, the IT platform is old and the new (incl. % audit module causes server performance overload. SEMCAR program will achievement) address the required system improvements Indicator 7 : Corporate Tax arrears reduced Corporate tax Indicator Value Corporate tax arrears are arrears reduced to dropped due to Not measured. (quantitative at 62% and income tax 25%, income tax lack of funds Arrears continue to or Qualitative) arrears are 39% arrears reduced to to support the be significant 20% target Date achieved 03/13/2008 10/30/2011 06/29/2012 Comments Project did not include activities to support this target. The taxpayer database (incl. % needs cleaning to enable enforcement process. achievement) Indicator 8 : National Investment Promotion Strategy adopted and being implemented National National Value Investment No National Investment Investment Strategy (quantitative Promotion Promotion Strategy 2012- 2016 or Qualitative) Strategy under approved in 2011 implementation Date achieved 03/13/2008 10/30/2011 06/29/2012 Comments (incl. % The indicator is fully achieved. The Strategy is approved and being implemented achievement) Business model and process for investment approvals clearly established in Indicator 9 : relevant agencies supported by the investment network Value No explicit business The GDIC and Establishment Manual for vi (quantitative model or investment relevant agencies of investment investment or Qualitative) network in place are better facilitation facilitation empowered to network to developed that implement the support outlines the process Investment business of investment Strategy model and approval. The processes approval processes established, the IT network could not be financed under the project. Date achieved 03/13/2008 10/30/2011 06/30/2012 06/29/2012 Comments Partially achieved. The EU finances the portal linking relevant agencies, (incl. % expected to be launched January 2013. achievement) Indicator 10 : Starting a business in 12 days Starting business Starting business takes 20 reduced to 15 days Value Reduce the time to days on average on average (quantitative start business to 12 according to Doing according to the or Qualitative) days Business Report 2008 Doing Business Report 2013 Date achieved 03/13/2008 10/30/2011 06/29/2012 Comments Partially achieved. No activities to support this target were implemented under (incl. % GDTAC. Target is addressed under the Public Sector Modernization Project. achievement) Number of days to process investment applications reduced from 90 days to 21 Indicator 11 : days 30 working days to Value process investment (quantitative 90 days 21 days application/consent or Qualitative) at GIDC Date achieved 03/13/2008 10/30/2011 06/29/2012 Comments Indicator gives average approval time. Some applications are cleared by the (incl. % Cabinet which adds at least 10 days to the clearance process. Unless the achievement) procedure is changed, achievement of 21 days target is not feasible. Capacity within the Bureau of Standards to provide quality assurance Indicator 12 : certification for food products increased All exports, Calibration and for which certification is done compulsory on the equipment standards procured and The acquisition Value exist, tested installed. 20 quality No equipment or and installation of (quantitative and certified. assurance for rum personnel capacity equipment for or Qualitative) Verified and food exports testing through a issued in the last 12 number of months, which certificates makes 12% of total issued certificates. vii Date achieved 03/13/2008 10/30/2011 06/30/2012 06/12/2012 Comments The indicator is fully met. The Bureau of Standards sets new service standards (incl. % building on the achievements under the project. achievement) Improved technical skills at the Bureau of Standards and other public and private Indicator 13 : industry laboratories 9 staff trained in quality management Number of officers All relevant Value systems, 2 trained from public and staff in BOS (quantitative Limited skills in material testing, private labs trained are trained in or Qualitative) 8 trained in in ISO 17027 ISO 17025 microbiology and conformity assessment Date achieved 03/13/2008 10/30/2011 06/30/2012 06/29/2012 Comments Indicator fully met. Training is provided by BOS to colleagues in St. Vincent, (incl. % Dominica and St. Lucia. achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/20/2008 Satisfactory Satisfactory 0.00 2 11/24/2008 Satisfactory Satisfactory 0.00 3 06/18/2009 Satisfactory Satisfactory 0.00 Moderately 4 12/09/2009 Moderately Satisfactory 0.25 Unsatisfactory 5 06/28/2010 Moderately Satisfactory Moderately Satisfactory 1.00 6 12/15/2010 Moderately Satisfactory Moderately Satisfactory 1.00 Moderately 7 07/11/2011 Moderately Satisfactory 1.00 Unsatisfactory Moderately 8 01/24/2012 Satisfactory 1.60 Unsatisfactory 9 06/30/2012 Moderately Satisfactory Satisfactory 1.81 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions 10/07/2011 MU MS 1.00 Type II restructuring. The viii ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions restructuring includes the following : (i) revision of some of the results indicators and target values to better align with project activities and reflect what can realistically be observed and measured at exit; (ii) streamline components to focus on project activities with the most value -added to the Project Development Objective; (iii) revision of the financing plan to reflect the increased requirements for the Customs Modernization component and consequent reallocation of funds across components; (iv) reallocation of Credit proceeds to accommodate revised activities and financing plan; (v) a nine month extension of the closing date (from October 31, 2011 to June 30, 2012) to facilitate achievement of desired outcomes at exit; and (vi) update of the procurement plan. The original Project Development Objective is maintained. ix I. Disbursement Profile x 1. Project Context, Development Objectives and Design During project preparation Grenada was recovering from two disastrous hurricanes (Ivan in 2004 and Emily in 2005), which caused damages equivalent to approximately 220 percent of the country’s GDP. The economy contracted by 5.7 percent in 2004 following a robust growth of 7 percent in 2003. Exports plummeted, reflecting the devastation to the agricultural sector and the nutmeg industry – an important export item – was hard hit. The volume of exports declined by 26 percent in 2005, while imports grew by 22.6 percent as a result of strong demand for building materials for reconstruction. The current account of the balance of payments deteriorated, pushing the deficit from 13.5 to 37.1 percent of GDP from 2004 to 2005. 1.1 Context at Appraisal A strong inflow of grants, which reached 11 percent of GDP in 2005, protected Grenada from deterioration of its fiscal position immediately after the hurricanes. However, the public debt stood at a high mark of 110.3 percent of GDP in 2005. Slowing in the inflow of external grants to 8 percent of GDP in 2006 resulted in difficulties for the Government to sustain the public expenditure and especially capital spending at the level of previous years. Facing growing fiscal pressures, the Government formulated an economic reform program for 2006-2008 focused on achieving macroeconomic stability and enhancing growth and poverty alleviation. Along with the measures to restore fiscal and debt sustainability, reduce vulnerabilities, and reduce poverty, the program had a goal of promoting sustained high economic growth through improving the investment climate. The Government program was supported by the IMF Poverty Reduction and Growth Facility since April 2006. However, the Government faced challenges with implementing this program because of the lower than projected tax collection and higher than projected public expenditure, caused by higher utility costs and increased transfers to households. Moreover, public sector growth was hampered by governance weaknesses, including, as highlighted in the 2007 Doing Business Survey, relatively weak performance in: (i) starting a business; (ii) dealing with licenses; (iii) registering property; (iv) paying taxes; (v) trading across borders; (vi) enforcing contracts; and (vii) closing a business. The Government demonstrated willingness to address these weaknesses by modernizing the company registration and improving start up business procedures through the Public Sector Modernization Technical Assistance Credit (Credit No 41370- GRD) financed by the World Bank. Additionally, the Government identified strategic areas focused on improving the business environment, including: (i) strengthening Customs capacity in risk management and reducing the processing time of exports and imports; (ii) strengthening tax administration through upgrading information systems and developing planning capacity; (iii) facilitating trade through provision of adequate trade information and building capacity for providing quality assurance for export goods; and (iv) strengthening investment promotion capacity. 1 The World Bank’s 2008 CAS Progress Report 1 supported initiatives aimed at (i) stimulating growth and improving competitiveness, (ii) reducing unemployment, and (iii) modernizing the public sector to improve efficiency. The lack of fiscal space to address development needs in Grenada, the clarity of the Government’s objectives in supporting the private sector-led growth through strengthening institutions that facilitate trade and investments, and the adequacy with the CAS framework were the key elements for supporting the Bank’s decision to provide a technical assistance credit to the Government of Grenada. The Bank IDA Credit of US$1.9 million equivalent was supplemented by a grant of Euro 500,000 provided by the European Commission to finance the activities aimed at strengthening institutions that would improve the business environment in Grenada. 1.2 Original Project Development Objectives (PDO) and Key Indicators The project development objectives were (i) to improve the efficiency and effectiveness of Customs; (ii) to improve the efficiency of tax administration and decrease transaction costs of paying taxes and consequently increase tax compliance; (iii) to enhance the Government's support for exports through improving access to trade information and the strengthening of the capacity of the Bureau of Standards to provide conformity assessment and quality assurance; and (iv) to modernize investment promotion. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification On October 7, 2011 the project was restructured (type II restructuring) without amending the Project Development Objective. Some of the result indicators were changed to better align expected results with project interventions that were re-focused to maximize value added to the PDO. The revised result framework is presented in Table 1, below. Table 1. Revised Project Results Framework Original Result Indicator Amended Result Comment, Indication of Indicator Achievement at Closure Project Outcome Indicators 1. Improved Client Maintained. perception of Custom Operations Result achieved 2. Customs administrative Dropped at The project did not directly address this cost as % of custom revenue restructuring indicator. reduced from 2% to around 1.5% 3. The average time for Maintained. customs clearance reduced from 4 Result achieved. days to 1.5 days 4. Improved client Maintained. perception of tax administration Result achieved. 1 Organization of Eastern Caribbean States CAS Progress Report 2008/09/23, Board Document Number R2008-0118; IDA/R2008-0169 Report Number 43478 2 5. Tax administration costs Dropped The Inland Revenue Department has no direct as a % of tax revenue collected control of planning or executing its budget. reduced from 2.1% to around The project did not address this indicator. 1.5% 6. New indicator, Time taken to pay all The 2012 Doing Business Report measures introduced at restructuring. the taxes reduced time to pay taxes as 140 hours. The original Formerly an intermediate result from 140 to 100 hours target was 50 hours, the value was increased indicator to 100 hours at the restructuring 7. % of non-filer in the Maintained. corporate tax category reduced Partially achieved (41% of non-filer in the from 59% to 20% corporate tax category) 8. Increased access to trade Maintained. Achieved. Trade portal launched. information from 0.51 index Index improved to 0.833. 9. Response to conformity Maintained. assessment requests at least 95%, Fully achieved. 100% response to conformity and number of quality assurance assessment. 58 certificates issued in three certificates for exports increased months before the project closure. above baseline. 