Document of The World Bank FOR OFFICIAL USE ONLY Report No. 66158-ZR INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION AND MULTILATERAL INVESTMENT GUARANTEE AGENCY COUNTRY ASSISTANCE STRATEGY FOR THE DEMOCRATIC REPUBLIC OF CONGO FOR THE PERIOD FY2013-FY2016 April 12, 2013 International Development Association Central Africa Country Cluster 2 (AFCC2) Africa Region International Finance Corporation Sub-Saharan Africa Department Multilateral Investment Guarantee Agency Sub-Saharan Africa Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. 0 CURRENCY EQUIVALENTS (Exchange Rate Effective as of March 18, 2013) Currency Unit = Congolese Franc (CDF) US$1.00 = CDF 919.00 Fiscal Year: January 1 – December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AAA Analytical and Advisory Activities ACCES Africa Clean Cooking Energy Solutions ACH Automatic clearing house AdPi Paris Airports (Aéroports de Paris) AECID Spanish Agency for International Development Cooperation AFD French Development Agency AfDB African Development Bank AFREA Africa Renewable Energy and Access Expansion Program AGPP Agriculture-based Growth Poles Project AIDS Acquired Immune Deficiency Syndrome AS WBG Africa Strategy ASARECA Eastern and Central Africa BCC Central Bank of Congo (Banque Centrale du Congo) BDS Business development services BOP Bottom of the economic pyramid BTC/CTB Belgian Technical Cooperation (Coopération Technique Belge) CAB Central African Backbone CAADP Comprehensive African Agricultural Development Plan CAF Country Assistance Framework CAFEF Conflict-Affected and Fragile Economies Facility CAR Central African Republic CAS Country Assistance Strategy CASA Conflict Affected States in Africa (IFC) CASF Central African SME Fund (IFC) CDD Community-driven development CDF Congolese Franc CDM Clean Development Mechanism CEM Country Economic Memorandum CEMAC Economic and Monetary Commission of Central African States CICOS International Commission of Congo-Oubangui-Sangha Basin CIDA Canadian International Development Agency CIF Climate Investment Funds CIRGL International Conference on the Great Lakes Region CMU Country management unit CNDP National Congress for the Defense of the People (Congrès National pour la Défense Du Peuple) COMESA Common Market for Eastern and Southern Africa COMIFAC Central Africa Forests Commission (Commission des Forêts de l’Afrique Centrale) 1 CSMOD Strategic Framework for the Implementation of Decentralization (Cadre Stratégique pour la Mise en œuvre de la Décentralisation) CTB See BTC CTC Technical Cooperation Committee CTF Conservation Trust Fund DBSA Development Bank of Southern Africa DCG Donor Coordination Group DFGG Demand for good governance DfID Department for International Development (UK) DGRAD Department of Revenue Administration (Direction générale des recettes administratives) DHS Demographic and Health Survey DP Development partner DRC Democratic Republic of the Congo (République Démocratique du Congo/RDC) DSA Debt Sustainability Analysis DTP3 Diphtheria-tetanus-pertussis EAC East Africa Community EC European Commission ECCAS Economic Community of Central African States ECF Extended Credit Facility EDR Support to Street Children and Vulnerable Groups Project (Projet Enfants Dits de la Rue) EIA Environmental Impact Assessment EIB European Investment Bank EISR External Implementation Status and Results Report EITI Extractive Industries Transparency Initiative EMK Mining SOE (Entreprise Minière de Kasenge) ER Emissions reduction ERPA Emissions Reduction Purchase Agreement ERL Emergency Recovery Loans ESMAP Energy Sector Management Assistance Program ESW Economic and sector work EU European Union FAO Food and Agriculture Organization of the United Nations FARDC Army of the Democratic Republic of Congo (Forces armées de la République démocratique du Congo) FBO Faith-based organization FCPF Forest Carbon Partnership Facility FDLR Democratic Forces for the Liberation of Rwanda (Forces démocratiques de libération du Rwanda) FIP Forest Investment Program FM Financial management FNCP Forest and Nature Conservation Project FPM Microfinance Promotion Fund (Fonds de promotion de la microfinance) FSAP Financial Sector Assessment Program FSRDC Social Fund of the Democratic Republic of the Congo (Fonds social de la République démocratique du Congo) FY Fiscal Year GAVI Global Alliance for Vaccines and Immunization GDP Gross domestic product GECAMINES Mining SOE (La Générale des Carrières et des Mines) GEF Global Environment Facility GFATM Global Fund to Fight AIDS, Tuberculosis and Malaria GHD Good Humanitarian Donorship (EU) GHG Greenhouse gas(es) ii GNI Gross national income GOXI Sharing in Governance of Extractive Industries GPE Global Partnership for Education GPF Governance Partnership Facility GPOBA Global Partnership on Output-Based Aid GPP Western DRC Agriculture-Based Growth Pole GPSA Global Partnership for Social Accountability GTZ German Agency for Technical Cooperation HDI Human Development Index (UNDP) HIPC Heavily Indebted Poor Countries Initiative HIV Humanimmuno deficiency virus ICCN Congolese Nature Conservation Institute (Institut Congolais de Conservation de la Nature) ICT Information and communication technology IDA International Development Association (WBG) IDF Institutional Development Fund IDP Internally displaced people/person IE IDA Eligible country IEP Interim Education Plan IFC International Finance Corporation (WBG) I4S See I-SSSS IMF International Monetary Fund INS National Statistical Institute (Institut National des Statistiques) IP International partner I-SSSS International Security and Stabilization Support Strategy JICA Japan International Cooperation Agency JSAN Joint Staff Advisory Note KFW German Reconstruction Credit Institute (Kreditanstaltfür Wiederaufbau) KOICA Korea International Cooperation Agency LEDG Local Education Donors Group LIC Low Income Country LLIN Long-lasting insecticidal nets (mosquito nets) LRA Lord’s Resistance Army M&E Monitoring and evaluation MDG Millennium Development Goals MDRI Multilateral Debt Relief Initiative MDTF Multi-donor Trust Fund MECNT Congolese Minister for Environment, Nature Conservation and Tourism(Ministère de l’Environnement, de la Conservation de la Nature et du Tourisme) MEPSP Ministry of Primary, Secondary, and Vocational Education (Ministère de l’Enseignement Primaire, Secondaire et Professionnel) MHE Ministry of Higher Education MIBA Mining SOE (Société minière de Bakwanga) MOU Memorandum of Understanding MTEF Medium-Term Expenditure Framework MIGA Multilateral Investment Guarantee Agency (WBG) MIS Management information system MONUSCO United Nations Organization Stabilization Mission in the DRC (Mission de l’Organisation des Nations Unies pour la stabilisation en RDC) MSE Micro and small enterprise MSF Doctors without Borders (Médecins sans Frontières) MSME Microfinance small and medium enterprise NEPAD New Partnership for Africa’s Development NGO Nongovernmental organization iii NHA National Health Accounts NORAD Norwegian Agency for Development NRM Natural resource management ODA Official development assistance OHADA Legal Framework on Harmonization of Business Laws in Africa (Organisation pour l’Harmonisation du Droit des Affaires en Afrique) PARRSA World Bank Financed Agriculture Rehabilitation Project (Projet d’Appui à la Réhabilitation et à la Relance du Secteur Agricole) PARSE World Bank Financed Basic Education Support Project (Projet d’Appui au Redressement du Secteur de l’Education) PARSS World Bank Financed Health Sector Rehabilitation Support Project (Projet d’Appui à la Réhabilitation du Secteur de la Santé) PASE World Bank Financed Education Sector Support Project (Programme d’Appui au Système Educatif) PASEC Analysis Programme of the CONFEMEN Education Systems (Programme d’analyse des systèmes éducatifs de la CONFEMEN) PASU Emergency Social Action Project (Projet d’Urgence d’Action Sociale) PCDSP Private Sector Development Project (Projet de Compétitivité et Développement du Secteur Privé) PCP Peace Consolidation Program PDF Project Development Facility PEFA Public Expenditures and Financial Accountability Program PEMU Urban Water Supply Project (Projet d’alimentation en Eau potable en Milieu Urbain) PER Public Expenditure Review PFM Public financial management PHC Population and Housing Census PIP Public Investment Program PIU Project Implementation Unit PMEDE Regional and Domestic Power Market Development Project - SAPMP (Projet de Développement du Marché d'Electricité pour la Consommation Domestique et l'Exportation) PNFC Forest and Nature Conservation Project PPP Public-private partnership PPP Purchasing power parity PRCG Enhancing Governance Capacity Project (Projet de Renforcement des Capacités en Gouvernance) PRGF Poverty Reduction and Growth Facility PREPAN National Parks Project (Projet de Réhabilitation du Réseau des Parcs Nationaux) (GEF) PROMINES Governance in the Mineral Sector Technical Assistance Project (Projet d’Assistance Technique au Secteur Minier) PROROUTES High Priority Roads Reopening and Maintenance Project (Projet de Maintien et Réhabilitation du Réseau de Routes Prioritaires) PRSP Poverty Reduction Strategy Paper PSD Private sector development PSRFP Strategic Plan for Public Finance Reform PTM Multimodal Transport Project (Projet de Transport Multimodal) PUACV Emergency Living Conditions Improvement Project (Projet d’Urgence d’Amélioration des Conditions de Vie) PURUS Emergency Urban and Social Rehabilitation Project (Projet d’Urgence et de Réhabilitation Urbaine et Sociale) RBF Results-based financing RCCM Multinational Registry of Commerce and Credit RE Renewable energy iv REDD+ UN-REDD+ reducing emissions from deforestation and forest degradation and promoting conservation of forest carbon stocks, sustainable management of forest, and enhancement of forest carbon stocks REGIDESO Public Water Supply Society (Régie de distribution d’eau) RTGS Real Time Gross Settlement System RVA National Aviation Administration (Régie des Voies Aériennes). RVF National River Administration (Régie des Voies Fluviales) SADC Southern Africa Development Community SAKIMA Mining SOE (Société Aurifère du Kivu et du Maniema) SAPMP Southern African Power Market Project SCTP Transport and Ports Co. (Société Commerciale des Transports et des Ports) SENGAMINE Diamond concession in DRC (La Minière de Senga Senga) SEZ Special economic zone SIDA Swedish International Development Cooperation Agency SIP Small Investment Program (MIGA) SME Small and medium enterprises SMS Short message service SNCC National Railroad Co. (Société Nationale des Chemins de Fer du Congo) SNEL Congolese National Power Co. (Société Nationale d’Electricité) SOE State-owned enterprise SOKIMO Mining SOE (Société Minière de Kilo-Moto) SPF State and Peace-building Fund SSA Sub-Saharan Africa SSR Security sector reform STAREC Stabilization and Reconstruction Plan for Eastern DRC TIC Tantalum-Niobium International Study Centre ToT Training of trainers TVE Technical and vocational education UN United Nations UNCDF United Nations Capital Development Fund UNDP United Nations Development Programme UNFPA United Nations Population Fund UNICEF United Nations Children’s Fund UN-REDD United Nations Collaborative Programme on Reducing Emissions from Deforestation and Degradation in Developing Countries USAID United States Agency for International Development VAT Value-added tax WACS West Africa Cable System WB World Bank WBG World Bank Group WBI World Bank Institute WDR World Development Report v IDA IFC MIGA Vice President:Makhtar Diop Vice President:Jean Philippe Prosper Vice President:Michel Wormser Country Director:Eustache Ouayoro Regional Director:OumarSeydi Regional Director:Ravi Vish Task Team Leader: Emmanuel Pinto Moreira Task Team Leader:BabacarSedikh Faye Task Team Leader:Conor Healy The core team comprised Luigi Giovine, MontheBienvenuBiyoudi, Milaine Rossanaly and Olga Kadima. Substantive inputs were received from IDA/IBRD: Maria L. Amelina, Amadou Oumar Ba, Brigitte Bocoum, Chiara Bronchi, Jean Christophe Carret, Jerome Chevallier, Amadou Dem, Spyros Demetriou, Bourama Diaite, Steven Dimitriyev, Mahine Diop, Alexandre Dossou, Louise Engulu, Madio Fall, Jean Jacques Frere, Johannes Herderschee, Antoine Lema, Thomas Maketa Lutete, Alexandre Marc, Anthony Molle, Jean Mabi Mulumba, Stephen Ndengwa, Pia Peeters, Rachidi Radji, Simon Rietbergen, Christophe Rockmore, HadiaSamaha, Papa Demba Thiam, SilvanaTordo, Denis Tshibombi, Moise Tshimenga, MauriziaTovo. IFC: Babacar Sedikh Faye, Markus Scheuermaier, Jean-Philippe Mukuaki, Richard Muamba Kasenga; MIGA: Conor Healy. Support was provided by Linda Carole Tiemoko and Veronique Okito. Alicia Hetzner edited the CAS. vi COUNTRY ASSISTANCE STRATEGY FOR THE DEMOCRATIC REPUBLIC OF CONGO TABLE OF CONTENTS EXECUTIVE SUMMARY I. INTRODUCTION .............................................................................................................. 1 II. SETTING THE COUNTRY CONTEXT: A FRAGILE ENVIRONMENT ...................... 1 A. Political Context ................................................................................................................... 2 B. Security Situation ................................................................................................................. 3 C. Poverty Profile, Social Context, and Progress toward MDGs ............................................. 4 D. Recent Economic Developments.......................................................................................... 5 III. DEVELOPMENT AGENDA AND GOVERNMENT PROGRAM .................................. 7 A. Opportunities and Development Challenges ........................................................................ 7 B. Country vision and poverty reduction strategy paper ........................................................ 16 IV. PROPOSED WORLD BANK GROUP ASSISTANCE STRATEGY ............................ 18 A. Implementation of the Previous Country Assistance Strategy and Lessons Learned ........ 18 B. Overview of the New World Bank Group DRC Country Assistance Strategy (FY2013– FY2016).............................................................................................................................. 20 C. Strategic Objectives and Results ........................................................................................ 22 D. Strengthening World Bank Coordination and Donor Harmonization ................................ 42 E. CAS Instruments ................................................................................................................ 44 V. RISKS AND MITIGATION............................................................................................. 46 Appendixes Appendix 1: DRC Results Matrix ............................................................................................................... 49 Appendix 2: CAS Completion Report (CAS FY2008-FY2011) ................................................................ 61 Appendix 3: Tentative AAA Pipeline under New CAS (FY13-FY16) .................................................... 101 Appendix 4: Tentative Lending Pipeline under New CAS (FY13-FY16) ................................................ 102 Appendix 5: DRC Portfolio as of End December 2012 ............................................................................ 104 Appendix 6: Ongoing AAA ...................................................................................................................... 105 Appendix 7: Trust Funds Portfolio (as of January 2013) .......................................................................... 106 Appendix 8: Donors’ Engagements and World Bank’s Contribution to Poverty Reduction in DRC ...... 108 Appendix 9: DRC Progress to MDGs ....................................................................................................... 112 Appendix 10: DRC-Macroeconomic Indicators 2007-16 ......................................................................... 113 Appendix 11: IFC Programs ..................................................................................................................... 114 Appendix 12: Key findings of the 2012 PEFA Assessment ..................................................................... 117 Appendix 13: DRC Transport Roads, 2012 .............................................................................................. 119 vii Appendix 14: Five Priority Economic Zones Identified under the Government Development Program, 2012–16 .................................................................................................................................................... 120 Appendix 15: CAS standard annexes........................................................................................................ 121 Figures Figure 1. DRC Voice and Accountability and .............................................................................................. 9 Figure 2. DRC Government Effectiveness, Rule of Law, Political Stability, and Control of Corruption, 2012 .............................................................................................................................................................. 9 Boxes Box 1. Economic Governance Matrix......................................................................................................... 10 Box 2. Forests and Climate Change in DRC .............................................................................................. 27 Box 3. State-Owned Enterprises ................................................................................................................. 28 Box 4. Improving Donors’ Coordination in PFM Reforms in DRC ........................................................... 44 viii EXECUTIVE SUMMARY 1. The Democratic Republic of Congo (DRC) is emerging from a long period of conflicts and mismanagement, which have had devastating impacts on the economy, the institutions, and the social fabric. In spite of the many challenges and concerns regarding the fairness of the 2011 electoral process, for the first time in more than four decades, DRC was able to organize back-to-back multiparty presidential and parliamentary elections. 2. Over the past few years, with the support of the international partners, including the World Bank, DRC was able to make significant progress in restoring security to most of its territory and stabilizing its economy. Implementation of sound macroeconomic policies has enabled DRC to weather the current global crisis. Since 2010, the DRC’s economic growth has exceeded the average for Sub - Saharan Africa by 2 percentage points, growing at an annual average of 7 percent. Economic growth in 2013 is projected to reach 8 percent, and future prospects remain broadly positive. 3. Following the progress made in the implementation of sound economic policies and structural reforms supported by the Bank and IMF during the previous CAS, DRC reached the HIPC completion point and in July 2010 received a debt cancellation of US$12.3 billion (the largest in HIPC history). Moreover, in order to entrench good governance following the HIPC completion point, an economic governance matrix focusing mostly on publication of mining and forestry contracts, increased transparency in the management of public resources, and improvement of the business climate was agreed with the authorities and has been implemented since December 2010. Progress in implementing it has triggered Bank financial support to DRC since December 2010. In agreement with the Government and the IMF, new forward-looking measures to deepen governance and development impact of the extractive industries, PFM, and state-owned enterprise (SOE) management are being added to the matrix. 4. DRC has huge potential to grow more quickly, reduce poverty, and improve human development indicators. Despite its abundant mineral resources and long history of mining, DRC has not yet reaped their developmental benefits. DRC remains one of the poorest countries in the world, ranking last on the UN Human Development Index in 2013. Seventy-one percent of its population lives on less than US$1.25 per day. The country will not meet any of the MDGs by 2015. Poor governance –– truly evidenced by the mismanagement of extractives, weak institutions, wars, and conflict ––has prevented the population from enjoying the benefits of their country’s incredible natural endowments. Addressing this paradox has been at the heart of the DRC Second Poverty Reduction Strategy Paper (PRSP) and the May 2012 Government Program. 5. The new FY2013-FY2016 CAS rests on the fundamental thrust that business as usual is not an option for a country that will have the world’s 11th largest population in 205 0 and that is facing the challenges of stabilization and peace consolidation in its eastern part . This new CAS is a joint WB, IFC, and MIGA strategy firmly anchored in the Government’s program as well as the World Bank Strategy for Africa. It aims at helping the Government make progress towards achieving the MDGs and strengthen the country’s foundations for higher growth rates, and shared prosperity. 6. The CAS program focuses on four strategic objectives: (i) increase the effectiveness of the state at the center and at decentralized levels and improve good governance while strengthening the development impact of World Bank operations; (ii) boost the competitiveness of the economy by accelerating private-sector-led growth that will create jobs; (iii) improve social service delivery to raise human development (HD) indicators, and (iv) address the development deficits contributing to fragility and conflicts in DRC's Eastern provinces. Gender and climate change are treated as cross-cutting issues and are addressed through the above four strategic objectives as relevant. ix  Supporting the first strategic objective on state effectiveness and good governance will cover civil service reform and rejuvenation in targeted ministries, implementing the public financial management action plan at the center and at the provincial levels, strengthening the capacity of civil society organizations to demand good governance, and reinforcing the capacity of state oversight institutions including the Parliament. As part of the same strategic objective, all Bank-financed operations will be implemented by Government’s institutions, and no new parallel project implementation units will be created while the existing ones will be phased out at the end of their respective programs.  To boost the competitiveness of the economy and accelerate private-sector-led growth, the Bank will support the development of one of the continent’s most cost-effective and abundant power sources (Inga); and agriculture and agribusiness value chains in geographically targeted economic spaces by financing hard and soft infrastructure and by addressing value chains specific investment climate bottlenecks, and skills limitations.  Strengthening basic services delivery systems, targeted social protection coverage, and access to primary and post-primary and other health services will support the third strategic objective.  The Bank will support the fourth strategic objective through an economic empowerment program by increasing economic opportunities in eastern DRC and by addressing some of the drivers of conflicts through analytical work and dialogue with all stakeholders; and by leveraging programs supported by donors including the UN that focus on the reform of the justice system and the security services. The regional dimension of the instability in Eastern DRC also will be covered. The February 24, 2013 Framework Peace Agreement offers an opportunity to build on a regional initiative that will anchor peace and stability in Eastern DRC. 7. The FY2013-FY2016 CAS will be supported by several of AAAs and 12 lending operations financed under IDA16-17. Strengthening national capacity for results will go a long way in reinforcing the national institution for statistics and enhancing the national capacity for monitoring and evaluation (M&E), which will be an integral part of the program supported by the Bank. The results framework will pay particular attention to gender-disaggregated indicators. Projects will report on results quarterly, and the use of surveys and targeted impact evaluations with Bank-financed operations will be made systematic. However, the lack of data including the recent poverty profile and the weakness of the statistical system in DRC are big issues. Under this CAS, the Bank will support the preparation of a household survey in 2013 and the development of statistics system including the national account statistics through a trust fund (TF) and additional IDA funding for the statistical system. Updated analytical work based on poverty data from the household survey will be used to prepare the Mid-term CAS progress report. 8. As was the case with the preceding CAS, this one will be implemented under challenging conditions. The main risks are related to both domestic factors, including political, security, deteriorating fiscal position, opposition to reforms and transparency by deeply entrenched vested interests, low capacity for effective and impactful program implementation; and lack of engagement by civil society and high unmet expectations for access to information and demand for good governance; and external factors, mainly and external shocks in a context of an uncertain global environment. 9. In recognition that sustained progress on governance is critical for this CAS to achieve its objectives, its implementation will pay particular attention to issues related to good governance. Good governance will be the building block to support state effectiveness, service delivery, and improved business climate for private sector development (PSD) and job creation. Lack of consistent progress in economic governance that could prevent the delivery of basic services to sizable parts of the population would make Bank assistance ineffective and less and less relevant. Under such conditions, the Bank would reduce its financial assistance and engage more on policy dialogue and targeted interventions that support access to basic services by the poor. The situation will be assessed at the mid-term review when the CAS Progress Report is being prepared. x I. INTRODUCTION 1. The last World Bank Country Assistance Strategy (CAS) for the Democratic Republic of Congo (DRC) covered FY08–FY11 and was broadly aligned with the IDA15 cycle. That CAS was discussed by the Board of Directors on December 18, 2007. A CAS Progress Report (CASPR) was presented to the Board on May 26, 2010. In the absence of a fully developed Poverty Reduction Strategy Paper (PRSP), and taking into account the uncertainty related to the general elections scheduled for end- 2011, a strategic note for IDA16 and the FY12 Work Program were presented to the Board on June 28, 2011. While the CASPR made some adjustments to the lending program to sharpen the focus of the Bank’s support to DRC and to strengthen the CAS results framework, the key objectives of the CAS were retained. 2. This new DRC CAS covers FY2013–FY2016 and has been prepared jointly with the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA).While building on the progress achieved by DRC during the past 5 years, the new CAS aims to help the Government of DRC address ongoing challenges and assist in the implementation of DRC’s second Poverty Reduction Strategy Paper (PRSP-2) (2011–2015), adopted in late 2011. This CAS has been prepared in parallel with other development partners, including the African Development Bank (AfDB), the European Commission (EC), and the United States Aid Development Agency (USAID). These partners also are preparing their respective country assistance strategies while the United Nations has completed the preparation of its assistance strategy. To provide operational advice on key priorities to strengthen the PRSP implementation, a Joint Staff Advisory Note (JSAN) for PRSP-2 was circulated to the World Bank Board on December 18, 2012. Similar to the previous one, this CAS is a results-based strategy anchored firmly in the Government’s program as well as in the World Bank Strategy for Africa (AS).1 The CAS also aligns with the Country Assistance Framework, which is the overall framework for donors’ coordination, which was jointly chaired by the United Nations Development Programme/United Nations (UNDP/UN) and the World Bank. 3. This CAS is organized in four sections. The first section provides an overview of the country’s political, economic, security, and governance contexts, including a summary of achievements in key areas over the past few years. The second section presents the Government’s development program, as outlined in the PRSP-2 and its May 2012 national program; and summarizes the opportunities and ongoing challenges faced by DRC. The third section focuses on the World Bank Group’s (WBG) new strategy, laying out ongoing and new activities and implementation arrangements. The fourth section addresses risks and their mitigation. Appendixes provide additional information and statistics, including the completion report of the previous CAS and the Results Framework of this CAS. II. SETTING THE COUNTRY CONTEXT: A FRAGILE ENVIRONMENT 4. DRC’s poverty and political instability are concerns in their own right. With a land surface area of 2.3 million km2, DRC is the largest country in Sub-Saharan Africa (SSA) and shares borders with 9 countries. The country is endowed with rich natural resources (mineral deposits, forests, water, and arable land), a strategic location, and a young population. Despite this wealth, 71 percent of Congolese live below the poverty line of US$1.25/day. DRC is emerging from more than four decades of conflicts and mismanagement that have devastated the economy and the people. Since 1998, over 3.5 million people are estimated to have died. During the same period, countless millions of others have been plunged into acute vulnerability due to displacement, loss of economic livelihoods, dilapidated institutions, and a destroyed social fabric. 1 “Africa’s Future and the World Bank’s Support to It,� World Bank, Washington, DC, March 2011. 1 5. DRC also is a destabilizing factor for its nine neighboring countries. While most of the country has returned to peace since the end of wars in 2002, Eastern DRC remains unstable. The recent crisis involving the M23 armed group2 has plunged the eastern region into yet another cycle of violence that could have spillover effects at both the national and regional levels. A large number of the drivers of conflict in Eastern DRC require a development solution that has a regional dimension perspective that involves all countries of the Great Lakes region in general; and Rwanda, Burundi, and Uganda in particular. In fact, peace and stability in DRC in general and in Eastern DRC in particular cannot take place without addressing the social, economic, and political roots of the conflicts. A. Political Context 6. The 2011 presidential and legislative elections tested the stability of DRC’s institutions . These elections were the second to be organized in DRC following the adoption of the 2006 Constitution. The 2006 elections were managed largely by the international community. Since that time, the authorities promulgated a new organic law dated July 28, 2010 to create a new Independent National Electoral Commission (CENI) to manage the presidential, legislative, provincial, and local elections. The international community was not involved directly in the organization of the 2011 elections, but it did help defray their costs. 7. The 2011 elections were marred by violence and contestations of the results. International observers raised doubts about the fairness and transparency of the process. Joseph Kabila, the incumbent President, was declared the winner and sworn in as President on December 20, 2011. However, the results were challenged by Etienne Tshisekedi, who came in second and declared himself president, initially posing a significant challenge to President Kabila and the stability of the country. More than 19,000 candidates contested the 500 parliamentary seats. President Kabila’s coalition won a large majority in Parliament (341 of 500 seats) and appointed a new prime minister and government. Nevertheless, the 2011 elections showed how fragmented the political spectrum was and underscored the fragility of DRC’s electoral institution in addition to the lack of a clear roadmap for organizing the next provincial and local elections. This situation has undermined the legitimacy of the political personnel. 8. The unfinished decentralization agenda has caused tensions between central authorities and the provincial authorities. To prevent the concentration of power that took place in DRC for decades, and in consideration of the country’s size, the 2006 Constitution defined DRC as a unitary but decentralized state. The current 11 provincial capitals are located on average 1,700 km from Kinshasa, the capital city; the closest provincial capital, Matadi, is located 346 km from Kinshasa. The 2006 Constitution assigned important responsibilities to the provinces. The decentralization framework envisaged the transfer of competencies in health, primary and secondary education, and agriculture to the provinces. In return, provinces were entitled to 40 percent of fiscal revenues collected by the national authorities. The number of provinces was set to increase from 11 to 26. In contrast, the reality is that (i) the existing provinces have limited institutional capacity or means to discharge their responsibilities and (ii) the large cost associated with creating 15 additional provinces has stalled the process. Despite their recent increases, provincial revenues consistently have been below the constitutionally mandated share. This situation has raised tensions between national and provincial authorities. In fact, the weak institutional capacity and limited accountability of the provincial authorities have impeded the delivery of basic services and have minimized the benefits expected from decentralization. 9. The current government is headed by Prime Minister Matata Ponyo, who, as minister of finance in the previous cabinet, was credited with solid macroeconomic management performance. 2 A new armed group composed essentially of former CNDP (National Congress for the Defense of the People) rebels, who were integrated in the national army as part of the March 2009 peace accord. 2 His new government, composed mostly of technocrats, was formed on April 28, 2012. Since then, the performance of public institutions has improved slowly. However, despite the parliamentary majority that the parties close to the president enjoy, the new Government remains at risk of being side tracked by those who are unhappy with the new drive for more transparency and accountability. At the same time, the state-owned enterprises (SOEs) continue to exhibit low levels of accountability, driven mostly by well-connected managers and staff. In the absence of well-functioning state institutions, the actions of a small number of individuals remain largely unconstrained and continue to have a disproportionate impact on the ability of state institutions to deliver for the population, thus undermining the effectiveness of the state. B. Security Situation 10. Since the end of the wars in 2002, DRC has been at peace everywhere except in some areas in the Eastern provinces. While most of the provinces in the west, the center, the north, and the south have been at peace for years, some locations in the Eastern provinces have been affected by low- intensity conflicts for decades. The only brief period of peace there was 2009 to 2011. The invasion of Goma, capital city of North Kivu on DRC’s eastern border with Rwanda in November 2012 for 11 days by the M23 rebellion was the cornerstone of the instability that continues to negatively affect large swaths of population. Decisions by the authorities by mid-2012 apparently (i) requiring the rotation of military troops from their initial postings in the mineral-rich Eastern provinces to other locations in the country and (ii) arresting one of the high-ranking military officials indicted by the International Criminal Court (ICC)3 may have contributed to the resurgence of the conflict in North Kivu during recent months. At present, over 2 million people are internally displaced (doubled from 1 million in 2006), while another 300,000 are refugees in neighboring countries. Violence against civilians also is pervasive. In 2011 over 10,000 acts of sexual violence were recorded in the North Kivu and South Kivu provinces and in the Ituri District of the Orientale Province. 11. The persistent instability in the East is the obvious manifestation of crumbling state institutions. Dysfunctional institutions that are not held accountable have diminished the country’s resilience to both internal and external shocks. Institutions with the ability to adjudicate the many conflicts and their underlying grievances over land rights and mineral and historic disputes are a precondition for peace. Strengthening these institutions could unlock the economic potential of DRC overall and of the Eastern provinces in particular. For decades, ethnic and communal identities in Eastern DRC have been manipulated by political actors and armed groups. These manipulations together with demographic imbalances created as a result of armed conflicts and migrations within the Great Lakes region have engendered social and political exclusion and loss of identity status. This situation has fueled instability and created large populations of forcibly displaced people, in and of themselves potential drivers of further conflicts. Ethnicity and identity also have been used in the competition for and occupation of land, leading to disenfranchisement and conflicts. Addressing these deep structural imbalances will require both investment to enhance social resilience through reconciliation and nonviolent conflict resolution, and the establishment of inclusive and equitable local governance mechanisms. 12. Numerous peace initiatives have failed to put an end to fighting among armed groups in the East. Over 25 armed groups are active in the Eastern DRC, among them the M23, the Democratic Forces for the Liberation of Rwanda (FDLR), the different Mai-Mai groups, and the Lord’s Resistance Army (LRA). Since 2004, several waves of armed groups have been integrated in the national army, but a number of them including Mai Mai always kept back some of their combatants, who continued harassing civilians and fighting one another or the army, often for control of mines. Finally, addressing the 3 Now under the custody of the ICC. 3 instability in Eastern DRC will require a regional solution that involves all of the countries of the Great Lakes region in general, and specifically, Burundi, Uganda, and Rwanda. The signing of a peace, security and cooperation framework for DRC by the 11 countries of the region on February 24, 2013 is an important step toward a sustainable peaceful solution to the conflicts in Eastern DRC4. C. Poverty Profile, Social Context, and Progress toward MDGs 13. Poverty remains widespread and the country will not reach any of the Millennium Development Goals (MDGs) by the 2015 deadline. With a 2011 per capita gross national income (GNI) of US$190, DRC’s population of approximately 71 million is among the poorest in the world. More than 71 percent of the population lives under the US$1.25-a-day poverty line (2006) and 14 percent of the poor in SSA live in DRC. The country’s poverty is more than monetary. It includes a sense of exclusion, economic instability, and the inability to cope with uncertainties and to project in the future. Poverty also is experienced as the lack of economic opportunities and physical and psychological insecurity. 14. While widespread, poverty is more likely to affect people living in the rural areas . There, 75 percent of the population is poor compared to 61 percent in the urban areas. Level of poverty also varies by province. Available data shows that the poorest provinces in DRC are the Equateur, Bandundu, and South Kivu, in which poverty is higher than 85 percent. South Kivu’s high level of poverty can be explained by insecurity, which directly impacts economic activities. In the affected regions, conflicts are making poverty reduction an elusive goal. In the other two provinces, the main causes are associated with the total collapse of economic activities due to the closing of large farms and the absence of road infrastructure. The lack of economic activities in sectors with high growth and poverty reducing potential such as agriculture has reduced opportunities for DRC to achieve the MDG1 on poverty and malnutrition. The vulnerability of the population is higher in areas affected by conflicts because they create fragile, insecure, and violent environments that hamper the people’s ability to maintain sustainable livelihoods. This insecurity is exacerbated by the quasi-absence of basic services. Displacement of large populations is another strong contributor to poverty. 15. All DRC’s human development indicators are low: the 2012Human Development Index (HDI) ranks DRC last among 187 countries.5 Life expectancy at birth is 48 years (2009); maternal mortality ratio6 is 670 per 100,000 live births, infant mortality rate is 97 per 1,000; and under-5 child mortality rate is 158 per 1,000. Causes of death are typical of those found in very low income countries with very poorly developed health systems. Among these causes, the lack of infrastructure, malaria, preventable infectious diseases, malnutrition, and pregnancy-related deaths are particularly prevalent and have impacted the government’s efforts toward achieving MDGs 4, 5 and 6. 16. Poverty in DRC clearly is gender biased. Discrimination against women is of particular concern given that women head 21 percent of households. Twenty-eight percent of women have never gone to school, compared to 14 percent of men. In the 15–49 age brackets, 4 times more women than men lack education (21 percent compared to 5 percent). Participation in the workforce is biased toward men: women’s participation is at 55 percent compared to 85 percent for men. When it comes to same job/same pay, women in DRC are more disadvantaged than in neighboring countries. DRC’s low ratio of 46 4 A UN Security Council resolution adopted March 28, 2013 has established a 2,500 strong intervention force under MONUSCO with an offensive mandate to disarm the armed groups and address the threats from these groups. 5 UNDP (United Nations Development Programme), New York, http://hdrstats.undp.org/en/countries/profiles/COD.html 6 Unless otherwise specified, all references in this document come from either DHS (Demographic and Health Survey) 2007 or MICS (Multiple Indicator Cluster Surveys) 2010. 4 percent7 contrasts with 69 percent in Uganda, 77 percent in Burundi, and 79 percent in Rwanda. Gender inequalities are profound, as reflected in the fact that DRC ranks 148 of 157 countries in the Gender- Related Development Index. 17. The alarming nutritional status of women and children has severe consequences. Poor maternal health care leads to poor nutrition for both mother and child. In DRC, 46 percent of under-5- year-olds are chronically malnourished or stunted. Malnutrition in the first 1,000 days of a child’s life leads to irreversible cognitive losses, which in turn lead to a significant and permanent lost-income- earning potential when these children become adults. Such high levels of chronic malnutrition in women and children have been shown to lead to annual GDP losses of 2 percent–3 percent.8Furthermore, malnutrition is an underlying cause of 48 percent of the under-5 child deaths (DHS 2007). DRC’s prevalence of malnutrition among pregnant women and children under 5 is among the highest in Sub- Saharan Africa, driven by poverty, poor access to basic health services, and inadequate hygiene and sanitation. 18. The absence of comprehensive and recent poverty information remains a major concern although data from the 2007 DHS and the 2010 MICS have provided valuable information to all stakeholders. The latest DRC census goes back to 1984 and the 2013 Household Survey (1-2-3 survey) is still ongoing. Data from this survey are still being collected although they were primarily intended to provide a new poverty profile in order to design the Government’s Poverty Reduction Strategy Paper, which was adopted in 2011. The Bank is financing the ongoing household survey and will support under this CAS, the development of the statistical system, including the national account statistics, through a TF and additional IDA funding for statistics. Data from the ongoing household survey will be used when preparing the CAS mid-term progress report. The Bank also will help the Government and the UNFPA to prepare a new census in 2014. To coordinate all of these programs, a seasoned statistician has been posted in the country office. D. Recent Economic Developments 19. DRC is now one of Africa’s most rapidly growing economies, but a lack of employment opportunities poses significant risks. Since 2010, economic growth has exceeded the average for SSA by 2 percentage points with the DRC economy growing from a very low base. According to Congolese Central Bank (BCC) projections, economic growth in 2013–15 is projected to reach 7.3 percent––some 5 percent per capita. These projections assume that the agricultural sector is expanding by over 3 percent whereas observers based in the provinces record double-digit growth. These divergent numbers suggest that actual growth may be nearly 9 percent. In addition, inflation declined to a single digit in 2012, down from 15.4 percent at end-2011 and from over 50 percent at end-2009. At the same time, over the past few years, the Congolese franc has remained stable at approximately 920 CDF per US$1. 