The World Bank Report No: ISR6284 Implementation Status & Results Madagascar MINERAL RESOURCES GOVERNANCE PROJECT (P076245) Public Disclosure Copy Operation Name: MINERAL RESOURCES GOVERNANCE PROJECT Project Stage: Implementation Seq.No: 16 Status: ARCHIVED Archive Date: 26-Sep-2011 (P076245) Country: Madagascar Approval FY: 2003 Product Line: IBRD/IDA Region: AFRICA Lending Instrument: Specific Investment Loan Implementing Agency(ies): UCPM/MEM Key Dates Board Approval Date 13-May-2003 Original Closing Date 31-Dec-2008 Planned Mid Term Review Date Last Archived ISR Date 26-Sep-2011 Effectiveness Date 22-Sep-2003 Revised Closing Date 30-Jun-2012 Actual Mid Term Review Date 28-Feb-2006 Project Development Objectives Project Development Objective (from Project Appraisal Document) 1. Strengthen transparency and governance in mining. 2. Promote key institution al reforms for the decentralized management of mineral resources 3. Promote private investments and value-added in the sector. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost 1. STRENGTHENING TRANSPARENCY AND GOVERNANCE IN MINING 4.00 2. KEY INSTITUTIONAL REFORMS FOR DECENTRALIZED MANAGEMENT OF MINERAL 7.00 RESOURCES 3. PROMOTING PRIVATE INVESTMENTS AND VALUE-ADDED IN THE SECTOR 30.00 4. PROJECT COORDINATION AND MANAGEMENT 6.00 Public Disclosure Copy 5. PPF 0.00 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Implementation Status Overview Page 1 of 15 The World Bank Report No: ISR6284 The Mineral Resources Governance Project (PGRM) was built to assist the Government of Madagascar in implementing its strategy to accelerate sustainable development and reduce poverty in Madagascar through the strengthening of governance and transparency in the management of mineral resources. It was highly relevant in the context of the 2003 Declaration of Mining Policy and the 2007 Madagascar Action Plan which both expressed a clear intention to develop mining and improve the management of extractive industries so that they sustainably contribute to the people. With mining rushes on precious stones and traditional gold mining that have continuously involved hundred thousands of workers Public Disclosure Copy across the Island, and the dramatic development of multi-billion industrial mines during the life of the project, the project objective has remained extremely relevant until now. Under the support of PGRM, the Government has developed cutting and polishing of gemstones, improved their trading, certification and export, and developed tools, pilots and other initiatives to assist decentralized authorities in formalizing artisanal mining. Under PGRM, the Government has also strengthened its capacities to facilitate and monitor industrial mining operations, including transparency. With the project, the Government also fully renewed the knowledge on the country's geology and mineral resources. The new geological map of Madagascar, with a wealth of related geo-scientific information, represents a major public good for future developments. Flagship achievements include: 1) The revision of the legal and regulatory frameworks (2005); 2) The new geological map of Madagascar and the national geo-databank (BPGRM); 3) The set up of the Gemology Institute of Madagascar (IGM); 4) The launch of the Extractive Industry Transparency Initiative (EITI); 5) The set up of environmental management units within the Ministry of Mines regional directions, including a fully integrated geo-referenced monitoring system; 6) A range of capacity building tools, pilots and approaches for i) formalizing artisanal mining and improving the gemstones supply chain (including a toolkit for dealing with rushes around protected areas), and ii) integrating industrial mining into local and regional development (including recommendations for mining revenue sharing). Locations No Location data has been entered Results Project Development Objective Indicators Public Disclosure Copy Page 2 of 15 The World Bank Report No: ISR6284 Indicator Name Core Unit of Measure Baseline Current End Target Four BAM (Mining Administration Bureau) Number Value 0.00 2.00 4.00 created Date 13-May-2003 30-May-2012 29-Jun-2012 Public Disclosure Copy Comments Although the process of establishing BAMs was adequately launched, only 2 out of 4 targeted were created and none actually functions as intended at the time of closure. The BAMs pilots lost of their