10. Improved investors’ Maintained. perception of service delivery Partially achieved. The service quality index from GIDC slightly decreased against the considerably higher expectations 11. Number of days to Maintained. process investment consents Achieved. Although the investment consent reduced from 215 days to 70 days procedures differ by sector, the current standard response time applied take from 1-5 days to a maximum of 123 days for construction permits, reported in the 2013 Doing Business Report. Intermediate Indicators 12. The % of consignments Maintained. subject to physical examination Achieved and surpassed the target for reduced from 60% to 30 % commercial cargo. 13. Customs capacity for Maintained. classification and valuation of Partially achieved (60%). 30 officers trained goods improved and deployed. 14. Field Audit Capacity in Maintained. Target surpassed (150%). 12 Customs/ the number of auditors officers trained in procedural audits and trained – total of 8 deployed 15. Custom Information Maintained. Practically achieved. The Technology upgraded from outstanding step in to connect to ASYCUDA ASYCUDA 2.7 to ASYCUDA World all relevant agencies. The work World continues after the closure 16. Planning and Monitoring Maintained. Partially achieved. Legally the capacity within IRD established unit is established and staff of IRD trained. and the P&M Unit is preparing a The unit is expected to be staffed in Q2 2013. corporate plan 17. New indicator The Tax IT system The upgrade of SIGTAS completed. The SIGTAS is upgraded system requires further upgrades of the server and operational to deal with increased demand for higher performance 18. Corporate tax arrears Dropped The project has not addressed the issue reduced from 62% to 25% and through stronger tax enforcement procedures. income tax arrears reduced from 39% to 20% 3 19. National Investment Maintained. Fulfilled. The strategy is being Promotion Strategy adopted and implemented. being implemented 20. Business model and Maintained. Partially achieved. The Business process for investment approvals model developed and approved. The network clearly established in relevant is being implemented through additional EU agencies, supported by the financing. The Launch is expected in January investment network 2013. 21. Starting a business time Maintained. Partially achieved (80%). The reduced from 20 to 12 days current indicator is 15 days, as reported in the 2013 Doing Business Report. 22. Number of days to Maintained. Partially achieved (70%). The process the investment current indicator is 30 business days for applications reduced from 90 to processing business applications. 21 days 23. Improvement in the Revised: Capacity Fully achieved. The equipment purchased, technical capacity of the Bureau within the Bureau of installed and operational. 20 quality of Standards to facilitate exports: Standards to provide certificates issued for rum and food products the acquisition and installation of quality assurance equipment for testing certification for food products improved 24. Improved technical Revised: Technical Achieved. skills at the Bureau of Standards skills at the Grenada All the relevant staff trained in ISO 17025 (19 and other public and private Bureau of Standards persons in total). industry laboratories. Number of testing and calibration officers trained in ISO 17025 laboratories improved 25. Trade portal established Achieved. and operational in key public and Trade portal launched in June 2012. The private sector agencies. portal is hosted by the developers. The Government needs to procure a virtual server for hosting the portal. 1.4 Main Beneficiaries The primary project target group includes key public sector institutions that contribute to improving the environment for private sector-led growth. These include: the Customs Department, the Inland Revenue Department, the Grenada Industrial Development Corporation, the Bureau of Standards, and the Trade Office of the Ministry of Environment, Foreign Trade and Export Development. The broader beneficiary circle includes the Grenada Chamber of Commerce, the Ministry of Finance, Planning, Economy, Energy and Co-operatives, investors, exporters, and tax payers. Improvements in trade and investments through better targeted policies, more transparent and efficient institutions, clear and user-friendly procedures for approvals of investment applications and clearance of trade will benefit the economy in general and entrepreneurs with interest to trade and invest in Grenada. 1.5 Original Components 4 Project components, as originally approved and maintained throughout the project, are presented in Table 2. The allocation of financing across the various components was revised, when the project was restructured, as shown below. Table 2. Summary of GDTAC Components at Approval Component Title Original US$ amount Revised US$ amount in in million (IDA Credit) million (IDA Credit) 1. Customs Modernization 0.853 1.145 2. Tax Administration Modernization 0.546 0.395 3. Modernization of Investment Promotion 0.295 0.260 4. Implementation of Export Strategy 0.505 0.485 5. Project Management 0.616 0.515 These components were aimed at achieving the following results: 1. Custom Modernization Objective: To improve the efficiency and effectiveness of Customs through modernization of the administration. Intermediate Objectives: (i) improving customs systems and procedures; (ii) upgrading information technology; and (iii) capacity building of management and staff in Customs. 2. Tax Administration Modernization Objective: To modernize critical areas of tax administration to increase the overall efficiency and effectiveness of tax administration and decrease the transaction cost of paying taxes, and thus increase the level of tax compliance. Intermediate Objectives: (i) improving the registration process for taxpayers; (ii) cleaning–up the taxpayer registry; (iii) strengthening the detection of non-registered taxpayers; (iv) improving taxpayer services; and (v) examining the feasibility of using Tax Compliance Certificates. 3. Modernization of Investment Promotion Objective: to modernize investment promotion in Grenada through the strengthening of the strategic and institutional environment for attracting investment into Grenada. Intermediate Objectives: (i) preparing an investment promotion strategy; (ii) implementing the Investment Promotion Strategy for Grenada; (iii) establishing an Investment Facilitation Network; and (iv) achieving institutional strengthening to enhance preparedness to process investment allowances. 4. Implementing Export Strategy Objective: implementing the comprehensive export strategy of 2006. Intermediate Objectives: (i) improving access to trade information; and (ii) strengthening the Bureau of Standards. 5. Project Management 5 Objective: managing contractual, financial and procurement aspects of the project; supporting the project Steering Committee by monitoring results, including conducing client surveys. 1.6 Revised Components The components remained the same as above, with a reallocation of funds from all sources (IDA Credit, EU Grant and Government Counterpart Co-financing). The Tax Administration Modernization Component was significantly reduced and refocused to support two sub-components: (i) improving the organization and management of the Inland Revenue Department (IRD); and (ii) upgrading the information technology within the IRD. The reason for the reduction of the scope Tax Administration Modernization Component was based on two pragmatic considerations: (i) a possibility to benefit from a newly approved Regional Bank-administered SEMCAR Program that supports strategic planning and institutional strengthening of the tax administration function in the Caribbean states; and (ii) the need to increase budget for implementation of the customs system’s upgrade within the limited IDA envelope. The Customs Modernization Component was quite advanced at that stage, and initiated information system upgrade was critical to achieving measurable improvements in customs performance and trade facilitation. The Bank team explored options to attract additional financing from the contributing donor, the European Union, but this was not successful due to financial planning constrains. Savings were identified through consolidation of activities under other components as well, however, without significantly impacting the attainment of planned results. 1.7 Other significant changes The project restructuring (of type II) approved on October 7, 2011 addressed the following three issues: (i) the extension of the project closing date by nine months to allow for the completion of the main project activities, such as the upgrade of the information technology systems in the Customs and the Inland Revenue Department; (ii) the revision of the results indicators to align them to better reflect areas over which the project had reasonable control and to remove the indicators to which the project was not contributing (such as the reduction of cost of tax and customs administration as a share of the revenue collected); and (iii) the reallocation of funds to reflect the actual higher costs of inputs for customs modernization. After implementation of ASYCUDA World significant improvements in services provided to the training community have been achieved, such as reduction of time for custom clearance, automated processing of customs proceedings, real time information on the status of clearance. These anticipated improvements justified the strategic choice for funds reallocation in order to achieve results contributing to the Project Development Objective. The initial cost estimates for the project activities were lower than actual costs. No contingency funds were reserved at design to account for rising prices. The total actual project financing was equivalent to US$2.766 million, comprising the following contributions from three sources: IDA, EU and the Government of Grenada. 6 Table 3. Actual GDTAC Fund Disbursements from various sources Source of Funding Disbursed in US$ million IDA Credit 1.809 EU Grant 0.655 Government of Grenada (GOG) 0.015 Sub Total (administered by GDTAC) 2.479 GOG parallel financing 0.287 Total 2.766 As seen from Table 2, the project budget was amended during restructuring to accommodate for the implementation of the upgrade of the Customs Information Communication Technology (ICT) system to the latest web-based version of ASYCUDA World (AW). However, increasing the allocation for Component 1 by 34 percent was not sufficient to cover the costs of the equipment for relevant offices, including hardware (computers, servers, and network equipment). To cover the financial gap, in parallel to the project, the Government contributed an additional US$287,392 through direct procurement by using government procedures. Although the main functionality and the core modules of ASYCUDA were implemented during the project, there is still an outstanding task of ensuring that relevant agencies, such as Statistics Office, Internal Revenue Department, Health and Agriculture authorities use the system. Physical connections have been put in place, and the training activities to access and operate the ASUCYDA World System are ongoing. The Customs Department will require support to assure an adequate access of these agencies to the system in order to fully automate customs procedures. Reallocation of funds caused some cancellations or reductions in the scope of activities in other components, namely, reductions in the scope of training for classification of export goods and in the financing for establishing a network for investment promotion, as well as abandoning the services of a long-term tax consultant. Regretfully, planned project financing was insufficient for attaining ambitious project objectives. Limited financing led to a substantial reduction in the scope of the SIGTAS upgrade for the tax administration. While the planned audit module, as envisaged by the project, was developed, installed and made operational in the Inland Revenue Department (IRD), the new module created much higher requirements for server performance. In the absence of sufficient resources, the IRD abandoned other important system upgrades of SIGTAS. As a result, this impacted the concurrent access of IRD officials to the system, thus resulting in inefficiencies in IRD performance. The Bank team decided to use SEMCAR Program’s resources to support necessary improvements in tax administration information system. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 7 In 2007, the first Doing Business report was issued for the OECS 2, identifying problems in the business environment that constrained growth. The Bank team used this report as an entry point for discussing measures for improving growth through trade facilitation, attraction of investments and improving the business environment in Grenada with the Government. The Government identified the needs to modernize their Customs and Tax Offices to ensure effective and efficient revenue collection, as well as address such weaknesses as the lack of conformity assessment for exported goods, and the lack of information for investors, lengthy procedures for clearing investment requests which hindered trade, as well as weaknesses in supporting investment and revenue collection in Grenada. During preparation, the Bank team coordinated with the Customs and Tax advisors of the IMF’s Caribbean Technical Assistance Center (CARTAC) to identify priority areas for technical assistance. The project design was informed by the lessons from similar project implementation in Grenada and other Caribbean Countries (particularly Dominica, which was implementing a similar project). The project design focused on capitalizing on strong reform ownership, achieving early results, nurturing private and public sector partnership, and supporting institutional capacity strengthening through direct involvement of related officials - reform champions in implementation. Given the limited IDA borrowing envelope for the OECS, the Bank took a strategic approach which involved leveraging additional resources for technical assistance from such sources as the European Union and the Government of Grenada. In addition to the SDR1.2 million of IDA credit, the European Union contributed EUR0.5 million for project implementation. The project design identified two operation-specific high risks: one related to the project’s multi-sector nature; and the second related to implementation capacity and sustainability. The first risk was mitigated through the design of an implementing structure that relied on the leadership of the Ministry of Finance and was supported by the Steering Committee, and on ownership from technical teams of the beneficiary departments. These arrangements served well, as the Steering Committee through its monthly meetings, prepared by the Project Manager, provided good supervision, direction and the coordination necessary to keep the beneficiary departments focused on the achievement of results. Similarly, the second high level risk (related to the capacity of multiple beneficiary departments) was mitigated through consultancy support and the effective functioning of the Steering Committee. The risks of insufficient financing of the project activities, as well as the risk of slow mobilization of the project implementing structure, caused in part by the electoral change in government, were not identified at the project design stage. These factors proved to play a significant, negative role in the ability of the Government of Grenada to complete all the planned activities in full and in time. The arrangements for government counterpart funding through the counterpart fund accounts were not analyzed or described in detail at the design stage and no conditions 2 OECS stands for Organization of East Caribbean States 8 (covenants) regarding the government counterpart financing obligations were agreed upon. This caused problems with financing project activities, as in the wake of the global financial and economic crisis the Government co-financed US$14,741 worth of project activities, or only 6% of the planned US$250,000. However, facing the need to implement the ASYCUDA World upgrade, the Government directly financed US$ 287,392 for works and hardware purchase, as part of the government contractual obligation with the vendor in order to enable system implementation. This amount, equivalent to 115 percent of the pledged amount, was not originally planned under the project design and thus was not included in the project procurement plan. 2.2 Implementation The project was approved by the Board on March 13, 2008, but did not become effective until January 29, 2009. The delay was due to the general elections in Grenada that took place on July 8, 2008, during which the National Democratic Congress (formerly in opposition) succeeded the New National Party. The Financing Agreement was signed on December 19, 2008, nine months after the Board approval. Although the project was declared effective on January 29, 2009, further delays with setting up project management arrangements continued until the project launch on October 20, 2009. The project Steering Committee was appointed on May 22, 2009, following a Bank supervision mission in April 2009. However, Project Manager was selected by the Ministry of Finance only in August 2009 (17 months after the Board approval), which ultimately enabled the Government of Grenada to start implementation. It took some three more months for the Project Coordination Unit, Project Management Unit and implementing agencies to develop a set of 12 terms of references to initiate procurement of consulting services, which were sent to the Bank on February 4, 2010. The late mobilization of the implementing agency, impacted by the arrival of the new government and insufficient project management capacity, led to the project’s extension by nine months beyond the original closing date of October 31, 2011 to June 30, 2012. The upgrade of the Customs information system from ASYCUDA 2.7 to a web-based ASYCUDA World cost about 34% more than estimated at the appraisal stage, not counting the network and hardware upgrade financed by the Government. The strategic decision to reallocate project resources to achieve this upgrade proved to be the right thing to do, as this led to a cardinal improvement of the quality and speed of services provided to the trading community, modernized the work processes and improved timeliness, access, and accuracy of customs information. To mitigate the high risks of resistance to institutional changes in multiple beneficiary institutions, a robust project management structure led by the Steering Committee was implemented. The Steering Committee that involved all major stakeholders from the public and private sector strongly contributed to the achievement of project results. Apart from the late mobilization of the project management structure and especially the hiring of the Project Manager, which caused significant delays, the project management structure proved to be effective in ensuring coordination and close oversight on behalf of the Ministry of Finance. To address resistance to change, key officials in the beneficiary agencies were involved as components’ technical leaders. A robust communication 9 program created high expectations among the ultimate project beneficiaries – the business community - thus creating pressure to modernize key institutions: the Customs Office, the Grenada Investment Development Corporation, the Grenada Bureau of Standards and to a lesser extent the Inland Revenue Department. The risk of the late and slow start up, brought about by the change in the administration after project approval, had not been identified at design and no proactive measures had been planned in this regard. Additionally, the departure of the original TTL soon after project signing introduced some follow up delays on the Bank side. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design. The M&E system was quite extensive, reflecting the multi-sector nature of the project. The project measured institutional and service quality changes in such distinct areas as customs and tax administration, investment promotion and export promotion. The original results framework was adjusted during the project restructuring in October 2011. Efficiency indicators for tax and customs operational costs, as well as indicators on tax arrears were removed, as the design of project activities did not allow project inputs to be directly attributed to attainment of these indicators. Other revisions were not significant (they were mostly editorial), as the majority of the original indicators had been well chosen. Implementation. The numerical indicators, such as client satisfaction with the quality of services provided, were measured through the update of the Doing Business Survey and through client surveys. The baseline for some indicators was established during the appraisal stage, while the baseline for others was determined during the baseline surveys in 2011. The reason for the late establishment of the baseline is that ‘client satisfaction’ with the service, chosen as an indicator at the design stage, could be only determined through a client survey which was not possible at the approval stage because of the absence of financial resources. Two surveys were commissioned and implemented during the project by the implementing agency: one baseline survey was conducted early in 2011, and the final survey that measured exit indicators was conducted in May-June 2012, prior to project closure. Utilization. Regretfully, the response to a structured questionnaire used for the final survey was not statistically significant in certain cases (e.g., only six out of some 130 respondents returned data on measuring the time taken to pay taxes). For such cases of inconclusive measurement, the achievement of the final objective will be judged based on the Doing Business 2013 update. Some indicators applicable to several distinct procedures were generalized to a single indicator, thus creating ambiguity in measurement. For example, it was difficult to accurately assess the number of days taken to process investment consent, as depending on the specific area of investment the number of days would be different. According to the procedure developed during project implementation, the requirements for review by government agencies depend on the type of the investment, and can be as low as 1 day or as many as 10 days. Valid responses for this indicator were not received in spite of the repeated survey. The Ministry of Finance 10 awaits the update of the Doing Business survey to verify project results for reducing the number of days for issuing investment consent. The Project ISRs had been dully reflecting achievement of intermediate results starting from 2011, when project activities started yielding results. 2.4 Safeguard and Fiduciary Compliance The project did not trigger any of the Environmental or Social Policy Safeguards. 2.5 Post-completion Operation/Next Phase The beneficiaries of the project have been actively involved in implementation, which is a foundation of results sustainability. The project has helped develop institutional capacity through training, implementation of upgrades of information systems, and the purchase and installation of equipment and advisory services that helped develop plans and manuals. The Customs Office upgraded its information system from ASYCUDA 2.7 to a web-based ASYCUDA World application, which is being used by the trained Customs officers, Custom brokers, tariff clearers, and exporters. This is a sustainable institutional change that reduced physical inspection of the commercial cargo and customs clearance time below the set target, and introduced a more efficient custom processing culture. However, the project has not supported the consolidation of the changes introduced, as some of the relevant agencies, such as Ministry of Agriculture, Ministry of Health, Department of Licensing, and Department of Trade have not yet been connected on line for processing the customs procedures. A local team of information specialists continues working in those agencies to enable their online access. Training related to the classification of the imported goods has not been implemented during the project. However, an agreement was reached with the Customs Office that a Bank-administered SEMCAR Program, supporting customs modernization in the Caribbean Region, will provide necessary training support. As for the tax administration information system’s SIGTAS upgrade, the project contribution was constrained by the lack of resources (time and money) to implement a comprehensive system upgrade, including that of the operational system platform (first established in 1998) and the capacity of servers. The implemented taxpayers’ audit module created a system overload which limited the use of the system by concurrent users during initial attempts to run an audit search. It is likely that for an effective use of the SIGTAS software application, further system upgrades would be required. As in the previous case of Customs, it is possible for the SEMCAR program to support the analysis and possibly an upgrade of the tax administration information system. Given that the SIGTAS upgrade was completed in June 2012, just before the project closure, no resources or time were available to address the SIGTAS system’s slow performance. One of the objectives for tax modernization was strengthening the capacity of the Internal Revenue Department (IRD) in planning and monitoring. Although the project provided assistance to developing planning capacity through training, the planning capacity was 11 not institutionalized through the establishment of an appropriate Planning Unit, due to the lack of budgetary allocation. The IRD plans to set up such a unit in 2013, following budget allocation for the Planning Unit for that year. Among the most impressive project achievements is the capacity in conformity assessment created in the Grenada Bureau of Standards (BOS). The BOS was equipped with the state of the art equipment in the areas of microbiology and chemical testing, metrology and construction materials testing. The competences of professional personnel of the BOS have been developed through training and skills transfer. Presently, along with using the equipment and learned skills in their daily work, the personnel of BOS also provide training to colleagues in other OECS countries (e.g., to St. Vincent, Dominica, St. Lucia). While testing and certification services were not previously available to Grenadian exporters, presently BOS issues quality conformity certificates for all interested exporters, as well as for the domestic producers at a fraction of a cost, as these activities are partially financed by the government budget. The BOS is planning to undergo an accreditation process in 2013 and build its capacity in line with the newest trends in the area of conformity compliance. The Grenada Industrial Development Corporation (GIDC) has received support for developing and implementing National Investment Promotion Strategy which was approved in 2011. The strategy helped to identify five target sectors where Grenada has comparative advantage. Presently, the GIDC staff work on creating investment opportunities profiles, and doing feasibility analyses, thus providing subsidized services to potential investors. The character of GIDC’s work has changed to a more focused, project driven approach. The GIDC was organizationally restructured to align with the five strategic priority sectors and project teams were created to lead the sector work. The project was instrumental in supporting institutional development of GIDC that would support the implementation of the Government investment strategy. For example, a system of Monitoring and Evaluation was installed, allowing for measuring the impact of GIDC’s work. The impact that GIDC plans to achieve is to create an additional 1,500 jobs by 2016, so as to alleviate the current level of unemployment (standing at 12,000 people). The GIDC, with the Cabinet approval, is implementing an investment incentive scheme which includes investment allowances or tax exceptions. The European Union is supporting the development and launch of an inter-agency information system for investment promotion (initially planned under the project but not completed due to the lack of funds, which were reallocated to support ASYCUDA World implementation). The inter-agency information system would support on-line information sharing as well as consolidate the investment approval procedures, in which various agencies are involved. The project has helped to achieve important improvements in the service quality in customs, conformity assessment, investment approvals, and access to trade information. The Director of Private Sector Development of the Ministry of Finance, who acted as the Chairperson of the Steering Committee, considers the project to have laid the foundation for improving the business environment. However, further improvements in revenue collection and facilitation of trade and investment would benefit from continued technical assistance. Due to financial constraints, the Government of Grenada is interested in 12 mobilizing donor grant resources for supporting the private sector-led growth through business facilitation and improving the quality of public sector management. 3. Assessment of Outcomes Outcome Rating – Moderately Satisfactory 3.1 Relevance of Objectives, Design and Implementation The GDTAC Objectives were and remain relevant for Grenada’s economic growth through strengthening of public management in organizations supporting trade, investments and revenue collection. The project development objective has identified critical areas for economic growth of Grenada and improvement in revenue mobilization to support important government programs. The project well targeted core areas of the national policy priorities as well as the OECS Country Partnership Strategy, and proposed a practical way to modernize relevant government institutions so as to enable them spur trade and investments in Grenada. However, the project underestimated the value of inputs required, which led to funds redistribution among the components and the elimination of lower priority activities. For example, the support of the tax administration advisor was cancelled; the size of modernization of tax information system – SIGTAS – was reduced to fit the budget; the post implementation support to ASYCUDA World was reduced due to lack of funds; the intra-agency information network for investment promotion is being implemented outside of the project with the support from EU finances; the connection of various agencies to ASYCUDA World has not been completed under the project and is being followed up by the government during the post implementation period. These results are mainly due to two factors: time and money. The implementation of the project was delayed for over one year due to the delayed establishment of the project implementing structures and the lengthy procurement process. The procurement process for update of the information system for tax administration was complicated by the use of Single Source Selection procedures, which required scrupulous reviews, and lengthy negotiations due to the need for contract price adjustment to fit the available budget. The budget, although augmented by the contribution of the EU Trust Fund, proved to be insufficient to fully achieve project objectives. When during the ASYCUDA system upgrade, the Government faced the need to upgrade the telecommunication infrastructure and hardware, it lieu of the full project contribution, the Government made direct investment in infrastructure outside of the project financing scheme. Finally, from the technical perspective, the project did not consider the impact of the SIGTAS system upgrade by adding an Audit Module on the ultimate SIGTAS performance. A detailed study of the system platform and its anticipated performance should have been done by an information specialist at the preparation stage. This could 13 have avoided the unsatisfactory result that the use of the new additional Audit Module slows down the SIGTAS system, preventing the simultaneous use of the system by many concurrent Internal Revenue Service personnel. Regretfully, this omission by the design team was not uncovered during the pre-approval stage. A Quality Enhancement Review was not conducted for this project prior to approval. 3.2 Achievement of Project Development Objectives Despite the start-up delays, and somewhat lengthy procurement process, exacerbated by the lack of funds for the upgrade of information management systems for tax and customs administration, the Project Development Objectives have been substantially achieved. Component 1. Customs Modernization: Outcome rating - Satisfactory The efficiency and effectiveness of Customs has been improved through implementation of the upgrade of the information system to a web-based ASYCUDA World version. This version has enabled electronic data exchange between the Customs Administration and the trading community through the Grenada Trade Portal (www.tradegreanda.gd). Presently, the Customs Administration electronically processes Custom Declarations, including claims for custom duty refunds, makes assessment and collection of custom duty from travelers, processes applications for warehouse licensing, provides trade statistics for other government bodies and deals with enquiries and complaints. As a result of new procedures, the time for clearance of imported goods has been reduced, as has the frequency of physical inspection of cargo, which was reduced below the original target of 30% since the launch of the ASYCUDA World in April 2012. Customs officers were trained in goods valuation. Capacity for Post Clearance Audit has been built through the implementation of new audit procedures and systems and through the training of auditors. Reduction of the time taken for custom processing resulted in improved efficiency. This in turn contributed to trade facilitation and satisfaction with the service within the trading community. Component 2. Tax Administration Modernization: Outcome rating – Moderately Unsatisfactory Improvements in the efficiency of tax administration and a decrease of the transaction costs have been partially achieved. Following the organizational and management review of the Internal Revenue Department (IRD), the organizational structure of the IRD has been optimized and better aligned with the IRD mandate. The audit function has been consolidated and a new audit module of taxpayers has been added to the existing SIGTAS system. This audit is operational and the auditors are trained in its use. However, the upgrade impacted the performance of the SIGTAS application, due to the overloading of system resources (the 1998 version of SIGTAS is run on a weak server of 4 Gb, and the ORACLE operating system needs to be upgraded to the ORACLE 11.6 version). The 14 IRD is considering upgrading the old operating system, which can be implemented outside the project. The project has not addressed the tax assessment automation in full, as data input into the system is done manually - based on paper tax return forms submitted by taxpayers. This leads to a slow tax return assessment. While the IRD was aware of the problem, it was outside of the agreed project scope. It would have been important to conduct a comprehensive assessment of the tax information system and design a comprehensive system modernization plan during the design stage, in order to avoid partial solutions that still leave the ultimate objective of tax modernization beyond reach. The Planning Unit has been designed, including staffing, business procedures, and even planning and monitoring skills; however, in the absence of a budget allocation for 2012, such unit has not become operational. Yet, the trained group of specialists from other IRD units develops Operational Plans for the implementation of the 3-year Strategic Plan developed under the project. The IRD is receiving further planning support through the Bank administered SEMCAR program. The IMF through its CARTAG program reviewed the new functions and organizational structure as part of VAT performance review in 2012 and found the new arrangements acceptable. The target of a reduction of tax-payers’ time to pay taxes from 140 hours to 100 hours has not been reached. The last available data obtained through the Doing Business 2013 still shows the same baseline value of 140 hours for preparing, filing and paying corporate taxes. According to the views of the IRS officials, preparing tax returns takes the longest time, as it reflects inherent weaknesses in businesses’ accounting system. This could have been addressed by introducing accounting software in private sector companies, but this was outside of the project scope. Therefore, this indicator could not have been attributed to the project results, and would have required an additional intervention and hence additional resources that were not available. The increase in tax compliance has been only partially achieved. The tax compliance indicator has improved from 59 to 39 percent (20 percentage points against the required 39 pp improvement). The activities that were supposed to lead to this result included awareness events, review of return forms, etc. However, these activities have been only partially successful. The IRD prepared and sent tax information (forms) to taxpayers on a monthly basis, but according to IRD officials this measure was insufficient to deal with the cultural change. Also, since the audit module has not been in active use since its deployment in June 2012, it is not possible to attribute compliance improvements to strengthening the audit function. Tax enforcement remains an area for the Government to continue addressing. The lack of funds to procure tax advisory services to guide and support IRD efforts may have possibly contributed to the lack of achievement in this area. Component 3. Modernization of Investment Promotion: Outcome rating – Satisfactory The project advanced well toward modernizing investment promotion. The Grenada Investment Generation Strategy 2012-2016 has been developed, setting