20. The rapid growth of the economy over the past years has not contributed to private sector employment. The private sector offered formal employment to only 1.2 percent of the labor force between 2001 and 2005. Moreover, DRC has formidable infrastructure and institutional obstacles to employment growth. In the absence of reliable data, the estimated employment is based on the 2005 household survey. The survey shows that young people, who constitute more than 50 percent of the workforce, are most affected by unemployment, particularly in the urban areas. The unemployment rate for the 15–24 age bracket is 32.2 percent, approximately twice the national average for urban areas (17.8 7 In DRC, women earn 46 percent of the salary of men for the same work. 8 D. Strauss and J. Thomas, 1997.“Health and Wages: Evidence on Men and Women in Urban Brazil,� Journal of Econometrics, Elsevier, vol. 77(1), 159–85, March; and World Bank, “Repositioning Nutrition as Central to Development: A Strategy for Large-Scale Action,� Washington, DC, 2006. 5 percent). Despite the fact that small-scale agriculture and large-scale mining are expanding rapidly, the absence of growth in the manufacturing sector and constraints to small and medium enterprise (SME) development suggest that job creation has been small. 21. Despite an overall positive economic outlook, DRC’s economy faces substantial downside risks because of its continued reliance on mining exports with no local content or significant in- country transformation. Mineral exports remain critical to DRC’s export revenues. A small number of mining products dominate exports while there is very little transformation in the country. However, when one or a few commodities account for the largest proportion of exports, the desire to maximize the value retained domestically is very high. DRC should develop mechanisms to undertake downstream processing of their raw materials to create a self-sustaining industrial base. The expansion of mineral processing is seen not only as an avenue for export promotion through vertical diversification, but also as a means to promote human resources and technological development by upgrading and creating specialized skills in both the private and public sectors. Primary commodity export prices have increased on global markets since 2002 but remain volatile. For example, copper prices declined by approximately 67 percent in early 2009 before recovering later that year. Hence, export revenues are vulnerable. 22. Fiscal revenues have increased dramatically as a share of GDP but remain low for a country of this size with so many needs. Following the introduction of a value-added tax (VAT) and other measures in 2012, the authorities’ own revenues are projected to reach 22 percent of GDP in 2012; up from 19 percent in 2011. Tax revenues increased most rapidly while petroleum royalties were more stable. In 2010 HIPC debt relief boosted the contributions of grants to the budget. Since then, grants have amounted to approximately 8.5 percentage points of GDP annually. Thanks to the HIPC initiative supported by the Bank, between 2009 and 2010, pro-poor spending grew as a share of total spending by roughly 5 percentage points (from 34 to 39 percent); whereas in 2011, there was a small drop in the share (to 38 percent of domestically financed expenditure), because higher than expected election costs put pressure on other spending items. Preliminary data from the2012 budget execution show that the share may have dropped to approximately 36 percent (but still above the share in 2009) due to the pressure on the budget from security-related spending because of the conflict in Eastern DRC. 23. Fiscal revenues have contributed to an investment boom. In 2012 public investment reached almost 10 percent of GDP, concentrated in public roads and, more recently, electricity generation. However, the impact of public investment remains low, explained partly by capacity constraints. Line ministries’ directorates of studies and planning still have difficulties in identifying and evaluating public investment projects. Furthermore, while representing approximately 75 percent of the total capital budget, investment projects financed from external resources, in most cases, are developed outside the budget and not incorporated in the sector Medium-Term Expenditure Frameworks (MTEFs).The effective MTEF approach requires a major change of the budgeting system and significantly strengthening line ministries’ capacities. Using capital expenditures as shock absorbers has long-term costs; hence the need to look for alternatives hedge strategies for which TA from the World Bank Treasury Department may be available, to be combined when possible with support from the IMF and IFC. 24. DRC’s medium-term economic outlook remains positive: economic growth is projected conservatively at 7 percent–8 percent during the CAS period with substantial upward potential. Baseline projections use BCC data, which are biased toward officially recorded activities. These projections show dramatic growth in the construction sector but do not reflect the growth potential of the agricultural or manufacturing sectors. On the demand side, public and private investments remain the main drivers of economic growth. Private investment is dominated by large-scale investment in the mining and telecommunications sectors, financed primarily by foreign investors. Residential construction is increasingly important. An analysis of agricultural growth suggests that, once basic security has been reestablished in Eastern DRC, double-digit growth will be feasible. Improved security and property 6 protection are likely to leverage agricultural gains because, today, only some 10 percent of agricultural land is under cultivation. Agricultural growth already may have cushioned the inflationary impact of rising international food prices to the benefit of the urban population, particularly the poorest, who tend to spend their income disproportionately on food. 25. Regular missions and technical assistance from the IMF have anchored financial sector and macroeconomic policies but are no substitute for resilient institutions . Under the IMF-supported program, the Government has been able to maintain solid macroeconomic performance despite the resumption of conflicts in the East. DRC’s fiscal and monetary policies are based on IMF-sanctioned projections that also suggest the policy priorities that would underpin the outcomes. The IMF also is supporting the development of institutional capacity that will help the authorities to make their own projections on which they can base policies. Because DRC had failed to publish one last mining contract, the IMF program expired in December 2012 without concluding the fourth and fifth reviews. An IMF mission visited the country March 5-12, 2013 and the Fund has been in discussion with the Government on the next steps of their partnership. III. DEVELOPMENT AGENDA AND GOVERNMENT PROGRAM 26. DRC has the potential to achieve significant economic growth and create job opportunities due to its abundant natural resources and under-employed, low-cost workforce. With its rapid population growth rate of 2.8 percent per year, by 2050 DRC will be the world’s 11th most populous country. The large and rapidly growing population represents a great market for the central Africa region if a large middle class population can develop. Regional integration cannot be put forward in this part of the continent without DRC. The country’s full richness encompasses fertile land that can feed the entire SSA, rivers for hydropower, mineral wealth, vibrant cross-border trade, and a young population thirsty for economic opportunities. For these huge potentials to be realized, the Government’s growth strategy should address the structural deficiencies of the economy and deeply reform the unfriendly investment climate while building a skilled workforce and maintaining macroeconomic stability. 27. Although DRC is a resource-rich country, it faces the multiple challenges of (i) improving governance and building strong institutions,(ii) improving infrastructure and the investment climate to unleash private sector potential that will create growth and generate jobs, (iii) building human capital, and (iv) consolidating peace and stabilizing the Eastern part of the country. A. Opportunities and Development Challenges Natural resources (mineral, forests, and water) and agriculture 28. The country’s mineral resources are huge and can make a tremendous difference in improving living conditions. The copper reserves of Katanga are the second largest in the world after Chile’s. DRC’s copper reserves are estimated to be as large as 70 million tons. Its cobalt and zinc reserves could represent 5 million tons and 6 million tons, respectively. The country has the world’s largest diamond reserves––representing almost 25 percent of the total. DRC also has great potential to exploit major reserves of gold, cobalt, rare earths, cassiterite, and columbite-tantalite (coltan)––all located in the East. The latter two are in high demand by global electronic goods manufacturers. Seventy percent of the world’s coltan production is in DRC. Ensuring transparency and accountability in the management of these natural resources, building capacity to negotiate and value these natural assets, and developing strong public finance management and strong public investment management capacity are essential to 7 transform natural wealth into development outcomes. These outcomes didn’t materialize in the past so DRC should advance on all of these fronts. 29. DRC’s potential hydroelectric generation capacity could power most of the continent. Of DRC’s potential capacity of 100,000 MW,9 2,400 MW are developed, but, of these, only 700 MW are available to the population. As a result, power supply is heavily constrained and subject to blackouts, placing major limitations on private sector activity. Less than 9 percent of the population has access to (unreliable) electricity, compared to 30 percent on average in SSA. Improving energy production and distribution to households and local private companies will spur economic activities and generate growth. However, these improvements will require (i) the development of an appropriate regulatory framework that can attract private sector participation and (ii) deep reforms in the governance of the national power utility and strengthened oversight of this entity in addition to a revision of the current monopoly arrangement. 30. DRC has the world’s second largest tropical forest endowment and carbon sink. DRC has 145 million ha of rain forests representing over 60 percent of the total forest area in the Congo basin, the second largest forest endowment in the world, and the second largest carbon sink in the world. On the other hand, DRC rain forests harbor 30–40 gigatons of carbon, which equal 8 percent of the world forest carbon, the equivalent of 3–5 years of world emissions of CO2 equivalent. Deforestation in DRC equals 0.25 percent per year, the highest deforestation rate in the Congo basin, but still a low rate compared to South America and Southeast Asia. Their net deforestation rates are, respectively, 2 and 4 times higher. DRC’s deforestation rate is expected to double in the next 20 years providing an opportunity for the country to pursue a low-emissions development pathway by sustainably managing its forests (REDD+). 31. The country’s enormous agricultural potential remains largely unrealized and could be its best source of inclusive growth. The country is endowed with over 80 million ha of fertile, arable land capable of supporting immense agricultural activities. The country ranks among the world’s areas with the highest potential agriculture value for the major crops: maize, palm-oil, soybean, and sugarcane. Today, only 10 percent of the fertile land is farmed, and 13 thousand ha are irrigated, a very small share of the potentially irrigable area (4 million ha). Furthermore, a stunning 52 percent of all fresh water resources in SSA are concentrated in DRC. The current land could support 40 million cattle whereas only 700,000 are in place. In addition, if the existing agricultural potential were being fully exploited, DRC could feed 1 billion people. However, currently, even the relatively small domestic market demand for food products is not met, so approximately one-third of all the food consumed in the country is imported. Annual imports include 200,000 tons of rice, 200,000 tons of maize, 120,000 tons of fish, 80,000 tons of sugar, 60,000 tons of vegetable oils, 50,000 tons of meat, and 30,000 tons of poultry. 32. Increased productivity, storage, processing, and marketing of agricultural products would accelerate growth and increase income generation from agriculture. Years of neglect of agricultural extension services have resulted in a low level of adoption of appropriate technologies and low agricultural productivity, confining farmers to subsistence agriculture. Substituting domestically produced food for imports could spur DRC’s agricultural growth by an additional 1 percent–2 percent per year. Poor infrastructure has locked down productivity and inhibited private investment in inputs and outputs marketing. Studies have shown that a 10 percent reduction in transportation costs could increase agricultural productivity by 6 percent. Increasing agricultural production by 10 percent could increase revenues by 16 percent, compared to 10 percent for services. Because of the labor-intensive nature of agricultural production, investing in agriculture would support job creation and reduce poverty. Increasing women’s access to agricultural inputs also would improve women’s livelihoods and increase food security in households. 9 The current total installed capacity in SSA is 80,000 MW. 8 Governance 33. Indicators benchmarking countries show that tackling governance problems in DRC is a priority. The quality of public administration, as measured in the 2012 Country Policy and Institutional Assessment (CPIA), is stable at 2.0 (of 6.0), compared to the average among IDA borrowers of 2.9. In 2012, DRC ranked 160 of 180 countries with a score of 21 of 100 and was perceived as one of the most corrupt countries in Transparency International’s (TI) Corruption Perceptions Index (CPI). DRC ranks 50 of 53 countries in the Mo Ibrahim Governance Index. According to the 2011 World Governance Indicators, DRC ranks in the lowest 10th percentile on voice and accountability and regulatory quality; and as low as the 5th percentile on government effectiveness, rule of law, political stability, and control of corruption. This performance remains significantly below the Sub-Saharan averages. Figure 1.DRC Voice and Accountability and Figure 2.DRC Government Effectiveness, Rule of Regulatory Quality, 2012 Law, Political Stability, and Control of Corruption, 2012 Source: 2012 World Governance Indicators. 34. Corruption continues to hamper DRC’s development prospects. Corruption remains widespread and is taking a heavy toll on public service capacity to deliver key services. Many high-level officials have tried to rapidly take advantage of their positions in a context fraught with uncertainties because of the repeated conflicts. Political turmoil that has lasted for decades in the absence of a strong executive able to impose effective sanctions has worsened the situation. At the lower echelons, the problem is compounded by the extremely low levels and still irregular payment of government employees’ salaries. The consensus is that, unless decisive action is taken in this area, DRC may not be able to break the current cycle of corruption, thus further opening the path to fragile institutions unable to reduce poverty. 35. For DRC’s exceptional resource endowment to be translated into long-term, sustainable growth and poverty reduction, strengthening the foundations to build government’s effectiveness is an essential condition. While successive administrations have struggled to meet this challenge, the new government is determined to push forward public sector management reforms that will underpin a credible fiscal policy and sustainable economic development. Areas of focus include strong PFM, a competent administration at both the national and provincial levels, and transparent and effective management in the extractive industries as well as in SOEs. To ensure credible and transparent management of the entire value chains of extractive industries, major efforts are required ranging from contract adjudication to monitoring operations, collection, and management of revenues to delivering services to the population. 36. Work is underway to strengthen DRC’s public financial management and public sector performance. Over the past five years, DRC has moved toward rebuilding a well-functioning PFM system. In June 2010 a strategic plan for public finance reform based on the 2008 Public Expenditure 9 Review (PER) was adopted. In July of the same year, a comprehensive legal framework was approved: the Public Financial Management Act (Loi relative aux Finances Publiques)10 regulates the management of public finances across the country. The new Public Procurement Code became effective in October 2010.11To mobilize revenues and improve revenue management, in January 2012, the Government introduced the Tax Payer Identification Number and implemented a VAT. The Government also is committed to undertake a long-overdue, comprehensive public administration modernization reform. This reform will be accomplished through creating a proper legal framework, improving human resources management, and creating a retirement system. Similar administrative reforms are underway in the Kasai Occidental, Katanga, South Kivu with support from the Bank, and Bandundu provinces, and locally to support the ongoing decentralization reforms. 37. However, to avoid potential risks to public funds at the central and local levels, the PFM system needs to be strengthened, and transparency and accountability improved. A 2012 Public Expenditure and Financial Accountability (PEFA) Assessment shows that the budget formulation and execution processes remain weak and that sector budgets often are not linked to the national development strategy. Consequently, substantial deviations between budget allocations and execution, in amount and composition, as well as abuses in the use of emergency procedures were observed. Particular attention needs to be paid to public investment management reforms that will improve the procedures for identification, selection, supervision, monitoring, and execution of investment programs. Even though basic systems of accounting, recording, and reporting are in place, DRC’s accounting system does not comply with international standards. A modern financial management information system has been introduced, but it is far from ensuring quality and reliability in reporting. 38. DRC’s implementation of governance and transparency reforms in extractive industries is moving slowly in the right direction but more needs to be done to entrench transparency and accountability. A detailed set of measures aimed to bring more transparency and a stronger legal and regulatory framework to the extractive and natural resources sectors is substantially completed. Some SOEs still resist being more transparent in managing their assets and operations. Weak management, limited capacity, poor governance structures, lack of supervision by national authorities and absence of sanctions have been the key impediments to the mining sector contributing substantially to fiscal revenues. However, the organization of the conference on governance and transparency in the mining sector in Lubumbashi under the chairmanship of President Kabila on January 30–31, 2013 was the right signal that management of the mining sector may no longer be as opaque as it was before. Box 1. Economic Governance Matrix Following an impressive effort during 2009–10, DRC reached the HIPC completion point in July 2010. Since then, economic governance has deteriorated after reports of cases of nontransparent concession awards in the extractive sectors. Poor governance has negatively impacted the business climate and accountability and efficiency in revenue collection. Thus, a stronger commitment to transparency was critical to restore confidence with development partners . An Economic Governance Matrix was prepared by Government and agreed with the Bank, aiming to improve governance in the management of natural resources, improve the business environment, and strengthen public finance management. The matrix was presented to the Bank’s Board in December 2010, and updates were presented to the Board in April 2011, June 2011, and June 2012. Major measures include (i) introducing critical transparency measures: publication of contracts (particularly in the mining, forestry, and oil sectors and traceability of revenue; (ii) adhering to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and implementing the enabling legislation to restore investor confidence and (iii) fully operationalizing the Procurement Code. 10 Law No 11/011 of July 13, 2011. 11 Promulgated by Decree on April 27, 2010; effective October 27, 2010. 10 Progress on the governance matrix has continued, with good progress on the publication of the mining contracts and related financial transactions by mining SOEs. As of early April 2013, the government has published 134 out of 135 mining contracts, and reached an agreement with the IMF regarding the treatment of the remaining COMIDE asset transfer. The New York Convention has been approved by government, and is pending approval in Parliament during April 2013. The new procurement entities are operational and they include the regulatory agency, the procurement board, and the conflict resolution mechanism. (The regulatory agency will be fully operational once overstaffing issues are resolved). Procurement units have been established in most ministries and other public institutions such as the National Assembly and the Supreme. In addition, since July 13, 2012, DRC has been a member of the Legal Framework on Harmonization of Business Laws in Africa (OHADA)––an important milestone to improve the country’s business climate. The new Government, which came in power following the November 2011 presidential elections, is committed to reforms and has taken positive steps toward improving governance in DRC. For instance, the Government organized a high-level conference on governance and transparency in the extractive industries in Lubumbashi on January 30–31, 2013. In collaboration with other partners, the Bank will leverage this momentum and has proposed forward- looking measures as part of the Economic Governance Matrix. These proposals are being discussed with the authorities. New governance reforms could include institutionalizing the principle of competitive sales of mining assets which will automatically increase transparency, systematic publication of mining contracts, and transparent disposal of financial resources deriving from the sales of mining assets, enhanced role of CSOs on supporting demand side accountability platforms in the extractive industries, annual assessments of the implementation of the procurement code at the central and decentralized levels, publication of these assessments and establishment of procurement boards in all provinces and all ministries and key SOEs. The same reforms regarding transparency and competition also should apply to the forestry and oil sectors. The new Bank facility that supports negotiations of mining deals will be used to help DRC better negotiates its mining contracts. The country can derive additional benefits by adopting the new mining code drafted with the Bank support that should promote increased transparency. In addition, the World Bank has started to discuss the possibility that the policy matrix could serve as a basis for channeling Norwegian and German support to REDD+. Based on progress in meeting forestry-related governance indicators, Norway could disburse funds to the DRC through the Bank, potentially tens of millions of dollars annually until 2020. Business climate 39. The business climate remains unfriendly to the private sector, and public sector institutions are dysfunctional. For example, Port services in Matadi are costly and inefficient by global standards. Container dwell times average 25 days, more than 5 times the SSA’s top performer. Crane productivity also is only a fraction of that found elsewhere. Not only is the quality of service poor (44 days to export, 63 days to import), but also, at $10 per ton, port-handling charges for general cargo are significantly higher than elsewhere. 40. Amid improving regulation, the small, underdeveloped financial sector is growing quickly; however, DRC’s access to financial services is one of the lowest in Africa. This low access is due to (i) high risks and costs of lending; (ii) weak capacity for long-term or large-scale investment project finance; and (iii) slow development/reform of the nonbanking financial sector, including insurance, pension system, leasing, secured lending, and other forms of financing. The extremely low banking penetration is apparent in the fact that less than 1 percent of the population has a bank account and the limited availability of branch banking (especially outside the largest urban centers). With the exception of microfinance, credit is restricted primarily to the largest companies or loans that are cash collateralized or benefit from offshore guarantees. There is some growth in the availability of trade finance (letters of credit, performance bonds) due mainly to the recent influx of large investment projects. 11 Infrastructure 41. The limited infrastructure stock and its poor quality have hindered the development of economic activities and are a drag on private sector development. Regional Diagnostic Studies have shown that economic growth per capita could have increased by 5 percent per year if the country had had the same infrastructure stock as Mauritius.12DRC’s infrastructure challenges are responsible for a 40 percent productivity loss handicap. Upgrading and expanding infrastructure are critical for economic development in DRC. Improving power supply could reduce costs to firms by as much as 80 percent, and improving feeder roads could reduce the cost of moving agricultural products by 70 percent. Dredging and upgrading could reduce river transportation costs by 50 percent. A reliable power system could increase manufacturing turnover by 60 percent and timber and mining exports by 30 percent. 42. The bulk of DRC’s territory is inaccessible, making moving people and goods very expensive. Kinshasa is connected to 5 provincial capitals (Bandundu, Kananga, Matadi, Mbandaka and Muji-Mayi) by road, to 1 provincial capital (Kisangani) by river and air, and to 4 provincial capitals (Bukavu, Goma, Kindu, and Lubumbashi) by air only. Communication among these capitals and other provincial centers as well as access to rural areas often is not possible 43. Communication is slow and expensive. The landline telephone network is almost completely destroyed, with much of its equipment either out of date or broken. There are no national fiber optic backbone and no broadband connection available using the existing infrastructure. DRC has neither direct nor indirect access to submarine fiber-optic cables. It is one of the few African countries that remain fully dependent on satellite for international bandwidth. The cost of bandwidth is US$4,000 – $5,000/Mbps/month, which is very high by SSA standards. By comparison, the equivalent price in East Africa is approximately US$500/Mbps/month and continues to decrease as a result of intense competition among submarine fiber-optic cable companies. 44. The DRC is undergoing rapid urbanization. Its 12 largest cities are estimated to be growing 4.7 percent annually. In 1956 the country was 9.9 percent urbanized. In 2012, the urban population was estimated to be 37 percent of the total population, or 24 million people. This number is projected to reach 40 million by 2025. With 400,000 new inhabitants joining the city every year, by 2030 Kinshasa will be the largest African city, ahead of Cairo and Lagos and the 16th largest metropolis in the world. All urban centers in DRC lack basic infrastructure and are characterized by their haphazard development, which, in turn, undermines economic growth. 45. The DRC is endowed with abundant water resources but access to water still is a challenge. Its river network, one of the most extensive in the world, and groundwater resources, considered to be widespread, have remained largely untapped. Despite this abundance, the country faces major challenges in supplying water to its population. Today, only 26 percent of the total population, as compared to the SSA average of approximately 60 percent. The unavailability of safe drinking water poses a major public health threat. Young children die from dehydration and malnutrition, results of suffering from diarrheal illnesses that could be prevented by clean water and good hygiene.13 Women and young girls, traditional water carriers are thus prevented from doing income-generating work or attending school, because the majority of their day is often spent walking miles for their families’ daily water needs. Because they travel such great distances from their villages on a daily basis, women and girls also are at an increased risk of violent attacks. 12 Cecilia M. Briceno-Garmendia; Vivian Foster; “Prioritizing Infrastructure Investments: A Spatial Approach�; Regional Diagnostic Studies, 2009. 13 Metwally, A.M., Ibrahim, N.A., Saad, A., & Abu El-Ela, M.H. (2006): Improving the roles of rural women in health and environmental issues. International Journal of Environmental Health Research, 16(2), 133-144. 12 Human development 46. The very rapid demographic growth that DRC is experiencing makes any response to its difficult social and economic conditions even more difficult and more expensive.At2.8 percent per year, DRC has one of the highest population growth rates in SSA. At such a rate, the country’s population will double in fewer than 25 years, putting massive pressure on all sectors. Given DRC’s very young age structure, high fertility rates, and low levels of modern contraceptive use, this population growth is expected to continue unabated. Approximately 46 percent of the country’s population is younger than 15 years old. Even greater problems with respect to human capital formation (such as in education and health) and job creation are likely if measures are not taken to address this demographic growth. Furthermore, due to the continuing high dependency ratio, estimated at 98 percent, rapid population growth impedes poverty reduction. Without a rapid decline in fertility, there will be no possibility of a demographic dividend for DRC. The total fertility rate was estimated at 6.3 in 2007, with differences between urban areas (5.4) and rural areas (7.0).14High fertility rates, close birth spacing, and teen pregnancies are additional major contributors to maternal and child morbidity, mortality, and malnutrition. Furthermore, by 2040, approximately50 percent of the total population will be of working age, most of them very young. This “youth bulge� poses enormous challenges to the Government on how to manage it so that these young people have a chance to be effective development agents. 47. Despite some progress in recent years, education outcomes remain low. The primary school completion rate is only 59 percent compared to a Sub-Saharan average of 76 percent. Girls remain disadvantaged compared to boys; the gender parity index is 0.87. Learning achievement remains low: only 59 percent of pupils demonstrate “minimal� knowledge in mathematics and 47 percent in French (PASEC 2010). According to a 2008 study,1568 percent, or 3 million, of DRC’s 4.3 million youths aged 12–14 years were out of school. Of these 3 million, only 71 percent had had some primary education. Of the 5.2 million youth aged 15–19 years who were out of school, 70 percent had some primary education. However, only 4 percent had completed 8 years of schooling. The situation was even worse for the 20– 24-year-old group (approximately 6 million youth), 93 percent of who were out of school and 75 percent of who were illiterate. Although more recent figures are not available regarding level of schooling, it is unlikely that the situation has changed much since 2008. Latest information16 shows that 7.3 million kids aged 5-17 years are out of school and they represent 28.9 percent of the population of children that should be attending school and that this proportion was reduced from 38.5 percent in 2007 to 32.5 percent in 2010. 48. DRC’s education system is fraught with deep-seated challenges, especially for technical and vocational education (TVE) and higher education. The quality and relevance of vocational education and training, which cover some 43 streams, generally are poor due to many factors. These include weak management, irrelevant curricula, obsolete equipment, and unqualified teachers. In addition, the consensus among stakeholders is that the training provided is largely supply driven with few linkages to labor market needs. As indicated earlier, gender disparities also are a central issue in the education sector. Over previous decades, as a result of increased access to basic education, student enrollments in tertiary education rose rapidly, from approximately 30,000 students in 1980–2001 to 338,000 in 2009– 2010 (although at a slow pace in the science and technology areas). However, the quality of tertiary education is questionable due to the low number of qualified instructors, poor learning conditions, and absence of a coherent quality assurance system. Less than 10 percent of teachers in tertiary education 14 2007 Demographic and Health Survey (DHS).Total fertility is based on births reported over the 3 years preceding the 2007 survey. 15 S. Bashir, “Changing the Trajectory: Education and Training for Youth in DRC,� World Bank Working Paper 168, Washington, DC, 2008. 16 2012 national survey, UNICEF. 13 have a doctorate, and many of the qualified teachers are overage (65 on average). The latter fact points to a critical staff renewal issue. 49. Skills demand is becoming an increasingly important constraint to formal firms. Surveys such as the World Bank’s Investment Climate Assessment (ICA) seem to suggest that human capital is not among the preeminent barriers (governance, security, and infrastructure constraints) to private investment. Nevertheless, there is evidence that skills shortages and mismatches in key sectors such as construction and mining are an emerging issue. In 2010, 9 percent of formal firms perceived skills as a problem, whereas only 1 percent felt it was a problem in 2006. More medium-sized firms (23 percent) experienced shortages than smaller and larger ones 50. Public sector financing of education and health services remains very low. During the years of conflicts when public financing were severely restricted and the state almost absent, faith-based organizations (FBOs) stepped in to administer state schools (Ecoles Conventionnées). Today, 72 percent of the 10.6 million primary pupils attend schools managed by religious communities. Public financing of education remains low and far below SSA’s average, putting a high burden on households, the majority of whom are poor. In the tertiary education subsector, too, cost-recovery mechanisms have resulted in substantial affordability barriers to entry to poorer students. An estimated US$200–$300 is collected every year from every student who attends a public university or other tertiary institution to cover a range of recurrent costs, including supplemental salaries for teaching staff. In recent years, national authorities have issued regulations to implement constitutionally mandated provisions for free education, but in the absence of effective state institutions, implementation of this policy has been poor. 51. Similarly, in the health sector, the Government spends only approximately US$2 per capita per year––one of the lowest levels of health funding in the world, with most of it allocated to personnel in Kinshasa and a few provinces. Between 2006 and 2010, Government health expenditures (from domestic resources) oscillated around 4 percent of its budget. This amount represents a substantial increase from the 2003 level of approximately US$0.40 per capita but remains among the lowest in the world. DRC’s health budget execution varies highly from one year to the next. The Government has made a number of salary commitments (incentives and additions to the civil service rolls) that cannot be covered by budget commitments. In the last decade, international financing of the sector has increased substantially––on the order of US$200 million annually. Even so, disbursement rates lag significantly behind commitments because of the health system’s poor implementation capacities. DRC’s decades -long chronic underfunding of the health sector undermines the improvement and sustainability of health care delivery in the country. However, DRC has made progress in achieving consensus on a development strategy and technical standards for health. 52. Current social protection programs, including safety nets, are fragmented and inefficient and do not respond to the needs of the chronic poor and most vulnerable. Although the PRSP specifically addresses social protection, the Government does not have a comprehensive social protection strategy (the current one was designed in 2004 and needs to be updated) nor clear social protection policies. The great majority of the country’s many vulnerable people do not benefit from any private or public interventions. The limited social protection services are concentrated in DRC’s most important cities and are offered primarily by FBOs and NGOs. In contrast, services provided by public actors are marginal, and their quality suffers from an acute lack of both human and financial resources. In light of the country’s damaged social fabric and widespread chronic poverty, social safety nets should receive particular attention. So far, however, interventions have been designed primarily as temporary programs focused on short-term emergency relief, especially in the conflict-stricken East, or limited to specific vulnerable groups. 14 53. The instability in Eastern DRC and the persistence of low-intensity conflicts have worsened already low human indicators in that part of the country, sacrificing generations for decades. In the Eastern provinces, continued armed conflicts and the total absence of effective state authority perpetuate significant human suffering, resulting in indicators that are consistently lower across the board, compared to the rest of the country. Gender inequality is high, and gender-based violence is a bleak day-to-day reality for a large number of Congolese women, as highlighted in the Gender Study17that was prepared as a background paper to the CAS. State institutions are captured to prey on the poor, and there is little investment in public goods and services, severely limiting the population’s access t o basic services. The vulnerability of displaced people exacerbates the issue of access to services by the population. Furthermore, the persistence of the conflict in the East is consuming significant national resources and distracts the Government from addressing important development issues including support to social development programs. Security and peace consolidation 54. Years of conflict and neglect by the Central Government have led to the near-total collapse of state authority and services in the Eastern region, allowing armed groups and criminal elements to operate with impunity. State institutions in Eastern DRC exhibit a marked lack of capacity and resources to deliver the minimal security and other essential public services that are the prerequisites to addressing the underlying structural causes of conflict and violence. At the same time, years of conflict have destroyed most state-owned infrastructure, while continued insecurity impedes the restoration and deployment of state services beyond provincial capitals. These problems have been compounded by inadequate transfers of resources from Central Government to provincial authorities, further distorting incentives and leading some officials to profit personally from insecurity and instability. In addition, forced displacement is a debilitating consequence of conflicts and instability but also is a contributing factor, exacerbating existing tensions. 55. Despite significant investments by the international community in Eastern DRC and a Government stabilization and reconstruction program (STAREC), peace remains elusive. Since 2006, international partners have been heavily involved in efforts to address security, humanitarian, and stabilization priorities in Eastern DRC. The UN’s largest peacekeeping ope ration in the world, MONUSCO, with an annual operating budget of approximately US$1.2 billion and over 18,000 troops, is concentrated in the East, supporting efforts to protect civilians and stabilize the region. A massive humanitarian operation averaging US$300–$500 million per year is providing essential services and relief to millions of people. Despite these efforts, neither the Government nor the international community has been able to stabilize the region. Dysfunctional statistical system and lack of quality data 56. Credible policy formulation and monitoring of development progress in all sectors are severely hampered by DRC’s poor statistical capacity. As of 2011, the statistical capacity was 74 percent of the SSA average, particularly on aspects related to source data and reporting.18Monitoring progress toward the MDGs, IDA Tier 1 and Tier 2 population-based indicators, sector strategies, and the macroeconomic situation is constrained by a lack of trained staff, insufficient and often poorly coordinated resources in a donor-driven environment, and the nearly 30-year gap since the last population and housing census (PHC). Most SSA countries have completed a census in the past 10 years. The quality 17 A gender paper was prepared in 2011 as a background document to help address gender related issues into the CAS. 18 Analysis of the 2011 data in the Country Statistical Information Database, http://bbsc.worldbank.org/bbsc/SelectColorParameter 15 of the database for DRC generated from extrapolating information collected from surveys will continue to decrease as the time lag between censuses grows longer. Routine administrative data are scarce, and their quality is uncertain. The needs of the decentralized institutions cannot be met by the available statistical information. However, a positive trend is developing slowly through both the PRSP’s results-monitoring arrangements and the Government’s funding for national price statistics, the population, and housing census. B. Country vision and poverty reduction strategy paper 57. The Government outlined its vision in the second Poverty Reduction Strategy Paper (PRSP-2), adopted in 2011, which aims to reduce the country’s poverty rate from 71 percent to 60 percent by 2015. DRC plans to achieve this reduction by maintaining a GDP growth of 7.2 percent per year and by increasing its public investment to an average of 19 percent of GDP. PRSP-2 rests on 4 pillars: (i) strengthening governance and consolidating peace, (ii) diversifying the economy to accelerate growth and create employment, (iii) improving access to basic social services and enhancing human capital, and (iv) protecting the environment and fighting climate change. The document also expects the achievement of the Millennium Development Goals (MDGs) and the elimination of gender-based inequalities by 2020, both highly unlikely targets. The new post-election Cabinet Development Program 2012–2016 provides a comprehensive implementation plan of PRSP-2. State effectiveness and governance 58. The Government’s vision is to promote a modern public administration, to strengthen governance in the management of natural resources, and to streamline the management of state enterprises to grow their contribution to the creation of national wealth. The Government has taken significant actions to tackle some key governance issues. Concerning public sector reform, the Government adopted a plan to transform its state-owned enterprises into commercial entities in 2009. Since January 2011, most SOEs have changed their status to commercial, but the transformations are not yet fully implemented. SOEs have been commercialized and transformed into limited liability corporations with new governing rules and regulations and boards of directors. For the first time, performance contracts have been signed for companies such as REGIDESCO (water utility) and SNEL (Société Nationale d'Electricité). Hence, it is extremely important for the Government to deepen this reform, including strengthening the supervisory capacity of the Ministry of Portfolio to adapt to the post- reform environment and ensuring that boards of directors and managers are acting in the best interest of their companies and the public. 