Page 1 PROGRAM INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB1242 Operation Name HT Economic Recovery Program Region Latin America and Caribbean Sector Central government administration (100%) Project ID P089873 Borrower(s) Government of Haiti Implementing Agency Ministry of Economy and Finance Environment Assessment OD 4.01 applies? [ ] Yes [X] No Date PID Prepared November 23, 2004 Estimated Date of Appraisal Authorization October 15, 2004 Estimated Date of Board Approval January 6, 2005 1. Key development issues and rationale for Bank involvement Occupying the western third of the island it shares with the Dominican Republic, Haiti is the poorest country in the Western Hemisphere and one of the most disadvantaged in the world, as social, economic and environmental indicators reveal: a GNI per capita of US$380 (2003, Atlas method); a ranking of 153 on the human development index; 65 percent of the population living under the poverty line (based on 1998 data); an under five mortality rate of 123 out of 1,000; and a 97 percent deforestation. Half the population does not have access to clean drinking water and only 28 percent has access to improved sanitary facilities. The illiteracy rate is nearly 50% and the incidence of HIV/AIDS is the highest outside of Sub-Saharan Africa (5 percent). These indicators may have worsened after the socio-political crisis of February-March 2004 that has been estimated to have caused a 5 percent economic slowdown, and following the heavy flooding that affected the country in May and September 2004 resulting in over 5,000 deaths and causing many poor and vulnerable households to loose their livelihoods and increasing risks of disease. For nearly two decades, Haiti has struggled to emerge from a cycle of internal conflicts that have caused stop and go performance of foreign aid, devastated the economy and inflicted severe hardship on its population. Recent conflicts that have marked the country include the military overthrow of democratically-elected president Jean Bertrand Aristide in 1991, electoral dispute around the results of legislative elections in 2000, and more recently an armed rebellion that forced President Aristide (who was re-elected in 2000) to step down in February 2004. Haiti is rated as one of the most corrupt countries in the world by Transparency International and this corruption has contributed significantly to impoverishment of the country. A Transitional Government has been put in place since March 2004 and is taking important steps to bring about political and social stability and jump start the flagging economy amidst an undercurrent of civil unrest. The Transitional Government has shown keen interest in breaking with past practices of mismanagement of public financial resources, and the Bank intends to seize on the window of opportunity to support the Government. The proposed Economic Governance Reform Credit (EGRC) is the main instrument for pursuing the objective of improving transparency and accountability of public officials in the use of public sector financial resources, and creating a culture of civil society and public participation in the monitoring economic governance reforms. Pursuing this objective successfully will contribute to reducing risks of social tensions and conflicts as the population gains a better understanding of government actions and becomes a partner with a vested interest in the success of ongoing reforms. The EGRC will also help implement sound governance-related policies at the sectoral level and thus prepare the ground for IDA investment lending. 2. Proposed objectives The proposed operation will support critical economic governance reforms identified by the Transitional Government in the Interim Cooperation Framework and will help improve the policy environment for increased Bank and other donor- supported investment lending in key sectors. It is a key component of the Bank’s program of re-engagement in Haiti as described in the Bank’s Transitional Support Strategy (TSS). Technical assistance Page 2 for the implementation of the economic governance reform supported by the EGRC will be provided by the World Bank through a LICUS grant for US$1.5 million and a technical assistance IDA operation. 3. Preliminary description (i) Fiscal management, budget processes and financial control . The component is expected to increase the capacity of public sector institutions involved in budget execution so as to improve and speed up the regular fund request and release process during budget execution. This will allow the Authorities to credibly pursue another important objective, namely permanently reducing the use of ministerial discretionary accounts and tightening the rule for their use and enforce those rule. In parallel with improvements in the capacity of budgetary institutions, it is critical to put in place the steps required to tighten financial controls in the public sector. This will involve strengthening the presence of public accountants in spending ministries, the creation of the corps of financial controllers and the tightening of accountability of government authorizing officers, and the restructuring of the supreme audit institution. (ii) Public sector procurement . The component would support the establishment of a national interim procurement commission, staff it, and support it with adequate technical assistance so as to create capacity for sound procurement decisions in the short term and build procurement capacity in sectoral ministries in the medium term. (iii) Anti-corruption strategy . This component aims to help operationalize the recently created an anti-corruption unit in the Government. Additionally, the component would complete a diagnostic survey in an effort to develop a detailed, national anti-corruption strategy. (iv) Human resource management . The component would support strengthening the capacity of the institutions involved in the Government’s Interim Cooperation Framework (ICF) as well as lay the foundation for the development of a medium-term civil service reform program. (v) Efficiency and transparency in the management of public enterprises and road maintenance . This component seeks to assist five key public enterprises responsible for electricity, telecommunications, airports, ports, and water in meeting international accounting standards so that they may be audited. The component also would confront the problem of road maintenance, lost of economic opportunities due to lack of roads, and high transport costs due to poor road conditions. (vi) Public-private partnership and governance in the education and health sectors . The component would assist the Authorities in strengthening the partnership between the public sector and private providers while strengthening the regulatory capacity of the public sector. This entails improving transfers to private schools based on transparent criteria and an accountability mechanism, and allowing public health facilities to sign services agreements with private health insurance agencies especially outside the capital city. (vii) Civil society monitoring economic governance reforms and enhanced public information . This component would facilitate the creation of mechanism allowing civil society to play a role in monitoring the implementation of Government policies and reforms. Such a mechanism entails an oversight committee formed by eminent individuals, an executive secretariat hired by the Government (and monitored by the oversight committee), which will be responsible for hiring individual civil society organizations to monitor specific components of the economic governance program. The civil society monitoring mechanism will be coupled with a sound communication strategy aimed at better informing relevant stakeholders and the wider public on the objectives and implications of Government’s actions in the area of economic governance. One key aspect of the communication strategy will be the dissemination of information on budgetary allocations and disbursements to the beneficiaries, including using the Internet and community radios. 4. Environment Aspects The proposed structural adjustment credit supports economic governance reforms that do not have direct environmental impacts. Page 3 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 0 INTERNATIONAL DEVELOPMENT ASSOCIATION 61 Total 61 6. Contact point Contact: Auguste Tano Kouame Title: Sr Country Economist Tel: (509) 510 3797 Email: Akouame@worldbank.org Location: Port-au-Prince, Haiti (IBRD)