an objective of 15 increasing private capital investment in five priority sectors: agribusiness, energy, health education and wellness services, information communication technology, and tourism. The implementation of the Strategy is well on track. The project supported organizational strengthening of the Grenada Industrial Development Corporation (GIDC) that improves the portfolio of services offered to Grenadian investors. The information portal (www.grenadaidc.com) provides useful information for investors (investor’s guide, various application forms in .pdf format, etc.). Currently, the GIDC is working on establishing an Investment Facilitation Network, which will be launched in November 2012. The GIDC has lately received recognition from the World Bank for the speed in response to investors, and FIAS ranked Grenada second after Brazil in Latin America for the progress in developing the investment climate in Grenada. Component 4. Implementation of Export Strategy: Outcome rating – Highly Satisfactory The project has achieved its objective of supporting Grenadian exporters by providing access to trade information and strengthening the capacity of the Bureau of Standards. Grenada Trade Portal (http://tradegrenada.gd/) was launched on June 14, 2012. It provides information on trading opportunities, products and markets. The Bureau of Standards has built its capacity in key areas and effectively provides conformity assessment, supports measurement standardization in local manufacturing, and offers quality assurance and certification of exported goods. These are important achievements supporting exporters of Grenada. Component 5. Project Management –Moderately Satisfactory The project management component played a critical role in implementation, mobilizing and coordinating consultancies and project beneficiaries, supporting decision-making by the Steering Committee, monitoring project results and observing project fiduciary arrangements. Procurement was slow, causing implementation delays. However, the performance of the Project Manager and the Project Coordination Unit improved toward the end of the project. This contributed to the high degree of attainment of the formally revised results, implementation of the client surveys to measure the impact of the project, and high degree of utilization of the allocated IDA and EU resources. 3.3 Efficiency The project has set up efficiency indicators for the cost of custom operations and tax administration as a share of the revenue collected. Admittedly, it has been difficult for the Internal Revenue Department to monitor its administration costs, as IRD does not have control over its budget and accounting system. As for the cost of Customs, at approval, the project introduced an indicator measuring operational costs of Customs as a share of the total revenue collection. However, during the restructuring this indicator was dropped. In the view of the management of the Customs Administration, it was difficult to achieve the reduction of operating costs from 2.1% to 1.5% during the economic crisis, as with 16 the economic decline and the accompanying reduction in international trade, the size of customs’ revenue declined. New staff employees were added to enable expanded service levels, which added to the operating costs. The implemented upgrade of the Customs information system to ASYCUDA World is likely to render Customs more efficient through the contribution to operational savings (e.g., through faster processing of custom procedures or through a reduction of the physical inspection of cargo). However, given that the launch of the information system has been done recently, it is too early to make any definitive quantitative conclusions. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory The project has fully achieved its development objectives in three of four cases: modernize Customs, implement key elements of the export strategy and modernize investment promotion. The project development objectives were well chosen to address the central issue of creating conditions for sustainable growth through improvements in trade, business/investment facilitation, and building capability of public institutions to support the above activities, while simultaneously strengthening government effectiveness and efficiency in revenue collection. These objectives were the focus of the government reform and growth agenda, as well as that of the Bank’s strategy. The modernization of tax administration started under the project with laying down the foundations for a better performing IRD: aligning the structure with functions, strengthening planning and monitoring function, improving the audit capacity, introducing an audit module to the information management system SIGTAS. However, more support is required to IRD to translate the initial initiatives to better outcomes. This has not been possible to achieve under the project financial and time constraints. However, the World Bank engagement in the area of tax administration continues through a regional SEMCAR project, supported by the Canadian government and administered by the World Bank. The same core team, including the TTL and technical specialists, are continuing engagement in strengthening tax administration capacity. This facilitates the achievement of the tax administration modernization started under GDTAC. From the efficiency perspective the project’s impact is significant, although this is difficult to measure. The improvement of investment and doing business environment, the facilitation of trade, the services in support of economic activities of the private sector actors is likely to impact the GDP growth and ultimately translate into greater revenues collected through government programs. Efficiency would be also supported through: (i) enhancement in government’s openness; (ii) better access to information; (iii) improved reliability of government performance, supported through more strategically managed institutions supported by upgraded information systems; (iv) faster speed and better quality of service; and (v) elimination of sources of corruption by limiting face time between government institutions and clients. 3.5 Overarching Themes, Other Outcomes and Impacts 17 (a) Poverty Impacts, Gender Aspects, and Social Development The indirect impact of the project is reduction of poverty through improving conditions for business activity: trade and investment. It translates in new employment and personal revenues. Better revenue administration will result and is already showing signs of better revenue collection. This means more fiscal room for the government to address social programs. (b) Institutional Change/Strengthening Institutional changes have occurred under GDTAC in the Customs, Inland Revenue Department, Grenada Industrial Development Corporation, and the Bureau of Standard. Other agencies taking part in the customs procedures and in investment approval have also adjusted their procedures and information system to improve government services that facilitate trade and investments. These institutions have experienced profound cultural changes from low value added routines to modern management procedures that are rational, transparent and efficient. The capacity of personnel that were directly involved in the project has improved. All this is translating in better services, better information access and improved customer satisfaction. (c) Other Unintended Outcomes and Impacts (positive or negative) The growing capacity of the government institutions involved in the project creates confidence in the possibility of change, as well as attracts the donor community to support more advanced modernization building on the created technical capacity, stronger institutions, and the commitment of the government. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Beneficiary surveys were conducted twice during the project lifetime: in 2011 before the implementation of major changes and within two months of project closure in 2012. The surveys measured client expectations and client perceptions of the quality of services in the custom, tax, investment promotion and trade facilitation areas. These surveys illustrated growing expectations and also growing perceptions of the improving service quality. However, the short time that elapsed since achievement of project final outputs related to information systems most likely gave customers insufficient time to fully experience all potential benefits, perhaps explaining why the gap between the expectations and perception increased in some cases. The general conclusion of the surveys was the acknowledgement of service improvements, although numerically modest. The detailed presentation of survey results is found in Annex 5. In the case of some surveys (such as the time needed to pay taxes), the customer response was not sufficient for making statistically significant estimation of results. Given that some of the project indicators coincide with the indicators measured by the Doing Business report, in the future the Government would be able to monitor the movement in customer expectations and perceptions and use this feedback for continuous improvement. 18 4. Assessment of Risk to Development Outcome Rating: Negligible to Low The low risk of maintaining the development outcome over the years is supported by the demonstrated high commitment at the decision-making level at the Ministry of Finance to further strengthen public management systems and further develop high quality services for business actors. Support to tax modernization would be required in the medium term and is expected to be provided through the SEMCAR project. Potential risks may come from slow legislative action of the government in the area of electronic provision of services that would recognize electronic records as legitimate. So far the use of the information system ASYCUDA World for custom processing is not mandatory. This means that some traders can still rely on manual procedures that reduce service efficiency. The training on new procedures and implementation of information systems creates a good basis for sustainability. The ownership of development outcomes, as demonstrated by core management and technical teams, appears to be high. During the discussions of project outcomes, the managers of the beneficiary organization were appreciative of results, although also aware of new development opportunities and challenges. The Bureau of Standards, for example, recognizes the rapid innovations in the area of product safety and the need to keep up their product testing capabilities in order to support exporters and local producers. The GIDC is using a strategic sector approach that would help future investors to make strategic investment decisions. Access to trade information would help local producers to explore new export possibilities. Better Customs services would improve efficiency of international trade. All these innovations would be supported by the private sector demand. For the tax administration, full benefits of the results achieved are likely to be realized with the future support from Bank’s SEMCAR program to implementation of tax modernization strategy and further enhancing their information system. 5. Assessment of Bank and Borrower Performance Rating: Moderately Satisfactory The objectives of the project were well chosen and the design generally supported the objectives. However, insufficient analysis was done during preparation in relation to specific institutional development issues, detailed requirements for information technology upgrades, and consequently to the costs of the activities leading to attainment of the project objectives. In terms of technical design, a more detailed assessment of the existing information system used for tax administration (SIGTAS) should have been carried out in order to assess not only functional requirements of the upgrades but also future impact of these upgrades on the system’s technical capabilities (e.g., operating system, performance, system response time, etc.). Similarly, the upgrade of the customs information system to a web-based solution could have benefited from an assessment of implications on the network infrastructure; something that required additional government investments during implementation. 