59. In September 2010, the authorities adopted the Economic Governance Matrix to improve governance including transparency, accountability, and effectiveness in the management of natural resource, particularly in the forestry, mining, and petroleum industries. The economic governance measures aim to restore investors’ confidence and improve transparency in the management of the extractive sector (box 1).With support from the Bank, a review of the mining code also is being undertaken to increase transparency and accountability in the management of mining assets and resources and to ensure that DRC gets its fair share of its natural wealth. In addition, the Government is implementing a plan to reach the Extractive Industries Transparency Initiative (EITI) validation status in May 2013.19 19 The validation status was due on March 1, 2013 but final decision is expected in May 2013 during the Sydney meeting of the EITI board and DRC was allowed more time to address the lack of specific data. The 2010 report was prepared following the definition of the perimeter, which includes 46 mining companies and 11 oil companies. The draft report was circulated to the main stakeholders for review. The DRC EITI Secretariat is working hard with the authorities to redress some of the discrepancies in the financial data. 16 60. Regarding public finance management, in June 2010, the Government of DRC adopted a comprehensive PFM Reform Strategy for 2011–18. This plan is being reinforced to take into account the recommendations of the 2012 PEFA assessment. Furthermore, on March 24, 2011, to advance the fiscal decentralization agenda, the Government approved the action plan of the Strategic Framework for the Implementation of Decentralization (CSMOD). Consolidating macroeconomic stability, sustaining economic growth, and creating employment 61. The Government has adopted ambitious targets to accelerate growth through the development of growth pole programs. The objective of these programs is to unleash the growth potential of key productive sectors including agriculture and agro-business, mining, and forestry. Under development program 2012–2016, the Government has identified 5 priority economic spaces that could be targeted for the development of integrated growth poles. 62. The Government has an ambitious program to improve the access to and quality of infrastructure services including improving the management of utility companies. For the latter, a new SNEL Board was appointed in September 2011; a performance contract between the state and SNEL was signed in February 2012; and the process to recruit a service contract operator is progressing, with the operator expected to be in place by September 2013. In the water sector, an international water operator has been contracted under a three-year Services Contract to help REGIDESO reach its objectives under the Performance Contract signed between it and the state. The Government also is implementing, albeit with some difficulties, the railways’ (Société Nationale des Chemins de Fer du Congo, or SNCC) financial and operational viability plan. The focus is on major SOEs in the infrastructure sector which are critical to improving the business climate and to the delivery of basic services. 63. Taking advantage of the country’s geographic position, the Government has ambitions to use regional integration as an opportunity to boost economic growth and create jobs. DRC is coordinating its market integration, infrastructure, and business environment with three regional economic communities. They are the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) in the East, and the Economic and Monetary Commission for Central African States (CEMAC) in the West. With the African Development Bank (AfDB) support, the authorities have launched studies for the construction of the railway and road bridge between Kinshasa and Brazzaville as part of the regional integration in Central Africa priority investment programs defined under the New Partnership for Africa Development (NEPAD). 64. DRC was admitted to the Legal Framework on Harmonization of Business Laws in Africa (OHADA) in July 2012, which will guarantee creditor rights and will provide more coherence, clarity, and impartiality to DRC's corporate legal framework. By coordinating business law among 17 countries in SSA, the OHADA treaty seeks to promote regional integration and economic growth and to ensure a secure legal environment. In the telecommunications sector, the Government’s policy to open its markets has succeeded in making the mobile phone service attractive to foreign investors, with four mobile telecommunication companies operating in the country. The Government continues to reform the payment system and the banking sector including the Congolese Central Bank, and to implement the roadmap of measures to improve the business and investment climate. Improving access to basic social services and enhancing human capital 65. The Government’s vision is to strengthen human capital, fight against HIV-AIDS, reduce inequalities, improve the living conditions of the population, and promote community dynamics. In education, the Government has developed an Interim Education Plan (IEP), which was endorsed by the Local Education Donors Group (LEDG) in June 2012. The IEP’s priorities include the (i) development of 17 a policy for early childhood education and primary education for all, (ii) reform of pre-service and in- service training for teachers and education advisers, (iii) restructuring of the Ministry of Primary, Secondary, and Vocational Education (Ministère de l’Enseignement Primaire, Secondaire et Professionnel, MEPSP) management at all levels, (iv) reform of teacher management, and (v) development of new policies for school construction and textbooks. 66. The Government has committed to strengthen service delivery systems in the health sector and to boost the achievement of basic health outcomes in the country. Some underlying strategic and planning work already has been done by two existing strategies. The 2006 Health System Strengthening Strategy focuses on the development of integrated primary health care services at the most decentralized level of the system (Health Zone). The 2010 National Plan for Health Development provides a robust framework for future directions, but it remains vague about resource mobilization and implementation. Some progress has been made in implementing these strategies, particularly in increasing access to a well-defined package of quality essential health services and rehabilitating health centers in targeted areas. 67. HIV-AIDS continues to be a government priority in the 2011–2015 PRSP. Actions and reforms are underway to reduce sexually transmitted diseases and HIV; improve universal access to care and treatment; and mitigate the health and socioeconomic impact of the epidemic at the individual, household, and community level. However, huge financing gaps to support the overall health sector remain because the resources that the Government has allocated to the sector are insufficient to fund key programs. Protecting the environment and fighting climate change 68. The Government has emphasized measures to manage natural resources and protect the environment. The emphasis includes (i) adopting and implementing legislation for the new environment framework law passed in 2011; (ii) taking actions to reduce climate change; (iii) strengthening national resilience to adapt to climate change, particularly because it negatively affects agricultural production, water resources, and vector-borne diseases. In addition to participating in the United Nations Reduced Emissions from Deforestation and Degradation in Developing Countries Program (UN-REDD), the Government’s intention is to rehabilitate and expand its entire protected areas network. IV. PROPOSED WORLD BANK GROUP ASSISTANCE STRATEGY A. Implementation of the Previous Country Assistance Strategy and Lessons Learned 69. The World Bank formulated the previous CAS (FY2008–FY2011) as DRC was gradually returning to peace, and a new, democratically elected government was installed. Formed in March 2007, the Government launched a social and economic rehabilitation program, which was presented in the first Poverty Reduction Strategy Paper (PRSP). It was against this background that the World Bank, in collaboration with other partners under the Country Assistance Framework (CAF), elaborated the FY08– FY11 CAS. The CAS was discussed at the Board on December 18, 2007. 70. The overall objective of the previous CAS was to lay the foundation for a medium-term poverty reduction effort, with a strong focus on governance and shared growth. While drawing from Bank experience on working in post-conflict and transitional countries, the document focused on (i) promoting good governance and consolidating peace through strengthened institutions, (ii) consolidating 18 macroeconomic stability and growth, (iii) improving access to social services and reducing vulnerability,(iv)combating HIV/AIDS, and (v) promoting local initiatives. 71. The strategy was slightly adjusted at mid-term to further sharpen the focus of the Bank’s support to DRC. The CAS program was regrouped under three themes: (i) rebuild state capacity to increase access to, and improve the quality of, basic services; (ii) create conditions for growth and economic diversification; and (iii) increase access to health and education. The CAS Progress Report (CASPR), presented to the Board on May 26, 2010, also strengthened the CAS Results Framework. The CAS Completion Report (CASCR) uses the updated results framework as the reference for assessing the CAS program’s performance. 72. Overall, the performance of the previous CAS program (FY08–FY11) is rated moderately satisfactory because the program achieved good progress toward major expected outcomes. More specifically, progress was moderately satisfactory regarding the first 2 pillars (rebuilding State capacity to increase access and improve the quality of basic services, and creating conditions for growth and economic diversification), and satisfactory for the third pillar (providing improved access to education and health). However the outcomes achieved (16 out of 30) were significantly more important than those partially (10) or not achieved (4). Notably, DRC reached the HIPC Completion Point in July 2010 and received a debt cancellation of US$12.3 billion. As a result of Bank support, the DRC also made particularly notable advances in road development (the share of high priority road network classified in good and fair condition increased from 13.8 percent in 2009 to 36.1 percent in 2012), the forestry sector (forested land under concessions was reduced from 24 million to 12 million ha following the cancellation of 76 existing concessions), health (increased access to qualified delivery care from 47 percent in 2007 to 77 percent in 2011), and education (gross enrollment rates of primary education increased from 64 percent in 2007 to 93 percent in 2011). Some progress was made in PFM. Less progress was registered in decentralization, energy, and public enterprise reform despite the transformation of the status of many of the SOEs, due primarily to the complexity of the issues, weak implementation capacity, and, in some cases, insufficient political commitment. The CASCR provides a detailed assessment of results achieved. 73. The Bank learned many lessons over the prior CAS implementation period. These lessons relate to the scope of the strategy, the choice and mix of instruments, addressing risks and changing conditions, involving stakeholders, working with donors, and achieving and reporting results.  Scope of the strategy. In a country such as DRC, whose needs are great and whose financial and human resources are limited, prioritization and trade-offs are essential. Going forward, more focused Bank strategies will require better coordination with donors, while ensuring that coordination inside of the institution is maximized.  Implementing reforms. Reforming state-owned enterprises and public administration, especially in fragile contexts, requires time and a deep understanding of the country’s political economy. In DRC, 20 public companies have become commercial entities through the Bank-financed Private Sector Development Project. Taking the next steps, which include addressing the huge debts saddling these companies, has been a long process and one that the previous Government had been unwilling to address decisively. For these companies to become viable entities and for the country to benefit from the reform, the challenge is for the new Government to directly address the SOE corporate governance issues.  Choice and mix of instruments. Instruments should be packaged to deliver tangible and impactful results and not be a wish list of activities to be implemented. The role and importance of knowledge should be underscored, and the way that knowledge is generated also is crucial to achieve impact. Going forward, it will be critical to (i) leverage more strongly the Bank’s and other donors’ analytical work; and (ii) make optimal use of local knowledge to better understand the political economy issues and be able to support the necessary far-reaching reforms. For 19 instance, the latter will require strengthening dialogue with other stakeholders including national and provincial think tanks and academia; or initiate the review of projects by the beneficiaries. For these steps to succeed, the analytical pieces should be limited to a few key strategic areas in which the knowledge gap is the greatest.  Addressing risks and managing changing conditions. The previous CAS developed built-in arrangements to address changing conditions, and the scope of the strategy was adapted appropriately when needed. Mid-term reviews are opportune periods to update strategies, but the approach in DRC should remain flexible and take into account changes in the environment.  Increasing beneficiary participation. To secure their buy-in, it is essential that beneficiaries be proactively and frequently involved during project preparation and implementation. The capacity of civil society needs to be strengthened and not taken for granted so that it can better engage with the Bank and the authorities during the design, implementation, and monitoring of the Government’s projects. More broadly, an independent, representative, and dynamic civil society needs to be fostered and engaged so that achievements in sector, national, provincial and district governance are sustained and adjusted to the changing context.  Achieving results and disbursements. Results are within reach, even in DRC’s difficult political and capacity-constrained environment. Disbursing in a post-conflict country is possible only if doing so is coupled with leadership, a proper M&E framework, and accountability. To achieve results, focusing on implementation readiness and disbursement arrangements during the preparation of projects is critical. Achieving bolder results that are transformational and identifiable should be an important piece of Bank support to DRC; thus, the need to be selective. B. Overview of the New World Bank Group DRC Country Assistance Strategy (FY2013–FY2016) 74. The new CAS provides a framework for World Bank Group support to DRC over 4 years, from FY2013–FY2016.The overall goals of the Bank Group’s proposed program are to support (i) the consolidation and expansion of DRC’s gains in macroeconomic stability, infrastructure, and human development through improved governance; (ii) the development of the enabling environment for sustained and inclusive growth and raising HD indicators; and (iii) the country's transition out of fragility, with a focus on addressing the developmental deficits that help to perpetuate violence and conflicts in the Eastern provinces. In addition to being aligned with the Government’s PRSP-2, the new CAS will absorb the lessons of experience and anchor country-specific analysis from the Africa Strategy (AS); the 2011 World Development Report (WDR) on conflict, security, and development; the 2012 WDR on gender equality; the 2013 WDR on jobs; and the 2011 DRC Country Economic Memorandum. Finally, the CAS builds on the 2011 Gender study as well as lessons learnt from the Gender-Based Violence program in South-Kivu that was completed in 2012. 75. To achieve these goals, the joint World Bank/IFC/MIGA program will focus on four strategic objectives. Making a serious dent in poverty will require a high economic growth rate for decades. In the absence of appropriate redistribution tools, only a sustained high level of economic growth will help DRC break away from its current poverty level. Achieving this high level of economic growth and ensuring that basic services are provided to the population will require an effective state that creates the conditions for the private sector to strive and a serious upgrading of governance. As a result, more jobs and basic services should be delivered, thus increasing the credibility of the institutions and helping the country transition away from fragility. The CAS’s strategic objectives are align ed with the pillars of the PRSP-2: 20  The first strategic objective is to increase state effectiveness and improve good governance . It supports the first pillar of the PRSP: “Strengthening governance and consolidating peace.�  The second strategic objective is to boost competitiveness to accelerate private-sector-led growth and job creation. It supports the second pillar of the PRSP: “Diversifying the economy to accelerate growth and create employment� and the fourth PRSP pillar: “Protecting the environment and sustaining the fight against climate change.�  The third strategic objective is to improve social services delivery and increase human development indicators. It supports the third pillar of the PRSP: “Improving access to basic social services and enhancing human capital.�  The fourth strategic objective is to address fragility and conflict in the Eastern provinces. This objective supports the Government's STAREC (Programme de Stabilisation et de Reconstruction des Zones sortants des Conflits) through a multi-sectoral intervention of assistance that targets key social, economic, and governance impediments to peace consolidation and sustainable development. This fourth objective also supports the first pillar of the PRSP: “Strengthening governance and consolidating peace.�  Gender and climate change are cross-cutting themes. 76. During this CAS period, the Bank Group will continue to provide strong IDA support to DRC. The CAS period spans two IDA replenishment periods (FY13–FY14 in IDA16 and FY15–FY16 in IDA17). In IDA16, DRC has been granted an extension of the phase-out period to receive an exceptional post-conflict allocation,20 which continues to provide a higher per capita allocation than regular IDA support. The indicative IDA envelope available for FY13–FY14 is approximately US$760 million21 to support IDA operations. The indicative envelope for FY15–FY16 is estimated at US$500 million.22In addition, the Bank will work closely with the authorities to fully explore the flexibility in IDA financing, including the potential use of the Immediate Response Mechanism.23The mechanism could support the Government’s rapid response to eligible crisis and emergency situations as well as the potential access to the IDA regional program, which could provide additional resources for participating in regional integration operations. The potential use of IDA guarantee24 or hedging instruments also could increase the leverage of IDA financing. Finally, the Bank would continue to play a platform role in helping the authorities improve donor coordination and leverage financing from other sources to support inclusive growth and poverty reduction. 77. Six principles will guide the development of the CAS. They comprise(i) making governance a principle for engagement, which also will require engaging more with civil society, including the active engagement and participation of women, and nontraditional stakeholders to enhance the demand side of 20 The extension of the phase-out of IDA16 (FY12–FY14) increased the duration of post-conflict support to DRC from 10 to 12 years and the total amount of the IDA16 envelope by approximately 20%. 21 The estimate of the IDA envelope is based on resources available from the IDA16 replenishment and is updated annually. The indicative estimate may vary depending on (i) total IDA resources available, (ii) the country’s performance rating, GNI per capita, and population; (iii) the terms of IDA assistance (grants/credits) and the allocation deductions associated with Multilateral Debt Relief Initiative (MDRI); (iv) the performance, other allocation parameters, and IDA assistance terms for other IDA borrowers; and (v) the number of IDA-eligible countries. The IDA allocation is provided in SDR terms. While the US$-equivalent amount is provided at the IDA16 replenishment exchange rate of US$1.50233/SDR, the exchange rate for each operation depends on the applicable prevailing rate at the time of approval. 22 This estimate will be revised on completion of changes to IDA’s resource allocation framework being discussed in the context of the IDA17 replenishment negotiations. 23 This mechanism enables the inclusion of emergency-related contingent components in selected investment operations to support rapid response in eligible crisis and emergency situations. 24 Only one-quarter of the amount of an IDA guarantee would count toward its IDA envelope. For example, an IDA envelope of $25m can support an IDA guarantee of $100 million. 21 good governance and in recognition that disengagement is the worst option; (ii) being selective and identifying impactful development solutions by focusing on geographically targeted interventions and enhanced coordination with other donors; (iii) using government structures to implement Bank-financed projects that support state effectiveness and capacity building; (iv) keeping fragility and conflict in mind, particularly for activities in the Eastern provinces; (v) maintaining flexibility in the design and implementation of the program to respond to changing conditions in a fragile setting; and (vi) promoting regional integration. 78. Consultations were held with stakeholders in DRC in May-June 2012. They involved intensive dialogue with civil society, think tanks, youth groups, religious groups, Parliament, members of the Government, and donors. The overarching theme of the consultations centered on inclusive growth with an emphasis on job creation. The main recommendations were to (i) improve access of local enterprises to finance; (ii) reduce barriers to business activities, including red tape and constant harassment by government officials; (iii) support efforts to move informal activities to the formal sector; (iv) enhance the skills of the workforce to fill the disconnect between supply and demand in the labor market; (v) support the reconstruction of a statistical system; (vi) continue support to infrastructure; (vii) increase allocation of public resources to the social sectors; (viii) improve citizens’ and donors’ access to information, including publishing budget reports; and (ix) improve transparency in the forestry, mining, and petroleum sectors. C. Strategic Objectives and Results 79. A limited number of outcome indicators will be used to monitor progress in implementing the CAS. Most of the results that will be achieved during this CAS period will come from ongoing programs, at least until the mid-term review. The results framework will pay particular attention to gender-disaggregated indicators. Strengthening national capacity for results will go a long way to reinforce the national institution for statistics and enhance national capacity on M&E. Projects will be required to report results quarterly, and the use of surveys will be promoted and made systematic with Bank-financed operations in addition to targeted impact evaluations. Strategic Objective One: To increase state effectiveness and improve good governance 80. The World Bank Group-supported activities will aim to (i) increase transparency and effective management of public finances at the central level and in the provinces of Bandundu, Katanga, Kasai Occidental and South Kivu: (ii) increase transparency and effectiveness in the management of financial resources from the extractive industries and ensure that the country gets a fair share from the management of its natural endowments; and (iii) strengthen governance of the mining sector SOEs and increase the operational performance of other SOEs including the water utility, the power utility, and the state airport authority. CAS Outcome 1.1. Increasing transparency and effectiveness in the management of public finances at the central level and in the provinces of Bandundu, Katanga, Kasai Occidental, and South Kivu 81. According to all stakeholders met during the extensive consultative process that preceded the preparation of the CAS, poor governance including poor management of public finances and human capital is at the root of the DRC’s development challenges. Addressing governance issues is critical for DRC to progress in bolstering economic growth, creating jobs, and reducing poverty. Support to public sector effectiveness will be centered on two existing operations: a new investment lending project and close coordination with other development partners involved in PFM. Actions are necessary to address the supply as well as demand sides of governance. In light of the entrenched vested interests and the culture of impunity that pervades DRC, making progress will not be 22 easy. Key areas to tackle include strengthening the public sector’s capacity to manage public resources, particularly the vast endowment of natural resources, effectively and transparently. Analytical and advisory activities 82. Following the Public Expenditure and Financial Assessment (PEFA) carried out in FY12 with Bank support, an action plan to improve the management of public finance was adopted. The action plan will be implemented in FY13 and beyond with the likely support of the UK’s Department for International Development (DfID) and a group of donors including the European Commission, France, Germany, UNDP, and the Bank. The Government is keenly interested in direct budget support. Therefore, having a strengthened PFM system in place is critical. A PEFA update will be completed before the end of the CAS period (FY15), and the next PEFA will be developed in the four above mentioned provinces in partnership with other donors. World Bank financing 83. Reforming civil service and restructuring the public sector are critical to re-establish the credibility and the effectiveness of the state. The scope of Bank interventions will be targeted to a limited number of ministries given the complexities of the undertaking, the huge stock of social debts, overstaffing, deep political economy issues, and the advanced state of degradation of DRC’s public sector. Two ongoing governance operations––the Enhancing Governance Capacity Project (US$50 million) and the Capacity for Core Public Management Project (US$29.9 million)––aim to enhance transparency and efficiency in central and subnational public finance and human resources. The approval of US$67 million in additional financing (planned for FY2013) to the Enhancing Governance Capacity Project will increase the Government’s ability to improve financial and procurement management as well as strengthen capacity in the four provinces (Bandundu, Katanga, Kasai Occidental, and South Kivu) which already benefit from these operations. A new Public Financial Management and Accountability Project (US$25 million) with likely funding from DfID is being prepared to support implementation of the PEFA action plan. 84. A new operation––the Public Service Reform and Rejuvenation Project (US$100 million)––will focus its interventions on a limited number of key ministries. This project will support (i) improving human resources management at the central and provincial levels and addressing the issue of staff who have reached retirement age but still are on the payroll, and the competitive recruitment of younger, more qualified staff; and (ii) supporting the establishment of an operational public service pension system combined with the organizational restructuring of targeted ministries while introducing a meritocratic performance system. This new operation will build on the experience gained at the provincial level. The operation will complement ongoing efforts to reform the Ministry of Environment and Nature Conservation under the Forestry Project and parallel efforts to support the Ministry of Agriculture under the ongoing Agriculture Rehabilitation Project. This new Public Service Reform and Rejuvenation Project will not specifically target the SOEs. Instead, it will strengthen the capacity of the ministry in charge of the SOEs to be in a position to supervise and monitor the performances of the 20 public enterprises now operating under commercial rules and ensure that appropriate and operating governance structures are in place to foster transparency, effectiveness, efficiency, and accountability in these entities. This project also will support social accountability by organizing and building the capacity of local civil society organizations (CSOs), a critical element to strengthen the demand for good governance. 85. The decentralization process provides significant scope for enhancing transparency and accountability at the local level. The Bank is supporting the development of public sector and financial management systems including personnel and payroll management in the same four provinces. Other donors such as EC, UNDP, and USAID are supporting similar activities in other provinces. 23 86. Improving the collection and processing of data, as well as optimizing the use of the limited data available, are key elements in enhancing governance and decision-making. A new statistics operation financed by the Bank’s Catalytic Fund (US$11.5million) will be prepared to support the development of the country’s statistical capacity. The new operation aims to strengthen the DRC’s National Statistical Institute (INS), improve staff working conditions, strengthen technical and management capacity, and support the preliminary activities needed to gather the national census and to improve national accounts. Resources from the Catalytic Fund remains limited in comparison to the needs. Additional funding will be provided by IDA to complement efforts supported by the fund and likely will target the development of human resources, the production of sector statistics, and a comprehensive civil registration system. The need for more qualified statisticians cannot be met through external scholarships for a few. Therefore, the setting up a good statistics training center in country remains a priority, as does the establishment of a true civil registration system. The Bank will work with donors to coordinate their statistical activities in support of better data quality and availability. Joint donor missions organized to date for the Population and Housing Census (PHC) have shown the benefit of working together, but additional efforts are required. 87. Accelerating the delivery of basic services and getting the state closer to the population require effective and accountable local government institutions. For these entities to carry out their mandated responsibilities in a country the size of Western Europe, the demand and supply sides of good governance as well as capacity building are essential. Competent and accountable local government structures will deliver better services that are locally demanded, thus increasing the resilience and decreasing the vulnerability of local communities. At the same time, effective local governance arrangements can help address overarching challenges to sustained development, such as corruption and mismanagement of public resources. 88. Results achieved under a pilot program initiated in South Kivu have shown that consistent introduction of participatory public finance practices facilitated by modern information and communication technologies (ICTs) can enhance people’s participation in budgetary decision- making and create mechanisms for effective public oversight over demand-driven capital investments. Implementation of an Institutional Development Fund (IDF) grant resulted in the adoption of provincial legislation that institutionalized citizens’ participation in public decision-making. It also led to significant increases in budgeted transfers from provincial to district administrations. Finally, closing the accountability loop, infrastructure projects that were selected for construction in a participatory manner have been completed on time and to the satisfaction of the population. Building on the knowledge and practice of workable ICT-enhanced participation in public investments, this program will be extended to the Bandundu, Katanga, and Kasai Occidental provinces. Civil society budget execution reports will be prepared by the National Civil Society Coordination Network. The Bank also will support the Parliamentary commissions in charge of finances to be in a better position to carry out the Parliament’s constitutional mandate over budget execution. In addition, the Bank will support CSOs’ work to clamp down on corruption in procurement through the Contract Watch Initiative. CSOs will be actively involved in supervising Bank operations, and the use of External Implementation Status and Results Reports (EISRs) will be generalized. In this regard, the work of the three CSOs that were awarded funding through the Global Facility for Social Accountability will be made public and widely publicized. The Bank also will support the organization of an annual international conference on economic growth and governance in DRC25 and will support the work of selected groups from academia, CSOs, and think tanks who address issues regarding economic management, service delivery, and good governance. 25 The first conference will take place in 2013. This annual conference will be institutionalized to open up the policy debate on economic growth, economic management, and governance. 24 89. An engagement framework will be designed with civil society, including women, to promote demand for good governance. This framework will cover demand-driven approaches across sectors and programs. The framework will elaborate appropriate mechanisms and institutional arrangements to engage with the relevant citizen groups including tools and techniques required to ensure broader outreach. The framework also will ensure women’s effective participation. CAS Outcome 1.2. Increasing transparency and effectiveness in the management of financial resources from the extractive industries and ensuring that the country gets a fair share of the revenues from its natural endowments Analytical and advisory activities 90. The DRC is a country with vast natural resources wealth, but poor governance has deprived the population of benefiting from this wealth. The World Bank made a bold attempt to increase transparency in the management of DRC’s natural resources by supporting the implementation of the Economic Governance Matrix(box 1). During this new CAS period, the Bank will continue to closely monitor government’s implementation of agreed actions, will regularly extend and update the governance matrix, and will support governance improvements and capacity building of the main mining SOEs. The new Bank facility supporting negotiations of mining deals will be used to help DRC better negotiates its mining contracts. The Bank will support the creation of an Inter-ministerial Council to oversee the granting of contracts and mineral asset sales. Civil society also will be invited to the contract negotiation table. The Bank will further strengthen its policy dialogue to include discussions aimed at setting up mechanisms to improve local content of mining operations, which will include training of nationals. In addition, the World Bank has started to discuss the possibility that the policy matrix could serve as a basis for channeling Norwegian and German support to REDD+. Based on progress in meeting forestry-related governance indicators, Norway could disburse funds to the DRC through the Bank, potentially tens of millions of dollars annually until 2020. World Bank financing 91. In addition to the capacity to manage the sector, transparency in the extractive industries in general, and in the mining sector in particular, it is critical for DRC to take advantage of its vast natural endowments to benefit its population. The Bank essentially is supporting DRC through two existing operations in the mining and the forestry sectors. First is the ongoing US$90 million Growth and Governance in the Mineral Sector Technical Assistance Project (PROMINES), co-financed with DfID. PROMINES has been designed to address capacity building at the Central Government level and governance issues in the mining sector, and to strengthen the capacity of CSOs to demand transparency and accountability. PROMINES is helping the Government, the private sector, and civil society to prepare a revised, forward-looking mining code with embedded transparency requirements. The code will build on the lessons learned from implementing the current 2002 code. PROMINES will give DRC a better knowledge of its mining assets by developing a geodesic and geological database, which will put DRC in a better position to auction these assets. 92. PROMINES also is providing TA to the oil sector by helping to draft a framework oil concession contract and preparing a diagnostic for the sector. In addition to the financing from PROMINES, the Bank is supporting DRC to become EITI compliant by 2013 and, going forward, will support DRC to entrench EITI principles and processes through a new Multi-donor Trust Fund (MDTF) under preparation. At the CAS mid-term review, the Bank will provide additional financing to PROMINES to tackle the governance, operational, and financial performance of the main mining sector SOEs. 25 93. Good governance in the extractive industries requires supporting demand-side monitoring and multi-stakeholder engagement. With the monitoring facilitated by the Economic Governance Matrix, the Bank’s support has been critical in stimulating the interest of DRC’s CSOs in issues related to transparency in the extractive industries. The CSOs also are becoming more vocal on governance-related issues, especially in the extractive industries. This momentum should be maintained and expanded. In coordination with the Carter Center, the WBI is supporting a number of activities. They include, first, piloting the new Extractive Industries Contract Monitoring Roadmap by local CSOs. A second activity is supporting the accountability platform design/planning of the PROMINES Project. This activity also is supporting the active use of the Sharing in Governance of Extractive Industries (GOXI) platform by stakeholders to share, learn, and connect for action toward greater accountability and, in turn, to facilitate better development outcomes from the extractive industries. The platform is used, for example, by Katanga civil society to exchange with other CSOs on strategies for better governance and to secure better impacts for the local population. In addition, PROMINES will identify specific high-impact activities (short or medium term) in which civil society involvement is crucial for successful implementation on the ground. 94. The ongoing Forestry Project (US$64 million) is helping to strengthen governance in the forest sector. The project includes support to decentralized forest management in the three main forested provinces: Bandundu, Equateur, and Orientale. The project also is facilitating the negotiation of social responsibility agreements between logging concessions and local communities; and the control, with the help of an international firm, of illegal chain saw lumber exports to neighboring countries. The DRC needs to explore aggregate offsets for biodiversity conservation - a mechanism to generate compensation revenues for the loss of biodiversity from forest exploitation or various extractive industries such as mining or hydrocarbon development. Trust Funds 95. The Bank is also involved in biodiversity conservation in DRC through its GEF National Parks Project (PREPAN) and Conservation Trust Fund (CTF) Projects. PREPAN (US$7 million) aims at strengthening the capacities of the Congolese Institute for Nature Conservation (ICCN) at both national and local levels. The CTF, for which the Bank is the executing agency for the investment of USD$12 million of GEF resources, will provide long-term sustainable funding for the management of DRC’s protected areas. The DRC's biodiversity is of outstanding importance globally, most notably encompassing the World's second largest area of remaining tropical rainforest. Although as yet generating little direct economic returns from nature-based tourism, the country has a huge potential to generate revenues from its biodiversity endowment. Gorilla-based tourism in Virunga National Park generated about $1 million per year of revenues for ICCN, a significant part of its budget, up until early 2012, at which time civil strife effectively brought a halt to tourism in this area. This amount is only a tiny fraction of future potential revenue country-wide, once minimal infrastructure and security measures are in place. 96. The Bank also is involved in three forest/climate change projects. The Congo Basin Forest is the second largest carbon sink in the world. Compared to business as usual, reduced deforestation would significantly help to reduce world CO2 emissions (box 2). 26 Box 2. Forests and Climate Change in DRC The rainforest in the Congo Basin is the second largest rainforest in the world behind the Amazon Basin, with 300 million hectares (ha) compared to the 800 million ha in the Amazon. Roughly 50 percent (145 million ha) of the Congo Basin rainforest lies within DRC’s boundaries. Since 1990, DRC’s deforestation rate has remained constant at 0.25%, which equates to the loss of 362,000 ha of trees annually. Compared to a business-as-usual development scenario in DRC, using current demographic and socioeconomic development trends, future environmental impacts caused by land degradation and deforestation might be significantly higher. Potentially 12–13 million ha could be deforested and 21–22 million ha degraded by 2030. Emissions would equate to 400 million tons of CO2in 2030, resulting from an increase of emissions by 3% –4% annually from 2010–30. The Forest Carbon Partnership Facility (FCPF) is a multi-donor initiative led by the World Bank. FCPF, along with other partners such as UNDP and the Norwegian Agency for Development (NORAD), is assisting DRC to become ready to benefit from REDD+ (reducing emissions from deforestation and forest degradation while promoting conservation of forest carbon stocks, sustainable management of forest, and enhancement of forest carbon stocks). The country has made considerable progress on this front and is well on track to have all key elements of “REDD Readiness� in place by the end of 201 4. In addition, the Forest Investment Program (US$36 million from the Climate Investment Funds, or CIF) will support pilot investments to reduce deforestation in the vicinity of Kinshasa. In parallel to the REDD Readiness process and in close cooperation with NGOs and private partners, the DRC is developing early ideas relative to a first Emission Reduction Programme (ER-Programme) in Bandundu Province. Once completed and submitted to the FCPF Carbon Fund, the country might enter into negotiations with the Carbon Fund for the sale/purchase of emission reductions to be generated under the program. These negotiations might lead to the signature of an Emission Reduction Purchase Agreement (ERPA), which would be one of the first REDD+-based carbon-forward transactions in the world. The nominal value of the ERPA would depend on the specifics and performance of the Programme, but it is expected to amount to 10 million tons of CO2 or US$50 million over 2015–20. Other buyers could acquire the leftovers of this program. The Bio Carbon Fund, for which the World Bank acts as a Trustee, supports the Ibi Bateke Carbon Sink Project, the first registered Clean Development Mechanism (CDM) project in Central Africa. The project is aimed at reforesting degraded lands around Kinshasa while providing a sustainable source of charcoal to the country's capital and testing carbon finance as a source of funding for reforestation activities. DRC also signed an Emissions Reduction Purchase Agreement (ERPA), in which the Bank buys emission reductions, (carbon credits) from DRC until 2017. CAS Outcome 1.3. Strengthening governance of the mining sector SOEs and increasing the operational performance of other SOEs (REGIDESO, SNEL, SNCC, and RVA) World Bank financing 97. To date, corporate governance issues have been addressed through multiple ongoing sectoral operations. They are the (i) Multimodal Project (SNCC, RVA), (ii) Regional Southern Africa Market Project (SNEL), and (iii) Urban Water Supply Project (REGISEDO). An Additional Financing to PROMINES Project will be prepared to tackle the governance, operational, and financial performances of the mining sector SOEs. The new operation––Public Service Reform and Rejuvenation Project––will strengthen the capacity of the Ministry of Portfolio to monitor performance and enforce accountability and transparency in the management of these entities. 