relevance especially after the 2008 ban of rough stones exports.The most significant pilot took place in Vatomandry where around 6-7000 miners rushed on rubies from 2001. After a promising start of the BAM which helped train around 500 artisans in 2004-2005, the dynamic of the rush reversed in 2006, the reserves were exhaustedand the mining sites around that location were gradually abandoned. Creation of one-stop shop for exports of Yes/No Value No Yes Yes gemstones Date 13-May-2003 30-May-2012 29-Jun-2012 Comments The one-stop shop is in place and jointly run by Mining and Customs administration staff. After a period of anarchical rushes on sapphire and ruby, such measures helped Public Disclosure Copy reducing long paper export procedures, limited one incentive to smuggle, and effectively contributed to an increase of formal exports. Increase in the collection rate of mining royalty Text Value 10% 100 80% as a result of decentralized tax collection Date 13-May-2003 30-May-2012 30-Jun-2012 procedures Comments The Ministry of Mines have statistics on expected and Page 3 of 15 The World Bank Report No: ISR6284 collected royalties based on number of "laissez passer" (for artisanal mining) and projected production Public Disclosure Copy (industrial mining). They show an increase of collection rate throughout the project period thanks to measures like the one-stop shop, but also the effect of industrial mining coming on stream. Figures do not include informal production,for which there is no statistics. Number of community development plans that Text Value 0 12 10 include management of mineral resources Date 17-Apr-2003 30-May-2012 30-Jun-2012 Comments PGRM supported End result could reach 15 if communities in many inter-communal plans are communes in integrating counted and 18 if Ambatovy mineral resources and communes are counted. revenues into their local development plan and budgets. On artisanal mining, pilots on gold management were developed in 9 communes. On industrial mining, the participatory budgetingprocess focused on 3 communes in Fort Dauphin and was extended to 3 others around the Ambatovy project (in partnership with another World Bank Project). In addition, 3 inter-communal Public Disclosure Copy development plans were developed to integrate mining development. Increase of mining fiscal revenues for Text Value +50% provinces and communes Date 13-May-2003 30-May-2012 29-Jun-2012 Comments In pilot communes, increase of fiscal revenues due to mining is clear. Sample data Page 4 of 15 The World Bank Report No: ISR6284 are expected by end of project. Increase in reported exports of gold and Text Value US$ 21 million US$ 50 million gemstones Public Disclosure Copy Date 17-Apr-2003 01-Mar-2009 30-Jun-2012 Comments Statistics are still being collected. Gemstones exports went up from 2003 to 2008 but collapsed after the ban on rough stones exports. Gold exports are expected to have dramatically increased due to commodity prices. Total mineral exports boomed after 2009 with QMM mining production. Increase of mining investments Text Value USD 10 million USD 2.9 billion USD 85 million Date 13-May-2003 30-May-2012 29-Jun-2012 Comments Last figure available is the 2009 2.9 billion investment (Central Bank) due mainly to Ambatovy. This does not reflect a trend but clearly demonstrates the scope of mining development in the country. Annual investment has also grown due to exploration expenditures. Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target New special regime for gemstones approved Text Value no yes yes Public Disclosure Copy Date 17-Apr-2003 31-Jul-2011 30-Jun-2012 Comments The regime for gemstones was approved as part of the 2006 decree of application of the 2005 Mining Code. Creation of 4 decentralized mining Text Value 0 0 4 administration offices (BAM) Date 17-Apr-2003 30-May-2012 30-Jun-2012 Comments Although the process of establishing BAMs was adequately launched, only 2 Page 5 of 15 The World Bank Report No: ISR6284 out of 4 targeted were created and none actually functions as intended at the time of closure. The BAMs pilots lost Public Disclosure Copy of their relevance especially after the 2008 ban of rough stones exports.The most significant pilot took place in Vatomandry where around 6-7000 miners rushed on rubies from 2001. After a promising start of the BAM which helped train around 500 artisans. Creation of exchanges