Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2930 Project Name CV-Growth & Compet. Supplemental Credit Region AFRICA Sector General public administration sector (35%); Compulsory pension and unemployment insurance (20%); General finance sector (20%);General industry and trade sector (20%);General transportation sector (5%) Project ID P103329 Borrower(s) GOVERNMENT OF CAPE VERDE Implementing Agency Government of Cape Verde Ministry of Economic Growth and Comp. Project Coordinating Unit Cape Verde Tel: (238)26 14 748 Coordenador@UCP.gov.cv Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared March 2, 2007 Estimated Date of Appraisal Authorization March 30, 2007 Estimated Date of Board Approval May 31, 2007 1. Key development issues and rationale for Bank involvement 3. Country context. Cape Verde is a small country with a population of about 472,000 people spread over nine islands in a ten-island archipelago. As a small island economy, Cape Verde is heavily dependent upon external support. Remittances and foreign aid are important sources of capital and the economy relies on imports for much of its consumption and investment. While lacking natural resources, it is more developed than most other countries in Sub-Saharan Africa and has a good track record of sustainable development and good governance. Cape Verde has grown steadily in recent years, with GDP growth averaging about 5.7 percent between 2000 and 2005 and reached 6.3 percent in 2005. The economy is dominated by the service sector, which accounted for about 75.5 percent of GDP in 2005. The fastest growing sectors are tourism, commerce, construction, transportation and communication. Agriculture and industry have been also growing but more slowly. 4. The original Credit. The original Development Credit Agreement (DCA) in the amount of SDR 8.5 million (US$11.5 million equivalent) was signed on June 3, 2003. It became effective on October 31, 2003 and the closing date is February 28, 2008. It is executed as a Sector Investment Project. Although there were initially no co-financing arrangements, the Millennium Challenge Corporation (MCC) approved, on July 4, 2005, a grant totaling US$105 million equivalent for infrastructure development on the port and road sectors and technical Page 2 assistance to support Cape Verde’s growth and competitiveness agenda. This program complements and works closely with the current project. As of February 12, 2007, 63 percent of the original Credit (SDR 8.25 million) had been disbursed. Disbursement projections indicate that the total credit amount will be fully disbursed prior to the closing date. 2. Proposed objective(s) The original project development objective (PDO) as stated in the PAD and the original DCA is to broaden the base of private participation in Cape Verde’s economic growth and enhance private sector competitiveness, as well as further develop its financial sector. This will be achieved through a series of actions supported by the project, notably: (a) financial sector reform, including pension reform; (b) investment climate reform, which includes, but is not limited to: (i) tax reform; (ii) alleviation of administrative barriers; (iii) improved supply chains and (iv) legal reform; (c) post-privatization and divestiture reforms; and (d) private sector and institutional capacity building. 3. Preliminary description 5. The project has a well-balanced approach to improving private sector development, the engine of growth, through the actions noted in paragraph 5. Overall project oversight is the responsibility of the Ministry of Economy, Growth and Competitiveness, while day-to-day coordination is ensured by a Project Coordination Unit (PCU). The Ministry of Finance (MoF), in collaboration with the Banco de Cabo Verde (BCV, the Central Bank of Cape Verde), is responsible for financial sector reform, including pension reform, customs and tax reform. Judicial reform is being successfully implemented by the Ministry of Justice (MoJ). The E- Government initiative which will revolutionize the manner in which Government interacts with the public began under the MoJ but due to its multi-ministerial approach, is now being coordinated by the Minister of State in the Prime Minister’s Office. The two Chambers of Commerce work together with Government to strengthen private-public partnerships and develop services to support private sector capacity building, including the MGF. Finally, the project also supports Government’s privatization efforts carried forth under the closed Privatization and Regulatory Capacity Building Project (PRCBP, Cr.3121-CV), which encompassed, but was not limited to infrastructure reform, including TACV and port reform and has been instrumental in establishing the Agência de Regulação Economica (ARE, the Agency for Economic Regulation for energy, water, sanitation and transport) and the Agência de Regulação e Supervisão de Produtos Farmaceuticos e Alimentares (ARFA, the regulatory agency for the oversight of food and pharmaceuticals). 6. Two high level Steering Committees, which will remain in place for the duration of the project, provide strategic direction of the reforms. The first Steering Committee is headed by the Minister of Economic Growth and Competitiveness and is comprised of high level government officials and private sector representatives. In addition to overall strategic direction and ministerial coordination, it provides oversight of the project by monitoring project implementation on a quarterly basis including work programs and budgets. The second Steering Committee focuses on pension reform, a priority for Government. It is co-chaired by the Page 3 Ministers of Finance and Labor and is comprised of various ministries and representatives of the private sector. It is responsible for the strategic direction of the pension reform, including the recent merger of the two pension schemes. For the past two years, it has also been supported by an internationally recruited pension specialist, who provides on and off-site support, including technical advice and training. 4. Safeguard policies that might apply [Guideline: Refer to section 5 of the PCN. Which safeguard policies might apply to the project and in what ways? What actions might be needed during project preparation to assess safeguard issues and prepare to mitigate them?] The original project had an environmental category of “C” and the proposed activities are technical assistance, that do not change the category. All audits have been carried out in a timely manner and are “non-qualified”. A recent procurement assessment made during the December 2006 mission, indicated that the PCU and the implementing agencies follow World Bank Guidelines “satisfactorily”. The Government is fully committed to the project and has complied with all covenants specified in the DCA. The PCU has established an acceptable accounting and reporting system for the project that will continue for the Additional Financing. 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 0 International Development Association (IDA) 3 Total 3 6. Contact point Contact: Sherri Ellen Archondo Title: Sr Operations Off. Tel: (202) 458-1799 Fax: (202) 614-0658 Email: Sarchondo@worldbank.org wb91459 P:\CAPEVERD\PSF\G & CP\Additional Funding\Project Information Document-Concept Stage.doc 03/02/2007 10:30:00 AM