27 Box 3. State-Owned Enterprises The 20 state-owned enterprises (SOEs) responsible for delivering the majority of public services across DRC are in extremely difficult financial position. Their restructuring and transformation is urgent. Most SOEs drain national fiscal resources, distort competition, and deter foreign investment in key sectors. The SOEs need to be thoroughly transformed to be able to deliver quality, commercially competitive services in liberalized sectors following modern corporate governance practices. All 20 SOEs are plagued with similar cross-cutting issues that weigh heavily on their ability to achieve viability. These issues include excessive indebtedness, deficient title to property and assets, unfinished separation of regulatory versus operating functions, and weak management know- how and discipline. Due to the strategic sectors that they operate, seven SOEs are considered of paramount importance . They are SNEL (energy), SNCC (railways), REGIDESO (water supply), SCTP (river transport, railways, and ports), RVF (river management and hydrology in support of river transport), RVA (airports authority and operator) and Gecamines (mining enterprise controlling vast territories for exploration on behalf of government). Transformation of the SOEs involves three phases: stabilization, restructuring, and rehabilitation. Four of the 7 SOEs (SNCC, Gecamines, SCTP, and RVA) received stabilization assistance from international teams of management experts with limited success. The Belgian private operator, Vecturis, is helping SNCC through the next phases of its transformation. In 2012, to improve its operational and financial management, RVA signed a results-based TA arrangement with a foreign airport agency, Aéroports de Paris (AdPi). The Government has signed performance contracts with SNEL and REGIDESO to be backed by performance-based service contracts with international companies. Such an arrangement is in place at REGIDESO and setting up the same arrangement with SNEL will take place by September 2013. A similar plan is being contemplated for SCTP. 98. Gender. The Bank will proactively support the establishment of mechanisms for greater gender inclusion in policy- and decision-making bodies at the local and community levels. Through the support of the Global Partnership for Social Accountability (GPSA), CSOs representing women at the national and local levels will receive capacity building support. In synergy with the Bank’s mining assistance program, the Nordic Human Rights Trust Fund could be leveraged to address women’s and children’s rights in mining areas. Improved collection of gender-disaggregated data and analysis of gender issues will be supported through the Catalytic Project to Strengthen the National Statistical Institute. Development partners 99. The Bank will collaborate with the IMF to define and monitor economic governance reforms in DRC. Other development partners include DfID (joint financing of the ongoing mining project, PROMINES, and PFM); AfDB (PFM governance; and capacity building in energy, transport, and water sectors); UNDP (justice, statistics); European Commission (PFM and justice), Belgium/CTB (governance); and USAID (natural resource management, or NRM). Strategic Objective Two: To boost competitiveness to accelerate private-sector-led growth and job creation 100. The CAS will help support the design and implementation of growth pole programs in 2 of the 5 priority economic zones identified in the Government PRSP-2 (2011–2015). The CAS will initiate a new approach that focuses on transformational projects in energy, transport, skills development, ICT, and agriculture under a growth pole approach in specific and limited geographic areas around two zones (Western and Southeastern DRC).26 This approach is justified by the country’s large size and the importance of achieving impact that will facilitate replication in other places. The CAS will focus on four outcomes: (i) enhanced business environment for PSD; (ii) improved access to quality broadband network 26 AfDB will support the development of a growth pole in the Bandundu, Kasai Occidental, Kasai Orientale, Maniema provinces, and northern Katanga province. This project will be a key piece of the AfDB’s new Country Assistance Strategy, which is under preparation. 28 and services at reduced cost; (iii) increased generation of energy and improved and increased access to it; and (iv) increased agriculture productivity and production and access to markets. CAS Outcome 2.1. Enhanced business environment for private sector development 101. The Bank, IFC and MIGA will collaborate closely to actively support job-creating private sector development in DRC. IFC’s planned operations in DRC for FY13–FY16 are in line with the CAS’ second strategic objective, which aims to boost competitiveness by accelerating private -sector- led growth to create jobs. Since 2007, the 3 pillars of IFC’s post-conflict initiative in DRC have evolved around combined advisory and investment operations focused on (i) improving the investment climate; (ii) proactive project mobilization and developing key investment projects to promote high-growth sectors; and (iii) expanding support to the SME sector. IFC’s operations have resulted in an investment portfolio that covers finance, telecommunications, and mining. IFC’s advisory services, supported by the CASA (Conflict-Affected States in Africa) Initiative, and in collaboration with the Bank, have focused on SME banking, microfinance, investment climate (OHADA, business reforms, and the establishment of a framework for Special Economic Zones), SME development support, and the provision of risk capital and advisory services to small businesses. MIGA’s planned engagement in DRC is also directly in line with the CAS’s second strategic objective. MIGA’s business strategy prioritizes IDA countries and post - conflict and fragile environments, and its product range is directly suited to investors concerned about the local business environment. Over the CAS period, MIGA will look to build on its existing portfolio in the country, which already covers the infrastructure and financial sectors. 102. During the FY2013–FY2016 period, IFC will continue to partner with the Bank based on achievements and lessons learned in the previous CAS period and in accordance with the February 22, 2012 guidance given by the Corporate Operations Committee to support a phased re- engagement in DRC (following the suspension of new IFC activities since 2009). The guidance provides for investments in SMEs to benefit the base of the pyramid with no government involvement and continued advisory services work. The guidance also states that full re-engagement with real sector advisor and investing will be possible only following the DRC government’s clear commitment to good governance, notably via accession to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. When possible, full reengagement will enable IFC to resume direct and large- scale/transformational investments in all growth sectors through targeted sector strategies with the Bank; facilitate private sector entry to infrastructure markets and service delivery; and support deeper and more impactful investment climate reforms. Alongside the Bank and IFC, MIGA will look for new opportunities to support private investment into the country. It will do this either on its own or in partnership with the broader Bank Group, replicating successful experience of joint collaboration elsewhere, where MIGA’s guarantees have been used alongside other World Bank products such as IFC loans or Partial Risk Guarantees. Analytical and Advisory Activities 103. Strengthening the capacity of SMEs to take advantage of business opportunities and to effectively and efficiently manage their existing businesses is important for DRC. IFC/Bank support for SME development will be provided through the DRC SME Development Program (second phase), which will design/establish a privately owned SME Facility with a virtual scheme in key markets to roll out IFC SME Management Solutions (Business Edge, SME toolkit, SME Governance). Working with lead firms in agribusiness, light manufacturing, and telecommunications, the DRC SME Development Program aims to increase the reach of SMEs through inclusive supply chains. The program also will intensify SMEs’ linkages to financial institutions. The program’s delivery model will be strengthened with additional resources provided by the Bank to scale it up and reach a much larger number of SMEs, 29 including female entrepreneurs. The program also will help develop integrated packages and promote new products and tools (certification, corporate governance, standards). 104. Strengthening DRC’s financial sector to ensure that economic activities are financed is critical for the development of private-sector-led growth and job creation. A Financial Sector Assessment Program (FSAP) is planned for FY2014. The FSAP will be a key element of the Bank’s assistance to help DRC strengthen its institutions and practices to provide adequate financing, payments support, and insurance against PSD risks. These risks are associated with short-term credit, trade facilitation, and long-term infrastructure finance facilities. A modern payment system will be implemented by end-2013. It will be financed through the new Financial Sector Support operation. A skills development study, an Investment Climate Strategy, and an ICT policy advisory note will address some of the knowledge gaps and support policy dialogue. 105. Furthermore, Bank engagement will include (i) a strategic partnership on supply chains with the Proactive Investment Promotion Platform and the Project Development Facility (PDF), which were presented to, and welcomed by, donors in December 2012; and (ii) the program for reopening closed companies that the Bank is pursuing to support jobs creation. These activities include the identified case of Bas-Congo, which will return approximately 150,000 small farmers to productive economic activities; and (iii) options to carry out adhoc operations such as Kintech (the technical pole of Kinshasa’s creative industries), Kinmeubles (clustered furniture city), and Kinmecanics (motor vehicle repair/maintenance) with common services centers from which IFC could deploy its support programs to SMEs. In addition, IFC, through its CASA initiative, will continue to support the Bank’s PSD operations. World Bank Group financing. 106. The Western DRC Agriculture-based Growth Pole will build on DRC’s comparative advantage in agriculture and the unmet demand for cheaper food for the 10 million inhabitants of Kinshasa. Anew Agriculture-based Growth Poles Project (AGPP) (US$110 million) will be prepared with IFC. The project will address critical bottlenecks in infrastructure and business climate by focusing on the Boma-Matadi-Kinshasa corridor (Bas Congo and Kinshasa Provinces) and building on programs already financed by other donors in the same geographic area. The project will deploy a critical mass of concrete, complementary interventions in the locations of highest potential. Examples of interventions are feeder roads, transportation, logistics, power, water supply, agriculture interventions, support to agribusiness, access to finance, support to SMEs, and trade facilitation. The project will select groups of interrelated industries with high employment potential that could drive growth in the intervention zones. 107. Efforts to address skills gaps also will be supported. To respond to the skills needs, the Bank will use the ongoing analytical work on skills and competencies. IFC will contribute technical support to the Bank’s planned AGPP including (i) incorporation of the deliverables of the IFC/WB- supported SEZ Program and continued provision of TA by IFC; (ii) provision of business development services to SMEs’ beneficiaries of the linkages created by the AGPP; and (iii) technical support aimed at addressing some key investment climate issues that constrain the creation and operation of SMEs. The project is being developed through the intensive engagement of the private sector. Efforts will be made to attract Congolese individuals, including the diaspora, to invest and develop micro, small, and medium- scale companies. 108. To re-launch the private sector, increasing SMEs’ access to finance and supporting the development of the financial sector in DRC are essential. The World Bank will prepare a new financial sector development project. This project will aim to modernize the DRC's banking, microfinance, and public sectors to enable effective and timely delivery of financing to private sector entrepreneurs and households. The project also will help increase availability of funds among trading partners nationally and internationally by enabling electronic payments and money transfers to be available almost immediately 30 and accurately, replacing the time-consuming manual clearing and settlement of payments that is subject to delays and errors. The new operation also will provide support to the growth of the microfinance industry in continuity with the $7 million in IDA funds in circulation among the Microfinance Promotion Fund (FPM) and various commercial banks and microfinance institutions, thereby fueling the expansion of the sector using cheaper long-term credit. IFC will further develop the range of products suitable to DRC’s financial markets and help build efficient financial infrastructure. Through its Central African SME Fund (CASF) and in close collaboration with the SME Development Program, IFC’s SME Ventures Program will expand the provision of risk capital and advisory services to a greater number of small businesses. 109. In addition, as part of its partnership with the MasterCard Foundation to scale up microfinance in Africa, IFC will continue to expand its microfinance programs in DRC to increase and support the number of commercially viable microfinance institutions and broaden SMEs’ access to financial services. IFC also will explore the possibility of complementing the Bank’s support to the microfinance fund. In parallel, IFC will continue to help build the capacity of MSMEs to strengthen their credit-worthiness. When feasible, IFC will develop additional projects with local banks to support small business banking through its Africa Microfinance, Small and Medium Enterprises (MSME) Finance Program. These projects will include thematic- and/or industry-focused activities (such as agribusiness, education, and gender).IFC will continue to provide trade finance advisory to finance professionals and team up with the Bank to establish nonexistent financial infrastructure (credit bureau, collateral registries, leasing regulatory framework). Based on market demand, technical feasibility, and financial sustainability, as well as lessons learned from previous IFC/Bank experience, IFC and the Bank will work together to establish risk-sharing facilities and introduce/develop housing finance in DRC. CAS Outcome 2.2. Improved connectivity and access to transport infrastructure Analytical and Advisory Activities 110. A series of analytical works is planned to support the regional integration agenda. In Western DRC, the Bank is supporting the preparation of a trade facilitation study between the ports of Kinshasa and Brazzaville. This study, carried out jointly with EC and DfID, will help the Governments of DRC and the Republic of Congo (RC) design and implement measures to facilitate the flow of goods and services between the two capital cities. More broadly, the Bank will help DRC design an integrated development strategy to benefit its border countries in the West (RC and Angola), with particular attention to the interests of Bas Congo Province. Competition among various infrastructure options will be one of the principles used in the study, allowing for simultaneous development of transport, energy, and telecommunications corridors, thus guaranteeing continuity of service if one supply route is disconnected. A similar study is envisaged for Eastern DRC to review trade opportunities and competitions with countries including Burundi, Rwanda, Uganda, and Zambia. 111. In addition, a new ESW––Spatial Economics, Growth Impacts, and Decision making for Infrastructure Investment in DRC––is intended to assist the Government in identifying the potential growth impacts of its five “priority economic zones� (see map in appendix 14). These potential areas for “spirals� of growth form a part of the Government’s 2012–16 Development Program. Infrastructure investment planning often is carried out in sectoral silos, with little attention to the agglomeration economies that could result from coordinating and sequencing interventions. In many cases, when projects are evaluated independently rather than as a package, not only are agglomeration economies not captured, but also the result is overlap and duplication of services. AfDB already has expressed its intent to help the Government develop Zone 2, and the World Bank is preparing operations in Zones 1 and 4. Zone 5, the river leg of the Congo Basin Atlantic Corridor, will be studied as well. This ESW could help determine which zones and which investments within areas are the most efficient and the priorities for 31 economic growth. This ESW might be undertaken in collaboration with, and possibly financed by, the Regional Spatial Development Initiative of the Development Bank of Southern Africa (DBSA). World Bank Group financing 112. The ongoing Multimodal Transport operation (US$255 million) will retain its critical role in supporting and revitalizing the core railway network in large parts of Southern and Central DRC, which could collapse without support from the project. The planned additional financing to the project (US$180 million) is ready and scheduled for Board presentation (FY13). The project will continue to help the Government implement structural reforms at SNCC (the national railway company), implement a transport-sector-wide governance plan, and strengthen the transport SOEs’ operational performance. 113. A new Urban Development Project (US$100 million) is being prepared to help secondary cities in growth corridors deliver basic services and reap the benefits from economies of agglomeration. The project will build up urban infrastructure through labor-intensive methods in the cities located in Western DRC (Matadi, Kikwit, and Mbandaka) as well as in the East and North Katanga (Bukavu, Kindu and Kalemie), areas targeted by the two agriculture-based growth poles operations. This project will focus on how best to use local materials and promote private sector initiatives. It also will improve urban governance through performance-based allocation of project resources with links to revenue collection and strengthened financial management. Strengthened urban governance will enable targeted cities to better provide basic services to their fast-growing populations while supporting linkages to their rural hinterlands. This approach underpins decentralization by pushing resources to the city level and supporting inclusive local governance. The project is expected to help generate jobs in construction and related activities. The urban project will complement the reconstruction program supported by China. CAS Outcome 2.3. Improved access to quality broadband network and services at reduced cost Analytical and Advisory Activities 114. The Bank has started a policy dialogue to review the legal and regulatory framework according to best practices (no exclusive rights on fiber optic assets, financial autonomy of the regulatory authority) with the objective that new legislation will be enacted in 2013. Its approval would make DRC eligible for the Central African Backbone (CAB) program. World Bank Group financing 115. The Government has officially indicated its interest in participating in the Central African Backbone (CAB) program (regional project). The Government already is participating in the public-private partnership (PPP) approach for international connectivity via the West Africa Cable System (WACS) consortium, and has installed a submarine landing station in Moanda and a fiber optic cable between Moanda and Kinshasa. Bank Group support is sought to develop, operate, and commercialize on a wholesale basis key economic clusters (Kinshasa, Lubumbashi, Goma) connected to submarine cable capacity with the quickest route (WACS for Kinshasa, cross-border connections for the other clusters), which will be linked together in a second phase via national fiber links. The Bank has started to review the legal and regulatory framework according to best practices (no exclusive rights on fiber optic assets, and financial autonomy of the regulatory authority). 116. In addition, IFC will help improve access to telecommunications for populations in remote and/or poorly covered areas by building on the successful pilot phase with a mobile operator to launch the broad Village Phone Program. The targets are 4,500 village phone operators (jobs) and improved access for approximately 900,000 people. 32 CAS Outcome 2.4Increased generation of and improved access to energy Analytical and Advisory Activities 117. There is an ongoing ESW on rural electrification that will complement the new TA project on Inga3.DRC also will benefit from the Africa Renewable Energy and Access Expansion Program (AFREA) funding. AFREA is an Energy Sector Management Assistance Program (ESMAP) for Africa with the objective to support the scale-up of energy access and clean energy solutions in SSA.DRC has been selected as a target country for the expansion of the World Bank’s Lighting Africa activities in the region and a pilot country for the Africa Clean Cooking Energy Solutions (ACCES) initiative, financed by AFREA. Lighting Africa is a joint World Bank-IFC program to accelerate the adoption of clean, off-grid lighting technologies by households and businesses throughout SSA that currently rely for their lighting needs on candles, kerosene, and other inferior and harmful fuels. In DRC, the program will be co-financed with the Global Partnership on Output-Based Aid (GPOBA) grant and will target providing output-based subsidies for the dissemination of modern off-grid lighting to increase its affordability for the poor. The ACCES objective is to accelerate the development of the clean cooking sector in SSA in order to increase access to modern technologies and cooking fuels that will alleviate the adverse health, environmental, and socioeconomic impacts of traditional cooking practices. In DRC, ACCES will cooperate with the forthcoming Forest Investment Program (FIP) to complement its activities with the focus on the promotion of clean cooking solutions, such as improved and advanced cook stoves. World Bank Group financing 118. Access to cheaper power is a key component of the competitiveness agenda. The Bank will prepare a new Technical Assistance Project with parallel financing from the AfDB to help the Government finalize the feasibility studies for Inga3 and midsize hydro-projects, select a developer, and prepare the detailed design of other hydroelectric sites in DRC. To date, the Bank’s heavy engagement in the electricity sector through the 2 regional energy projects (Southern African Power Market, US$560.6million; and Regional and Domestic Power Market Development, $US579.7 million) has yielded limited results. However, significant progress has been made in the recent months on the institutional front, including strengthening governance within the National Electricity Company (SNEL), as demonstrated by the appointment of a new Board and senior management, the signing of the performance contract between SNEL and the state, and progress in the recruitment of the TA service operator supported by the Bank. To prepare for the increasing demand for electricity in Katanga’s mining sector as well as in countries belonging to the Southern Africa Power Pool, including South Africa, AfDB has financed preliminary feasibility studies of a new 4.8 GW generation capacity at Inga (Inga3). With a hydropower potential of 40 GW, Inga is the largest and most cost-effective hydroelectric site in the world. CAS Outcome 2.5Boost agriculture production and increase access to markets Analytical and Advisory Activities 119. Studies financed under the regional ongoing Trust Fund will enhance access to the results of research in the regional agriculture systems in Eastern and Central Africa (ASARECA) as part of the Regional Integration Strategy for Central Africa. World Bank Group financing 120. The Bank will continue to implement the ongoing Support to Agriculture project ($120 million), which focuses on support to farmers’ organizations and linking farmers to market. The project’s objective is to double yields for maize, cassava, and rice. To achieve its objectives, the project will enhance the capacity of 400,000 beneficiaries and rehabilitate 2,500 km of feeder roads to connect farmers with Central Africa Republic (CAR) and the Congo River. In addition, a new Southeastern DRC Agriculture-based Growth Pole Project is proposed that will focus on agriculture and agribusiness. This 33 project will complement road and rehabilitation efforts under two ongoing projects in the Southeast (from Katanga to South Kivu). It will complement port rehabilitation activities on Lake Tanganyika financed by the European Union, and agriculture programs financed by Belgium and the AfDB. If these initiatives are successful in creating much-needed jobs, the Government, with the support of other development partners, will extend these programs to other areas. These agriculture operations as well as the AGPP will significantly contribute to supporting Government’s efforts at alleviating extreme poverty and malnutrition (MDG1). 121. Gender. Boosting competitiveness by accelerating private-sector-led growth will facilitate jobs creation. The Bank program on PSD and employment (growth poles projects based on agriculture and agribusiness) will specifically support the promotion of small-scale agricultural businesses run by women, improve their access to finance, focus agricultural service delivery on the needs and priorities of women farmers, and ensure gender inclusion in community-level and other REDD-related decision- making bodies. This support will complement ongoing efforts developed by IFC’s Advisory Services programs for Access to Finance and SME Development program. At the same time, the Bank program also will make specific efforts to promote employment of male youth. Development partners 122. Key development partners include France (AFD) (infrastructure); AfDB (growth pole project, regional integration infrastructure––roads, energy, and river transport, environment and climate change); Belgium (agriculture, rural roads, technical and vocational training); China (basic infrastructure); DfID (PSD, roads); European Commission (infrastructure, rural roads, energy), KWF and EIB (energy); FAO (agriculture), and UNDP/UNCDF (business climate). Strategic Objective Three: To increase access to social services and raise human development indicators 123. It is essential that DRC address its stark social inequalities and raise the quality and stock of its human capital. As conflict situations stabilize, health and education services are among the most important improvements that people expect. In addition, investing in the human capital of its entire population, especially in the current context of high fertility rates, will position DRC to take full advantage of its enormous natural resource wealth in the coming decades and to garner long-term productivity gains that otherwise would be lost. The Bank’s engagement will emphasize both (i) financing essential services and (ii) maintaining strategic and sustained engagement to strengthen service delivery systems in education, health, nutrition, and social protection. 124. Regarding IDA financing in the social sectors, a core principle will be to focus on strengthening governance and service delivery systems, while supporting delivery of services to the population. Another principle will be to build multi-sectoral programs that will have the desired development impact effectively and in scale, while staying mindful of the need to avoid implementation complexities. For example, the objective of achieving higher health facility utilization rates might entail incorporation of demand-side interventions developed in collaboration with the social protection sector. Another example could be to reduce DRC’s high levels of malnutrition through a complementary program of agriculture and health sector interventions. A third example might be to increase girls’ school completion rates by incorporating water and sanitation services as integral parts of a basic education program. While having a primary sector of focus, all future operations also will seek opportunities to build on synergies with other sectors to maximize service delivery and results. 34 CAS Outcome 3.1. Increased access to clean water and sanitation World Bank financing 125. Support to the water sector will be provided mostly through the ongoing Water Sector Rehabilitation Project, approved in FY10; no new water operation will be prepared during this CAS period. The project will support the Government’s efforts to improve access to potable water, which contributes to the achievement of MDG 7. It aims to increase access to drinking water in three major urban centers of DRC (Kinshasa, Lubumbashi, and Matadi), and to improve the performance of REGIDESO. The access rate in the targeted cities will increase from 43 percent at end-2011 to 53 percent by end-2015. This increase will result in approximately 1.2 million urban residents’ gaining access to safe water. The project will increase the financial viability of REGIDESO, and improve its operations. An international water operator has been contracted under a three-year service contract and has started to help REGIDESO reach its objectives under the performance contract signed with the state. 126. In collaboration with the Bank-financed Water project team, WBI is launching a beneficiary feedback in the water sector called MAYINTIC.27The purpose of this program is to strengthen governance in the sector by supporting the ongoing dialogue between REGIDESO and the water users. MAYINTIC gives voice to users’ grievances, which are geo-referenced and aggregated through a short message service (SMS) data collection system. The data generated is made available to the public. Feedback to users on their complaints is done through SMS, exchanges with local water associations, and a television show on which REGIDESO representatives must respond monthly to the complaints received through SMS. This process of gathering beneficiaries’ feedback and monitoring results will be mainstreamed throughout this CAS period for other sectors. UNICEF is emulating the same approach by moving most of its M&E activities into SMS-based monitoring. Development partners 127. The Water project complements programs supported by other donors. These donors include, in particular, the AfDB, French Development Agency (AFD), Belgium, German Development Agency (KfW), and EU. In addition, the Japan International Cooperation Agency (JICA) and the Chinese Cooperation have projects in the same urban areas in which the Bank is active with its financing. While the Bank-financed project focuses on urban water supply, other donors, including the AfDB, AFD, Belgian Technical Cooperation (BTC/CTB), and UNICEF are focusing on the semi-urban and rural sectors. The Water project also is implemented in full partnership with the AfDB-funded Water project (2007), which focuses on investments while the World Bank supports investments and the reform process. CAS Outcome 3.2. Improved access to health services in targeted areas Analytical and Advisory Activities 128. The Bank will continue to support analytical work in the social sectors carried out by the Government and other partners. The Bank will focus its support to the preparation of a higher education strategy, social protection strategy, skills development, social sector public expenditures review including health finances, and the development of systems to identify and target the most vulnerable populations. 129. Jointly with interested international partners (IPs), the Bank will update the 2008 public expenditure review (PER) in the social sectors. Building on ongoing engagement on budget issues in these sectors, the PER will cover the health, education, and social protection sectors. For example, 27 “Mayi� means “water� in Lingala, a local language widely spoken in DRC, and “NTIC� is French for “TIC� (Technologie de l’Information et de la Communication) 35 building on the existing sector strategy in health, the PER will inform the policy dialogue with the Government, the decentralized authorities, and the donors to increase the effectiveness of spending in the sector and ensure that the Government allocates adequate funding to the health sector. Thanks to the ongoing policy dialogue on health sector financing, in 2012 the Government allocated more funding to the health sector and, for the first time, provided financing to procure vaccines. The PER will build on this encouraging development. In addition to improvements in budget preparation and execution, there is a need for DRC to track expenditures from the Central and provincial levels to service delivery points at the community level. 130. The Bank, in collaboration with its partners, will undertake a Programmatic Multi-Year Non-Lending Technical Assistance Program (FY2013–FY2016) in health systems to identify and address key bottlenecks in health sector management. The specific areas of intervention will be identified in the coming months. Some of these areas could include drug supply and management, health information systems, health worker training and distribution, planning and management capacity at health zone and facility levels, and use of adequate PFM instruments at the peripheral levels. 131. The PFM instruments will build on the ongoing activities in capacity building for budget preparation and execution in the health sector, financed by a Bank-executed Canadian International Development Agency (CIDA) Trust Fund of US$4.6 million. These activities are helping to improve the budgetary processes in the sector at the provincial and national levels in line with Government PFM reform. This PFM reform includes the development of multiyear budget programming through the introduction of sectoral Medium-Term Expenditure Frameworks (MTEFs) and support to decentralized budgeting processes in 11 provinces. In addition, these activities will strengthen institutional capacity to (i) improve health sector budget execution and results monitoring (at the central and provincial levels) within the existing budget execution framework, as well as (ii) prepare the sector to migrate progressively toward the new PFM policy and procedures. Such activities are expected to continue beyond FY14 with additional support from CIDA and, potentially, DfID. World Bank financing 132. The Bank already has initiated support to DRC to strengthen its health service delivery system. IDA’s $75 million additional financing (FY13) to the ongoing Health Project ($260 million), which became effective in November 2012, will begin to address some of systemic issues at the central and health zone levels. The capacity of the central Ministry of Health (MOH) to monitor and supervise the implementation of the National Health Plan will be strengthened in parallel with the establishment of National Health Accounts. At a decentralized level, the supervisory responsibility carried out by NGOs will be transferred to the Health Zone management teams with TA provided by the project. In parallel, the project will finance basic health packages, malaria and HIV/AIDS control, family planning, pre- and post- maternal health, nutrition, immunizations, and piloting results-based financing (RBF) of health services in 5 provinces (83 health zones). The project will contribute to Government’s efforts towards the achievement of three MDGs (MDG 4, 5 and 6). The rapid demographic growth and high level of fertility, mentioned earlier as the central development issues in DRC, will be addressed in targeted areas by supporting family planning and birth control. 133. Future Bank involvement in the health sector will use a two-pronged approach: improving governance, management, and financing of the sector while continuing to provide support to the delivery of essential services to the population. A new health sector project is scheduled for FY14. This new lending operation will help address health system strengthening, governance, and service delivery issues. Experiences from RBF approaches will be used to help formulate the new 36 program. Indeed, the Katanga RBF Pilot, which is being evaluated through an impact evaluation28 and routine monitoring data, is showing significantly better results in the RBF facilities compared to areas that have no RBF.29 Learning from this pilot will help shape the thinking of the potential benefit of scaling up RBF in DRC. 134. Furthermore, given the weak service delivery capacity across the social sectors, the Bank will finance a multi-sectoral HD Service Delivery Technical Assistance Program (FY14) to provide strategic financing to strengthen key systems in education, health, and social protection. CAS Outcome 3.3. Improved access to basic education in targeted areas Analytical and Advisory Activities 135. At the basic education level, interventions are needed to reduce the number of out-of- school children, increase completion rates, and expand access to all, including minorities and those in the conflict areas in the East. Progress made in basic education calls for expansion of secondary education opportunities, particularly for girls, who are grossly under-represented. In addition, reforms to technical and vocational education (TVE) to better align it with the needs of the economy are urgent. The Bank is supporting a skills development study that should help define training priorities for the needs of the Western DRC Agriculture-based Growth Poles operation and for the Kinshasa area. 136. At the tertiary education level, a robust regulatory regime to ensure a level playing field, quality of education, and value for money is urgently needed. This regime would need to be accompanied by reform of the financing system to improve equity in access (for example, the introduction of a student loan system plus a scholarship system for disadvantaged students). Given the low funding of the subsector, special effort is needed to mobilize other sources of funding, including from the private sector and development partners active in the DRC. World Bank financing 137. Although major access and quality challenges remain at the basic education level, a holistic and integrated approach to education development in the DRC is necessary. To support inclusive growth, the country needs adequate human resources. Ensuring a minimum level of education for all citizens is a way to strengthen their participation in development, increase the potential for peace, and reduce vulnerability to conflict. Improving quality of learning is a priority at all levels. The Bank’s ongoing US$150 million Education project (PASE) is the current major operation targeting primary education, for which approximately US$70 million remain to be disbursed. 138. Because of its leadership in the education sector, the Bank has been requested to manage the US$100 million multilateral Global Partnership for Education (GPE) for the next 3 years . This operation, expected to be approved in FY13, will complement the ongoing Education project. A key policy dialogue will center on increasing the national budget allocation to the education sector and supporting training of teachers and learning assessment activities. In addition, a new operation (US$150 million) will be financed in the education sector to reinforce the gains achieved and expand them to secondary and tertiary education. All three operations support Government’s efforts towards achieving MDG 2 and 3. The 2012 budget funded the education sector at 9 percent, higher than in previous budgets and the 2013 allocation has been increased to 11 percent of the budget. 28 http://www.rbfhealth.org/rbfhealth/news/item/500/dealing-difficult-design-decisions-rbf-pilot-program- democratic-republic-congo-drc 29 Presentation during the International Education Conference in Istanbul, November 12–17, 2012. 37 CAS Outcome 3.4. Strengthened social protection Key outcome indicators expected to be influenced by Bank-supported activities: Analytical and Advisory Activities 139. The Bank will provide technical support to help the Government review its social protection programs, update the Social Protection Strategy (FY2014–FY2015), and define a concrete action plan for implementation. One lesson from experience in other countries is that the most effective approach to prepare for crises is to build elements of a safety net that can be used in normal times as a permanent program for vulnerable groups (for example, infants, pregnant women, disabled) and be scaled up to cover others during crises. The assistance provided will focus on developing an efficient system by building on the ongoing institutional audit of the Ministry of Social Affairs (supported by the Street Children Project) and on the findings of the envisaged Social Sectors Public Expenditures Review, as well as on the efforts of other partners, such as UNICEF’s support for the establishment of a comprehensive database. The multi-sectoral HD Service Delivery Technical Assistance Program (FY14) mentioned above also will contribute to translating into concrete actions the recommendations of the institutional audit. Opportunities for partnerships with the private sector will be explored, giving special attention to the extractive industries to leverage governance efforts under Strategic Objective One. World Bank financing 140. The CAS will focus on assisting the Government to improve the allocation and effectiveness of fragmented social protection expenditures and their impacts on human development. To contribute to social protection for the most vulnerable, the Bank will finance a Social Protection and Eastern recovery project (FY14) that will build on the positive experience of the Emergency Social Action Program (closing in June 2013). This operation will improve delivery of basic social services by rehabilitating and building community infrastructure, while at the same time fostering governance at the local level and building social accountability. Given the particularly acute needs of the conflict-stricken East and the proven effectiveness of such approaches in fragile contexts, a special economic recovery envelop should complement the allocation for that part of the country. 141. Because a labor-intensive public works program was piloted successfully in Katanga province, it would make sense to launch a similar program with much wider coverage, setting the basis for a safety net system. Given the employment challenges faced by youth and the strong link between youth unemployment and civil unrest, a public works program should target the youth, and include capacity building elements to help them bridge the gap between occasional and steady employment. Whether these pro-youth elements can be built into the proposed new operation or will require a standalone project can be determined at a later stage and the IDA envelope adjusted accordingly. 142. Gender. Improving social services delivery and raising human development indicators. The Bank’s program in the social sectors will focus on gender inclusion in access to schools at all levels. One of the components of the ongoing health project addresses family planning, reproductive health, and sexual health care. The proposed PER in the social sectors, as well as the proposed ESWs on higher education, skills development and health systems and financing, will consider and address gender inequality in the underlying analysis. Women’s needs and perspectives will be taken into consideration when designing and implementing the Eastern DRC Economic Recovery Project. Development partners 143. Key development partners include DfID (primary health, water, sanitation and hygiene, primary education); USAID (health, education); EU, WHO, MSF, and Belgium (health); and AfDB, UNDP, UNICEF, and Belgium/CTB (education). 38 144. Given the size and the importance of the needs, close coordination with international partners will be important to avoid duplications, create synergies, and ensure coherence in approaches. As an example of close collaboration between the WB and IPs, the World Bank President and USAID Administrator have called for a stronger collaboration between the two agencies, and DRC was chosen as one of the pilot countries for this initiative. As a result, the 2 teams have developed an 18- month action plan to identify additional areas of collaboration such as the necessity to build the capacity of DRC’s health system to reduce parallel donor systems. An area of current collaboration is financing the 2012–13 Demographic and Health Survey (DHS). Strategic Objective Four: To address fragility and conflicts in the Eastern provinces 145. Supporting stabilization and peace consolidation efforts in Eastern DRC are parts of the broader development agenda and should include a regional dimension. In view of the destabilizing impact of continued conflicts and insecurity in Eastern DRC on the development prospects of the country as a whole, the Bank will seek to identify opportunities to work with other partners to optimize the development impacts of its interventions. In line with World Development Report 2011: Conflict, Security, and Development, the Bank will design a targeted, multi-sectoral program of assistance that builds on the existing portfolio and complements the Bank's already diverse assistance strategy. All efforts should be made to coordinate efforts with Bank programs in Burundi and Uganda, and communications among members of the respective country teams should be intensified. In addition, country management units (CMUs) covering Burundi, DRC, Rwanda, and Uganda will coordinate their work and information on conflicts with the support of the Nairobi Hub and in relation with the Regional Integration department of the World Bank Africa Region. The program will pursue two main directions, which follow. 146. Leveraging national policy dialogue to support peace consolidation. World Bank engagement in national policy dialogue and reform will be leveraged to prioritize strengthening the accountability and effectiveness of state institutions in the Eastern provinces. The Bank will ensure that support for policy dialogue with the Government on economic governance, transparency, financial management, and management of mining contracts also extends to the Eastern provinces, particularly areas affected by or prone to destabilization and conflicts. Successful ongoing Bank support will be scaled up and extended to other provinces, including South Kivu, in which the current support is helping to improve inclusion, institutional transparency, and effectiveness through participatory budgeting. 