for gemstones Text Value Most is informal Two Gemstones markets One big exchange in organized per month in Antananarivo and at least one Antanarivo since 2007 (Equ. small exchange in each 260 days of market), now province constituted as an association andauto-financed. Date 17-Apr-2003 30-May-2012 30-Jun-2012 Comments Gemstones exchanges were also organized in regions but most of the trading has gradually concentrated in the capital. One-stop shop for export of gemstones Yes/No Value No Yes Yes Date 13-May-2003 30-May-2012 29-Jun-2012 Comments The One-stop shop for gemstones export was established by the Arrete n° 12506/2003. Conceived and equipped by the project, it Public Disclosure Copy stillcentralizes in one location all sectoral and customs formalities for gemstones export. Set up of certificate of origins Yes/No Value No No Yes Date 13-May-2003 30-May-2012 29-Jun-2012 Comments The project supported certification of gemstones mainly through the creation of IGM. No specific certificate of Page 6 of 15 The World Bank Report No: ISR6284 "Malagasy stones" have been undertaken (and actually planned) by the project. PGRM had however an Public Disclosure Copy critical role in certifying exports, and building thereputation of Madagascar in the international gemstones market before the 2008 ban. Collection of mining royalties increase Percentage Value 10.00 60.00 80.00 Date 13-May-2003 30-May-2012 31-Dec-2008 Comments The Ministry of Mines have statistics on expected and collected royalties based on number of "laissez passer" for artisanal mining.Figures of 2008 (as targeted in the PAD) show 60% against 80% in 2006 and 100% in 2010. Number of small artisans trained and certified Text Value 185 certified individuals per At least 20 individuals in gem processing techniques year (average) certified each year of project implementation. Date 17-Apr-2003 30-May-2012 30-Jun-2012 Comments IGM has successfully trained many Malagasy artisans or entrepreneurs thanks to PGRM continued support. 1,750 individuals were trained (195 per year) and around 95% of them obtaining there certificates. Mining Environmental Management Units Text Value 0 6 6 established in all Provinces Public Disclosure Copy Date 17-Apr-2003 30-May-2012 30-Jun-2012 Comments PGRM established and supported one central and six decentralized environment Units in main mining regions. Those Units have successfully been integrated within the Ministry of Mines' organization and staff hired as Page 7 of 15 The World Bank Report No: ISR6284 civil servants, ensuring sustainability. Sector Environmental and Social Assessment Yes/No Value No Yes Yes (SESA) completed by mid term review Public Disclosure Copy Date 13-May-2003 30-May-2012 31-Dec-2006 Comments SESA was realized by end of 2003. Studies on decentralized management of Number Value 4.00 4.00 mineral resources Date 13-May-2003 30-May-2012 29-Jun-2012 Comments Several studies were completed. One major piece on Anosy was achieved in 2006, and 3 inter-communal schemes to integrate mining development into local and regional development were conducted in 2012. Declared exports of gold and gemstones Amount(USD) Value 30.00 50.00 Date 13-May-2003 30-May-2012 30-May-2008 Comments Available statistics show that official exports for gold plus gemstones were around 30 million dollars in 2008, after a peak of around 40 million in 2006. Percentage of value added to gemstones in the Percentage Value country Date Comments This indicator does not have a clear definition and target. Value addition in the gemstones market was ensured mainly through the Public Disclosure Copy creation of IGM and subsequent business development in cutting and polishing. There are presently numerous lapidaries and jewelery inthe capital. Estimates are expected by end of project. Backlog of overdue application of mining Number Value permits Date 13-May-2003 30-May-2012 29-Jun-2012 Page 8 of 15 The World Bank Report No: ISR6284 Comments The Madagascar mining Not exceeding 5% of all cadastre (BCMM) was a permits model in Africa until the political crisis, and mining Public Disclosure Copy permits were efficiently allocated (although data on time average still need to be completed). However, since the political crisis a de facto moratorium on permit allocations has been imposed. In April 2012 almost 3000 requests were pending. This number is expected to be reduced with PGRM