19 The quality of financial planning at entry could have been better and based on a more detailed analysis (technical and financial) of needed inputs. Related to the technical design, there was a need to make more accurate cost estimation for the achievement of project objectives at the project design stage. The lack of funds to implement initially planned activities led to cutting or consolidating inputs in four of the five components to make attainment of key results possible. During the 2011 restructuring, the team wrote in the restructuring paper: “given the delay in implementation and the actual costs of critical inputs, project activities have been streamlined to focus on activities that are critical and have the most value added for achieving the PDO”. While the Government counterpart financing was planned, no covenants related to how this would be achieved were envisaged. As a result, the Government contributed only 6 percent of the declared contribution amount. Yet in total, to enable the ASYCUDA upgrade, the Government spent almost 20% more than initially pledged to provide the enabling environment (network and hardware) for web based access to ASYCUDA. Another problem that hit the project from the very beginning was a protracted delay in its launch. Although it had been well known that the country faced an election, the associated risk for mobilizing the implementing and beneficiary organizations was not properly assessed. As a result, the project was launched 19 months after approval, leading to an eight month extension that proved too short to enable technical support after the implementation of major information system upgrades in the Customs and IRD. During the implementation, procurement was a challenge. These challenges were the result of a number of factors: the procurement capacity of the recipient and the choice of single source selection for both upgrades of the information system, as the government used proprietary systems which they chose to maintain. The length of the procurement process for contracting services of the firm SOGEMA for the SIGTAS upgrade - almost two years - was especially long. Since the first submission of the TOR for Bank review in February 2010 to signing the contract in the first week of January 2012, the Project Coordination Unit engaged in back and forth negotiations with the sole vendor that led to revising the scope and financial envelope. The system implementation upgrade from January to June 2012 was quite short. The cuts in the scope of upgrade due to insufficient budget, as well as overlooked need for upgrade the hardware and operating platform during the design stage, have probably led to the SIGTAS system’s unstable performance after its implementation. The implementation process faced resource challenges: time and money. Arguably, these challenges could have been envisaged at preparation and approval. 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Unsatisfactory 20 The quality at entry could have been improved to avoid implementation delays and the lack of funding to complete activities leading to the achievement of development objectives. Technical problems, related to upgrade of information systems, could have been avoided had there been a realistic assessment of the existing ICT system’s (specifically, SIGTAS) performance, projected performance after the upgrade, the need for additional network infrastructure, server capability and robustness of the operating platform. Should the project team have involved technical specialists in analyzing functional requirements and technical specifications for the system upgrade, the cost of the planned ASYCUDA and SIGRAS upgrade could have been more realistically projected. Some results indicators, such as those measuring efficiency through the reduction of operating costs in tax and customs, were only vaguely related to project activities and intermediate outcomes. For example, the IRD, as a department of the MOF, does not have independent budget authority, therefore, does not have direct control or incentives over cutting operational costs. In the end, the efficiency indicators were dropped during the restructuring. Overall, the ambitiousness of the project objectives was not commensurate with the projected costs of activities. An initial IT assessment of the SIGTAS’ (installed in 1998) technical capabilities should have been performed during the design stage, prior to deciding to implement additional modules for tax audit purposes. Presently, the IRD needs additional sources of funding (potentially from the SEMCAR program administered by the World Bank) to implement required system analysis and updates. (b) Quality of Supervision Rating: Satisfactory The Bank supervision missions were timely and focused on monitoring results, as well as assisting the government with resolving implementation challenges. The ISRs were filed as per procedure. Project ratings were realistic. Some slowness of procurement clearances, mentioned by the Project Coordination Unit (PCU), has been explained by a lack of timely compliance with procurement procedures on the part of the client. The choice of a Sole Source Selection method of procurement for the upgrade of the proprietary software application SIGTAS resulted in delays, as this method required additional vigilance during the review on the part of Bank procurement specialists. However, more significantly, the lack of finances led to incremental reduction of the contract scope and repeated negotiations over the scope and price. Fiduciary arrangements in place have been satisfactory and the project audit issued unqualified opinions. To the credit of the Bank supervision team, it helped the Government overcome problems of insufficient resources through a timely restructuring, when the need for more time and the lack of money became evident to both the Government and the Bank team. However, the final supporting argument for satisfactory rating is practical attainment of the project Development Objectives in spite of time and resource constraint. 21 (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory Overall Bank performance during design and implementation of the project is moderately satisfactory. While the technical, financial and project mobilization challenges were not realistically assessed at entry, during supervision these issues have been addressed and the Government achieved most of the project objectives. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory Following the elections in July 2008, the change in administration triggered a prolonged delay in launching the project. Even after signing early in 2009, it took the government an inadequately long time to set up an implementation structure. However, after the launch of the project in October 2009, the government support to implementation was quite effective. The Steering Committee, chaired by the Minister and managed by the Director of Economic Development of the Ministry of Finance, worked regularly and effectively, monitoring progress and addressing emerging issues. The Government has not met its counterpart contribution pledge to provide the equivalent of US$250,000 to co-finance planned project activities. This amount, however, was surpassed through Government parallel financing of network infrastructure that enabled web-based operation of ASYCUDA World for processing customs clearances from remote devises. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory The Ministry of Finance, as an implementing agency, coordinated project beneficiary agencies including the Customs Administration (CA), the Internal Revenue Department (IRD), the Trade Department (TD), the Bureau of Standards (BOS), and the Grenada Industrial Development Corporation (GIDC). The degree of commitment and ownership were mixed among most of the entities involved: from very high in GIDC, BOS, and CA to somewhat lower in IRD. The performance of the project suffered from a slow procurement process, especially for the contracts related to upgrade of information technology, resulting in significant delays in implementation. The implementing agency conducted an effective awareness program, making sure that ultimate beneficiaries of the project knew about the changes being introduced in the trade and investment processes. However, the implementing agency did not ensure budget allocation necessary for institutionalizing the strategic planning and monitoring function in the IRD. The delays in effecting legislative changes to ensure that electronic records processed through the ASYCUDA World were considered legally acceptable in lieu of the paper records resulted in the use of a dual electronic and paper-based customs 22 clearance system. This impacts the ultimate productivity of the Customs system by increasing the time of processing of customs clearances. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory In spite of delays caused by political (initially) and technical (during implementation) reasons, the project has achieved most of its objectives. The implementing agency supported by the Project Management Unit ensured good coordination and focus on results among the GDTAC beneficiaries. Good information and awareness program created interest and demand for better government services in support of trade and investment activities. Procurement performance was most of the time less than satisfactory, causing delays in mobilizing consultancy. That led to late implementation of important information system upgrades and left practically no time before the closure of the project to fully eliminate program bugs in the SIGTAS system. 6. Lessons Learned GDTAC offers a number of general and specific, project-related lessons, listed below. • A strong ownership and coordination enabled the implementing agency to address implementation challenges that were critical to the achievement of the Development Objectives. This project has achieved most of the original objectives to a large extent due to a regular, bi-weekly coordination meetings of the Steering Committee, that with the support of the Chairman and the Project Manager kept implementing agencies focused on results and accountable for their achievement. • Pro-activeness in resolving the lack of financial resources was essential to the achievement of the project Development Objectives. It is important to leverage insufficient IDA resources with other development partners in small IDA counties. • Financial challenges in implementing projects in small countries. Given the size of the country, there is a limit of borrowing from debt sustainability considerations. However, intervention to address institutional weaknesses does not reduce in step with the size of the economy. This implies that traditional investment operations, costly for the Bank to support (inadequate supervision budget to permit involvement of technical specialists in the areas outside Bank’s staff expertise), may not be the best instrument from efficiency point of view. Regional programs, such as SEMCAR, that target a number of small countries, that experience similar institutional development issues, could serve as a model of a combination of analytical and technical assistance support. Having the same team allows the Bank team to acquire and use expertise in addressing problems specific for the region. • Technical design of the project activities, related to the upgrade of information systems, should include professional assessment by an ICT specialist to avoid 23 partial upgrade solutions that may be incompatible with or too burdensome for the technical performance capabilities of an old operational system. Detailed cost assessment for information solutions should be made based on market reference costs to avoid insufficient allocation of resources for key information system upgrades. Analysis at the preparation stage should also include consideration of options of replacing the information system with new solutions, as an alternative to upgrading an old system. In the case of the system for tax administration, SIGTAS is an old system deployed in 1998, and at the time of preparation in 2007 and implementation in 2011-2012, other competing options based on newer technological solutions could have been considered. • When costs of activities are estimated, it is essential that the Bank team carry out an analysis of the costs involved: those to be covered from the project proceeds and those additional costs that the government will have to bear as a counterpart contribution (e.g., for telecommunication network upgrade). Similar information technology solutions implemented at the time of preparation in other projects could be one guide; however, specific country conditions (e.g., infrastructure) should be assessed by information technology specialists. This could provide a more realistic guidance to determining future project costs. • While sole source selection may appear a quick and easy way to procure consulting services for a proprietary system upgrade, in reality it took this project almost two years (23 months) to complete the procurement process, when funds were insufficient and the government had to cut back its requirements and provide very detailed justification for the cost structure in the contract. Procurement under Quality-and-Cost-Based Selection may have avoided difficulties of procurement in the non-competitive environment. • For Government counterpart financing, if it is expected to finance project components leading to achievement of Development Objectives, specific arrangements for disbursements should be worked out and protected through project implementation covenants in order to avoid non-compliance of the Government in allocating and disbursing funds. Also if institutional reforms envisage setting up new organizational units, such as Planning and Monitoring Unit in the Internal Revenue Department, the project could specify in an implementation covenant that the Government should provide necessary budgetary resources to enable institutionalization of such a function during the project lifetime, to assure sustainability. • Suitability of the procurement Bank procurement rules to the small countries. There is a specific issue of availability of technical expertise in the consultancy market of a small country with the population of approximately 100,000 inhabitants. International consultancy, while indispensible in certain instances, may be cost-prohibitive more generally due to island countries’ isolation from the mainland. It would be useful for the Bank to analyze this aspect ensuring that the balance between the competition in procurement (as a condition of better quality) and the associated costs. The low IDA allocation envelope and modest grant resources mobilization capability of the small island 24 states either suggests very narrow and limited scope of assistance or new more cost efficient procedures. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The Borrower suggested that: • All activities, even if not included in the project, but essential for the achievement of Development Objectives, need to be appraised and reflected in the Project Appraisal Document, to inform the Government’s resource planning. The Project Manager commented that the need to upgrade the information network infrastructure for implementation of ASYCUDA was not reflected. This led the Government to commit and disburse additional US$287,392 equivalent that had not been planned in advance. Mobilizing significant amount of unplanned resources by the Government is problematic and usually leads to delays. • The Borrower complained about the long procurement process leading to obtaining Bank’s no objection and delays in response of the beneficiary agencies to the comments on the quality of procurement documents. The issue was discussed with the TTL and two explanations were offered. First, the inadequate quality of the submitted documents, specifically terms of reference, required Bank’s review and comments, in order to meet the requirements of Consultants Guidelines. However, the Borrower has not always been consistent in working on the latest Bank commented version and incorporating all of the suggested changes. This caused delays. The second explanation of long procurement process was related to the Sole Source Selection process that requires an additional scrutiny by the Bank’s procurement team to ensure efficient procurement despite lack of competition. Finally, the insufficient budget forced repeated readjustments in the scope of work which, required additional reviews and caused delays. • Implementing agencies expressed regrets that the project was closed 3 almost immediately after the implementation of the main information system upgrades. This left them with insufficient support in operating the new system. Although the training had been delivered, in the case of tax administration, running the new audit module created significant system overload, limiting the possibility of concurrent users to work through the system. The explanation for this is that the scope of updates to the SIGTAS system was narrowed down due to insufficient finances. Therefore, important other system upgrades were cancelled. This ultimately resulted in the need to seek other financing options to conduct the necessary operating system upgrades. The Bank SEMCAR program plans to address concerns related to the performance of SIGTAS. 3 The project was closed on June 30, 2012, which is the revised project closing date 25 (b) Cofinanciers The European Union (EU) co-financed project implementation in the amount of US$655,000 equivalent (EUR500,000). The EU raised issues of slow mobilization of activities and delivery of results in the initial phases of the project in 2010. Once the project activities picked up, the EU, whose representative sat on the Steering Committee, was engaged in constructive project supervision along with the Bank team. (c) Other partners and stakeholders The Grenada Chamber of Commerce is an important project stakeholder and beneficiary. The Chairperson of the Chamber of Commerce was part of the Steering Committee and, according to the Ministry of Finance, this collaboration proved to be very effective and set a positive example of public-private development cooperation. 26 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate* (USD (USD millions) Appraisal millions) 1. Custom Modernization 0.853 1.145 134% 2. Tax Administration 0.546 0.395 72% Modernization 3. Modernization of Investment 0.295 0.260 88% Promotion 4. Implementation of Export 0.505 0.485 96% Strategy 5. Project Management 0.616 0.515 84% Total Baseline Cost 2.815 2.482 88% Physical Contingencies 0.00 0.00 0.00 Price Contingencies 0.00 0.00 0.00 Total Project Costs 2.815 0.00 Front-end fee PPF 0.00 0.00 .00 Front-end fee IBRD 0.00 0.00 .00 Total Financing Required 0.00 0.00 • The amounts highlighted in blue reflect the allocation among components during the restructuring. These amounts are higher than the total of US$2.482 million, reflecting the difference between the planned and actually disbursed amounts. (b) Financing Appraisal Actual/Latest Type of Co- Estimate Estimate Percentage of Source of Funds financing (USD (USD Appraisal millions) millions) Government Borrower 0.250 0.015 6.00 contribution EC: European Commission Grant 0.670 0.655 98.00 International Development IDA Credit 1.860 1.812 97.00 Association (IDA) 27 Annex 2. Outputs by Component Planned Project Planned Outputs Achievements Outcome Component 1. Customs Modernization – Rating – Satisfactory Improve the Improved Customs Achieved. Risk management and post clearance efficiency and Systems and audit capacity developed. 12 officers trained in effectiveness of Procedures post clearance audit. Customs brokers trained in Customs the use of new procedures. A single window customer service center has been established in the Port. Agencies involved in custom procedures are linked to ASYCUDA World. Upgraded Achieved. Upgrade of the Customs information Information system to ASYCUDA World (AW) completed; Technology AW system users trained. To enable a web-based access to AW system, the government upgraded network and hardware infrastructure Improved Capacity Partially achieved. 30 officers trained in goods of Management and valuation. Training in classification of goods was Staff not implemented due to lack of time and funds. Component 2. Tax Administration Modernization – Rating – Moderately Unsatisfactory Improve the Improved Partially Achieved. The organizational review efficiency of tax Organization and was conducted and restructuring implemented. A administration Management of the three year corporate plan developed and and decrease Inland Revenue Operational Plans are being prepared annually. transaction costs Department (IRD) The Planning and Monitoring Unit was designed of paying taxes but not made operational due to budget shortage. and consequently Audit unit was consolidated and provided with increase tax the automated Tax Audit Module of SIGTAS compliance system Improved Not achieved. Assessment of taxpayers has not Registration and been implemented. Consulting services of a tax Taxpayer Services advisor were cancelled due to insufficient resources. Improved Tax Partially achieved. The number of non-filers has Compliance reduced from 59% to 39%, missing the target of 20%. Enforcement remains weak and compliance culture is still low. Strengthened Tax Partially achieved. The rates of tax collection Collection, have somewhat improved, but still short of the Enforcement and target. Tax audit module can potentially Control contribute to identifying non-filers, but it has not been actively in use due to the system overload, as server capacity and operating system have not been upgraded due to the lack of funds. 28 Upgraded Partially implemented but with negative impact Information on the system performance. SIGTAS upgrade Technology in the with adding a new Tax Audit Module was IRD completed at the end of the project. The new Audit Module is functioning in a test regime, but has not been fully used by the IRD yet. The system still has bugs and when in use creates system overload and shutdown due to unresolved system capacity issues (server and operating system need upgrades). Component 3. Modernization of Investment Promotion – Rating – Satisfactory Modernize An Investment Achieved. A Grenada Investment Generation investment Promotion Strategy Strategy for 2012-2016 was approved by Cabinet promotion Developed in August 2011. http://grenadaworld.com/Publications/tabid/70/Default.aspx Implementation of Achieved. Institutional Review of GIDC the Investment implemented to align the mandate and structure Promotion Strategy with the Strategy. GIDC emerged as a project started driven organization focused on 5 investment priority areas. GIDC staff have learned new tools, having been trained in relevant areas: market intelligence, services to investors. Investment incentive allowances are approved in 6 weeks. The need for a Cabinet decision on some investment allowances limits the possibility to reduce the time of this service further. M&E system installed to follow up the implementation of the strategy. Electronic services are provided to investors. The first phase of implementation of the Strategy is ongoing: GIDC prepares sector profiles, defines investment niches. Expectations of service quality, as measured by the survey, increased by 3percent, while client satisfaction with the services has not improved above the baseline yet due to the short time that the new services have been available to potential investors. An Investment Achieved with additional EU support. An Facilitation institutional study implemented to develop Network business processes for approval of new Established investments. Investment approval standards set up for related government entities. Inter-agency electronic network, supported by the EU funding, is under development and is 29 expected to be launched in November 2012. Component 4. Implementation of Export Strategy. Rating – Highly Satisfactory Enhance the Access to Trade Achieved. Trade Information Portal Government’s Information http://tradegrenada.gd was launched in June support to the Improved 2012. The Portal provides information on export sector Customs for exporters and importers. It also through includes economic analysis, sector information, improving access product pricing, etc. to information The survey for access to information shows a and the notable improvement of the indicator from the strengthening the baseline 0.51 to 0.83. capacity of the Bureau of Achieved. The capacity of the Bureau of Bureau of Standards Standards (BOS) has been significantly improved Standards to Strengthened by investment in testing equipment and training provide of personnel (19 trained). The BOS is capable of conformity providing services to exporters and local assessment and businesses on conformity compliance and quality quality assurance. certification, as well as metrology services. The during the last two months prior to project closure BOS issues 57 certificates, including those for rum, food exports and other. The BOS has become an exporter of know-how in the area to the OECS. BOS has presence in the traders’ service center in the Port of St. George’s. Component 5. Project Management Support the Implementation of Achieved. The project was implemented achievement of fiduciary function, according to the Financing Agreement and project objectives monitoring and achieved most of the results, as revised during evaluation, audits, restructuring. client survey 30 Annex 3. Economic and Financial Analysis The project was expected to provide a direct impact on improvement of service delivery in the areas of the public sector that support the Government in fostering its economic activity through promotion of exports and investments, improving the investment climate, as well as modernizing tax and custom administration to ensure improved collection of revenue to finance government programs in Grenada. The medium-to-long term impacts were