147. Strengthening resilience, peace consolidation, and sustainable development in the East. To strengthen societal capacities for local peace consolidation and sustainable development, the Bank's long-standing expertise and experience will be focused on bridging ongoing stabilization interventions developed within the STAREC/I-SSSS with longer term development solutions. The objective of Bank engagement will be to mitigate key determinants of conflict and instability; while strengthening the sustainability, effectiveness, and accountability of local institutions. Given the immense human impact of conflicts during the past several years, Bank interventions will target areas of acute vulnerability, focusing on war-affected populations (including returning IDPs, refugees, high-risk youth, and local communities). Particular emphasis will be placed on income-generating activities, promoting equitable and participatory forms of local development planning, and strengthening mechanisms for the peaceful resolution of conflicts related to land and identity. CAS Outcome 4.1.Improved management of public finances and accountability in targeted conflict- affected areas Analytical and Advisory Activities 39 148. To support the revised I-SSSS, and in view of the necessity for the Government to deepen a security sector reform (SSR)in order to provide effective security to its citizens, the Bank could support other donors that may want to review public expenditures in the security sector. In the DRC context, Bank engagement could be only on a supporting basis. It could be envisaged if associated with a credible, comprehensive SSR process steered by the Government and supported by a broad coalition of international partners heavily involved in SSR over the years, including the bilateral partners and MONUSCO. 149. Given the Bank’s long-standing expertise and experience coupled with its convening capacity, it is well positioned to support a larger policy dialogue around the drivers of conflict in the East and the rest of DRC. The World Bank will launch a capacity building initiative to support national think tanks in analyzing sources of conflict and fragility, developing policy recommendations, and ensuring that the information is widely disseminated and discussed by all stakeholders. Multimedia campaigns will be used to disseminate findings and facilitate dialogue around the main issues. 150. Furthermore, specific analysis of possible Government responses to the drivers of fragility will be carried out by the Bank together with local think tanks. A series of analytical activities will be undertaken to support an engagement with the Government on strengthening policies to reduce conflict around, among others, land, governance of natural resources, and local power-sharing. This analysis will be carried out in close collaboration with Bank partners, particularly the UN and DfID. World Bank financing 151. The Bank will contribute to this pillar through the ongoing Governance project by supporting the Government’s efforts to transfer its share of budget to provinces, including conflict-affected province of South-Kivu, and improve budget execution at the provincial and local levels. The Bank will aim at mainstreaming participatory budgeting in all districts of South Kivu. CAS Outcome 4.2. Increase social economic opportunities in conflict-affected areas 152. The World Bank will implement a two-pronged approach to provide support in Eastern DRC, predicated on rapid deployment for early results; flexible, context-driven design; and the ability to make corrective adjustments in the course of execution. This approach will build on some of the positive dynamics observed in South Kivu. Perhaps the three most impactful determinants of success in peace building are employment generation, improved local governance, and participation. These three will be pursued as key cross-cutting objectives under all activities. World Bank financing 153. The first prong will focus on leveraging the current IDA portfolio to increase its impact on stabilization and peace consolidation. The Bank will examine how existing and planned operations could have more impact on peace consolidation in the East, drawing on the relative success of existing projects in improving economic productivity, livelihoods, and economic governance. This realignment of projects when appropriate will take into account conflict sensitivity, synergies with the UN and other organizations, and flexibility to respond rapidly to needs. The sectors through which a peace consolidation focus will be strengthened during the CAS period will include agriculture, roads, urban development, governance, and community empowerment.30 30 World Bank operations identified in this context also will include existing and pipeline projects from other CAS strategic objectives/pillars based on their relevance and ability to contribute to peace and stability outcomes in the Eastern provinces. 40 154. The second prong will focus on identification of instruments to drive innovative approaches. This prong will include a component on data collection and analysis and a component that will support quick experimentation with small projects that, if successful, could be scaled up under funding from IDA or other donors. The second component will be funded possibly through a strategic State and Peace-building Fund (SPF) or similar mechanism: i. In Eastern DRC, the drivers of fragility due to conflict have been well studied, and a number of organizations (from the UN to local CSOs) regularly collect data on a wide range of issues. At present, however, there is no reliable mechanism to link real-time data collection and analysis with interventions designed to address medium-term peace consolidation and development priorities. To test and evaluate pilot programs, and monitor their impact on beneficiaries over time, specific mechanisms need to be set up. These mechanisms are particularly important in DRC due to the localized nature of conflict and the enormous diversity and complexity of conflict dynamics throughout the eastern part. These mechanisms also will be of value to World Bank task team leaders and staff involved in the design and implementation of operations, as well as to local governments and international partners. The World Bank will work closely with UN, Government (particularly with the STAREC structure), and NGO partners. ii. A facility will be created to support small pilot projects that will be deployed rapidly and to test new experimental approaches. This facility will help identify implementation arrangements adapted to the operating environment in Eastern DRC (particularly South Kivu). The facility will address areas with priority stabilization needs that can be subsequently scaled up through larger projects. It also could support local institutional strengthening, easing the resumption of Government activities, and testing mechanisms for local conflict resolution. 155. The Bank will develop an Eastern DRC Economic Recovery project targeting areas in provinces covered by the STAREC program. The Bank will allocate US$65 million to help build social cohesion and strengthen community-level capacities in local development planning. The project will also help reintegrate displaced people. The project will be based on CDD approaches already proven effective in other fragile and conflict-affected countries. It will complement activities that will be developed under the Southeastern DRC Agriculture-based Growth Pole. It will also complement activities undertaking by the new Urban Development project in the city of Bukavu, aiming to improve access to basic services. This project will undertake labor intensive public works, which would lead to short-term employment generation. 156. Gender. When addressing gender issues in DRC’s conflict-affected areas, the fact that conflict negatively affects women and men in different ways and results in gender-specific disadvantages will be taken into account. The direct impact of violence falls primarily on young males, the majority of fighting forces. Women and children, on the other hand, often suffer disproportionately from indirect effects. Gender inequality reflects power imbalances in social structures that existed in pre-conflict periods and are exacerbated by armed conflicts and their aftermath. Development partners 157. The Bank will prioritize collaboration within the framework of the Government's STAREC Program and the UN-I-SSSS. In doing so, the Bank will seek to identify areas in which it can complement and extend current stabilization and peace consolidation efforts that are aligned with its current portfolio. Where possible, the Bank also will seek opportunities for deeper operational alignment and synergies with key Government and international partners. It also will participate in key field coordination mechanisms (notably the provincial joint technical committees) to ensure that its operations are well informed and optimally coordinated with those of its partners. Key DPs include the United Nations (MONUSCO and other UN agencies, funds and programs involved in the I-SSSS), USAID, DfID, and key development-focused international NGO. 41 Climate Change 158. Climate change in DRC and the Congo River Basin could undermine the productive use and economic benefits of water and land resources, and escalate the impacts of natural disasters related to extreme water and weather events. Therefore, it is essential to build the capacity to monitor and forecast hydro-meteorology (hydro-met) in DRC, and importantly, transfer this improved understanding of current and future climate to decision-making and planning as a way to build adaptation and resilience. Over the last decades, the number of meteorological synoptic stations declined from 125 to 24, including 10 installed in airports to assist with air navigation. From 350 hydro-meteorological stations in 1960, the country has only 10 today: 5 on the Congo River and 5 on the Kasai River. Considering the need to understand climate change impacts and to enable the resources of the Congo River, whose discharge is equivalent to almost 70 percent of the discharge of Africa’s 20 largest rivers, a future hydro- met TA project will be prepared to strengthen Congo’s hydro-meteorological services. 159. This new project will help the Government of DRC as well as key stakeholders, including dam operators, river basin organizations, and the private sector, in reducing the uncertainties and shocks to climate change. It also will strengthen the application of more accurate water and weather forecasts in productive sectors such as navigation for river transport and aviation, as well as management of water for hydropower and agriculture. Investments would have to be cognizant of the complexities of water management in DRC and the need for training and capacity building, the vastness and hydrological uniqueness of the Congo River, and the critical status of hydro-met services at present. As such, investments will focus on optimizing hydro-met monitoring through suitable rehabilitation/installation of observation equipment, as well as bringing in data and forecasts from remote sensing sources. During the CAS period, significant advances are expected in the global understanding of climate change but also the ability to derive useful information from satellite monitoring. 160. In the context of DRC, the proposed project could bridge these global resources and expertise to meet the need for relevant hydro-met information at country level. Equally important, the project would focus on improving the sharing of information and forecasts as public goods that are used in decision-making, particularly in water resources planning, climate change analysis, and early warning systems that would benefit vulnerable communities in flood- or drought-prone areas. 161. In addition to this operation, the Bank will ensure that projects and other activities under the new CAS will be designed and implemented to integrate both the adaptation and the mitigation dimensions of climate change. Adaptation is particularly important in the energy (including hydropower), agriculture, and transport sectors. Complementing other regional activities supported by the Bank, such as the Inga3 case study in the regional infrastructure and climate change ESW, the proposed support will seek strong development outcomes while improving climate resilience. In combination with the support to strengthen the capacity of the Government’s hydro-met services, these initiatives are mutually reinforcing. D. Strengthening World Bank Coordination and Donor Harmonization 162. Going forward, the Bank and IFC are committed to continuous and meaningful collaboration (where it is likely to add real value) to reach the highest development impact in DRC by combining resources and leveraging synergies. As part of the continuous joint strategy process, Bank and IFC teams will be planning joint dissemination and implementation exercises. Periodic reviews will be conducted jointly to track progress, make needed course adjustments, and explore additional opportunities for greater collaboration. 42 163. DRC is a priority country for MIGA, in line with two of the Agency’s key strategic objectives: supporting projects in IDA countries and projects in post-conflict and fragile environments. For this CAS, MIGA will continue to engage alongside the other World Bank institutions in the country and is likely to be most closely aligned with the private sector (second strategic objective). 164. Currently, MIGA has 2 active projects in DRC that are guaranteed for investment. The two represent a gross exposure of US$30.1 million and support the infrastructure equipment and financial sectors. The two operations complement the Bank’s and IFC’s operations to support the economic diversification agenda. In the coming period, MIGA will look to further capitalize on its existing engagement. MIGA continues to offer its product for investors looking to enter the local market, thus supporting its own and the WBG’s wider objectives in the country. MIGA’s support for DRC will continue to be offered across its Transfer Restriction, Expropriation, Breach of Contract, and War and Civil Disturbance political risk insurance product lines. As elsewhere in Africa, these product lines can be used alongside other World Bank products, for example, IFC loans or PRG (Partial Risk Guarantees) support; or to directly support Government PPPs or Independent Power Projects, as applied elsewhere in the region. MIGA's Small Investment Product (SIP) also could be useful for the country, whereby more streamlined procedures could enable smaller projects to be supported. The Bank and IFC will explore further collaboration with MIGA in the course of this strategy. 165. Traditional annual donor contributions to DRC are estimated at US$1.6 billion. The infrastructure sector is the largest beneficiary (37 percent, of which energy is 17 percent, transport 14 percent, and water and sanitation 6 percent). The social sectors rank second with 28 percent (18 percent for health, 6 percent for social protection and emergency support, and 4 percent for education). They are followed by agriculture and environment (14 percent); governance (13 percent, including support to public sector reform and statistics,); and security, the judiciary, and democracy (10 percent). Development banks contribute approximately 60 percent of annual financial assistance to the DRC (including 26 percent from the World Bank and 16 percent from the AfDB). Europeans, including the European Union, provide 25 percent of the total; and USAID 13 percent. 166. In Eastern DRC, partnerships with international partners including the UN constitute sine qua non prerequisites for leveraging Bank resources and enabling collective risk sharing. The Bank will seek to promote closer alignment among diplomatic, security, humanitarian, and development actors in the international community. This alignment will build on the Bank's current leadership role (together with the UN) within the Donor Coordination Group (DCG), and its participation in the implementation of the G7+/New Deal initiative. The Bank also will lend its support, through the EU’s Good Humanitarian Donorship (GHD) and DCG mechanisms, to the articulation of closer coordination between humanitarian and development efforts in Eastern DRC, to enable an eventual transition as conditions stabilize. 167. Coordination with international partners will be strengthened, enabling the World Bank to be more selective than in the past. To prepare for such strengthening, the donor community, under Bank coordination, has prepared a series of 19 policy notes with the objective of reaching consensus on key policy reforms and providing a detailed picture of existing and intended activities. Among traditional donors, the mechanism for IP coordination is formalized through the DCG, which, until recently, was co- chaired by the Bank and the UN. The coordination platform for PFM reforms recently put in place can be considered a model for the other sectors on how to engage in a concerted dialogue with authorities (box 4). 168. For newcomers, such as China and India, donor coordination is not formalized. However, China recently attended some DCG meetings. Efforts will be made during the DCG period to reinforce information-sharing with these key partners and further strengthen harmonization and results-oriented 43 collaboration. Several IPs are developing their new multiyear strategies in parallel with the Bank. Appendix8shows the main donor-supported programs. The DCG will remain the Bank’s main forum for consultations and partnership as it harmonizes its selective approach to assistance and risk-mitigating strategy in DRC’s evolving operating environment. Box 4. Improving Donors’ Coordination in PFM Reforms in DRC Donors’ public financial management (PFM) practices are limiting the extent of their influence, particularly because of weaknesses in donor coordination. To address this challenge, and after the successful completion of the 2012 Public Expenditures and Financial Accountability (PEFA) exercise, international development partners that make up the PFM thematic group on public finances 31 and the Government signed a memorandum of understanding (MOU) to monitor the implementation of the PFM reform program and harmonize international development partners’ PFM interventions. The joint donor/Government group will meet quarterly to (i) discuss the strategic direction and orientation of PFM reforms, (ii) review the implementation progress of the Strategic Plan for Public Finance Reform (PSRFP), and (iii) discuss any coordination issues in funding the reform program. Successful implementation of the MOU is expected to improve donor coordination and the sequencing of PFM reforms. The action plan will be implemented in FY13 and beyond, with the likely support of DfID and a group of donors including IMF, European Commission, African Development Bank, France, Germany, and UNDP. In order to support the scaling up of the World-Bank-executed trust fund to be financed by DfID, a PFM reform program using a basket-funding mechanism through a multi-donor trust fund (MDTF) is being developed with the support of DfID. This MDTF should serve as a platform for better donor coordination of PFM reform by using a common basket-funding mechanism and increasing financial information about donor-funded operations such as aid budget and on accounting. 169. DRC has requested and obtained “pilot� country status under the “New Deal,� the most recent in a number of successive paradigms intended to improve the quality of donor support to fragile and post-conflict states. Three aspects of the New Deal could be of immediate relevance to DRC and its partners. They are:  To reduce artificial barriers between the humanitarian/relief and the development communities of practice. While many locations remain recipients of humanitarian assistance, the transfer of services from emergency provision to more sustainable management remains problematic.  To avoid making a false dichotomy between short-term, quick-impact interventions (from emergency health services to road repairs) and sustainable long-term interventions in infrastructure, agriculture, or energy. Both types are needed.  To adjust implementation arrangements to a realistic assessment of capacity. E. CAS Instruments 170. Over the past years, the portfolio has improved. It includes 15 projects and 2 regional projects for a total commitment of US$3.1 billion, of which US$1.14 billion goes to regional projects. Infrastructure accounts for 64 percent of the project portfolio, followed by the social sectors (18 percent), agriculture and private sector development (11 percent), and governance (7 percent). The portfolio has no problem project. However, great attention needs to be paid to the large share of potential problem projects, and all efforts should be geared to maintaining the current 100 percent proactivity rating. Appendix 5 provides a detailed picture of the ongoing project portfolio. The portfolio is complemented by a number of existing AAA (appendix 6) and Trust Fund activities (appendix 7). 31 These donors include AfDB, DfID, French Cooperation, German Cooperation, UNDP, and World Bank. 44 171. The DRC portfolio has made great progress toward increasing its disbursement levels beyond the target set for the Africa Region. In FY2012, the DRC portfolio disbursement reached the 27 percent target––2 percentage points above the target set by the institution. Significant efforts have been made to increase disbursements, and the overall trend is higher than in previous fiscal years. Several factors have contributed to this performance including close follow-up with counterparts, regular performance review meetings, and a large number of tasks managed by decentralized staff. In low- capacity environments, the standard Bank model of supervision cannot be expected to function successfully, so Bank teams must be prepared to operate on a more supportive, even hand-holding, basis. The Bank also must be prepared for higher supervision budgets to finance longer periods in the field working directly with Government counterparts. Similarly, the Bank should anticipate higher overhead and administrative costs within project budgets to ensure that Government units have the capacity to ensure smooth project implementation. Finally, to be closer to beneficiaries and to sustain the day-to-day dialogue with national counterparts, key IPs, and the entire spectrum of stakeholders, the Bank may need to address the limitations posed by being located exclusively in Kinshasa. 172. The portfolio will be consolidated. Limited IDA resources need to be allocated strategically to maximize development outcomes in key areas. Areas of interventions will be better focused to ensure greater impact. Consolidation will take account of the Bank’s comparative advantage in sectors important to unlocking growth while maximizing employment creation. Project teams will be encouraged to consider additional financing and restructuring, especially in sectors in which scaling up is necessary or in which a different approach may be needed based on the evolving dialogue with the Government. Such circumstances most certainly will require making tougher strategic choices in consultation with the Government. All new Bank-financed operations included in this CAS will be implemented by Government’s institutions. No new project implementation units will be created, and existing PIUs will be phased out at the end of their respective programs. 173. Given the fluid political and security conditions of different parts of the country, the Bank should be in the position to differentiate its operational procedures as it sees fit. Flexibility–– using multiple and differentiated approaches according to situations––will be a key feature of Bank interventions, The Bank should be able to use appropriate arrangements according to options provided by OP8.0. Options include the use of additional financing and project restructuring; use of a third-party agent or agents to augment and strengthen––but not substitute for––project supervision; use of mobile-phone- based technologies to get insights into implementation of projects and to ensure direct feedback from beneficiaries in remote areas; and relying on partnerships, especially with UN agencies, NGOs, and community groups. The World Bank’s Centre for Conflict, Security and Development in Nairobi is hiring clearance-level fiduciary staff in procurement, financial management (FM), and safeguards. The center is incorporating these staff when needed into regular supervisory missions. Their participation can help elevate and resolve implementation issues sooner rather than later. Proposed new activities 174. Analytical and Advisory Activities. In partnership with Government and donors, the Bank will undertake core AAA diagnostics; AAA related to CAS objectives; and just-in-time policy notes as needed. In undertaking AAA, the Bank will emphasize Government ownership to ensure that findings are internalized and translated into actions and results. Most of the AAA will be developed with local institutions including NGOs and think tanks, and dissemination will be an important part of the knowledge work. Appendix 3 provides a tentative AAA pipeline. 175. World Bank financing. Under the 4-year CAS, the World Bank will finance approximately 12 new projects and use 3 additional financings to scale up successful interventions. The Bank will finance an additional two regional investment operations that involve DRC. Appendix 4 provides a detailed list of pipeline projects. Development policy operations should be considered as part of the menu of instruments 45 that could be used to address critical reforms. The massive work on PFM reforms that the Bank will support during this CAS period should help create the conditions for the use of this important instrument. V. RISKS AND MITIGATION 176. As was the case with the preceding Country Assistance Strategy, this CAS will be implemented under highly challenging conditions. Some of the main risks are (i) political and security- related and the conflict in the East; (ii) system-wide shocks associated with the external environment due to the volatility of demand for minerals, high oil and food prices, and the persistence of the euro crisis; (iii) poor fiscal space, deteriorating fiscal position, and their macroeconomic impacts; (iv) opposition to reforms and transparency by deeply entrenched vested interests; (v) corruption; (vi) tensions arising from unmet expectations in improved living conditions in the face of a dynamic youth bulge and the unfinished decentralization agenda; (vii) low capacity for program implementation; and (viii) lack of engagement by civil society and unmet high expectations regarding access to information and demand for good governance. 177. Political and security-related risks. Recently, the security situation in North Kivu has deteriorated considerably. If the Government proves unable to control the rebellion, the former’s survival may be at risk. In such a case, delivering the proposed program would be extremely difficult. The UN reports that the chances that the rebellion continues to prosper in Eastern DRC are real, considering the inability of the armed forces to dislodge it and the lukewarm reaction of the neighboring countries to limit their support. The conflict will last, and resources will be diverted to military expenditures so will not serve development purposes. This situation is unlikely to affect Bank-financed programs in the rest of the country but will make critical national reforms difficult to implement. In the end, continuous fighting in the East will undermine the Government’s ability to deliver, so will weaken it and could lead to its dismissal. However, the recent signing of the Framework peace agreement offers additional conditions for the restoration of peace but peace will not automatically happen of the signing of another peace accord. The present Government is the most committed to reforms since the re-establishment of a democratic process in 2006. If this Government does not make consistent progress in economic governance and deliver basic services to sizable parts of the population, Bank assistance would not be effective and could be considerably reduced. The Bank will focus its intervention on the most critical programs that are associated with service delivery and social protection. 178. Shocks associated with the external environment, including poor fiscal space. DRC remains vulnerable to the reverberations of the European financial crisis. Exports of mining products represent some 63 percent of GDP in DRC, making the economy vulnerable to natural resource prices on international markets. In absence of access to international financial markets, a fall in mining prices would constrain funding for imports or quickly exhaust accumulated foreign exchange reserves as experience in early 2009. A sharp contracting in import would have devastating effects on living standards in DRC in particularly in urban centers such as Kinshasa which are dependent on food imports. Reduced demand for the commodities exported by DRC would negatively impact macroeconomic management and public finances. However, to date, DRC has demonstrated its capacity to weather the global financial crisis. As it has increased its capacity to adjust production, its economic system is becoming more resilient to external shocks. The recent introduction of the VAT has strengthened the resilience of DRC’s revenue mobilization. Non-concessional borrowing, as was done under a 2008 scheme, remains a potential source of risk and would have to be effectively managed to avoid seriously undermining DRC’s fiscal position. The Bank may require access to the Crisis Response Window and prepare an emergency support operation to provide funding that will help sustain financing by the Government of social sectors and critical imports. 46 179. 180. Opposition to reform from entrenched vested interests. The present Government is well aware of resistance to change, including at different levels of the state. Nevertheless, this Government is committed to reform the public sector, including public enterprises, and to improve the business climate. Delivering on its commitment as rapidly as possible remains a critical step toward neutralizing opposition, building confidence with citizens, and generating a momentum for reforms. It is important for the Bank and the donor community to be highly supportive of those in DRC who are keen to embrace and implement reforms and to carefully monitor early successes and build on them. In the coming months, if, despite the crisis in the East, the Government is able to take highly relevant actions demonstrating its commitment to increased transparency and better governance, these actions would sustain the momentum for reforms that, over time, will undermine the resistance of vested interests. The Bank will promote broad support for, and ownership of, programs both at the national and provincial levels so that success becomes less dependent on individuals and the Bank will beef up its staffing capacity to respond to the situation. 181. Corruption. Critical risks include persistence of poor governance in critical areas (mining, public expenditure management), misuse of Government’s budget resources and misuse of resources under donor-financed projects. Based on previous experiences, project oversight has been strengthened, with more frequent oversight and implementation support missions, and a heightened dialogue and focus on good governance, including through the economic governance matrix. The Bank will take early measures as risks emerge, to ensure that resources are not misused. 182. Tensions due to unmet expectations in improving living conditions and in decentralizing. As indicated above, the effective decentralization of fiscal and human resources is lagging behind stated intentions. In several provinces, the Bank has been active in promoting participation of local staff in the preparation of programs. Past efforts are expected to be amplified during the CAS period. It is important for the Bank to use its convening power to help national and provincial actors reach agreements on how to share limited resources as effectively as possible. The Bank will continue to strengthen capacity including core fiduciary functions of the central and decentralized governments. Promoting the accountability of provincial and local governments should continue in order to support the country’s stability and increased and better service delivery. The Bank will strengthen its staffing capacity to support the provinces and assist in the policy dialogue on decentralization. 183. Low capacity for program implementation. Restoring strong public service with high- quality and well-paid staff remains a daunting challenge. It is critical to design and implement a realistic program to rebuild capacity in state institutions at the Central and provincial levels. The Government has launched the preparation of a public sector reform and rejuvenation program aiming to hire talented and motivated junior staff. Staffing capacity will be reinforced, and the country team will build on support from the Nairobi Hub and other expertise within the Africa Region. 184. Low civil society engagement. Civil society consistently has demonstrated its interest in participating in programs designed to improve the living conditions of the population. Too often, civil society has been prevented from being too assertive, as doing so would threaten powerful rent-seeking groups. It is important for the Bank to ensure the broad and active participation of potential beneficiaries in the preparation and implementation of projects. The use of the Global Facility for Social Accountability (GFSA) will support Bank efforts in this direction, and the Bank will support a concerted effort to strengthen the capacity of CSOs. The Bank will strengthen its staffing profile to respond to the needs. 47 185. Additional risk analysis and lower case scenario. In response to the volatility of the environment and to maximize the Bank’s responsiveness to significant shocks, the CMU will launch a holistic country and operational risk analysis, culminating in the formulation of a flexible/viable alternative engagement scenario. The current CAS presumes a positive progression toward improved country conditions and the active engagement of national counterparts. Thus, the country team’s focus will be directed at harnessing these positive factors toward attaining the CAS’s development objectives. The risk analysis and formulation of a lower case scenario will help the Bank internalize the potential impact of shocks (escalation/expansion of conflict, political shocks, natural catastrophes, program or lack of program with the IMF, other). These actions will facilitate the design of the fundamental elements of a response around the type of projects to be frozen or scaled up and how the team should organize to deliver in such conditions. The mid-term review will help the Bank adjust its interventions. 48 APPENDIXES Appendix 1. DRC Results Matrix Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals CAS Strategic Objective One: Increase state effectiveness and improve good governance PRSP goal 1: Strengthening governance and consolidating peace Improve public Weak public CAS Outcome 1.1. Increased transparency PROJECTS financial financial and efficiency in the management of public Ongoing: management at management finances at the central level and in the Enhancing Governance national and system at provinces of Bandundu, Katanga, Kasai Capacity (FY08) provincial level national and Occidental and South Kivu Capacity for Core Public provincial Percentage of national revenue transferred to Integrated Budget Execution Reports are published on Management (FY11) Pursue the levels targeted provinces the Ministry of Budget and Ministry of Finance decentralization Baseline: 31.5% (end-2011) websites on a regular basis, at central and provincial Pipeline: process Inadequate Target: 35 % (2016) levels. Public Sector Reform and capacity at Rejuvenation project national and Reduced discrepancy between projected and Budget reports are made available on a comprehensive (FY14) provincial actual expenditures in the 4 targeted provinces manner to the population by 2014. Statistics project (FY15) levels resulting (Bandundu, Katanga Kasai Occidental and in budget South-Kivu) TRUST FUNDS overruns Baseline: 51% (end 2011) Support to Statistics TF Target: 10% (2016) TA and capacity building for budget preparation in Poor human DRC provinces resource Percentage of public contracts awarded Procurement Dispute Committee and procurement management in through open competitive bidding in selected units at provincial level are in place and operational by AAA the public ministries and provinces. end 2014 Ongoing dialogue on service Baseline: 0 (2012) Economic Governance Target: 50% of large contracts (end 2016) Increased number of disputes resolved by the Matrix Lack of Procurement Dispute Committee in the 4 targeted Coordinated PFM Reform transparency in provinces and 6 targeted ministries per year PEFA (FY13) public Governance and Public procurement Procurement plans and reports at national and Sector work(FY12) provincial level (in the 4 targeted provinces) are Provincial Budget Planning 49 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals published on regular basis Municipal Development (FY14) ROSC OTHER PARTNERS IMF, DfID, AfDB, UNDP European Commission, Belgium/CTB and USAID Improve Poor CAS Outcome 1.2. Increased transparency PROJECTS transparency and management of and effectiveness in the management of Ongoing: governance in forest, oil and financial resources from the forest, oil and Promines Project (FY11) the management mining mining industries Forestry Project (FY10) of natural resources due Percentage increase in forest taxes collected Regular update of the list of holders of forestry rights resources. to weak legal Baseline: 10% (end 20 11) that are current in the payment of taxes and inform the Pipeline: framework, Target: 35% (mid 2015) forestry administration on other cases, with a view to Promines AF (FY14) Improve lack of adopt of enforcement measures traceability of enforcement Area of forest concessions with signed social TRUST FUNDS Government mechanisms, responsibility contracts A National REDD+ Strategy (including the legal FCPF Readiness Grant revenues issued and weak Baseline: 2M Ha (end 2011) framework) is prepared and validated by national Support to EITI from natural institutional Target: 4M Ha (mid 2015) stakeholders by 2014 resources capacity AAA generally. Percentage increase in revenue from mining EITI Validation status is completed (by end 2013) Ongoing dialogue on Increase its sector in total fiscal revenue Economic Governance contribution to Baseline: 2% of GDP(end 2011) Revenue collected are published on quarterly basis Matrix domestic Target: 4% of GDP (2015) Ongoing dialogue on economy and Procurement plans for selling mining assets are petroleum local Percentage of oil petroleum permits published every 6 months communities competitively auctioned OTHER PARTNERS welfare Baseline: 0% Inter-ministerial Council (incl. Civil society) for IMF, EC, DfID, GTZ, CTB, Target: 90% in 2015 contract negotiation and asset sales is created and is USAID operational Petroleum code adopted by 2014, and effectively implemented by 2014. 