supportby end of June. Territorial conservation practises in ASM areas Yes/No Value No Yes Yes improved and Resitution of previous conditions Date 13-May-2003 30-May-2012 31-Dec-2006 after exploration Comments This indicator had no specific definition. PGRM undertook sensitization campaigns in ASM settlements on environment management. It also developed tools for better controlling artisanal mining rushes. More information is needed to document that aspect in project pilot areas. Review of mining fiscal framework Yes/No Value No Yes Yes Date 31-Aug-2007 30-May-2012 28-Feb-2009 Comments A comprehensive assessment of the mining fiscal framework was conducted and Public Disclosure Copy recommendations submitted early 2009. The political crisis has prevented follow up reforms at this point, but the Government has background, legal and fiscal analysis needed to envisage changes in the future. Page 9 of 15 The World Bank Report No: ISR6284 Inter-ministerial coordination and adjustments Yes/No Value No Yes Yes to the legal and institutional frameworks Date 31-Aug-2007 30-May-2012 28-Feb-2009 Comments PGRM supported different Public Disclosure Copy coordination mechanisms, most importantly the CGIM, a special inter-ministerial commission in charge of the monitoring of LGIM contracts. PGRM facilitated its creation and funded its permanent technical secretariat. CGIM has been the mainarm of the Government to negotiate with candidate large-scale mining companies and oversee their investments, in particular the Ambatovy one. The Commission is still operational and the Secretariat will be integrated within the Ministry of Mines after project closure. Mechanisms to ensure a fair participation and Yes/No Value No Yes Yes usage of mining fiscal revenues Date 31-Aug-2007 30-May-2012 28-Feb-2009 Comments A series of studies and workshop took place in the Anosy region to devise possible mechanisms for channeling mining royalties at the regional and local level in a more sustainable way. The consensus reached end of 2008 focused on the creation Public Disclosure Copy of a Mining Community Foundation. All the preparatory work (feasibility works, consultations, status) were prepared. The draft Decree was proposed just before the political crisis which interrupted the discussion. Page 10 of 15 The World Bank Report No: ISR6284 Education and training programs related to Yes/No Value Yes Yes Yes Extractive Industries at Madagascar Date 31-Aug-2007 30-May-2012 30-Jun-2012 universities Comments PGRM financed much training Public Disclosure Copy on mining for many staff of different institutions, including the PIU, the BPGRM, the Environment Cells, the CGIM, the BCMM, the Direction of Mines, the Direction of Geology. A few PhD at university were supported as part of the knowledge transfer in geology contracts. Training of staff at the agencies in charge of Yes/No Value No Yes Yes hydrocarbons and mining implemented; Date 31-Aug-2007 30-May-2012 30-Jun-2012 Comments Training on petroleum was the responsibility of Norway cooperation (as part of a coordination mechanism, see explanation in other petroleum-related indicators). PGRM did finance much training on mining for many staff of different institutions, including the PIU, the BPGRM, the Environment Cells, the CGIM, the BCMM, the Direction of Mines, the Direction of Geology. Methodologies to facilitate and promote the Yes/No Value No Yes Yes integration of large scale mining projects into Date 31-Aug-2007 30-May-2012 30-Jun-2012 local economic development Comments PGRM supported Public Disclosure Copy participatory budgeting at municipal level and provided much technical assistance to the two main mining regions to better integrate industrial mining at the decentralized levels. Page 11 of 15 The World Bank Report No: ISR6284 Methodologies to control ASM rushes and to Yes/No Value No Yes Yes manage conflicts between ASM activities and Date 31-Aug-2007 30-May-2012 protected areas Comments The project supported the Public Disclosure Copy production of a toolkit for management of ASM in or around protected areas. National Geological Survey and the integrated Yes/No Value No No Yes sector data bank and information systems have Date 31-Aug-2007 30-May-2012 31-Aug-2009 been established Comments PGRM has created the BPGRM, the center for geoscientific data which is the core of a National Geological Survey. A study on its