expected to be substantial, including better service and reduction of custom clearance time, reduced time and transaction costs for entrepreneurs while they pay taxes, greater access to trade data and issuance quality assurance to support Grenadian exporters, and increased investments as a result of a more streamlined and faster system for investment approval in Grenada. The early project results demonstrate achievement of shorter processing time in Customs through the use of the web-based and easily accessed by the trading community and government agencies upgraded information management system ASYCUDA World (AW). Total cargo release time reduced from 8.6 days prior to the launch of the new system to 3.73 days, with significant time reduction for both parties: Declarants and Customs officials. The time for the Customs has reduced 33 times from 4 days to less than 3 hours. Web access allows custom brokers to file information and follow the procedure from either computer workstations set up in several locations in Grenada or access the AW system from their mobile devices. Significant capacity improvements have been achieved in investment and export promotion: from much improved access to information to electronic services. The time for investment approval has been reduced from 215 days to 123 days (for the longest procedure) or shorter, according to Doing Business 2012 report. The processing of investment applications has been reduced from 90 to 30 days. The quality of information and support to investors has improved and will continue improving in the next 3-5 years when the sector studies will provide good guidance on investment opportunities. Overall the project created better conditions for business start-ups, investors and cross- border trade. This would lead to stabilizing government revenue and job creation in the coming years. These potential benefits make the IDA contribution of SDR 1.2 million into this project a worthwhile investment into the future of Grenada. This investment also enabled the mobilization of the EU funds in the amount of EUR 500,000, as well as the investment of the Government in the total amount of US$302,133 equivalent, of which EC$42,315 was a counterpart contribution and EC$772,568 was Government parallel financing that helped strengthened network infrastructure to enable the web-based access to ASYCUDA World. 31 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Michael Corlett Senior Country Officer AFCMG Enrique Fanta Ivanovic Senior Public Sector Specialist LCSPS Errol George Graham Senior Economist AFTP3 Svetlana V. Klimenko Sr Financial Management Specialist LCSFM Lisa Lui Lead Counsel LEGIP Rachel McColgan-Arnold Chair, Staff Association WBGSA Judith C. Morroy Consultant LCSPT Ganna Musakova Senior Program Assistant LCSHE Michael Paul Consultant FIEID Stefka Slavova Senior Economist CICBR Supervision/ICR Sandra X. Alborta Program Assistant SASHD Gisela Durand Consultant LCSPF Tanya Gupta Senior Resource Management Off CFRPA Jose Eduardo Gutierrez Ossio Senior Public Sector Specialist LCSPS Svetlana V. Klimenko Sr Financial Management Specialist LCSFM Patricia E. Macgowan Consultant LCSPT Carmen Machicado Operations Officer LCSPS Nicholas Paul Manning Adviser PRMPS May Cabilas Olalia Senior Operations Officer LCSPS Roberto O. Panzardi Sr Public Sector Mgmt. Spec. AFTP3 Rolande Simone Pryce Senior Country Officer AFCTZ Norma M. Rodriguez Procurement Analyst LCSPT Milena Sanchez de Boado Consultant LCSPS Plamen Stoyanov Kirov Sr. Procurement Specialist LCSPT (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY07 80.71 FY08 108.31 Total: 189.02 Supervision/ICR FY07 0.00 FY08 2.29 Total: 2.29 32 Annex 5. Beneficiary Survey Results Beneficiary Surveys have been undertaken immediately before the closing date of GDTAC. The summary of the Beneficiary Surveys are presented in the table below by project component. The overall focus of the survey was on the following aspects of customer perceptions: (i) clients’ perception of operations and customer service at the Customs and Excise Department; (ii) clients’/ tax payers’ perception of service quality and tax administration at the Inland Revenue Division; (iii) ease for exporters and potential exporters of finding information on trade and export; (iv) quality of service delivered by the Customs Department; and (v) investors’ and potential investors’ perception of the quality of service delivered by the Grenada Industrial Development corporation. Indicator Baseline, 2011 Final Survey Comments Results, 2012 Component 1. Customs Modernization Achievements that impacted the change in perceptions of the service quality: • Launch and roll-out of the electronic manifest module of ASYCUDA World at Customs and all Ports of entry • Launch of declaration, accounting and selectivity module of ASYCUDA World at St. George's Port with roll-out planned for other ports before the end of June, 2012. • Provision of customer service training to all staff • Training in Post Clearance Audit provided to selected staff The final survey showed heightened expectations for 4.578 Customs Service Responsiveness, Empathy, (out of Quality 4.71 Reliability and Tangibles. The maximum score Expectation single indicator showing of 5) lower expectation was Assurance. The gap between the perceived quality and expectation widened. The narrowest gap was for Custom Service adequate information for 3.25 3.34 Quality Perception decision-making, modern looking equipment, customers feel safe in their transactions. The widest gap was for Responsiveness and Empathy. 33 Component 2. Tax Administration Modernization Achievements in the Inland Revenue Department that Impacted the Change in Perceptions: • Review of organizational and management structure with preparations for implementation of recommendations • Design and establishment of a planning and monitoring unit within the IRD • The upgrade of IRD's ERP system (SIGTAS) still in progress Respondents indicated higher Expectations of the expectations of the ideal IRD. ideal Inland Higher expectations 4.578 4.716 Revenue particularly were measured for Department (IRD) Responsiveness, Empathy, Reliability and Tangibles. The gap between the expectations and perceptions is practically unchanged. Perception of the The narrowest gap was quality of IRD 3.322 3.386 registered for the adequate services information for decision- making, modern looking equipment and facilities and safe feeling in transactions. Component 3. Modernization of Investment Promotion Achievements in GIDC that Impacted the Change in Expectations and Perceptions: • Investment Promotion Strategy developed and adopted by cabinet. Strategy was launched • Institutional review of GIDC completed with implementation of recommendations in progress • Training of staff of GIDC and agencies involved in investment facilitation to build capacity for effective implementation of strategy Expectations were very high, Expectations of an with the highest indices for Ideal Investment 4.629 4.784 assurance, reliability and promotion agency responsiveness. The perceptions have not increased, and the gap between expectations and Perceptions of the perceptions widened. The quality of the lowest perceptions were in 3.685 3.617 service received relation to visually appealing from GIDC physical facilities, accurate billing and feelings safe in transactions. The project has not directly addressed these 34 indicators. The gap for reliability and responsiveness remains big. Component 4. Implementation of Export Strategy Achievements that impacted the changes in expectations and perceptions: Launch of the trade portal in June 2012 Perception of Significant improvement access to 0.51 (out of 1) 0.69 (out of 1) information Access to the new trade portal - 80% Excellent and Very Good User Friendliness of the Portal - 80% Excellent and Very Good As the portal is new, its Quality of information may not be fully Information - 33% comprehensive, but with the Excellent and Very potential to improve in the Good future Surveys also were conducted (twice) to assess the time taken by businesses to pay taxes, but were found inconclusive due to the low response rates, which made it impossible to determine statistically significant results. 35 Annex 6. Stakeholder Workshop Report and Results No stakeholder workshops were conducted during the ICR mission due to the absence of the principal stakeholder (Chairperson of the Chamber of Commerce of Grenada) in the country. 36 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR The Borrower’s ICR provides important insights into the achievements as well as challenges faced during the implementation. The Borrower’s ICR gives a complete overview of the results achieved by the Government with GDTAC support, which is accurate and consistent with the observations of the Bank team during supervision missions and consistent with the results of the interviews conducted by the ICR mission after the project closure. The main messages reflected in the ICR were reiterated during the final meeting with the Chairman of the Project Steering Committee. General Borrower’s Conclusions Despite the late launch of the Project that took place in October 2009, or 19 months after Board approval and eight months after effectiveness, the project achieved most of its objectives. The project budget, being lower than planned, could not support in full all the activities, and along with the initial implementation delays, caused project restructuring in October 2011. The restructuring resulted in cancelling some activities of lower priority in order to fit the available financing. While IDA and EU financing was realized in full, the Government counterpart funding for project activities was executed only up to 6 percent of what was planned. Given the reduction of activities, a few intermediate project indicators were amended. The Borrower’s ICR identifies a number of challenges experienced through the life of the project, such as: • Inadequate budgeting and insufficient allocation of resources in the procurement plans. This led to procurement delays and re-advertising when financial proposals of interested consultancies exceeded the available budget. Financing of some activities (e.g. Investment Promotion Network) had to be mobilized outside the project budget. • Delays in the procurement process due to late responses from the Bank 4 as well as key project stakeholders. • Limited counterpart funding caused disbursement delays. That created numerous problems with implementation of ASYCUDA World system in the Customs Department. • The late launch of the project (19 months delay) resulted in completion of some key activities immediately before the closure. Both information systems updates, ASYCUDA World and SIGTAS, were completed in June 2012. Borrower provided comments on the draft ICR, which are included in the ICR package. 4 An analysis during the ICR preparation revealed that Bank comments were not always fully addressed, making issuing No Objection problematic. A random sample of communication records between the Bank and the Project Coordination Unit does not show excessive delays in Bank team’s responses. 37 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders No comments were received 38 Annex 9. List of Supporting Documents 1. Project Appraisal Document 2. Project Restructuring Paper 3. Borrower’s Implementation Completion Report 4. Results of the final beneficiary surveys 5. Minutes of the ICR QER meeting 6. Comments of peer-reviewers 7. Borrower’s Comments 8. Table of comments received and addressed in the ICR 39 IBRD 33412 61°45' 61°30' SAINT VINCENT AND THE S GRENADINES E I N Petit Martinique GRENADA D 12°30' 12°30' A Hillsborough N Grand Bay E CARRIACOU R Carriacou G Saline Island Frigate Island Large Island E Caribbean H Sea T Diamond Island Les Tantes Ronde Island Caille Island London Bridge 12°15' 12°15' Sauteurs Caille Island Levera Sandy Island Pond Grenada SAINT Bay Bird Island 0 1 2 3 4 5 6 Kilometers ck t ri Victoria MARK t. P a Lake SAINT S S t. Antoine 0 1 2 3 4 5 6 Miles Ma PATRICK rks Gouyave Tivoli Mt. Saint This map was produced by the Map Design Unit of The World Bank. Catherine The boundaries, colors, denominations and any other information (840 m) shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any SAINT Paradise endorsement or acceptance of such boundaries. Grand Roy Great River JOHN Gr eat Bay Grenville 61°30' Grenville SAINT Bay Beau s ANDREW Marquis Grenada GR E N A D A Grand ej ur Étang o South Vendôme East Mt. SAINT (716 m) GEORGE SAINT SELECTED CITIES AND TOWNS ST. GEORGE'S Belmont DAVID Saint David's PARISH CAPITALS Grand Anse Corinth NATIONAL CAPITAL Bay RIVERS Calivigny Point MAIN ROADS Salines 12°00' PARISH BOUNDARIES Glove Island INTERNATIONAL BOUNDARIES 61°45' DECEMBER 2004