50 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals Improve Weak CAS Outcome 1.3. Enhanced governance of PROJECTS transparency and enforcement the mining sector SOEs and increasing the Ongoing: performance capacity operational performance of other SOEs Southern Africa Power management of Market AF project (FY12) key State-Owned Lack of Increased efficiency of SOEs that deliver key Restructuring of pre-2011 debts of strategic SOEs is Urban Water Supply Project Enterprises (SOEs) transparency in public services (SNCC, SNEL, SCTP, RVA, completed by mid-2014. (FY09) the RVF, REGIDESO) through Public-Private Multimodal Project AF management of Partnership (PPP) or management performance Business Plans for achievement of positive cash flows (FY13) SOEs contracts (by 2016) by strategic SOEs is adopted by respective Baseline: 3 (2013) Governance Boards by mid-2014. Pipeline: Influence from Target: 6 (2016) Promines AF (FY14) vested interest Certified financial audits of strategic SOEs are published annually OTHER PARTNERS Ineffective DfID, AfDB, CTG, EC government oversight of strategic SOEs CAS Strategic Objective Two : To boost competitiveness to accelerate private sector-led growth and job creation PRSP goal 2 : Diversifying the economy to accelerate growth and create employment PRSP goal 4 : Protecting the environment and sustaining the fight against climate change Pursue structural Years of CAS Outcome 2.1 Enhanced Business PROJECTS economic conflict have environment for private sector development Ongoing: reforms to undermined the Private Sector Development promote private capacity of Competitiveness (FY04) sector private development enterprises to TRUST FUNDS thrive and Time to register a business is decreased by half One-Stop shop (Guichet unique) is implemented and DRC Strengthening the therefore are Baseline: 58 days (2012) operational by end-2014. Payment System TF not Target: 30 days (2015) SEZ Program-Phase II contributing to An action plan to improve key business indicators (IFC) the growth of prepared by end-2013. the economy Pipeline: 51 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals A fully functioning, modern payment system The Real Time Gross Settlement (RTGS) system and Western DRC Agriculture- Lack of access providing electronic (cash-less) funds transfer the Automated Clearing House (ACH) are based Growth Pole (FY13) to finance with real-time clearing and settlement of implemented and operational by mid-2014. Financial Sector Project accounts, and interconnectivity with other (FY14) Public payments systems in the region in place by enterprises are 2015 AAA a major Investment Climate bottleneck to Increased number of SMEs benefiting from the Annual plan for advisory services provided to SMEs Diagnostic (Enterprise private sector matching grant fund (of which percent of by IFC are adopted Surveys and business development in women) reform Memos) (FY13-14) DRC Baseline: 0 (2012) Payments System: Regional Target: 60 (2016) Integration/Legal Harmonization (FIRST TF) (FY13-15) Financial Sector Assessment Program (FSAP) (FY14-15) IFC Entrepreneurship/SME capacity building “Business Edge� (IFC) SME credit lines (IFC) OTHER PARTNERS DfID, KFW, UNDP/UNCDF, EC, AfDB, CTB, GTZ 52 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals Improve Poor quality of CAS Outcome 2.2. Improved connectivity PROJECTS infrastructure infrastructure and access to transport infrastructure Ongoing: capacity Emergency Urban & Social covering the road High cost of Average transit time between copper belt and Cumulative number of Km reopened in project areas Rehab (FY07) sector, railways, movement of Zambian border (Province Orientale, Katanga and Equateur) Agriculture Rehab & telecoms and goods, people Baseline: 17 days (2011) Baseline: 300 km (Dec 2011) Recovery SIL (FY10) electricity. and services Target: 5 days (end-2016) Target: 2,176 km (June 2015) Pro-Routes (FY08) Multimodal Transport Lack of Number of days/year with roads not passable Cumulative number of Km maintained in project areas project (FY11) technical by 4×2 in project areas(Province Orientale, (Province Orientale, Katanga, Equateur and South capacity Katanga, Equateur and South Kivu) Kivu) Pipeline: Baseline: total of80 days(2011) Baseline: 0 km (Dec 2011) Growth Poles (FY13) Weak M&N Target: 60 days (2016) Target: 2,917 km (June 2016) Urban development project system (FY13) AAA Municipal Development (FY14) Spatial Economics of the Five Economic Priority Zones (FY15) OTHER PARTNERS DfID, AfDB, AFD, CTB, EC, Kwf, EIB, JICA Build a modern Landline CAS Outcome 2.3. Improved access to PROJECTS national telephone quality broadband network and services at Ongoing: infrastructure for network almost reduced cost Telecom Component of the telecoms completely Regional Southern Africa destroyed Increased total broadband penetration New legal and regulatory telecoms framework adopted Power Market APL1 F Improve the (Household penetration) by 2014. (FY04) access rate to Costly Baseline: 0.1% of population (Dec. 2011) Telecom Component of the telecoms and broadband Target: 2.5% of population(2016) Design and signature of a Memorandum of Private Sector Development new technologies internet and Understanding between public and private Competitiveness (FY04) phone access; Increased international Internet Bandwidth stakeholders for the establishment of Special Vehicle 53 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals Strengthen the Over (Bitps per capita) Purpose (SVP) to build, operate and manage the new Pipeline: liberalization and dependence on Baseline: < 14 (Dec. 2011) broadband backbone network by mid-2014. Regional CAB APL5 DRC competitiveness satellite Target: 25 (2016) (FY15) of the sector to technology, no Recruitment of international operators to attract private national fiber commercialize the excess capacity of the SNEL AAA investments optic backbone network by 2014 Policy Advise ICT dialogue Increase the Wide spread CAS Outcome 2.4. Increased generation of PROJECTS production and supply and improved access to energy Ongoing: transmission shortfalls SNEL performance contract is signed and Regional Southern Africa capacity of Quantity of energy delivered to Katanga implemented Power Market APL1 electrical energy Inadequate Region (FY04) transmission of Baseline: 2,540 GWh (End-2011) Annual report of the performance contracts is prepared Regional & Domestic Develop networks Target: 5,515 GWh (Dec 2015) Power Market Dev. (FY07) infrastructure for Annual technical audit of the performance contract of the supply of High cost of Quantity of renewable Energy generated at SNEL is published Pipeline: energy to power Inga (GWh) Inga3 and Mid-size Hydro- improve Baseline: 4,809 GWh (End 2010) met TA project (FY14) households’ Weak Target: 9,039 GWh (End 2016) access to institutional AAA electricity capacity Increased access to electricity services in Regional Lighting Africa targeted areas including Kinshasa Program Develop Baseline: 9 % (2012) renewable Target:15 % (2016) OTHER PARTNERS energy sources AfDB, EIB, KfW, USAID, NORAD, AFD, CTB Increase Low CAS Outcome 2.5 Boost agriculture PROJECTS agriculture agriculture production and increase access to markets Ongoing: productivity productivity Agriculture Rehab & Farmers lack Increased yields of primary crops in targeted Improved agricultural and animal technologies Recovery SIL (FY10) access to areas in the Equateur province provided to farmers in targeted areas in the Equateur agriculture Target and Baseline: Increase crop yields from province Pipeline: input 2012 to 2015: Baseline: 73,500 beneficiaries Western DRC Agriculture- Weak - Maize (1.5t/ha from less than 1t/ha); Target: 400,000 beneficiaries based Growth Pole Project 54 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals institution to - Cassava (12t/ha from 7t/ha); Of which % of direct female beneficiaries (FY13) manage - Rice (2.0t/ha from 1t/ha) Baseline: 10 percent Southeastern DRC agricultural and Target: 60 percent Agriculture-Based Growth rural Pole (FY15) development Number of Km of rural roads rehabilitated in targeted food growing areas AAA Baseline: 0 (2012) Enhance access to the Target: 2,500 km (2016) results of research in the regional agriculture systems in Easter and Central Africa (ASARECA) Regional TF OTHER PARTNERS DfID, FAO, AFDB, CTB, KOICA Strategic Objective Three: Improve social services delivery and increase Human Development indicators PRSP goal 3: Improving access to basic social services while raising human capital Increased access Lack of CAS Outcome 3.1. Increased access to clean PROJECTS to potable water institutional water and sanitation capacity to Ongoing: deliver clean Percentage of population in the targeted areas Km of secondary and tertiary water distribution Urban Water Supply Project water with access to potable water network constructed. (FY09) throughout the Baseline: 43% (End 2011) Baseline: 0 Emergency Urban & Social country Target: 53% (End 2015) Target: 651 km Rehab ERL (FY07) Emergency Social Action Number of people (including women) in Additional number of households with new piped (FY05) targeted areas provided with access to water connections Street Children Project improved water sources in project areas Baseline: 0 (FY10) Baseline: 221,148 (March 2010) Target: 40,000 (2016) Target: 420,180 (March 2013) OTHER PARTNERS DfID, CTB, WHO, MSF, UNICEF, UNDP, USAID 55 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals Improve delivery Low coverage CAS Outcome 3.2. Improved access to PROJECTS of primary health and poor health services in targeted areas care quality of Ongoing: health service Rate of DPT3 immunization Cold chain equipment available in 80% of health Health Sector Rehabilitation Baseline: 85% (end 2011) centers by end of 2014. and Support Project (FY06) Target: 90% (end 2014) Emergency Urban & Social 80% of delivery rooms in health facilities have Rehab ERL (FY07) Percentage of deliveries assisted by qualified received standard medical equipment for obstetric care personnel By 2014 Pipeline: Baseline: 80% (end 2011) 50% of health workers have been retrained in obstetric HD Service Delivery Target:85% (end 2014) and neonatal health care by 2014 Technical Assistance Program (FY14) Number of women 15-49 new users of family Family planning commodities available in 80% of planning health facilities by 2014. TRUST FUNDS Baseline: 6% (end 2011) Capacity Building in Target: 11% (end 2014) Coverage of 80% population with long lasting Budget Preparation for the insecticide bed nets per household completed by the Health Sector Project Percentage of children under 5 sleeping under end of 2013 LLINs (mosquito nets) in targeted areas AAA Baseline: 35% (end 2011) Health Systems and Target: 80% (end 2014) Financing (FY12) Capacity building for health sector budget preparation (FY12-14) PER (FY14-15) Programmatic Multi-Year Non-Lending TA Program (FY13-16) OTHER PARTNERS EC, GFATM, GAVI, KOICA, USAID, DfiD, CIDA, Belgium, JICA, GTZ 56 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals Increase access Low coverage CAS Outcome 3.3. Improved access to basic PROJECTS and equity to the of education education in targeted areas Ongoing: various levels of services Education Sector Project education, and Increased primary gross enrollment ratio in Textbooks distributed in targeted areas by 2015 (FY07) particularly in Lack of targeted areas basic education, sustainable Baseline: 89.7% (end 2011) Teachers posted in targeted areas by 2015 Pipeline: especially for financing Target: 105.8 % (end 2015) HD Service Delivery girls mechanism for Share of female Classrooms constructed and rehabilitated in targeted Technical Assistance the delivery of Baseline: 47% (end 2011) areas by 2015 Program (FY14) education Target: 50% (end 2015) Support to Basic Education services Program under the GPE Increased completion ratio in primary in Fund (FY13) Low quality of targeted areas Post-Basic Education and education Baseline: 59.0% (end 2011) Training (FY15) Target: 75%(end 2016) Share of female AAA Baseline: 51.0% (end 2011) Operationalizing Higher Target: 65% (end 2016) Education (FY12) Skills Development Study (FY12) Gender Study (FY12) Higher Education Strategy (FY13) OTHER PARTNERS ICR, CRS, EC, CTB, UNICEF, UNDP, USAID, AfDB Enhance safety Widespread CAS Outcome 3.4. Strengthened Social PROJECTS net through poverty due to protection system Ongoing: improved access lack of social Street Children project to basic social safety net Comprehensive database of safety net Updated Social Protection Strategy (FY10) services programs to beneficiaries established and regularly Social Fund additional assist the poor maintained. Action plan for improving efficiency of safety nets financing (FY10) Baseline: dataset only contains information programs 57 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals street children (2012) TRUST FUNDS Target: dataset includes beneficiaries of other Stakeholders trained in data collection and use of Evaluation of Gender Based safety net programs, e.g., labor-intensive database. Violence Program in South public works, and is updated at least every six Kivu months with input from provinces (2015) Katanga pilot labor-intensive public works program is replicated in at least three provinces Pipeline: Number of beneficiaries of labor intensive HD Service Delivery public works (share of female) Technical Assistance Baseline: 3,192(30% female; 2012) A national multi-sectoral coordination committee for Program (FY14) Target:18,000 (35% female; 2016) the protection of Orphan and Vulnerable Children Eastern DRC Economic (OVC) is established and operational. Recovery Project (FY14) AAA Review of Social Protection Strategy (FY14-15) 58 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals Strategic Objective Four: Addressing Fragility and Conflict in the Eastern provinces PRSP goal 1: Strengthening governance and consolidating peace Leveraging Weak State CAS Outcome 4.1. Improved management PROJECTS national policy capacity to of public finances and accountability in dialogue to provide targeted conflict-affected areas Ongoing: strengthen Enhancing Governance accountability public services Increased budget retrocession to Eastern Information and analysis produced by the Bank is Capacity (FY08) and effectiveness conflict-affected province of South-Kivu utilized in policy dialogue, and contributes to of state Lack of Baseline: currently receiving 10-20% of its improved government policy decisions and actions in Pipeline: institutions in accountability revenues as retrocessions the Eastern provinces, and influences government and Additional Financing to support of peace in the Target: increases to 30% by 2015 donor programs and service delivery at field level by Governance Project (FY13) consolidation. management of 2015. State and Peace building public finances Number of communities benefitting from Facility (FY14) participatory budget planning processes Eastern DRC Economic Volatile Baseline: 4 districts in South-Kivu Recovery (FY14) political and Target: all districts in conflict-affected security provinces of North-Kivu and Sud-Kivu, by AAA environment 2015 Public Expenditure Review of the security sector Reduced discrepancy between projected and Budget reports are made available on a comprehensive Capacity-building of local actual expenditures in conflicted-affected manner to the population by 2014. think tanks province of South-Kivu Policy dialogue AAA on Baseline: 51% (end 2011) policy actions that promote Target: 10% (2016) peace building OTHER PARTNERS Government's STAREC Program United Nations (I-SSSS) EU 59 Country Issues and Development CAS Outcomes Milestones Bank Program (and Partners) Obstacles Goals Lack of CAS Outcome 4.2.Increasedsocioeconomic Number of Km of roads rehabilitated in project areas PROJECTS Strengthening employment opportunities in targeted conflict-affected in conflict-affected city of Bukavu Pipeline: societal opportunities areas Baseline: 0 km (2013) Urban Development (FY13) capabilities and Target: 4km (2016) Southeastern Agricultural resilience for Limited access Increased number of person-days of Growth Pole (FY15) peace to services by employment created in project areas in Eastern DRC Economic consolidation, the population conflict-affected city of Bukavu Number of Km of drainage constructed in project areas Recovery (FY14) and sustainable Baseline: 0 in conflict-affected city of Bukavu development in Target: 226,000 persons-per days by 2016 Baseline: 0 km (2013) AAA: the East. Target: 4km (2016) High level dialogue with the Great Lakes neighboring countries OTHER PARTNERS Government's STAREC Program United Nations (I-SSSS) DFID, USAID, EU International NGOs 60 Appendix 2: CAS Completion Report (CAS FY2008-FY2011) TABLE OF CONTENTS I.INTRODUCTION A. DRC’s Economic and Social Background B. World Bank’s Program Support II. CASPROGRAM PERFORMANCE A. Overview and Principles of Engagements B. Progress by CAS Pillars (Towards CAS Outcomes) B.1. Rebuilding State Capacity to Increase Access and Improve Quality of Basic Services B.2. Creating Conditions for Growth and Economic Diversification B.3. Providing Improved Access to Health and Education III. WORLD BANK GROUP PERFORMANCE A. CAS Design B. Implementing the Strategy C. Managing the Risks IV. LESSONS LEARNED AND RECOMMENDATIONS A. At the country level B. At the operational level ANNEXES OF THE CAS Completion Report (CAS FY2008-FY2011) Annex 1: Results Matrix FY08-FY11 (as of December 31, 2012) Annex 2: Indicative and Actual Lending Program for FY08-FY11 61 COUNTRY ASSISTANCE STRATEGY COMPLETION REPORT DEMOCRATIC REPUBLIC OF CONGO FY08-FY11 I. INTRODUCTION 1. This report assesses the performance of the FY08-FY11 Country Assistance Strategy for the Democratic Republic of Congo which was discussed at the Board on December 18, 2007. It describes the support provided through an integrated package of financial, knowledge, and coordination services, evaluates the strategy’s outcomes and the Bank’s performance, and draws lessons for the new FY13-FY16 CAS currently under preparation. The May 26, 2010 CAS Progress Report slightly adjusted the original CAS program and strengthened the CAS results matrix. This completion report uses the updated results matrix as the reference for assessing the CAS program’s performance. A. DRC’s Economic and Social Context at Inception of the FY08-FY11 CAS 2. At the time of developing the FY08-FY11 CAS, DRC was still reeling from years of economic mismanagement and from the effects of a protracted civil war, with several parts of the country – especially in the east – still under active armed conflict. After many years of neglect, very few roads were passable, and schools and health facilities had fallen into disrepair, and HIV/AIDS epidemic remained uncontained. Although still very fragile, the economy was already beginning to stabilize by 2007. Indeed, inflation was down to 10 percent at end 2007, from 18 percent at end 2006, and annual GDP growth was averaging 6 percent. However, the country remained saddled with massive external debt. Debt service on public and publicly guaranteed (PPG) external debt amounted to 26 percent of exports at end 2006, while the net present value of PPG external debt exceeded 300 percent of exports, 90 percent of GDP, and 700 percent of government revenue. This was clearly unsustainable, making reaching HIPC completion point and stimulating economic growth of utmost urgency. 3. In view of the above, the newly elected Government, which was formed in March 2007, launched a social and economic rehabilitation program organized around five themes: (a) promotion of peace and good governance; (b) consolidation of macroeconomic stability and promotion of economic growth; (c) improvement in access to social services; (d) prevention of HIV/AIDS; and (e) promotion of community dynamics. It is against this background that the World Bank, in collaboration with other partners under the Country Assistance Framework (CAF), elaborated the FY08-FY11 CAS. B. World Bank’s Program Support 4. Picking up from the Government’s own strategy and the CAF, the CAS was organized around five themes: (i) promoting good governance and consolidating peace through strengthened institutions; (ii) consolidating macro-economic stability and growth; (iii) improving access to social services and reducing vulnerability; (iv) combating HIV/AIDS; and (v) promoting local initiatives. The strategy was slightly adjusted at mid-term in order to respond to (a) the large macroeconomic imbalances resulting from the impact of the global financial crisis on the DRC economy; (b) the findings of analytical work undertaken during the CAS period; (c) the outcomes of the aid coordination conference (the Kinshasa Agenda) of June 2009, which set the stage for enhanced donor coordination; and (d) lessons learned in implementing the CAS, including the need to address the persistent weakness in Government capacity. 62 5. Specifically, activities were added to the program to protect critical imports and expedite economic recovery, respond to the malaria epidemic, contain a polio outbreak, consolidate the roads rehabilitation program, strengthen core public sector capacity, rejuvenate the aging public service, mainstream governance, support climate change adaptation and mitigation, and promote regional integration through trade facilitation. 6. In order to further sharpen the focus of the Bank’s support to DRC, the CAS program was regrouped under three themes: (i) rebuilding state capacity to increase access and improve the quality of basic services; (ii) creating conditions for growth and economic diversification; and (iii) providing improved access to health and education. II. CAS PROGRAM PERFORMANCE 7. Overall, the performance of the CAS program is rated moderately satisfactory as the program achieved good progress toward all major expected outcomes. More specifically, progress was moderately satisfactory regarding the first 2 pillars (rebuilding State capacity to increase access and improve the quality of basic services, and creating conditions for growth and economic diversification), and satisfactory for the third pillar (providing improved access to education and health). However the outcomes achieved (16 out of 30) were significantly more important than those partially (10) or not achieved (4). There were particularly notable advances in road development, forestry sector, health and education, and some progress in public finance management (PFM) and decentralization. Less progress was registered in energy, and public enterprise reform, due to the complexity of issues, weak implementation capacity, and in some cases insufficient political commitment. The CAS results matrix is shown in Annex 1. This section presents an overview of key principles of engagement that underpinned the CAS, followed by a succinct summary of the specific progress made under each of the three strategic elements of the CAS. A. Overview of Principles of Engagement 8. The Bank followed three basic principles of engagement in developing its relationship with DRC: flexibility, gradual shift from the emergency mode to a sharper sectoral focus, and donor coordination. The Bank sought to act flexibly in implementing the CAS. For instance, during the 2008- 2009 global financial crises, the Bank approved and disbursed, in record time, funding to protect critical imports. Second, there was a deliberate shift away from emergency operations to sustainable development through the development of a number of sector strategies (such as in health, education, transport, energy, and telecommunication), and a greater focus on the often harder to implement structural reforms. Finally, there were efforts to enhance donor coordination within the CAF, including establishing thematic groups and holding an Aid Effectiveness Forum that resulted in a coordination framework called the Kinshasa Agenda. B. Progress toward CAS Outcomes, by CAS Pillars as Restated at Mid Term B.1. Pillar 1: Rebuilding State Capacity to Increase Access and Improve the Quality of Basic Service 9. Progress under this pillar was moderately satisfactory. Bank support mainly focused on: (i) reforming the public administration, especially within the context of decentralization; (ii) strengthening public financial management; and (iii) improving access to water and sanitation services in selected urban centers. 4 out of the 11 outcome indicators for this pillar (36 percent) have been achieved, 5 (45 percent) 63 partially achieved and 2 (18 percent) not achieved. Regarding the milestones, 9 (56 percent) have been achieved, 4 (25 percent) partially achieved and 3 (19 percent) not achieved. 10. Public Administration Reforms and Decentralization. Major progress was achieved in supporting the decentralization agenda considering the importance of decentralized governments in the management of service delivery in a country as large of two thirds of Europe. Despite the obvious resources constraints these entities have to go through, provincial governments have seen their financial resources increased manifolds in Katanga, Bandundu, and South Kivu for example. New financial management procedures were set up and implemented as well as the approval of new procurement codes in South Kivu and Katanga provinces. Resources managed at the provincial level increased to 31.5 percent of national resources in 2011 compared to 11 percent in 2008. The Bank, jointly with the European Commission, UNDP, and the Belgian Cooperation, supported several pieces of analytical work32 and technical assistance, which were instrumental in the crafting of a package of laws regulating the functions of the provincial governments, including the organization of civil service between the central and provincial governments, developing a transparent revenue sharing mechanism between the central and provincial governments, and assessing the financial feasibility of the proposed territorial administration reforms including the decoupage from 11 to 26 provinces as mandated by the Constitution. In addition, the reforms entailed putting in place a legal and regulatory framework for human resource management and inter-governmental fiscal relations. The process was not easy because of deep political economy considerations. The complexity of these reforms, the difficulty in reaching a consensus among the various stakeholders, and especially the inadequate political commitment in many cases, resulted in limited progress on the finalization of legal frameworks for decentralizations, despite a lot of technical background work that was accomplished. However, the Government adopted in 2011 several elements of an over-arching framework for civil service reform in order to make it able to support the process of decentralization. 11. However there are still a number of pieces of legislation to accompany this process of decentralization, which have been in their final draft form for some time, but still await cabinet and parliamentary approval.33  Rejuvenating the public sector. Good progress has been made in developing and adopting tools and practices for a more efficient, and results-oriented administration. A critical dimension of public administration reform includes retiring over-age staff (more than two thirds of DRC civil servants are past retirement age due to lack of funds to pay their departure indemnities), rejuvenating the public service, and hence improving the performance of those who stay or are newly recruited. The payment system has been simplified by reducing the number of variables from 20 to 3. As a result, 55 percent of civil servants are paid through the payment system in 2011 compared to 31 percent in 2008. Similarly, preparation is underway for supporting the retirement process based on an incremental approach – ministry by ministry. As of to date, the Ministry of Environment, Nature conservation and Tourism (MECNT) is one that is most advanced with a biometric census completed that has identified all MECNT staff including approximately 2,700 workers eligible for retirement, 1,700 of whom received their retirement payments in May 2011. Moreover, 2,267 staff of the national railways company (SNCC) that have past retirement age have left the company following the payment of their retirement rights with funding from the World Bank. This support from the Bank has reduced the operating costs 32 Decentralization: Opportunities and Risks (2008) technical background notes; and study for Territorial Administration Reform (Decoupage; 2009). 33 Draft law on Provincial Administration circumscribing the autonomous status of provinces; Draft fundamental (“organic�) law on Public Service; the Draft law on Public Service pertaining to the national level; the Draft law on Public Service pertaining to provincial and local administration. 64 of SNCC and has improved the prospect for this company to reach financial self-sufficiency in the next future. Progress was also made in defining eligible staff and organizing the retirement of staff in several ministries (agriculture, budget and finance in particular). The next steps in the public sector will be supported by the new project in preparation which will tackle the reform of the ministries in charge of finances, budget, planning and portfolio.  Public Finance Management. The objective was to, among other things, to reform budgetary processes, to establish a more effective and transparent payroll system for civil servants, and to improve government revenues and inter-governmental resource transfers. The PEFA assessment carried out between June 2012 and September 2012 showed that about 50 percent of the PEFA ratings increased from 2008 to 2012. A new public finance law organizing the management of public resources has created the legal framework that will speed the modernization of the public financial management systems and increase transparency and accountability in the use of public resources. Key aspects of inter-governmental fiscal relations were addressed in this new Public Finance Law through the Coordinated PFM reform Assistance Trust Fund. However, central government revenue collection and resource transfers to provinces remained below targets. The new provinces revenue law, supported through the Fiscal and Administrative Impact Assessment of Administrative Territorial Reform Trust Fund, has been adopted by the Parliament early October 2012 and it is expected that provinces revenue collection will increase to reduce their dependency from the national budget. Medium term expenditures frameworks were developed for the first time for the ministries of Health, Education and Agriculture thanks to Bank support (under the Capacity Building in Macro-projections for the MTEF and PRSP Trust Fund) but their use in the preparation of the budget has been lagging. PFM and human resource management systems have been developed in four provinces (Katanga, South Kivu, Bandundu, and Kasai Occidental) which have resulted in marked improvements in the way these provinces are managed compared to provinces where no Bank interventions have been in place. More striking has been the dramatic increase in internally revenue generation in the provinces of Bandundu and Katanga over the last two years thanks to the reforms of the provincial collection revenue agencies. These reforms are complemented by the revenue administration reforms at the national level where the integrated financial management system of both the customs and tax departments are streamlined, import valuation procedures enhanced and the large taxpayers unit strengthened. Central Government budget execution data is regularly published though quality remains to be improved. The strengthening of the expenditure chain both at the central and at provincial levels has started and this has translated in stronger discipline in the management of resources at the provincial level.  Procurement. The Bank provided financial and technical assistance for the development of a new public procurement law, which was approved in 2010 replacing an obsolete and poorly transparent system dating back from 1969. For the first time, a procurement regulatory agency was established as well as procurement implementation entities (ARMP and DGCMP) although only partially operational since April 2011. At the central level, the procurement units are operational in 10 major ministries including the ministries of (i) Interior and Security, (ii) Health, (iii) Infrastructure, Public Works and Reconstruction,(iv)Agriculture,(v)Energy, (vi) Primary, Secondary and Professional education,(vii)Environment, Nature Conservation and Tourism, (viii)Budget. The procurement units are also in place in public institutions such as National Assembly and the Supreme Court, and 6 out of 11provinces have already adopted decrees on public procurement. In addition, the Dispute Resolution Committee has been established and staff appointed and installed by Decree No 12/027 of July 25, 2012. More than 1,500 staff has already been trained on the new system. As of to date, all the procurement plans and decisions are published on ARMP website (www.armp-rdc.com).An independent firm has been recruited to 65 review the performance of the new procurement system, and the draft audit report has been prepared.  Water and Sanitation. The Bank supported the rehabilitation of water facilities under two existing emergency operations, including construction of a new unit at the N'Djili water treatment facility, adding 160,000 m3 of drinking water per day, and doubling the distribution capacity in order to provide water to about 3 million people in Kinshasa. A new operation (Water Sector Rehabilitation Project) was approved and is under implementation to further increase access to drinking water in some major urban centers of DRC, and to improve the performance of the country’s water utility (REGIDESO). Selection of an international water operator has been completed and the operator is about to start its activities which will consist of managing the water utility and improving REGIDESO operational and financial performance following decades of mismanagement is ongoing. B.2. Pillar 2: Creating Conditions for Growth and Economic Diversification 12. Progress under this pillar has been moderately satisfactory. Bank support focused on: (i) maintaining macroeconomic stability and improving fiscal management; (ii) rehabilitating targeted transport infrastructure; (iii) increasing the availability of electricity to serve domestic demand and for export; (iv) undertaking reforms and building capacity for sustainable natural resource management (especially forestry and mining); and (iv) improving the business climate, coupled with restructuring and reforming public enterprises in line with international standards. Progress has been satisfactory thanks to significant headways in economic and fiscal management, and in transportation infrastructure. However, little progress was made on the business climate while impressive strides were made in disclosing mining contracts despite attempts to derail this process by key and well-connected stakeholders. The World Bank was quite active and the only donor addressing the highly charged reform of public enterprises. Overall, 8 (53 percent) outcome indicators have been achieved, 5 (33 percent) partially achieved and 2 (13 percent) not achieved. As regard to the milestones, 10 (56 percent) have been achieved, 7 (39 percent) partially achieved and 1 (6 percent) not achieved.  Macroeconomic Stabilization and Fiscal Management. A major achievement during the CAS period was the achievement of DRC at HIPC Completion Point in July 2010 for a debt cancellation of US$ 16.3 billion in total of which US12.3 billion after the completion point. Following the achievement of the DRC at HIPC completion point, all external debt indicators remain below the required thresholds, with the exception of the present value of debt-to-GDP ratio (over 30%), as a result of government guarantees for loans contracted under the Sino- Congolese agreement. The DRC economy, which had grown at an average of 6 percent between 2001 and 2008, began to weaken with the onset of the global financial crisis, dropping sharply to 2.8 percent in 2009. There was a sharp deterioration in the country’s terms of trade and a ra pid depletion of foreign reserves. Inflation, which had reduced to 10 percent by end 2007, increased to 27.6 percent by end 2008, peaking at 53.4 percent by 2009. Many jobs were lost, especially in the artisanal mining sector. The Bank, together with the IMF and other development partners, acted quickly with policy advice and funds to protect critical imports, build foreign reserves, and stimulate growth.34 In 2010, with the resumption in mining activity, growth was back up at 7.2 percent, and average inflation down to 23.2 percent (end of year 9.8 percent). A spike in international food and fuel prices early in 2011 boosted inflation but by year end it had declined again to 15.4 percent at end-2011, and is estimated to fall to 4.5 percent at end-2012. 34 The Bank’s support of $100 million, provided in February 2009, was the first op eration in the Africa Region under the Fast Track Facility. 66  Transport. Major progress was made in this sector, including the reopening of 1,530 km of roads in Province Orientale, South Kivu and Katanga. Of the 15,800 km of high-priority road networks, 36.1 percent are now classified as in good or fair condition, compared to 13.8 percent in 2009. The Bank and DFID contributed the bulk of the financing for these roads’ reopening. The economic impact of the rehabilitated sections was significant, reducing transportation costs by as much as 80 percent in some cases and cutting travel time by more than half. For instance, in two isolated areas in Katanga province, travel time was reduced from 60 hours to 3 hours to cross 110 km. The Bank, through ProRoutes project, contributed to the bulk of the financing of this road with support from DFID. The Study on “Prioritizing infrastructure investments: a spatial approach� carried out in 2009, and financed by a Trade Facilitation and Corridor Diagnostic Trust Fund, helped identify the priority corridors with high potential impact including the road networks. In addition, the Bank supported the restructuring of the National Railway and the improvement of governance in other transport state-owned enterprises. This recently included the provision of finance for a comprehensive railway rehabilitation program, as well as selective modernization of the other transport SOEs.  Energy. Significant progress has been made on the institutional front, including strengthening of governance within the National Electricity Company (SNEL), as demonstrated by the appointment of a new Board and Senior Management, the signing of the performance contract between SNEL and the State and progress in the recruitment of the technical assistance service operators supported by the Bank. Progress has also been made in the overall support to SNEL performance, as measured by a 30 percent increase in revenue collected per kWh from 2007 to 2011, and an increase of 20 percent of total collection rate within the same period. However less progress has been made on the rehabilitation side. Works on four Inga units are still underway, and the delivery of the first Inga unit (G12) will now happen only in 2013. The rehabilitation and reinforcement of the high voltage transmission line corridor from Inga to Kasumbalesa at the border with Zambia is also ongoing. Under the SAPMP, 95 km of new transmission line have been built and contracts for the remaining lines have been signed. The delay in starting the rehabilitation of Inga units was mostly due to difficulties to attract qualified contractors in the post conflict environment of DRC, and difficulties for studies and bidding documents to properly define the scope of the required rehabilitation works leading to non- conclusive bidding process for many contracts.  Forestry. Bank support played an important role in the legal review of the 156 logging contracts by an inter-ministerial commission, which was successfully completed in early 2009. The Bank helped to consolidate these gains by helping carry out institutional reforms at the ministry in charge of forestry aimed at strengthening its oversight capacity. This included facilitating the retirement of some 1,700 past-retirement staff, creating room for more suitably adapted new hires. Bank support is facilitating the negotiation between forest concessionaires and local communities and indigenous peoples on social responsibility contracts.35 Bank funding has enabled the Government to deploy a new timber control system in Western DRC in May 2012 and over 100,000 m3 of illegal wood have been identified and seized since then. The control system is generating a considerable increase in tax receipts and it is set up to be self-financing. The Bank is also supporting the rehabilitation of the protected areas around the Virunga National Park, including a program of community development and conservation activities. Bank support was also instrumental in helping the country to play an important role in the Copenhagen climate change negotiations, where it advocated for the creation of a Reduced Emissions from 35 Some 41 such contracts have already been signed, setting the stage for forest industries to make significant contributions to social infrastructure (schools, medical facilities) in the remote areas where the concessionaires are operating. 67 Deforestation and Degradation in Developing Countries (REDD) mechanism. Forest Carbon Partnership Facility (FCPF) and UN-REDD (FAO, UNDP, UNEP) are jointly supporting the country in REDD Readiness. The coordination of these two REDD programs in DRC is regarded as a model for other countries engaged in REDD, as well as for donor harmonization. DRC is preparing its REDD+ strategy, is in the process of finalizing the preparation of its investment program thanks to the Forest Investment Program (FIP) and is ready to request funding for emission reduction.  Mining Sector. Significant progress was made in this sector. In 2008, the Bank carried a series of analytical works to: (i) examine the mining sector’s potential to contribution to economic growth and (ii) propose measures to strengthen institutions and good governance in the mining sector. Key reforms are supported under the growth with governance in mining sector project. Following reports of non-transparent handling of mining concessions in the spring and summer of 2010, the Bank agreed with Government on economic governance measures aimed at improving transparency in the extractive industries. According to the information available to date, 100 percent of the existing petroleum contracts and 134 out of the 135 existing mining contracts have been published. In addition, The Bank supported mining sector project will help strengthen the capacity of key institutions to manage the minerals sector, improve the conditions for increased investments in and revenues from mining, and help increase the socio-economic benefits from artisanal and industrial mining in mining areas.  DRC was accepted as an EITI Candidate Country at the EITI board meeting in Accra in February 2008, and produced its first mining revenues reconciliation report in December 2009, and is at an advanced stage for validation. In April 2010, on the basis of the progress to date, the country was granted by the EITI Board a 6-months extension period to be able to reach full validation. Because of the scope of the mining sector in DRC, it was difficult for the country to meet the requirements in the first place. A new deadline of March 1, 2013 was set by the EITI secretariat to achieve the EITI Compliant status, and efforts are made by Government with the Bank support to achieve this target. Finally, decision regarding validation will take place in May 2013 at the EITI board meeting in Australia.  Private Sector Development. Significant progress has been achieved under the Bank’s support to private sector development. World Bank support was focused on laying the foundations for an improved business climate, including: (i) reducing the time for creating business (down by 51 percent over the CAS period); (ii) reducing the time for securing Property Registry and Construction Permits (down by 54 percent), although the number of procedures remains unchanged and high; (iii) instituting a one-stop-shop for customs administration; (iv) reducing the number of taxes (from 118 to 30); (v) preparing DRC for adhesion to the harmonized regional business laws commonly known as OHADA (which are now effective as of September 2012 after DRC’s adhesion as a member country)36; and (vi) facilitating DRC participation in the African Trade Insurance system (with DRC currently constituting ATI’s largest portfolio). Regarding OHADA, the adhesion of DRC to OHADA brings modern legislation, which, albeit imperfect and in need of further reform, raises DRC judicial standards to at least on par with many of its trading partners in the region, as well as institutes supranational oversight of DRC commercial justice framework that opens more channels for transparency, equity and efficiency in enforcement of court decisions. On the financial sector, the action plan for modernizing the 36 OHADA is a system of business laws and implementing institutions adopted by sixteen West and Central African nations. OHADA is the French acronym for "Organisation pour l'Harmonisation en Afrique du Droit des Affaires", which translates into English as "Organization for the Harmonization of Business Law in Africa". It was created on October 17, 1993 in Port Louis, Mauritius. 68 banking sector payment system was developed, and the implementation process has been initiated. Although setting up the Microfinance Promotion Fund has been slow, which is now fully funded by IDA contribution, it is now supporting this fast growing sector as evidenced by the growth from 100,000 clients in 2007 to the current 700,000 clients compared to a target of 300,000 clients. The Bank also supported Government in drawing up legal instruments for adhering to the New York Convention of 1958 on International Arbitration. They have been approved by cabinet, and are awaiting Parliamentary approval. While a lot of progress has been made, DRC still has a challenging business environment, and more work lies ahead. In addition, overall competitiveness is still hampered by the unfinished rehabilitation of the state-owned enterprises, which play a dominant role in DRC’s economy. Developing their restructuring strategies was slow because of the complexity of the reforms and lack of a political consensus, but has been restated with vigor by the new Government in place with the signing the decree clarifying how social debts will be addressed. This is a major step that will help complete the restructuring process and support the positive contribution of these enterprises to the economy following the transformation of the status as commercial entities of 20 more public enterprises. B.3. Pillar 3: Providing Improved Access to Education and Health 13. Progress under this pillar was satisfactory and all targeted indicators achieved and even surpassed. The Bank mainly focused on improving access to basic primary education and increasing access to a well-defined package of quality essential health services in target areas. While still off track to reach the Millennium Goals, the country has made some progress in improving education and health outcomes, compared to conditions during the conflict, and the Bank has contributed significantly to these results. Health and education services have been delivered in very remote areas of DRC where no partners or services were available for decades. Programs in landlocked districts with no road access have been in place and made a difference in districts such as the Mongala and Tshuapa districts of the Equateur province and as result, supporting the decentralization process in such a large country. Under this pillar, all the 4 outcome indicators have been achieved. Regarding the milestones, 4 (67 percent) have been achieved and 2 (33 percent) partially achieved.  Education. Significant results have been achieved including: (i) 396 schools were constructed as part of the Emergency Social Actions Fund project and 522 classrooms as part of the Education project and construction and rehabilitation of facilities was over the target; (ii) gross enrollment rates of primary education increased from 64 percent in 2007 to 93 percent in 2011 compared to the expected 72 percent; and (iii) a total of 43,355 teachers were integrated to the public payroll compared to a target of 30,000 teachers; (iv) completion rate increased from 29 percent in 2007 to 59 percent in 2011 compared to a target of 34 percent. In order to improve learning outcomes and improve the quality of education services about 14 million books and teacher guides were purchased and distributed to public and private primary schools and teachers' in-service training were provided. In fact, 125,208 teachers benefited from teacher guides compared to a target of 125,000 teachers. In partnership with other sector donors, the Bank assisted the Government in developing its basic education strategy which was adopted in March 2010. In order to have an integrated strategy covering the whole sector by 2013, the Bank has been instrumental in providing support to the Government in the development of a strategy for higher education, and for non-formal education and literacy. Bank support has also contributed to a progressive development of the sector, including an improved access and equity to basic education, strengthening of the learning environment and more effective management of the system. While the quality of education remains a key issue, student learning assessment surveys point to significant progress in comparison to other countries in the region. 69  Health. A lot of progress has been achieved in DRC despite the challenging conditions. The Bank’s support focused on providing essential health services and infrastructure rehabilitation in selected health zones. These interventions were successful in the targeted districts. For example, the percentage of children of 0-11 months vaccinated with DTP3 has increased from 54 percent in 2007 to 83 percent in 2011, and deliveries assisted by qualified personnel went from 47 percent in 2007 to 77 percent in 2011 compared to the target of 65 percent in the same year, thanks to PARSS project and an Immunization and Vaccination Program. Distribution of treated bed-nets to more than 1 million households has increased the number of children in the Kinshasa area protected against malaria from 32 percent to 62 percent. More than 2.8 million bed-nets have been distributed in the Kwango and Kwilu districts of the Bandudu province by the multi sector PURUS project and 12 million bed-nets have been distributed by the PARSS through a combination of routine distribution and mass campaigns. Moreover, the target of constructing 86 health centers was met and in addition, 808 health facilities were constructed/renovated and equipped. The broad issue of rehabilitating and adequately supplying and maintaining the health sector remains a daunting challenge, requiring massive resources. DRC’s health sector continues to be characterized by poor funding, lack of qualified personnel, inadequate essential medicines, dilapidated infrastructure, and overall poor service delivery. Government needs to mobilize more resources to the social sector to allow the Bank and other development partners to gradually shift from directly supporting health service delivery to systems strengthening. A better harmonization and complementarity of donor support is also crucial for this sector. III. WORLD BANK GROUP PERFORMANCE 14. The World Bank’s performance is rated satisfactory. The CAS was relevant, aligned with the Government PRSP, well-coordinated with other development partners (both through the CAF and the Kinshasa Agenda), and its design and implementation allowed for focus, and timely adaptation to changing circumstances and priorities. A. CAS Design 15. The CAS was fully in line with the Government’s PRSP . It’s anchoring in the Country Assistance Framework (a collection of 17 donors in DRC) was the right approach as it greatly facilitated donor harmonization, and synergy. The CAS’s flexibility allowed addressing the: (i) global financial crisis with speed to contain its contagion effect on the Congolese economy with the US$100 million Mitigating the Impact of the Financial crisis ; (ii) malaria epidemic and polio outbreak with two Additional financing of US$110 million to the Health project; (iii) economic governance issues through an Economic governance matrix addressing the issues of transparency and accountability in the extractive industries, public finances management and the business climate when these became paramount concerns, especially by mid-2010. B. Implementing the Strategy 16. The Bank made considerable efforts to enhance the overall quality the portfolio, especially by laying a strong emphasis on the reduction of problem projects and a considerable increase of the disbursement ratio. The number of problem projects was reduced during the CAS period from 3 projects at end-2010 to 2 at end-2011. There is currently no problem project in the portfolio since the long- standing agriculture and water projects had been upgraded in 2012. It is currently stable with 3 problem projects. Thanks to the recent upgrade of two long-term moderately unsatisfactory projects, precisely in the water and agriculture sectors, the proactivity rate has also improved from 50 percent in 2011 to 60 percent in 2012 and it is now at 100 percent. In terms of disbursements, DRC is now one of the top 70 performing large portfolios of the regions: from a disbursement rate of 19.5 percent in FY08-10, the country surpassed the region's disbursement target of 25 percent by reaching 27.4 percent in FY12. This was achieved through: (a) intensified dialogue with the Government during the annual Country Portfolio Performance Reviews, and following up with monthly meetings with government project coordinators to resolve any impediments to implementation; (b) increased staff presence in the field from around 45 members in 2009 to 64 member in 2012 (including consultants and temporaries); (c) adoption of e- signature disbursement arrangements for most of the projects; and (d) a drive for timely effectiveness of new operations. 