sustainability and its possible externalization out of the Direction of Geology where it has successfully been integrated was undertaken in the last year of the project. Given the political context, it is unlikely that the institutional reform needed to take that final step happen before closure. Mining inspectorate regulatory functions Yes/No Value No No Yes streamlined Date 31-Aug-2007 30-May-2012 28-Feb-2009 Comments PGRM has supported the creation of the Environment cells which combined with the decentralized offices of the Cadastre and the Direction of Mines were supposed to be Public Disclosure Copy integrated in the new Mining Inspectorate. The key pieces are therefore in place, but given the political context, it is unlikely that the institutional reform needed to take the final step of its creation as an agency happens before closure. Page 12 of 15 The World Bank Report No: ISR6284 Financial mechanisms for long term Yes/No Value No Yes Yes sustainability of mining institutions Date 31-Aug-2007 30-May-2012 31-Dec-2009 Comments Sustainability studies started Public Disclosure Copy early 2009 but had to be stopped when the crisis hit. They successfully resumed in the last year of the project and produced recommendations for the short and medium term. Hydrocarbons law and regulations updated Yes/No Value No No Yes Date 31-Aug-2007 30-May-2012 28-Feb-2009 Comments This indicator does not refer to PGRM- funded activities. It was included in the AF because it was part of a coordination agreementwith Norway which was launching a project on hydrocarbon aspects in parallel (see the coordination matrix in the Project Paper Annex). The Oil for Development Project of Norway was active until February 2009, but was canceled following the political crisis. The work on the hydrocarbon law had started (a draft was discussed), but remains to be resumed. Production Sharing Contract model revised Yes/No Value No No Yes Public Disclosure Copy Date 31-Aug-2007 30-May-2012 28-Feb-2008 Comments This indicator does not refer to PGRM- funded activities. It was included in the AF because it was part of a coordination agreementwith Norway which was launching a project on hydrocarbon aspects in parallel (see the coordination matrix in the Project Paper Annex). The Oil Page 13 of 15 The World Bank Report No: ISR6284 for Development Project of Norway was active until February 2009, but was canceled following the Public Disclosure Copy political crisis. The work on the model production sharing agreement law had started (a draft was discussed) but was delayed in 2008. It now remains to beresumed. Plan with specific time based measures for the Yes/No Value No No Yes restructuring of OMNIS adopted Date 31-Aug-2007 30-May-2012 31-Dec-2008 Comments This indicator does not refer to PGRM- funded activities. It was included in the AF because it was part of a coordination agreementwith Norway which was launching a project on hydrocarbon aspects in parallel (see the coordination matrix in the Project Paper Annex). The Oil for Development Project of Norway was active until February 2009, but was canceled following the political crisis. The work on OMNIS restructuring had only been initiated in 2008. Data on Financial Performance (as of 22-May-2012) Financial Agreement(s) Key Dates Public Disclosure Copy Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P076245 IDA-37540 Effective 13-May-2003 23-Jun-2003 22-Sep-2003 31-Dec-2008 30-Jun-2012 P076245 IDA-37541 Effective 22-May-2007 05-Jun-2007 31-Aug-2007 31-Dec-2010 30-Jun-2012 P076245 IDA-3754A Closed 13-May-2003 23-Jun-2003 22-Sep-2003 31-Dec-2008 31-Dec-2008 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P076245 IDA-37540 Effective XDR 21.92 21.92 0.00 21.92 0.00 100.00 P076245 IDA-37541 Effective XDR 5.30 5.30 0.00 4.26 1.04 80.00 Page 14 of 15 The World Bank Report No: ISR6284 P076245 IDA-3754A Closed XDR 1.28 1.28 0.00 1.28 0.00 100.00 Disbursement Graph Public Disclosure Copy Key Decisions Regarding Implementation The project is approaching completion and as such activities are being wrapped up. The Government should ensure all geo-data acquired during the project are managed in a sustainable way and stay accessible to the public. Restructuring History There has been no restructuring to date. Related Projects Public Disclosure Copy P104983-Additional Financing for the Mineral Resources Governance Project Page 15 of 15