17. As indicated above, the Bank significantly strengthened its presence on the ground, greatly enhancing dialogue and project implementation. The Country Director relocated to Kinshasa in 2008, and in the course of 2009-2011, about 15 international staff relocated to Kinshasa as well, including a Lead Operations Officer and Sector Leaders for sustainable development and human development. Currently, 10 out of 16 active projects are managed from DRC and neighboring countries. 18. The Bank also intensified its donor coordination efforts. Official development assistance to DRC (from a large number of development partners) remains high, financing some 35 percent of government spending. IDA’s engagement with other development partners was strengthened substantially during the elaboration of the 2007-2010 multi-donors CAF in 2007, from which the CAS was derived. During the entire CAS period, the Bank continued to play a leading role in improving donor coordination and harmonization, including helping organize the Aid Effectiveness Forum in June 2009 that resulted in a coordination framework called the Kinshasa Agenda and a number of thematic groups, three of which (governance, industry, and mining) are co-led by the Bank. The Kinshasa Agenda calls for better division of labor among donors and use of harmonized implementation mechanisms (in the absence of use of national systems). The Bank has taken the lead in developing joint mechanisms for project implementation to help reduce the cost of doing business and avoid overtaxing already weak government capacity37. In addition, the Bank, in coordination with other donors, will continue to move from stand- alone project units towards sector implementation units integrated in the line ministries. Partnership with IFC and MIGA 19. The Bank worked very collaboratively with IFC and MIGA to ensure synergy while capitalizing on each institution’s comparative advantage and mandate.  IFC. IFC’s activities in DRC included investment operations and advisory services, especially in facilitating access to finance. In 2009, IFC provided a US$7 million line of credit to local bank (Rawbank), accompanied by a US$1.2 million technical assistance to help Rawbank develop products and services targeting small and medium enterprises and women-owned businesses. A venture capital fund was created to provide risk capital of up to US$500,000 to start-up companies. IFC’s Africa Leasing Facility is working in partnership with the Central Bank and the Ministry of Finance to develop leasing activities. A partnership has been finalized with the pan- African leasing group Alios Finance to create the first leasing company in DRC. IFC is collaborating with the World Bank is setting up a Special Economic Zone near Kinshasa through the new Growth Poles project which is currently under preparation. The main challenge for IFC’s program in DRC was the Government’s cancellation in 2009 of the mining contract regarding the Kingamyambo Musonoi Tailings (KMT) mining project, in which IFC had an ownership stake. The case got resolved in February 2012. 37 An illustrative case is the joint implementation unit for energy sector programs funded by the Bank, AfDB, and the European Investment Bank (EIB). 71  MIGA. MIGA’s exposure over the CAS period was US$41.9 million for five projects. In the period under review, MIGA supported two investment projects in DRC – (a) US$25.1 million in Political Risk Insurance to Congo Equipment Company; and (b) a US$4.3 million guarantee for Congo Oil and Derivatives Company. MIGA is exploring opportunities in energy generation projects, telecoms, and agribusiness. C. Managing the Risks 20. Some of the risks that had been identified in the CAS included risks related to the fragile political and security situation, the limited capacity to manage macroeconomic shocks, the slow implementation of economic and governance reforms, a poorly managed decentralization process, corruption, lack of donor coordination, and poor operational performance. Generally, the CAS managed well the risks that arose during its implementation, although some impacted the implementation pace of the Bank funded portfolio. For instance, the slow pace of decision making significantly reduced the speed at which reforms of the public administration and state-owned enterprises were conducted. The Bank closely monitored these risks, and where possible, took proactive measures for their mitigation. For example, the Bank and IMF acted quickly to contain the impact of the global financial crisis of 2008. 21. The risks related to the security situation didn’t materialize during the CAS implementation period but fighting in North Kivu broke up in April 2012 fueling a humanitarian crisis in this part of the country. The new CAS will address some of the underlying causes of the conflict and will support social cohesion among the communities and access to economic opportunities. In addition, the political transition following the 2011 presidential and legislative elections was much smoother than foreseen with a continuity of programs and an excellent relationship with the new authorities. 22. Deterioration in economic governance, in particular in the extractive industries prompted the adoption of a matrix of measures to reinforce economic governance, including improved guarantees in relation to contract sanctity and measures to enhance transparency and competitive principles in contract and concession awards. Close monitoring of the matrix has been organized and updates have been provided to the Board on a regular basis. IV. LESSONS LEARNED AND RECOMMENDATIONS At the country level 23. Scope of the strategy. In a country such as DRC, whose needs are great and whose financial and human resources are limited, prioritization and trade-offs are essential. Going forward, more focused Bank strategies will require better coordination with donors, while ensuring that coordination inside of the institution is maximized. 24. Working with donors. DRC is country for which 20 donors are providing 90 percent of the official development assistance (ODA). Coordinating the strategies of all these donors has been a very difficult undertaking that goes beyond organizing regular monthly meetings. There are two key roles for the government still to play (i) better aligning donor interventions with the government’s priorities and (ii) identifying sectors of concentration or focus for or by each donor. Two areas of urgent concern and attention are the education and the health sectors where better coordination will be needed and division of labor should be better defined. 72 25. Implementing reforms. Reforming state-owned enterprises and public administration, especially in fragile contexts, requires time and a deep understanding of the country’s political economy. In DRC, 20 public companies have become commercial entities through the Bank-financed Private Sector Development Project. Taking the next steps, which include addressing the huge debts saddling these companies, has been a long process and one that the previous government has been unwilling to address decisively. For these companies to become viable entities and for the country to benefit from the reform, the challenge is for the government to directly address the SOE corporate governance issues. At the operational level 26. Maintaining Flexibility. In a post conflict environment, it is important to design and implement investment, AAA program and Trust Funds in a flexible manner. As indicated earlier, the country team demonstrated great agility in responding to unanticipated events. Beyond program design, this should extend to flexible procurement procedures to accommodate the challenges in such environments. There were instances where more flexible application of the rules would have yielded quicker and cheaper solutions.38 27. Choice and mix of instruments. Instruments should be packaged to deliver tangible and impactful results and not be a wish list of activities to be implemented. The role and importance of knowledge should be underscored and the way knowledge is generated also is critical to achieve impact. Going forward, it will be critical to (i) leverage more strongly the Bank’s and other donors’ analytical work; and (ii) make optimal use of local knowledge to better understand the political economy issues and be able to support far-reaching reforms that the country needs. For instance, this will require strengthening dialogue with other stakeholders including national and provincial think tanks and academia; or initiate the review of projects by the beneficiaries. For these steps to succeed, the analytical pieces should be limited to a few key strategic areas in which the knowledge gap is the greatest. 28. Addressing risks and managing changing conditions. The previous CAS developed built-in arrangements to address changing conditions, and the scope of the strategy was adapted appropriately when needed. Mid-term reviews are opportune periods to update strategies, but the approach in DRC should remain flexible and take into account changes of the environment. 29. Increasing beneficiary participation. To secure their buy-in, it is essential that beneficiaries be proactively and frequently involved during project preparation and implementation. The capacity of civil society needs to be strengthened and not taken for granted so that it can better engage with the Bank and the authorities during the design, implementation, and monitoring of the government’s projects. More broadly, an independent, representative, and dynamic civil society is a prerequisite to any sustained demand for good governance. 30. Achieving and reporting results. The World Bank’s credibility lies in the ability of its support to the country to deliver impactful, clear, and attributable results for the authorities but, more importantly, for the population to recognize. For this reason, clearly identifying in advance the results to be achieved; measuring the results; and involving stakeholders in identifying and measuring these results are critical. Achieving bolder results that are transformational and identifiable should be an important objective of Bank support to DRC; thus, the need to be selective. 38 For example, when a contractor became bankrupt, the Bank objected to Government’s request to negotiate with an existing contractor that had been selected competitively to undertake similar work, at competitive rates. Rebidding eventually cost an extra nine months and at twice the price of what Government had been able to get under sole source 73 31. Achieving results and disbursements. Results are within reach, even in DRC’s difficult political and capacity-constrained environment. Disbursing in a post-conflict country is possible only if doing so is coupled with leadership, a proper M&E framework, and accountability. To achieve results, focusing on implementation readiness and disbursement arrangements during the preparation of projects is critical. Achieving bolder results that are transformational and identifiable should be an important piece of Bank support to DRC; thus, the need to be selective. 32. Avoiding overruns and delays in infrastructure projects. Past large infrastructure programs (such as the rehabilitation of the power facilities at Inga) have incurred major cost overruns. Predetermining costs in a fragile environment has been very difficult, as has obtaining a large number of competitive bids. Similarly, bidders attach a high risk premium to operating in DRC, which has been difficult for task teams to handle. To avoid disrupting implementation, programs under the new CAS should entail more thorough preparation and envisage robust contingencies. 33. Strengthening Safeguard Oversight. The number of Inspection Panel cases has abated in recent years due to more thorough preparation and implementation monitoring of World Bank financed projects. The new CAS period should aim at eliminating altogether situations that warrant such investigations. The preparation of projects should be done better and more importantly, implementation and supervision should pay attention to these issues. The decentralization of staff dealing with safeguards has been positive and should help the team. 34. Operating outside Kinshasa. DRC is an immense country with severe infrastructure challenges that make it difficult to move around. Air transportation has been the only effective mean to travel outside Kinshasa to conduct the supervision of project activities in the field. However given the dreadful security and the poor safety record plaguing DRC aviation industry, Staff was advised to fly by international companies with connections to Addis Ababa, Nairobi and Johannesburg in order to organize their supervision mission in the Eastern part of DRC notably (Kisangani, Lubumbashi, Bukavu, Goma, the last two cities requiring an additional transport by road from and to Kigali). The transport arrangements increased significantly the cost of projects supervision. Further, several projects suffered from getting in contractors who are able to deliver at sub-national level. Project preparation and monitoring in outlying provinces could be enhanced by a fully-equipped field office at a suitable location outside Kinshasa, in addition to the Kinshasa office. 74 CAS Completion Report CAS Results Matrix Annex 1: CAS Results Matrix CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS CAS Pillar 1 - Rebuilding State Capacity to Increase Access and Improve Quality of Basic Services (Corresponds to DRC PRSP Pillar 1 Good Governance and Peace Building, and Pillar 3 Improved Access to Social Services and Reduced Vulnerability) CAS outcome 1.1: a. Preparation of National 1. and a. Partially achieved. A Implementation by 2011 Code of Values, on the leadership seminar was held by basis of the government Establishing Capacity for The implementation of of National Code of Government in March and September Core Public Management the National Code of Values to provide leadership retreats, and its 2011 to conduct the consultation overall guidance and adoption by government; Project (FY11) Values requires a strong process. Following the seminar, 16 political commitment and basic principles to the Ministerial Rapid Results Initiatives financing. Congolese have been implemented into eight IDF: DRC- Demand-side administration: ministries; including the one related to Governance and 1. Number of key the implementation of the Code of Strengthening of the Civil ministries Values within the public Society (TF097437) implementing Code; administration. However, the process got disrupted during the presidential and legislative elections, and the Code GAC DRC empowering of Values is not yet implemented. The citizens to support better Establishing Capacity for Core Public governance (TF097773) Management Project which was expected to contribute to its implementation was only approved end-June 2011, due to the governance situation in the country. 75 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS CAS Outcome 1.2: 1. and a. Achieved. The Government Establishing Capacity for Adoption by a. Finalization of PAP-REC has redesigned the National Capacity Core Public Government and and PRONAREC; Building Program (Programme Management" Project partners of the National National de Renforcement des (FY11) Capacity Building Capacités – PRONAREC), which will Program (PRONAREC): now cover the duration of the new PRSP II and has been refocused on IDF: DRC- Demand-side 1. PRONAREC Governance and approved by public sector capacity. A detailed first phase Action Plan called PAP-REC Strengthening of the Civil government Society (TF097437) (Programme d’Actions Prioritaires – Renforcement des Capacités), covering the first three years of implementation, GAC DRC empowering has been also finalized. After the citizens to support better conclusion of PAP-REC, the support to governance (TF097773) PRONAREC will adopt a more programmatic modality based on annual plans, sound fiduciary Capacity Building in management, and effective reporting Macro-projections for the that will require disbursement to be MTEF and PRSP closely linked to results. (TF094817) These two documents have been adopted on December 14, 2010 by the Economic Commission of the Government (ECOREC), which is charged with the coordination of institutional reform policies and approved by Government Decree in March 2011. 76 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS b. Discussion of PAP-REC b. Achieved. Discussions of PAP-REC and PRONAREC with and PRONAREC with civil society civil society and private and private sector took place during sector; the consultations organized in the context of preparation of the PRSP2. c. Funding for initial action c. Achieved. Funding was made plan acquired; available by the Bank. 2. Implementation plan d. Implementation begins 2. and d. Achieved. A pilot strategic with budget leadership seminar was held for nine approved; selected ministries (Finance, Budget, Planning, Public Service, Decentralization, Education, Health, Regional and International Cooperation and Infrastructure) on 12- 13 March 2011 with the aim to pilot a Results Based Management approach to resolving key impediments to the implementation of priority policy agendas. The Establishing Capacity for Core Public Management" Project approved (FY11) is designed as a Technical Assistance Grant with a programmatic perspective and it is built on a short term and a long-term track. The system of results based management operates successfully in 77 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS some ministries as well as at the provincial level, including in Katanga and South Kivu. CAS Outcome 1.3: 1. Not achieved. The latest data Establish a more available is from 3rd quarter 2009 Governance ESW (FY10) Support to core elements effective and transparent which indicates that 643,308 civil of the public payroll system for civil servants are registered in DRC. Of this administration reform, in servants: total, 179,278 (28%) are paid through Enhancing Governance particular the retirement 1. Discrepancy between the simplified payroll system known as Capacity (FY08) process, needs to be personnel register and PTS. The PTS is not yet extended to provided through a payroll numbers is the provinces. Remainder receives flexible instrument, Coordinated PFM reform allowing for long-term reduced from 20% occasional allowances. The ongoing Assistance to DRC support. (2007) to less than 5% in Civil service census (expected to be (TF093502) 2011; completed by June 2013) will clarify the status and number of workers. Fiscal and Administrative 2. Partially achieved. Achievement Impact Assessment of 2. Base pay is at least 75% estimated at 55% to 60% by end-2009 Administrative Territorial of real pay in 2011, up and varies by ministry (latest data Reform in DRC from 10% in 2007; available). (TF093364) 3. 65% of central 3. Partially achieved. By end-2011, government civil 55% of civil servants from Central servants are paid through Government were paid by the PTS. a reformed payroll system by 2011, up from a. Public service pay system a. Achieved. Public service pay 31% 2008; is simplified, reducing system is being simplified. The number of variables from number of variables is reduced to 3. 20 to 3; 78 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS b. A Human Resource b. Not achieved. The census is not Database is operational at completed and a fully operational central level; database is not yet in place. The census got delayed due to lack of sufficient funding and is expected to be completed by June 2013. 4. Civil service c. At least 15,000 public 4. and c. Partially achieved. In the retirement process servants having reached context of the President’s Zero and organizational the mandatory pension age Tolerance Initiative, the retirement re-alignment effectively process was re-initiated; including (i) completed for at the launching process of mass least two ministries retirement of 1,212 Secretaries- General and other Ministry officials in July 2009 and of 2,569 Ministry Officials in January 2010. The Ministry of Environment, Nature Conservation and Tourism (MENCT) is the most advanced with a biometric census that has identified all MECNT staff including approximately 2,700 workers eligible for retirement, 1,700 of whom received their retirement payments in May 2011. Progress was also made in defining eligible staff and processes in several other ministries (agriculture, budget and finance in particular). 79 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS CAS Outcome 1.4: Fiduciary systems are Governance ESW (FY11) established in targeted provinces: Enhancing Governance 1. Partially Achieved. By end-2011, Capacity (FY08) 1. At least 35% of domestic revenue is 31.54% of national revenue was transferred to sub- transferred to the provinces,39 which is Coordinated PFM reform a significant progress compared to the national level by 2011 Assistance to DRC 11% in 2008. compared to 10-15% in (TF093502) 2007; a. Not achieved. Legal framework for a. 11 provinces have fully Fiscal and Administrative provincial & local Governments has taken over exclusive not yet been promulgated. The Impact Assessment of competencies; competencies are not yet transferred to Administrative Territorial the provinces. Reform in DRC (TF093364) b. New revenue retention and b. Partially achieved. New revenue retention & transfer systems being transfer systems fully prepared. operational; c. Public service and payroll c. Partially achieved. Systems in systems in place in 5 place in Bandundu, Bas Congo, provinces Katanga and South Kivu, not yet in Kasai Occidental. 2. Citizen satisfaction with d. Baseline Citizen Scorecard 2. and d. Achieved. The first survey public services in Survey undertaken 39 30 percent of budget is used for provincial expenditure, but out of these 60 percent are still centrally managed 80 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS targeted provinces was undertaken in 2009 and the second reaches at least 60%; one will be done in February 2013. In targeted provinces (Bandundu, South- Kivu and Katanga), results obtained so far show that: 60% of the population is satisfied with services provided in the health sector; 50% in the education sector, 60% in the water sector, and 66% in the energy sector. CAS Outcome 1.5: Central HIPC Initiative Government revenues are increased and the budgetary process is reformed: 1. Achieved. Revenues increased by PER (FY08) 125 percent from FC 1.2 trillion in 1. 20% increase in 2008 to FC 2.7 trillion in 2011 Government revenues (excluding signing bonus from joint CFAA (FY09) excluding grants (from venture with China), as a share of GDP 13.3% of GDP in 2006); from 18.5 percent to 18.8 percent Enhancing Governance (against 13.3 percent in 2006). Capacity (FY08) 2. Deviation between 2. Not achieved. The deviation actual and budgeted Coordinated PFM reform between the voting budget and expenditure by central expenditure from domestic resources Assistance to DRC government is reduced increased from 34% in 2008 to 36% in (TF093502) from 34% in 2008 to less 2010, and then estimated 66% based than 20% by 2011. ; on budget execution in 2011, due to the insecurity in the Eastern DRC. a. Tax Authority has a fully a. Not achieved. Automated tax automated tax application application processing system is not processing system; yet in place, due to the delay in the 81 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS approval of the additional financing to the Enhancing Governance Capacity, which was expected to address this. b. Achieved. The new organic PFM b. New legal framework for Law was enacted on July 13, 2011 PFM; while a comprehensive PFM Reform Strategic Action Plan has been approved in 2010. c. Annual report on budget c. Achieved. The report on 2011 execution received from budget execution is published and key ministries starting provides information on executed 2010; expenditure by department and institution. d. Implementation of the d. Achieved. A new Procurement Law revised public is in force since April 2010 and new procurement legislation procurement institutions (ARMP and DGCMP) have been established at central level, the procurement units are set up at the provincial and sectoral levels. Implementation has started. CAS Pillar 2 – Creating Conditions for Growth and Economic Diversification (Corresponds to DRC PRSP Pillar 2 Consolidating Macro-Economic Stability and Growth) Outcome 2.1: Debt, inflation and fiscal 1. Partially achieved. Following the achievement of the DRC at the HIPC Initiative A deeper engagement is management improved: needed to actively completion point of HIPC, all external 1. Debt indicators below debt indicators remain below the participate in the the threshold levels by PER (FY08) macroeconomic dialogue, required thresholds, with the exception 2011; of the PV (Present value) of the debt- which requires DPLs. 82 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS to-GDP ratio (over 30%), due to Capacity Building in government guarantees for loans Macro-projections for the contracted by a joint venture under the MTEF and PRSP agreement Sino-Congolese to finance (TF094817) infrastructure. 2. Partially achieved. Because of 2. Inflation below 15% by rapidly rising in global food and fuel 2011; prices earlier this year, inflation fell to 15.4 percent at end 2011, and below 10 percent by end September 2012 while remaining on a downward trend. 3. Achieved. The domestic fiscal 3. Domestic fiscal balance balance deficit (on a cash basis) would deficit < 2% (IMF be contained in 1.7 percent of GDP, definition) by 2011. through fiscal discipline supported by the IMF EFC program. a. HIPC Completion Point a. Achieved. DRC reached the Completion Point under the enhanced achieved by 2010; HIPC Initiative and MDRI Initiative in June 2010. b. Debt information b. Achieved. All debts, including those management centralized; contracted under DRC-China agreement, are recorded in the national debt office (Direction Générale de la Dette Publique, DGDP) which has been integrated into the Ministry of Finance with the sole responsibility for coordinating and managing public 83 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS debt. c. Monthly debt service c. Achieved. Every quarter, the projections produced national debt office (DGDP) prepares quarterly; monthly debt service statements, including debt service projections, and provides it to the Ministry of Finance for payments. d. Monthly Treasury balance d. Achieved. Regarding with IMF ECF produced automatically. program, monthly treasury balance is produced and published after 30 days. CAS Outcome 2.2.: Emergency Living Support road Targeted transport Conditions Improvement maintenance program infrastructure is (FY05) – PUAACV and maintain the rehabilitated : effective operation of the 1. Increase in % national 1. Achieved. Progress was made in Road Maintenance Fund improving the condition of the high- Pro-Routes (FY08) (RMF) is critical. The roads (RN) in good priority road network (15,800 km). establishment of the condition (2077 km, RMF was a condition of 36% of the national roads are now Emergency Urban and 13.8%, in good effectiveness for Pro considered in good and fair condition. Social Rehabilitation condition 2009); Routes. Pro routes is (FY07) – PURUS setting up the RMF by 2. Achieved. Although no economic 2. Average transport costs preparing the Manual for analysis has been carried out, this on upgraded roads: Emergency Economic programming, objective is considered as achieved - 25% reduction in and Social Reunification implementation and with regard to the huge time savings transport costs for Support Project (FY04) – funding of the road recorded in these main arterial roads goods between PUSPRES maintenance program (although roads from Akula-Gemena- Lubumbashi and (completed in May 2012) Zongo were not completed). Travel Kasenga by 2010 and providing the road time has been dramatically reduced. compared to 2007 ; DRC Trade Facilitation sector with a sound road There is a 60% of reduction of - 30% reduction in Audit and Corridor development strategy transport costs on the Bank-financed transport costs for Diagnostic (TF095197) including a 15 to 20 84 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS goods between road (750km) between Kisangani and years investment and Akula and Gemena Beni. Between Lubumbashi and maintenance program by 2010 compared Kasenga, before the roads were (study undergoing). to 2007; rehabilitated and reopened to the traffic, it took 60 hours to cross 110 km, which has now reduced to 3 hours. Dialogue is also maintained with the Ministry in charge of a. 40 km of roads a. Partially achieved. 24 km of urban Public Works to follow rehabilitated in Kinshasa roads have been rehabilitated enabling up on the functioning of 980,000 inhabitants to have all season the RMF. The first to improve access for access to urban roads. Works for 15 technical audit report 800,000 residents; kms of urban roads are ongoing and related to works funded are expected to be completed by by the RMF is currently March, 2013. The implementation of under validation process. this activity is behind schedule due mainly to the time taken to have the bidding documents ready. b. Additional 1,400 km of b. Achieved. 1530 km of roads have roads (RN) reopened and been reopened. This includes 400 km from Proroutes, 930 km from maintained in Oriental, PUSPRES (Kisangani-Beni and South Kivu and Katanga; Bukavu-Kamituga); 60 km (from Mbuji Mayi) and 137 km (Lubumbashi-Kasomeno) from PUAACV. The roads reopened under Pro Routes will be maintained under Pro Routes. The Kisangani-Beni road reopened under PUSPRES will be maintained over a four year period, through an Output and performance bases road maintenance contract under 85 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS Pro-routes. The remaining works on Akula-Gemena-Libenge-Zongo (376kms) will be carried out and maintained by Pro Routes AF. CAS Outcome 2.3: Increased availability of 1. (i) Not achieved. The project has not yet achieved its intended results up Regional and Domestic electricity to serve domestic Power Market Rehabilitation works demand and for export: to now. Because of their complexity, should be assesses in the contracts have a long Development (FY07) 1. Increase power depth to properly implementation period. In addition, estimate their cost and delivered from Inga : due to the country’s post conflict gather sufficient Southern Africa Power (i) to Kinshasa from environment, studies and bidding information for a 3000 GWhs in 2007 documents could not properly define Market Program (SAPMP APL-1) (FY03 +add fin successful bidding to 3650 GWhs in the scope of the required rehabilitation exercise. 2011) works leading to protracted or repeated FY08) bidding for many contracts. Currently, Installation of new units works on four Inga units are ongoing instead of rehabilitation and first results will be visible by end- appears to be less risky. 2012 when the first Inga unit (G12) will be completely rehabilitated and In post conflict countries, commissioned. projects require longer implementation periods (ii) to South African 1. (ii) Partially achieved. and more frequent Bank Power Pool to 210 Rehabilitation works on transmission supervisions. MW from 100MW lines connecting Inga to the South by 2012, and to African Power Pool are ongoing. Katanga region to Although the indicator is not fully 300 MW by 2012; achieved, progress has been made and additional 50 MW are now available. 2. 330,000 households 2. Not achieved. Power distribution connected in Kinshasa infrastructure is not yet in place, but by 2011 (up from works are well underway. 86 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS 290,000 in 2006); c. Power distribution c. Partially achieved. There have infrastructure rehabilitated been delays due to costs overruns and in Kinshasa; underestimation of cost of appraisal, but works for the electrification of Kimbanseke and other areas in Kinshasa providing access to electricity is ongoing. Out of the 18 contracts for the distribution component, 13 have been signed and are being executed, including the installation of new transformers, rehabilitation of existing distribution sub-stations and supply of distribution equipment to SNEL for their maintenance. 3.Achieved. Progress has been made 3. Improved performance in the overall support to SNEL of SNEL as measured by performance. Revenue collected per (i) 30% increase in kWh has increased by 53% from 2007 revenue collected per to 2011. Total collection rate has kWh and (ii) increase in increased by 20% between 2007 and collection of account 201140. receivables from 35% to 55% in 2011; d. Partially achieved. The d. Rehabilitation of rehabilitation and reinforcement of the transmission line to border high voltage transmission line corridor of Zambia; from Inga to Kasumbalesa at the border with Zambia is ongoing. Under the SAPMP, 95km of new 40 SNEL data show 57.7% of total collection rate with arrears in 2007 and 78.5% in 2011. 87 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS transmission line have been built up to end-2011. The contract for the rehabilitation of the existing lines has been signed and works are scheduled to start by December 2012. CAS Outcome 2.4: Forest and Nature Essential part of success Undertake reforms and build Conservation (FY09) of politically challenging capacity so that natural legal review of resources are managed in a concessions was to build sustainable manner: Rehabilitation and and maintain a broad Participatory stakeholder coalition 1. Percentage of logging 1. Partially achieved. A new logging Management of Key (government, civil infractions discovered control system funded by the Bank- Protected Areas (FY08) society, timber industry that are prosecuted in funded Forest and Nature Conservation association, bilateral pilot provinces Project has become operational in donors). Western DRC in May 2012 and has MDTF Grant for already led to seizure of 100,000 m3 of Strengthening illegal logs, but no court cases have Governance for Nature been brought as yet. An Independent Resources in DRC Observer for the Forest Sector (IO), the (TF092910) NGO Resource Extraction Monitoring originally to be hired under a Bank- managed Multi-Donor Trust Fund was DRC: FCPF Readiness recruited by the EU and has carried out Grant (TF093871) a number of missions but their reports have not been made public as the DRC Forest Investment Regulation for the establishment of the Program - Project IO Oversight Committee has not been Preparation Grant adopted. 2. The management of key (TF011253) bio-diversity and natural 2. Partially Achieved. There has been habitats is improved (as significant progress in strengthening Economic Governance the capacity of the Congolese Nature 88 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS measured by increases in Conservation Institute (ICCN) to Matrix process the management scores); manage targeted protected areas. At (December 2010 – on the central level, with support from the going) Bank Project, ICCN has reinforced human resources in the Finance DRC - Support to the Department, which is in the process of Extractive Industries modernizing its financial, accounting Transparency Initiative and auditing systems in order to TF (TF091920) provide reports on budget execution. Newly recruited social development experts have launched a program of Growth with Governance training and support to reinforce the in the Mining Sector TA social development dimension of Project (P106982), ICCN’s conservation role. A contract for management of the Mikeno Sector (the mountain gorilla sector of the Virunga National Park) was signed with German conservancy institution in May 2010 and a contract for management of the Maiko National Park was signed with an NGO consortium in January 2012. ICCN has also completed negotiations with African Parks Network for a similar contract to manage the Garamba National Park. The contract is expected to be signed in the coming months. The management effectiveness scores will be updated annually following contract signature. 3. Number of contracts and pilot initiatives based on 3. Achieved. 7 REDD pilot projects 89 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS payment for carbon are under implementation throughout storage, biodiversity the country led by the National REDD conservation, and other Coordination supported by the World environmental services; Bank. DRC has been able to secure USD 60 million of investment capital from the Forest Investment Program, targeted at REDD+ activities ranging from sustainable biomass production to the promotion of community-based natural resource management. The country is currently putting in place the legislative framework for awarding rights for private sector firms to conduct forest carbon transactions in the country. Two contracts with private companies (Canadian Ecosystem Restoration Association and Jadora Company) have been signed for private-led REDD projects in DRC. Markets for other environmental services, such as Biodiversity, are still lagging behind, which is also a reflection of the global markets for ecosystem services in general. a. Moratorium on new forest a. Achieved. The moratorium has been concessions is maintained maintained and the legal review of and illegal concessions are concessions has been completed, cancelled; resulting in the cancellation of 76 concessions deemed illegal, halving the concession area in DRC (from 24 million ha to 12 million ha). 90 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS b. Achieved. Third party observer has b. Third party observer to been deployed, financed by EU. (See assist the forest also 1. above) administration in law enforcement in the field is deployed; c. Achieved. Through the GEF- c. ICCN and NGO financed National Protected Areas partnerships strengthened Network Rehabilitation Project the to rehabilitate protected Congolese Institute for Nature areas; Conservation (ICCN) has signed delegated management contracts with the Frankfurt Zoological Society for the management of the Mikeno Sector of the Virunga National Park, and with the Africa Parks Network for the management of the Garamba National Park. Contract for the Garamba park was not signed yet. Under the Forest and Nature Conservation Project, ICCN has signed a delegated management contract with an NGO consortium led by Conservation International for management of the Maiko National Park. d. Adopt specific legislation d. Partially Achieved. The target was and guidelines relative to partially achieved, through a Decree disclosure of company (passed on May 20, 2011) making information modeled on mandatory to publish signed contracts requirements of TSX or between SOEs of the extractive sector ASX; and private partners. This represents a 91 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS major step forward, as a result from the economic governance process related to the mining, hydrocarbons and forestry sectors. e. Upgrade skills of mines e. Not achieved. The dialogue between the Bank and the GoDRC focused on inspection service to the design of a more comprehensive conduct health, safety and institutional capacity building environmental compliance program, including evaluation and inspections in at least 15 monitoring, the implementation of mining sites in Katanga; which was delayed because of transparency issues in the mining. CAS Outcome 2.5: The dedicated IC steering Investment climate committee has been Business climate improved (FY07) and public enterprises are successful due to robust restructured and reformed in TA and financial support line with international IFC Pro-credit Bank from IDA, which is tied standards: to specific action plans, 1. Achieved. Number of days to create milestones and 1. Number of days to a business reduced to 65 days, which is IFC Global Trade achievements. Local create a company less than 50% of the 2005 data. Finance Program M&E capacity needs reduced by 30 percent strengthening. between 2006 and 2011; 2. Achieved. The IMF assessed that FIAS TA (FY08) 3 specialized commercial banking sector has strengthened courts have been 2. Commercial banks’ supervision leading to satisfactory compliance with constructed with IDA compliance, as evidenced by dramatic Private Sector Devt/ support and are fully prudential regulations is reduction in non-performing loans, Competitiveness (FY08) operational (Kinshasa, satisfactory (as per IMF number of problem banks and the fully Matadi and Kisangani); assessment) by 2011; recapitalized banking sector. while 3 others are being Infrastructure review (FY10) constructed. 92 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS 3. Achieved. Information available in ISR indicates that as of end-Dec 2009, Reform of business 3. At least 5 microfinance clients in the microfinance sector CEM (FY11) licensing procedures will institutions reach exceeded 700,000, indicating a be needed in each key operational self- phenomenal growth. industry sector (value chain). sufficiency by 2011; a. Partially achieved. Enterprise Modernization of registration process was simplified and payment system is more made less costly, as was issuance of lengthy, complex and a. Enterprise creation permits and licenses for construction of procedures and licensing costly to implement due premises, construction licenses and to fragile starting requirements are transfer of property titles. However, conditions in banking simplified; further work on simplification of system. licensing requirements is needed for each key industry sector. Commercial banks need training, and have b. Achieved. System modifications expressed desire to have been designed and an finance it, if it can be implementation action plan has been properly prepared for b. Action plan to modernize agreed. the payment system their needs. developed and agreed c. Partially achieved. A credit registry Payment system for upon; is working at the Central Bank and will small retail transactions be upgraded to a full Credit Bureau will be possible using c. Credit Bureau is under private management with mobile phone networks. modernized; assistance from IFC and the German Regulations are already Development Bank (KfW) by end- in place, but 2013. implementation is a slow process. d. Achieved. The Microfinance Promotion Fund (FPM) was registered Credit Bureau focus is on as a non-profit organization (ASBL) in modernizing the 93 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS d. Micro-Finance Promotion November 2010 and began operations centralized credit registry Fund is institutionalized; in February 2011, with initial loans and at the Central Bank, to be TA provided to several microfinance followed by a more clients in mid-2011 and a strong integrated credit pipeline of client applications being information system, processed in 2012 (4 outstanding loans currently under as of June 2012) development. e. Partially achieved. As of today, Inventory of assets is a inventory of SNCC assets is 85% partial element of reform completed due to the complexity and of the SOEs, which needs e. Inventories of RVA, geographical spread of its operations. much more work, both in ONATRA and SNCC Debts have been determined and a plan terms of policy assets and liabilities for their resolution has been decisiveness as well as completed formulated. Completion of assets leadership by inventory requires Government policy government. decisions their title registration and ownership rights, to reflect the new status of these enterprises recently transformed into corporate entities. CAS Pillar 3 – Providing Improved Access to Health and Education (Corresponds to DRC PRSP Pillar 3, Improving Access to Social Services and Reducing Vulnerability) 94 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS CAS Outcome 3.1: Access 1. Achieved. Increase from 64% in to and quality of basic 2007 to 93% in 2011. Availability of Education Sector Project. primary education services is timely core statistics remains (FY07) improved: challenging despite technical assistance from various donors. More coordinated efforts to continue. It is Youth Education Study 1. Increase in primary important to note that baseline data (FY08) education GER from was probably not entirely accurate at 64% in 2007 to 72% in that time, due to the weak statistical 2011 capacity in the country. Emergency Social Action Fund (FY05) 2. Achieved. Primary education 2. Increase in primary completion rate increased from 29% in Emergency Urban and education completion 2007 to 59% in 2011 (2010/11 school Social Rehabilitation rate from 29% in 2007 year data). It is important to note that project (FY07) to 34% in 2011 baseline data was probably not entirely accurate at that time, due to the weak Immunization and Vaccine statistical capacity in the country. Program (TF057963) a. Complete construction of a. Achieved. A total of 396 schools 396 schools and repair of have been constructed as part of the 600 classrooms in targeted Emergency Social Actions Fund areas ; project and 522 classrooms rehabilitated as part of the Education project. b. 30,000 primary school b. Achieved. As of today, 43,355 teachers are integrated into primary school teachers have been the public payroll; integrated into the public payroll, including 17,355 integrated in August 2011 by Bank-funded Education 95 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS project and 26,000 integrated in October 2010 by Government. c. Evaluate progress to c. Achieved. Although no formal assessment has been done, significant reduce school fees paid by efforts have been made to reduce parents ; school fees. From the Bank side, the Emergency Urban and Social Rehabilitation project financed school operating costs in targeted areas and the Education project supported the integration of primary school teachers into the public payroll (as described in the indicator above). Government has also adopted a fee-free policy in primary education, for the first three grades. d. Reform of teacher career d. Achieved. The Education project structure; restructuring supports this indicator. A draft teacher career structure (training, deployment, salary and incentives) has been approved by the Government. The final report on the teacher career structure has been submitted for Government approval. Reformed guidelines for pre-service teacher training have been developed and applied. 96 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS e. Education sector strategy e. Partially Achieved. The strategy for approved. primary, secondary education and vocational training was adopted by the Government in March 2010. The strategy for higher education and that for non-formal education and adult literacy are underway for Government adoption. The development of a global strategy for the sector is progressing with some difficulty as the task of integration of the three sub-sector strategies in a rational manner is complex. The selection of a consultant to support that work is well advanced. It is expected that the work will be completed by January 2013.A consensus has been made to put priority on primary education, and the fee-free policy in primary education, starting with the first three grades, has been under implementation since Sept 2010. CAS Outcome 3.2: Increase Health Sector The transfer of fiduciary access in target areas to a Rehabilitation Support management well-defined package of (FY06) responsibility from quality essential health BCECO (Min Finance) to services: 1. Achieved. The % of 0-11 months the Project vaccinated with DPT3 has increased Emergency Social Action Implementation Unit 1. % children 0-11 Fund (FY05) from 54% in 2007 to 83 % in 2011 in (PIU), while BCECO months vaccinated project districts. experts continued to with DPT3 increases provide Technical from 54% (2007) to Immunization and Assistance to build Vaccine Program 97 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS 75% (2011); (TF057963) capacity of the PIU, resulted in significant 2. % deliveries assisted 2. Achieved. 77% of deliveries were improvement in project assisted by qualified personnel in DRC Health Results- implementation and by qualified personnel increases 2011, compared to 47% in 2007, in Based Financing (HRBF) disbursement. project districts Design (TF092458) from 47% (2007) to Use of implementing 65% (2011); partners (international a. Complete 86 clinics. a Achieved. All 86 health centers have NGOs) contributed to been constructed under the Social ensuring delivery of Action Fund project. 808 health services to the target facilities have been constructed, population but further renovated/equipped through the Health effort needs to be made in project. strengthening of local health authorities' capacity to ensure better ownership. While the emphasis was understandably on the provision of basic health care, more attention should be paid to health systems strengthening: financing, human resources, pharmaceuticals, regulations/governance and Health Information systems. Insufficient coordination between donors existed 98 CAS Outcomes WBG Lessons and Expects to Influence by Milestones/Outputs by 2011 Progress made WBG instruments Suggestions for the new end 2011 CAS and opportunities for complementarities and synergy were undermined (situation has improved ) On HIV/AIDS, inappropriate project design and weak accountability arising from lack of clarity in the responsibilities. Project would have required much closer monitoring In general: lack of robust information available from HMIS on health status, service delivery, performance. External Evaluation Agency or surveys complemented this but needs further strengthening of HMIS. Important logistical difficulties in carrying out field supervisions (outside Kinshasa). 99 CAS Completion Report - Indicative and Actual Lending Program for FY08-FY11 CAS Plan Status IDA IDA DDR Supplemental (Demobilization & 50 Actual 50 Reintegration) EMRRP Supplemental (PMURR) 12 Actual 12 Private Sector Development AF 60 Actual 60 FY08 South Power Pool AF 30 Forwarded to FY09 182 Governance Capacity Enhancement 50 Actual 50 Roads Rehabilitation and Maintenance 40 Actual 50 TOTAL FOR FY08 242 Forest Sector 50 Actual 64 Water Sector Rehabilitation 150 Actual 190 Economic Management Support TA 30 Dropped FY09 Mining 50 Forwarded to early FY11 TOTAL FOR FY09 280 Multi-modal Transport 180 Actual 255 Agriculture 120 Actual 120 FY10 Urban Rehabilitation and Development AF 100 Actual 40 Development Policy 50 Dropped TOTAL FOR FY10 450 Power Power Pool Expansion AF 150 Forwarded to FY12 180 Education SWAP 80 Dropped Health SWAP 80 Dropped FY11 Governance 50 Actual 30 Social Fund AF 50 Actual 35 TOTAL FOR FY11 410 Progress Report Plan Status Proroutes AF 90 Forwarded to FY11 63 PROMINES 50 Actual 50 Multimodal 255 Actual 255 FY10 Street Children 10 Actual 10 PURUS AF 40 Actual 40 Regional Trade Facilitation 3.5 Dropped TOTAL FOR FY10 340 Core Public Sector Management 30 Actual 30 Public Service Rejuvenation 40 Forwarded to FY13 100 Private Sector Development AF 30 Dropped FY11 DPO 100 Dropped PARSS AF 80 Actual 30 PMEDE AF 100 Actual 283 TOTAL FY11 380 100 Appendix 3: Tentative AAA Pipeline under New CAS (FY13-FY16) Activities Planned delivery Strategic Objective 1: Increase State effectiveness and improve good governance PEFA/Public Investment Management FY13–14 Poverty Monitoring/Statistics and Economic Updates FY13–16 ROSC FY14 Strategic Objective 2: Boost competitiveness to accelerate private sector-led growth and job creation Skills Development Study FY13 Policy Advice ICT Dialogue/ICT Regulation Services FY13–14 FSAP/Strengthening the Payment System TA FY13–14 Investment Climate Strategy FY14 Spatial Economics of the Five Economic Priority Zones FY15 Oil and Gas Sector Diagnostic and Advisory and TA FY14 Regional integration Addressing the climate vulnerability of Africa’s infrastructure: DRC Inga3 FY14 Competing suppliers to ensure economic efficiency in multi-country region Study FY15 River and Urban Transport Diagnostic FY14–15 Strategic objective 3: Improve social services delivery and increase human development indicators Health Systems Programmatic NLTA FY14-16 Higher Education Strategy and Skills Programmatic AAA FY14-16 Social Sector Public Expenditure Review FY14 Social Protection Strategy FY14-FY15 Strategic objective 4: Address fragility and conflict in the Eastern provinces Public Expenditure Review (Security Sector)/Analysis on Sources of Conflict (*) FY14–15 Policy Dialogue AAA on policy actions that promote peace building FY14-16 (*) This activity will be undertaken in partnership with other donors. 101 Appendix4: Tentative Lending Pipeline under New CAS (FY13-FY16) IDA amount Planned delivery (US$m) National projects Strategic Objective 1: Increase state effectiveness and improve good governance Public Sector Reform and Rejuvenation FY13 100 Additional Financing to Governance Project FY13 67 Additional Financing to PROMINES FY14 15 Statistics Project FY15 20 Strategic Objective 2: Boost competitiveness of the economy to unleash private-sector-led growth and job creation Urban Development Project FY13 100 Western DRC Agriculture-based Growth Pole FY13 110 Additional Financing to MULTIMODAL FY13 180 New Financial Sector Project FY14 40 Southeastern DRC Agriculture-based Growth Pole FY15 100 Strategic Objective 3: Improve social services delivery and increase human development indicators New Multi-Sector HD Technical Assistance FY 14 15 New Health Systems and Results Project FY15 150 Eastern DRC Economic Recovery Project FY14 65 Post-Basic Education and Training FY15 150 Strategic Objective 4: Address fragility and conflict in the Eastern provinces Eastern DRC Economic Recovery Project FY 14 65(*) Regional projects Share of regional Inga3 Feasibility Studies (**)- FY13 50 CAB Project FY14 25 Outer years – To be determined - TBD (*)Eastern DRC Economic Recovery Projection also will support social service delivery activities under Strategic Objective3 (**) Financed with national IDA. 102 Other Pipeline/Planned Operations (Non-IDA Resources) Amount Planned delivery (US$m) National projects PFM and Accountability Program FY13 25.0 GEF conservation TF FY13 11.3 GPE Education Project FY13 100.0 Catalytic Project to strengthen the National Statistics Institute FY13 11.8 Phase II EITI Implementation FY13 0.5 IDF new procurement law capacity building TA FY13 0.42 REDD Readiness FY13 3.6 Forest Investment TF FY13 36.0 State and Peace Building Facility FY13 7.0 Hydro-met TA project FY14 10.0 103 Appendix 5: DRC Portfolio as of End December 2012 Name of Project Date of Effectiveness Closing Age Total Total Disb. Disb in FY13 Approval Date Date Allocation (US$mil) (US$mil) (US$mil) Growth and Governance in the July-10 Oct-11 Dec-15 1,4 50.00 3,9 0.5 Mineral sector (PROMINES) Multimodal Transport (PTM) June-10 April-11 Dec-15 1,4 255.00 106.6 27.7 Road Reopening (PROROUTES) Mar-08 Oct-08 June-16 3,7 113.30 28.8 11.4 Enhancing Governance Capacity April-08 Aug-08 Feb-13 3,6 50.00 48.5 2.3 (PRCG) Capacity for Core Public June-09 Oct-11 Sep-16 0,4 29.90 3.2 0.7 Management (PRCG GAP) Agriculture Rehabilitation & Mar-10 Dec-10 Dec-15 1,7 120.00 27.3 5.6 Recovery (PAARSA) Forest and Nature Conservation April-09 Sep-09 June-15 2,7 64.00 36.9 3.7 (PNFC) Private Sector Development and July-03 Dec-03 Dec-12 8,3 180.00 165.8 10.3 Competitiveness (PCDSP) Education Sector Project June-07 Jan-08 Dec-13 4,5 150.00 71.4 10.5 (PARSE) Health Sector Rehabilitation Sep-05 April-06 June-13 6,2 335.00 251.3 27.4 Support (PARSS) Emergency Social Action (PASU) Aug-04 July-05 Mar-13 7,3 101.80 97.7 16.7 Street Children (EDR) June-10 Feb-11 Aug-15 1,5 10.00 2.3 1.0 Emergency Urban and Social Mar-07 July-07 May-12 4,7 220.00 189.4 9.1 Rehabilitation Project (PURUS) Urban Water Supply Project Dec-08 Nov-09 Mar-14 3,0 190,00 49.1 10.1 (PEMU) Subtotal 1 1,869 1,090.3 137 2 Regional Projects Regional Southern Africa Power Nov-03 May-04 Jan-13 8,0 560.6 182.1 10.5 Market (SAPMP) Regional and Domestic Power May-07 April-08 Oct-17 4,4 579,70 103.5 9.1 Market Development (PMEDE) Subtotal 2 1140.3 285.6 19.6 Total 3,009.3 1,375.9 156.6 104 Appendix6: Ongoing AAA FY Project ID Project Name 2012 P104047 DRC Governance and Public Sector ESW 2012 P116349 DRC Health Systems and Financing 2012 P123857 DRC Skills Development Study 2012 P109868 Country Gender Assessment 2012 P113619 Coordinated PFM Reform Assistance 2012 P115349 Statistical Work for NDSS 2012 P118929 TA for Poverty Monitoring 2012 P119794 Issues and options rural electrification TA 2012 P123040 Provincial Macro Economic Projection 2012 P127283 Oil and Gas 2012 P127546 Support for introducing the "BOOST" 2012 P128640 Operationalizing Higher Education 2012 P130862 Reform Plan 105 Appendix 7: Trust Funds Portfolio (as of January 2013) The Bank funding envelop for the Democratic Republic of Congo described in Appendix 5 is complemented by a Trust Funds (TFs) portfolio amounting to approximately US$30 million in net commitments. The portfolio consists of 24 active Trust Funds mostly recipient-executed, with an overall disbursement rate of 42 percent as of January 2013.The funds are distributed among six major sectors with a large allocation to Forestry and Nature Conservation (45 percent), and Governance (19 percent). More specifically, donor contributions were translated in the implementation of the National Parks Network Rehabilitation Project and the Forest and Nature Conservation Project, which serve as mechanisms to ensure transparency in the forestry sector. Additionally, two TFs were set up in order to increase the effectiveness of the state at all levels and improve governance, particularly in the mining sector. Major efforts to strengthen the health sector are mainly supported by the TF for Capacity Building in Budget Preparation for the Health Sector. DRC Trust Funds Portfolio(Figures in thousands of USD) Project # TF Name Amt. Disb. Balance Fund Effective Closing Sector FY Benef. Date Date P083813 National Parks Network 7,000.0 3,204.4 3,795.60 Recipient 9/25/2009 1/31/2014 Forestry, nature 9 Rehabilitation Project conservation P096414 IbiBateke Carbon Sink Project 320.0 70.0 250.00 Recipient 8/4/2009 12/31/2018 Forestry, nature 10 conservation P111621 Forest and Nature Conservation 6,000.0 933.7 5,066.30 Recipient 9/9/2009 6/30/2015 Forestry, nature 10 Project conservation P126214 DRC - FIP Investment Plan 250.0 99.3 150.70 Recipient 8/30/2011 12/15/2012 Forestry, nature 12 Preparation Grant conservation P128887 Forest Investment Plan: MDB 250.0 0.0 250.00 Recipient 11/30/2011 10/31/2018 Forestry, nature 12 fees for FIP Program 5 conservation P104041 Country Governance and Anti- 3,000.0 2,453.7 546.30 Recipient 1/30/2009 10/31/2013 Governance 9 corruption program implementation P121445 IDF - Demand-side Governance 465.5 221.9 243.60 Recipient 8/23/2010 8/23/2013 Governance 11 and Strengthening of the Civil Society P106982 Growth with Governance in the 2,278.7 44.6 2,234.10 Bank 10/10/2011 10/29/2015 Governance 12 Mineral Sector P126890 Capacity Building in Budget 1,072.1 229.3 842.80 Bank 10/1/2011 10/31/2013 Health and social 12 Preparation for the Health Sector service P126890 Capacity Building in Budget 2,627.4 886.9 1,740.50 Recipient 12/7/2011 8/31/2013 Health and social 12 Preparation for the Health Sector service Project SEZ Program-Phase II 1,875.0 1,865.3 9.70 Bank 6/1/2009 2/28/2013 Industry/Trade 9 IFC- GTF DRC 100.0 89.7 10.30 Bank 3/15/2011 2/28/2013 Industry/Trade 11 00549376 P123857 Improving Linkages Between 68.5 0.0 68.50 Recipient 6/8/2012 12/31/2012 Industry/Trade 12 Skills Supply and Demand P071144 Project Pipeline Screening and 74.0 10.7 63.30 Recipient 11/27/2012 6/30/2013 Industry/Trade 13 Initial Feasibility Assessment of Potential Infrastructure PPPs in DRC TF013412 Foundation for International 500.0 37.7 462.30 Bank 10/5/2012 9/30/2016 Industry/Trade 13 Community Assistance Democratic Republic of Congo MasterCard Foundation Technical Assistance P132451 DRC Strengthening the Payment 510.8 0.4 510.40 Recipient 7/17/2012 4/30/2013 Industry/Trade 13 System 106 P106432 Capacity building for the 350.0 348.6 1.40 Recipient 5/13/2010 12/30/2012 Public Adm., Law 10 preparation and use of a 1-2-3 survey in the context of DR Congo’s PRSP 2. P120647 Multi-Donor Trust Fund for 224.7 48.5 176.20 Recipient 6/10/2011 9/30/2012 Public Adm., Law 11 Statistical Capacity Building - III P123040 Technical assistance and 305.2 294.3 10.90 Recipient 10/29/2010 3/31/2013 Public Adm., Law 11 capacity building for budget preparation in DRC provinces P128452 Capacity building at the DRC 600.0 10.2 589.80 Recipient 11/7/2011 3/29/2013 Public Adm., Law 12 PRSP unit "UPPE" P078658 Women's and Children's Rights 430.0 425.0 5.00 Recipient 2/8/2010 9/30/2012 Social protection 10 in the DRC Country Program P109868 Evaluation of Gender Based 200.0 38.9 161.10 Recipient 7/27/2010 6/30/2013 Social protection 11 Violence Program in South Kivu P115318 Evaluating efforts to prevent the 200.0 111.8 88.20 Recipient 7/23/2010 6/30/2013 Social protection 11 phenomenon of street children in an African post conflict country P117558 Addressing Gender Based 1,984.8 1,599.0 385.80 Recipient 7/30/2010 9/30/2012 Social protection 11 Violence in South Kivu, DRC TOTAL 30,686.6 13,023.8 17,662.80 DRC Trust Funds Portfolio by Sector (in thousands of USD) Sector Approvals Disbursed Disb. Rate (%) Forestry, Nature Conservation 13,820.0 4,307.4 31.2 Governance 5,744.2 2,720.2 47.4 Health and Social Service 3,699.4 1,116.2 30.2 Industry/Trade 3,128.3 2,003.8 64.1 Public Administration, Law 1,479.9 701.6 47.4 Social Protection 2,814.8 2,174.7 77.3 TOTAL 30,686.6 13,023.8 42.4 DRC Trust Funds Portfolio - Approvals Social Protection Public Admin., Law 9% 5% Industry & Trade 10% Forestry, Nature Conservation Health and Social 45% Service 12% Governance 19% 107 Appendix 8: Donors’ Engagements and World Bank’s Contribution to Poverty Reduction in DRC 108 109 110 111 Appendix 9: DRC Progress to MDGs Likelihood of 1990 MDGs Current status Millennium Development Goals achieving target benchmark (year) DRC by 2015 1. Halve the rates for extreme poverty and malnutrition - Low - Poverty headcount ratio at $1.25 a day (PPP) (% of population) 71 (2006) 2. Achieve universal primary education - Primary completion rate, total (% of relevant age group) Low 48 59 (2008) 3. Eliminate gender disparity in education and empower women - Raise ratio of girls/boys in primary school to 100%. 70 86 (2009) Medium 4. Reduce child mortality by two-thirds - Reduce under 5 mortality rate (per 1,000) 181 158 (2010) Low - Reduce infant mortality rate (per 1,000 live births) 117 97 (2010) Low 5. Reduce maternal mortality by three-fourths - Maternal mortality ratio (modeled estimate, per 100,000 live births) 900 670 (2008) Low 6. Combat HIV/AIDS, malaria, and other diseases - Prevalence of HIV/AIDS (% of population ages 15-49) - 1.3 (2007) 7. Halve the proportion of people without sustainable access to basic needs - Access to an improved water source (% of population) 45 26 (2010) Low Data source: World Development Indicators (December 2011 version) updated with latest sector data aggregated from various sources. The year for the estimate is in parentheses. 112 Appendix 10: DRC-Macroeconomic Indicators 2007-16 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Nominal GDP at market prices (in millions of US$) 10,028 11,595 11,108 13,124 15,689 17,703 19,352 20,784 22,404 24,234 Nominal GDP at market prices (in billions of CF) 5,175 6,530 9,073 11,903 14,403 16,255 18,288 20,878 23,904 27,385 (Annual percent change) GDP Growth 6.3 6.2 2.8 7.2 6.9 7.1 8.3 6.4 6.9 6.8 Extractive industries 2.5 11.4 0.8 24.9 15.7 13.1 15.2 6.6 8.4 7.1 Non-mining 6.8 5.4 3.2 4.5 5.3 5.9 6.8 6.4 6.6 6.7 Inflation 10.0 27.6 53.4 9.8 15.4 5.7 4.0 3.7 3.5 3.5 (Percent of GDP) Gross National saving 17.1 4.9 7.5 15.4 9.0 15.0 17.0 16.8 17.9 19.8 Gross Investment 18.2 22.4 18.0 23.5 20.5 27.4 29.0 30.0 30.2 29.8 Public investment 2.3 3.7 5.3 8.5 6.7 9.8 9.8 8.9 8.3 7.7 Private investment 15.9 18.7 12.7 15.0 13.9 17.6 19.2 21.2 21.8 22.1 Current account balance(1) -1.1 -17.5 -10.5 -8.1 -11.6 -12.4 -12.0 -13.3 -12.2 -10.0 Government Revenue (including grants) 17.0 17.9 16.8 19.0 18.9 22.3 21.7 23.4 25.0 27.4 Total Government expenditure 26.0 19.4 26.0 27.3 29.1 33.5 31.8 33.0 33.6 34.1 Overall fiscal balance, commit. basis -3.5 -3.3 -1.7 5.8 -1.8 -2.3 -3.1 -4.2 -3.8 -3.6 (US$ millions) Exports, merchandise 6,142 6,586 4,370 8,321 9,800 9,244 10,585 12,034 13,405 15,090 Imports, merchandise -5,257 -6,711 -4,949 -7,667 -9,301 -8,555 -9,268 -9,668 -9,811 -10,476 Factor income, balance -635 -1,321 -779 -910 -1,272 -2,036 -2,762 -4,323 -5,688 -6,400 Gross international reserve (in weeks of imports) 1.2 0.8 6.3 6.9 7.8 7.1 7.8 8.8 9.1 9.4 Source: Congolese authorities and IMF staff estimates and projections (as of January 2013) (*) projections (1)including grants 113 Appendix 11: IFC Programs INVESTMENT ACTIVITY Client Sector Commitment INSTRUMENTS (US$M) ProCredit Bank Congo Finance & Insurance 1.26 Equity Advans bank Congo Finance & Insurance 2.65 Equity Rawbank Finance & Insurance 5.60 Loan Stanbic Finance & Insurance 3.00 Loan KMT Oil, Gas and Mining 0.34 Equity Airtel Telecom 34.00 Loan Tigo Telecom 50.00 Loan TOTAL 96.85 114 2. ONGOING ADVISORY SERVICES Programs Objective Clients Beneficiaries DRC SME Enhance the ability of farmers and MSMEs to Multi clients: large Farmers, Development increase revenues and expand access to growth firms, banks, donors, MSMEs Program markets by strengthening their management capacity NGOs, BMOs (financial literacy, business acumen) and their access (Business Membership to financial services and to information. Organizations), etc. On top of the credit line of US$7 million provided by Rawbank MSMEs IFC, IFC offered an 2 year onsite advisory program (special focus (supported by a Resident Advisor and 2 local Staff) to on women strengthen the Bank’s capacity to lend to MSMEs entrepreneurs IFC Ventures Provide Risk Capital (equity, quasi-equity & loans): King Kuba Capital Farmers, (SME Fund) MSMEs Special Develop a pilot SEZ that would provide a competitive MSMEs and Economic Zones operating environment with respect to business large regulations and infrastructure for national and corporations international investors. Program implemented jointly by IFC and the WB as agreed in February 2012. The deliverables of the SEZ program will be incorporated into the WB Growth Poles Program. Business Support the Government on business reforms environment OHADA IFC and the World Bank have been supporting the country’s adhesion to Organization for the Harmonization of Corporate Law in Africa (OHADA). The objective is to provide a clear and sound commercial legal system to ensure a more efficient and fair justice in DRC to the private sector. Global Trade Increase the provision of trade finance to underserved Banks Commercial Finance Program clients through the development of local banks’ trade Banks’ Staff finance specialists (training, etc.) Leasing Program Support implementation of leasing in DRC by Leasing Operators MSMEs assisting leasing companies. Awaiting regulation adoption by DRC Parliament Village Phone Support a client company (Airtel) to improve access Airtel (MOU signed) MFIs, MSMEs, to telecommunications for the populations in remote Populations are and/or poorly covered areas. Implement the necessary infrastructure in remote areas to meet the need of underserved market and develop entrepreneurship schemes 115 3. SUPPORTS TO CLIENTS AND BENEFICIARIES Number of Number of MSMEs MSMEs in Number of Participant INITIATIVE reached Agribusiness Participants Women MIDEMA: Support to Midema Supply Chain; bakeries, poultry sector 348 348 1065 369 MINOCO: Support to bakeries in Brazzaville & Pointe-Noire (Replication of IFC-Midema Project in Congo Brazzaville through the SEABOARD Group Shareholding): 34 34 117 0 VODACOM: Support to Staff 0 0 126 53 RAWBANK: Support for Extension of clientele base & Portfolio Improvement 336 24 993 887 PROCREDIT BANK: Support for its up scaling Project targeting bigger SMEs Support targeting 400 farmers/MSMEs 77 23 288 104 Business Membership Organizations (BMOs): 100 7 103 67 BE accredited Firms Led Initiatives (with the Support of SNV, BTC, Crafod) 90 90 109 23 IFC Show Case at Agribusiness FAIR in Kimpese (Bas-Congo) 36 36 36 5 Long Distance Training – Pilot by IFC 73 61 73 11 WB – IFC: WB Retrenchment Program (Support to Retrenched Staff from REGIDESO to launch new career as entrepreneurs) 282 136 1692 0 TOTAL 1376 759 4602 1519 116 Appendix 12: Key findings of the 2012 PEFA Assessment Despite recent progress, improving public sector capacity and efficiency is one of the key challenges in the DRC. The 2008 and 2012 Public Expenditures and Financial Accountability (PEFA) reviews identify a range of weaknesses in DRC’s Public Financial Management system, including critical shortcomings in budget preparation and execution processes as well as in internal and external controls. These shortcomings are a key impediment to service delivery. The key features of the PFM performance system in DRC are follows: Planning and budgeting.There is no coherent forward-looking perspective in the budget. Despite the development of medium-term expenditures frameworks (MTEF) in key sectors (i.e., health, primary, secondary and vocational education, agriculture, rural development and infrastructure), the link between sector policies and priorities and the budget is still weak. Major capacity constraints exist in various departments. The Directorates of Studies and Planning of line ministries still have difficulties in identifying and evaluating investment projects. Moreover, the new budget classification is still not operational, nor is it fully understood by all stakeholders. It has not yet been codified into the PFM information system. Furthermore, there is no clear plan to establish administrative and financial directorates in line ministries, although this is a key requirement of the Public Financial Management Act (Loi relative aux Finances Publiques, hereafter LOFIP)41. Budget execution. Budget execution is affected mainly by (a) redundant and lengthy steps in budget execution processes, including various political interventions in the approval of commitments and payments; (b) abuse in the use of the exceptional/emergency procedures; (c) excessive centralization of budget execution authority in the Ministry of Economy and Finance and Ministry of Budget; (d) and non- incorporation of significant budget expenditures, including payroll into the budget management information system. Accounting, cash management, and reporting. One of the most important challenges in the modernization of the DRC PFM systems is the rebuilding of the entire accounting system. Both at the institutional and operational levels, accounting and financial reporting are characterized by considerable delays. A proposed reorganization of the various directorates in charge of accounting, cash management, and financial reporting is being developed. This reorganization includes the creation of a Directorate General for Public Accounts and the Treasury and the establishment of a General Regulation on Public Accounts. It also consists of the development and implementation of an accrual accounting system as well as the creation of a network of public accountants. This is an essential reform that should improve the quality and timely production of the accounts and periodic financial reports. However, it requires strong collaboration of the Central Bank that plays the de facto accountant general’s role in the PFM system. Internal audit. Internal audit falls under the purview of the General Inspectorate of Finance, which has overall authority to audit public finances. Recent retirements have reduced significantly the number of inspectors. Besides, like many government services, the General Inspectorate of Finance suffers from lack of funding for its operating costs. Consequently, the General Inspectorate does not have the capacity to perform its mandate adequately and cover key risk areas. External audits. The Supreme Audit Institution (Cour des Comptes), which has made significant progress over recent years with support from various donors, including the European Commission. As a result, the Cour des Comptes has developed its strategic plan and reviewed the Government’s audited financial statements from FY2004 to FY2008. However, significant challenges remain within the institution, including (a) delays in the approval of its organic law, which reinforces its independence; 41 Law No 11/011 of July 13, 2011. 117 (b)delays in judgment of the accounts; (c) lack of follow up of audit recommendations and findings; (d) limited human resources capacity; and (e) lack of audit manuals and a risk-based approach. Legislative oversight. The Constitution entrusts the Senate and the Parliament with the responsibility of financial oversight over government spending. The Parliamentary Oversight Committees, with the support of the Law Committee, are in charge of reviewing the draft budget bill and then to audition Cabinet and administrative authorities concerning its content. However, the Parliament and Senate have not played their oversight role over the last years, except for the review of the annual budget laws. They have not yet reviewed the audited financial statements sent by Cour des Comptes and have not taken any actions to follow up on these findings and observations. Members of Parliament also are facing serious capacity constraints and receive no support that would assist them in actually carrying out their oversight function. Public sector and PFM systems at the provincial level. Decentralization has been a key tenet of the country’s democratic processes since 2006 and was further strengthened by subsequent adoption of decentralization laws in 2008. It is broadly perceived as the only long-term option for preserving national integrity. With support from a World Bank-funded GCEP, a triumvirate of development partners that support public sector management reforms at the subnational level, the Government, and subnational authorities agreed in October 2010 on a decentralization framework. This framework agreement (plateforme minimale pour les provinces) sets minimum requirements that development partners must include in their programs when supporting subnational governments. In addition, each development partner was assigned specific provinces with the understanding that the framework agreement will be the basis for supporting public sector reforms. While the development of the framework agreement has improved the public sector management of the provinces, there remain significant challenges. Despite the apparent support of Central Government authorities to the decentralization agenda, fiscal transfers to provinces fluctuated between 6 and 15 percent in the period of 2007-2011.In addition, the adjustment fund (Caisse de péréquation) is not functioning. Another key challenge is the delay in adoption of laws and regulations by the provinces. There also are few checks and balances at the provincial level. Ex post controls (General Inspectorate of Finance and Cour des Comptes) are non-existent, and civil society oversight is still at its early stages. Provincial assemblies are still not exercising their oversight roles and tend to approve all documents submitted by the local authorities. Summary of PFM Performance Scores in 2012 and 2008 As a result of the weaknesses in its PFM system, DRC scored very low in the 2008 PEFA assessment — 22 of 28 indicators that measure PFM performance were rated “D�. In 2012, the PEFA assessment shows an improvement in the overall scoring of the performance indicators. Only 17 indicators were rated “D� with a majority improving from D to D+. However, the 2012 assessment also highlights the continued weaknesses in key pillars of the PFM framework. With four “D� scores, budget credibility ranks as the weakest pillar of the overall PFM system. External controls and legislative oversight also are areas of concern and where significant improvements are needed despite the clearing of backlog of audit reports by Cour des Comptes. One interesting finding is the rating for PI 8, Transparency of inter- governmental fiscal relations, which slightly improved from “D� in 2008 to “D+� in 2012 despite the country’s focus on decentralization. Another notable result is the static rating for donor practices. Like 2008, the 2012 scores rating donors’ practices remain at “D�, indicating a very low trust in the country’s PFM systems by the donor community. During the review period, none of the donors provided direct budget support. Financial information about donor-funded operations is partially included in the budget documents. 118 Appendix 13: DRC Transport Roads, 2012 Source: Ministère de l’Aménagement du Territoire, Urbanisme, Habitat, Infrastructures, Travaux Publics et Reconstruction, République Démocratique du Congo. 119 Appendix 14: Five Priority Economic Zones Identified under the Government Development Program, 2012–16 120 Appendix 15: CAS standard annexes Congo, Dem. Rep. at a glance 3/29/12 S ub- P O V E R T Y a nd S O C IA L C o ngo , S a ha ra n Lo w- Development diamond* D e m . R e p. A f ric a inc o m e 2 0 10 P o pulatio n, mid-year (millio ns) 70.0 853 796 Lif e expectancy GNI per capita (A tlas metho d, US$ ) 180 1 ,176 528 GNI (A tlas metho d, US$ billio ns) 12.0 1,004 421 A v e ra ge a nnua l gro wt h, 2 0 0 4 - 10 P o pulatio n (%) 2.8 2.5 2.1 Labo r fo rce (%) 3.2 2.8 2.6 GNI Gross per primary M o s t re c e nt e s t im a t e ( la t e s t ye a r a v a ila ble , 2 0 0 4 - 10 ) capita enrollment P o verty (% o f po pulatio n belo w natio nal po verty line) 71 .. .. Urban po pulatio n (% o f to tal po pulatio n) 35 37 28 Life expectancy at birth (years) 48 54 59 Infant mo rtality (per 1,000 live births) 97 76 70 Child malnutritio n (% o f children under 5) 28 22 23 Access to improv ed water source A ccess to an impro ved water so urce (% o f po pulatio n) 45 61 65 Literacy (% o f po pulatio n age 1 5+) 67 62 61 Gro ss primary enro llment (% o f scho o l-age po pulatio n) 94 100 104 Congo, Dem. Rep. M ale 100 104 108 Low-income group Female 87 95 101 KE Y E C O N O M IC R A T IO S a nd LO N G - T E R M T R E N D S 19 9 0 2000 2009 2 0 10 Economic ratios* GDP (US$ billio ns) 9.3 4.3 11.2 13.1 Gro ss capital fo rmatio n/GDP 9.1 3.5 28.7 .. Trade Expo rts o f go o ds and services/GDP 29.5 22.4 17.0 26.0 Gro ss do mestic savings/GDP 9.3 4.5 17.1 .. Gro ss natio nal savings/GDP .. .. .. .. Current acco unt balance/GDP -7.9 -4.6 -1 0.4 -6.8 Domestic Capital Interest payments/GDP 1.6 0.6 2.2 1.0 sav ings f ormation To tal debt/GDP 109.7 271.6 109.6 43.9 To tal debt service/expo rts 13.5 2.5 15.7 6.2 P resent value o f debt/GDP .. .. .. 22.6 P resent value o f debt/expo rts .. .. .. 68.4 Indebtedness 19 9 0 - 0 0 2 0 0 0 - 10 2009 2 0 10 2 0 10 - 14 (average annual gro wth) GDP -4.9 5.2 2.8 7.2 6.7 Congo, Dem. Rep. GDP per capita -7.8 2.3 0.0 4.3 4.0 Low-income group Expo rts o f go o ds and services -0.5 7.0 -6.2 52.9 9.3 S T R UC T UR E o f t he E C O N O M Y 19 9 0 2000 2009 2 0 10 Growth of capital and GDP (%) (% o f GDP ) 8 A griculture 31 .0 50.0 42.9 .. 6 Industry 29.0 20.3 24.0 .. 4 M anufacturing 11.3 4.8 5.5 .. 2 Services 40.0 29.7 33.0 .. 0 Ho useho ld final co nsumptio n expenditure 79.1 88.0 77.1 .. 05 06 07 08 09 10 General go v't final co nsumptio n expenditure 11.5 7.5 7.6 .. GCF GDP Impo rts o f go o ds and services 29.2 21.4 30.5 38.8 19 9 0 - 0 0 2 0 0 0 - 10 2009 2 0 10 Growth of exports and imports (%) (average annual gro wth) 60 A griculture 1.4 1.7 3.0 .. Industry -8.0 8.7 -4.2 .. 40 M anufacturing -8.7 6.3 .. .. 20 Services -13.0 11.2 5.9 .. 0 05 06 07 08 09 10 Ho useho ld final co nsumptio n expenditure -4.5 .. .. .. -20 General go v't final co nsumptio n expenditure -17.4 .. .. .. Gro ss capital fo rmatio n -0.7 .. .. .. Expor ts Imports Impo rts o f go o ds and services -2.4 15.7 -12.5 36.3 No te: 2010 data are preliminary estimates. This table was pro duced fro m the Develo pment Eco no mics LDB database. * The diamo nds sho w fo ur key indicato rs in the co untry (in bo ld) co mpared with its inco me-gro up average. If data are missing, the diamo nd will be inco mplete. 121 Congo, Dem. Rep. P R IC E S a nd G O V E R N M E N T F IN A N C E 19 9 0 2000 2009 2 0 10 Inflation (%) D o m e s t ic pric e s 50 (% change) 40 Co nsumer prices .. 511.0 46.2 23.5 30 Implicit GDP deflato r 109.0 515.8 35.2 22.4 20 G o v e rnm e nt f ina nc e 10 (% o f GDP , includes current grants) 0 Current revenue .. 5.1 24.3 33.0 05 06 07 08 09 10 Current budget balance .. -5.6 6.1 18.5 GDP deflator CPI Overall surplus/deficit .. -6.0 -4.2 2.4 TRADE 19 9 0 2000 2009 2 0 10 Export and import levels (US$ mill.) (US$ millio ns) To tal expo rts (fo b) .. 892 4,370 8,321 10,000 Co pper .. 444 .. .. 8,000 Co ffee .. 207 .. .. M anufactures .. 97 .. .. 6,000 To tal impo rts (cif) .. 669 4,949 7,667 4,000 Fo o d .. .. .. .. 2,000 Fuel and energy .. 49 .. .. Capital go o ds .. .. .. .. 0 04 05 06 07 08 09 10 Expo rt price index (2000=100) .. 100 .. .. Impo rt price index (2000=100) .. 100 .. .. Exports Imports Terms o f trade (2000=1 00) .. 100 .. .. B A LA N C E o f P A Y M E N T S 19 9 0 2000 2009 2 0 10 Current account balance to GDP (%) (US$ millio ns) Expo rts o f go o ds and services 2,557 963 5,021 8,978 0 04 05 06 07 08 09 10 Impo rts o f go o ds and services 2,497 915 6,766 10,102 Reso urce balance 60 48 -1,745 -1,124 -5 Net inco me -770 -388 -779 -881 -10 Net current transfers -27 141 .. .. Current acco unt balance -738 -199 -1,167 -897 -15 Financing items (net) 737 214 1,605 1,724 -20 Changes in net reserves 1 -15 -438 -827 M emo : Reserves including go ld (US$ millio ns) .. 51 .. .. Co nversio n rate (DEC, lo cal/US$ ) 2.39E-9 69.0 809.8 905.9 E X T E R N A L D E B T a nd R E S O UR C E F LO WS 19 9 0 2000 2009 2 0 10 Composition of 2010 debt (US$ mill.) (US$ millio ns) To tal debt o utstanding and disbursed 10,259 11,692 12,276 5,774 IB RD 49 81 0 0 G: 494 IDA 1,112 1,188 2,497 849 F: 106 B: 849 To tal debt service 348 25 623 268 C: 323 IB RD 6 0 0 0 IDA 9 0 23 13 Co mpo sitio n o f net reso urce flo ws Official grants 374 137 2,001 5,480 E: 2,279 Official credito rs 278 0 -100 -39 P rivate credito rs -12 0 -21 -4 D: 1,723 Fo reign direct investment (net inflo ws) -14 72 664 2,939 P o rtfo lio equity (net inflo ws) 0 0 0 0 Wo rld B ank pro gram Co mmitments 1 9 0 0 0 Disbursements 1 10 0 85 19 A - IBRD E - Bilateral B - IDA D - Other multilateral F - Private P rincipal repayments 7 0 7 1 C - IMF G - Short-term Net flo ws 103 0 78 17 Interest payments 8 0 16 12 Net transfers 94 0 62 6 No te: This table was pro duced fro m the Develo pment Eco no mics LDB database. 3/29/12 122 Millennium Development Goals Congo, Dem. Rep. With selected targets to achieve b etween 1990 and 2015 (estimate clo sest to date sho wn, +/- 2 years) C o ngo , D e m . R e p. G o a l 1: ha lv e t he ra t e s f o r e xt re m e po v e rt y a nd m a lnut rit io n 19 9 0 19 9 5 2000 2 0 10 P o verty headco unt ratio at $ 1 .25 a day (P P P , % o f po pulatio n) .. .. .. 87.7 P o verty headco unt ratio at natio nal po verty line (% o f po pulatio n) .. .. .. 71.3 Share o f inco me o r co nsumptio n to the po o rest qunitile (%) .. .. .. 5.5 P revalence o f malnutritio n (% o f children under 5) .. 30.7 33.6 28.2 G o a l 2 : e ns ure t ha t c hildre n a re a ble t o c o m ple t e prim a ry s c ho o ling P rimary scho o l enro llment (net, %) 56 60 33 .. P rimary co mpletio n rate (% o f relevant age gro up) 48 43 32 59 Seco ndary scho o l enro llment (gro ss, %) 21 26 19 38 Yo uth literacy rate (% o f peo ple ages 1 5-24) .. .. 70 68 G o a l 3 : e lim ina t e ge nde r dis pa rit y in e duc a t io n a nd e m po we r wo m e n Ratio o f girls to bo ys in primary and seco ndary educatio n (%) 70 67 80 79 Wo men emplo yed in the no nagricultural secto r (% o f no nagricultural emplo yment) 26 .. .. .. P ro po rtio n o f seats held by wo men in natio nal parliament (%) 5 5 .. 8 G o a l 4 : re duc e unde r- 5 m o rt a lit y by t wo - t hirds Under-5 mo rtality rate (per 1 ,000) 181 181 181 170 Infant mo rtality rate (per 1,000 live births) 117 117 117 1 12 M easles immunizatio n (pro po rtio n o f o ne-year o lds immunized, %) 38 27 46 68 G o a l 5 : re duc e m a t e rna l m o rt a lit y by t hre e - f o urt hs M aternal mo rtality ratio (mo deled estimate, per 1 00,000 live births) 900 910 850 670 B irths attended by skilled health staff (% o f to tal) .. .. 61 79 Co ntraceptive prevalence (% o f wo men ages 1 5-49) 8 .. 31 1 7 G o a l 6 : ha lt a nd be gin t o re v e rs e t he s pre a d o f H IV / A ID S a nd o t he r m a jo r dis e a s e s P revalence o f HIV (% o f po pulatio n ages 1 5-49) .. .. .. .. Incidence o f tuberculo sis (per 100,000 peo ple) 327 327 327 327 Tuberculo sis case detectio n rate (%, all fo rms) 18 30 38 53 G o a l 7 : ha lv e t he pro po rt io n o f pe o ple wit ho ut s us t a ina ble a c c e s s t o ba s ic ne e ds A ccess to an impro ved water so urce (% o f po pulatio n) 45 44 44 45 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 9 12 16 24 Fo rest area (% o f to tal land area) 70.7 .. 69.4 68.0 Terrestrial pro tected areas (% o f land area) 10.0 10.0 10.0 10.0 CO2 emissio ns (metric to ns per capita) 0.1 0.1 0.0 0.0 GDP per unit o f energy use (co nstant 2005 P P P $ per kg o f o il equivalent) 1.9 1.2 0.8 0.8 G o a l 8 : de v e lo p a glo ba l pa rt ne rs hip f o r de v e lo pm e nt Telepho ne mainlines (per 1 00 peo ple) 0.1 0.1 0.0 0.1 M o bile pho ne subscribers (per 1 00 peo ple) 0.0 0.0 0.0 17.9 Internet users (per 1 00 peo ple) 0.0 0.0 0.0 0.7 Co mputer users (per 1 00 peo ple) .. .. .. .. Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 100 100 20 75 75 15 50 50 10 25 25 5 0 2000 2005 2010 0 0 1990 1995 2000 2010 2000 2005 2010 Primary net enrollm ent ratio (..) Fixed + mob ile subscribers Ratio of girls to boys in prima ry & secondary Cong o, Dem. R ep. Sub-Sah aran Africa education Internet users No te: Figures in italics are fo r years o ther than tho se specified. .. indicates data are no t available. 4/5/12 Develo pment Eco no mics, Develo pment Data Gro up (DECDG). 123 Selected Indicators* of Bank Portfolio Performance and Management (As of date 1/10/2013) Indicator 2010 2011 2012 2013 Portfolio Assessment a Number of Projects Under Implementation 18 17 15 14 b Average Implementation Period (years) 3.3 3.7 4.3 4.6 a, c Percent of Problem Projects by Number 11.1 17.6 40.0 14.3 a, c Percent of Problem Projects by Amount 8.4 27.8 36.7 7.2 a, d Percent of Projects at Risk by Number 55.6 64.7 80.0 57.1 a, d Percent of Projects at Risk by Amount 66.1 84.7 75.7 53.5 e Disbursement Ratio (%) 27.0 20.8 27.5 14.9 Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Since FY Memorandum Item 80 Last Five FYs Project Evaluation by OED by Number 63 3 Project Evaluation by OED by Amount (US$millions) 3,031.1 882.9 % of OED Projects Rated U or HU by Number 75.4 33.3 % of OED Projects Rated U or HU by Amount 60.1 11.7 a.As shown in the Annual Report on Portfolio Performance (except for current FY). b.Average age of projects in the Bank's country portfolio. c.Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d.As defined under the Portfolio Improvement Program. e.Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. *All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 124 Democratic Republic of Congo: IFC Investment Operations Program Congo, Democrat: IFC Investment Operations Program 2010 2011 2012 2013* Original Commitments (US$m) IFC and Participants 85.17 0.12 0.50 0.53 IFC's Own Accounts only 55.17 0.12 0.50 0.53 Original Commitments by Sector (%)- IFC Accounts only FINANCE & INSURANCE 9.38 100 100 100 INFORMATION 90.62 Total 100 100 100 100 Original Commitments by Investment Instrument (%) - IFC Accounts only Equity 3.37 100 Guarantee 6.01 100 100 Loan 90.62 Total 100 100 100 100 * Data as of January 01,2013 125 B8 (IFC) for the Democratic Republic of Congo B8 (IFC) for Congo, Democrat Congo, Democrat Committed and Disbursed Outstanding Investment Portfolio As of 12/31/2012 (In USD Millions) Committed Disbursed Outstanding **Quasi Partici **Quasi Partici FY Approval Company Loan Equity Equity *GT/RM pant Loan Equity Equity *GT/RM pant 10/12/2008 Advans congo 0 2.65 0 0 0 0 2.65 0 0 0 2005 Kmt 0 0.34 0 0 0 0 0 0 0 0 2005/10 Pcb congo 0 1.26 0 0 0 0 1.26 0 0 0 0 Rawbank 4.9 0 0 0.53 0 4.9 0 0 0.53 0 0 Stanbic drc 0 0 3 0 0 0 0 3 0 0 2010 Tigo 50 0 0 0 30 50 0 0 0 30 Total Portfolio: 54.9 4.25 3 0.53 30 54.9 3.91 3 0.53 30 * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. 126 CAS Annex B8 - Democratic Republic of Congo CAS Annex B8 - Congo, Democrat Operations Portfolio (IBRD/IDA and Grants) As Of Date 1/10/2013 Closed Projects 78 IBRD/IDA * Total Disbursed (Active) 907.30 of w hich has been repaid 0.00 Total Disbursed (Closed) 2,328.65 of w hich has been repaid 476.59 Total Disbursed (Active + Closed) 3,235.95 of w hich has been repaid 476.59 Total Undisbursed (Active) 801.02 Total Undisbursed (Closed) 23.01 Total Undisbursed (Active + Closed) 824.03 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Development Implementation Project ID Project Name Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd Objectives Progress P100620 DRC- Forest and Nature Conservation SIL MS MS 2009 64 29.63 7.32 P092724 DRC Ag Rehab & Recovery SIL (FY10) MS MS 2010 120 92.38 P104497 DRC Em. Urban & Social Rehab ERL (FY07) S MS 2007 220 38.50 -9.45 P086874 DRC Emerg Soc Action (FY05) S MS 2005 101.8 6.74 -37.69 P091092 DRC Urban Water Supply Project (FY09) S MS 2009 190 148.41 116.50 P101745 DRC- Pro-Routes (FY08) MS MU 2008 113.3 81.93 20.64 16.99 P086294 DRC-Education Sector Project (FY07) MS MS 2007 150 81.90 78.64 16.72 P104041 DRC-Enhancing Governance Capacity (FY08) S S 2008 50 0.01 1.47 P083813 DRC-GEF National Parks (FY09) S MS 2009 7 3.80 1.16 P106982 DRC-Growth w/ Gov in Mineral Sector MS MS 2011 50 46.68 17.47 1.47 P092537 DRC-Multi-Modal Transp MS S 2010 255 154.83 69.27 74.25 P115318 DRC-Street Children Project (FY10) MU MU 2010 10 7.90 P117382 DRC: Capacity for Core Public Management MS MS 2011 29.9 26.42 P111621 DRC:Rehab&Particip Mgt of KeyProt. area S MS 2009 6 5.25 P088751 ZR-Health Sec Rehab Supt (FY06) MS S 2006 335 85.69 -99.07 -53.04 Overall Result 1689 13 810.07 133.15 56.39 127 Country MAP c 128