Document of The World Bank FOR OFFICIAL USE ONLY Report No. 70275-JM INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT FOR JAMAICA FOR THE PERIOD OF FY 2010-2013 August 28, 2012 Caribbean Country Management Unit Latin America and Caribbean Region 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 The last Country Partnership Strategy for Jamaica was discussed by the Executive Directors on March 23, 2010 CURRENCY EQUIVALENTS (As of March 8, 2012) Currency Unit: Jamaica Dollar (J$), US$1.00 = J$86.10 FISCAL YEAR April 1 – March 30 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities AIDS Acquired Immune Deficiency Syndrome CIDA Canadian International Development Agency CPS Country Partnership Strategy DFID UK Department for International Development ESW Economic and Sector Work EU European Union FY Fiscal Year GDP Gross Domestic Product GEF Global Environmental Facility IDB Inter-American Development Bank IFC International Financial Corporation IMF International Monetary Fund LAC Latin America and the Caribbean MDG Millennium Development Goals NGO Non-Governmental Organizations UNDP United Nations Development Programme USAID United States Agency for International Development WB World Bank WWF World Wildlife Fund VAT Value Added Tax IBRD IFC Vice President Hasan Tuluy Acting Vice President Bernard Sheahan Country Director Françoise Clottes Regional Director Paolo M. Martelli Task Team Leader Afef Haddad Co-TTL Judith Green ii TABLE OF CONTENTS JAMAICA COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT A. INTRODUCTION .......................................................................................................................................................4 B. RECENT POLITICAL AND ECONOMIC DEVELOPMENTS ...................................................................................................4 C. PROGRAM IMPLEMENTATION AND PROGRESS TOWARDS RESULTS .............................................................................8 D. MOVING FORWARD ...................................................................................................................................................... 12 E. PARTNERSHIPS............................................................................................................................................................ 14 F. RISKS ............................................................................................................................................................................ 14 ANNEX A1: KEY ECONOMIC & PROGRAM INDICATORS - CHANGE FROM CPS .................................................................... 17 ANNEX A2: JAMAICA AT –A-GLANCE ..................................................................................................................................... 18 ANNEX B2: SELECTED INDICATORS OF BANK PORTFOLIO PERFORMANCE AND MANAGEMENT ....................................... 21 ANNEX B3: IFC INVESTMENT OPERATIONS PROGRAM........................................................................................................ 22 ANNEX B4: SUMMARY OF NON-LENDING SERVICES .............................................................................................................. 23 ANNEX B5: SOCIAL INDICATORS ............................................................................................................................................ 24 ANNEX B6: KEY ECONOMIC INDICATORS ............................................................................................................................. 25 ANNEX B7: KEY EXPOSURE INDICATORS .............................................................................................................................. 27 ANNEX B8: IFC INVESTMENT OPERATIONS PROGRAM........................................................................................................ 28 ANNEX B8: OPERATIONS PORTFOLIO (IBRD/IDA AND GRANTS) ................................................................................... 29 ANNEX B. CPS REVISED RESULTS FRAMEWORK .................................................................................................................. 30 3 JAMAICA-WORLD BANK GROUP COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT A. INTRODUCTION 1. This Country Partnership Strategy Progress Report (CPSPR) takes stock of the implementation of the World Bank Group (WBG)’s 2010-13 CPS discussed by the Board on March 23, 2010, provides an update on the economic situation, and describes the way forward for the remaining 18 months. The CPS was articulated around three Results Areas (Supporting Economic Stability, Promoting Inclusive Growth, Promoting Sustained Growth), and one cross-cutting Area (Strengthening Governance). While the broad objectives and Results Areas of the CPS remain valid, recent political and economic developments call for some flexibility in the program for the remainder of the CPS to allow for any adjustments that may be required. Discussions with the Government on potential lending services will continue, and the scope of such lending will depend on the nature of the program that the Government adopts and requests in the coming months. The list of ongoing and indicative planned activities for the remaining CPS period is attached under the Results Framework (Annex B). 2. A new Government was elected in December 2011 and has launched consultations with the WBG and the IMF on key policy measures going forward. Lack of performance under the IMF Stand By Arrangement (SBA) was a key campaign issue. The Government acknowledges that there are difficult and urgent decisions to be made to improve macroeconomic stability and help Jamaica transition to a knowledge-driven, globally competitive, green, and innovative economy. Key priorities, which have been the focus of initial discussions between the Government and the IMF, include bringing the public debt on a downward trajectory through significantly higher primary fiscal surpluses and improved debt management; fiscal and financial reforms; improved exchange rate management; and further strengthening of the financial sector regulation and supervision. Failure to reach an agreement with the IMF could deprive the country of external financing, lead to a resurfacing of capital market pressures, and constrain other multilaterals’ ability to provide support. B. RECENT POLITICAL AND ECONOMIC DEVELOPMENTS 3. Political Developments. Following the resignation of Prime Minister Golding in October 2011, Andrew Holness, the new Prime Minister, called elections on December 29, 2011, about one year ahead of schedule. The PNP won the elections with Portia Simpson- Miller as Prime Minister. The PNP also won the recent local elections in March, 2012, which gives it major control over the country’s agenda of reforms. The new Government indicated its commitment to maintaining a partnership with critical stakeholders and development partners, including the WBG and the IMF. The Government has pledged to use state resources to stimulate growth and support employment through the Jamaica Emergency Employment Programme (JEEP), ensure adequate social protection for citizens, particularly the most vulnerable, and accelerate the pace of the training, 4 apprenticeship, and job guidance for the vulnerable to enter the labor market and begin to earn an income (welfare to work agenda) 1 . Other priorities include public sector modernization, pension and tax reforms, growth and competitiveness, and climate change adaptation. 4. Economic Developments. The global crisis exacerbated the Jamaican reality of high debt, high crime incidence, and low growth, and had adverse impact on tourism, bauxite, and alumina exports. In FY2008/09, the current account deficit worsened to 18.7 percent of GDP; real GDP contracted by a cumulative 4.3 percent between March 2008 and March 2010. To improve fiscal and debt sustainability which were threatened by the crisis, the Government introduced three important policy initiatives. First, the authorities negotiated a 27-month Standby Arrangement (SBA) with the IMF. The SBA, which was anchored into the country’s homegrown economic reform program, was approved on February 4, 2010. Second, the authorities undertook a voluntary domestic debt exchange (JDX) which consolidated 345 securities into 25 new benchmark bonds and extended debt maturity by 4.4 years with an annual savings of over 5 percent of GDP. Third, the Government took a more resolute stance on privatization, especially in the privatization of Air Jamaica. 5. The Jamaican economy has begun to recover from a protracted recession. Following thirteen quarters of economic decline, real GDP expanded in the last quarter of FY10/11 by 1.6 percent and grew by 1.2 percent in FY11/12 (year-on-year). The improved outturn was underpinned primarily by the recovery of the mining sector and stronger domestic demand due in part to higher remittance inflows to Jamaica. Inflation moderated to 7.3 percent at end-of FY11/12 (year-on-year). The exchange rate has remained stable and interest rates continue to fall. 6. Despite the nascent recovery, the outlook for growth in the medium-term is adversely affected by long-standing development challenges. These constraints include low productivity, inadequate human capital, high external dependence, high debt burden, and tax policy distortions. In this context, real GDP is only expected to recover to its FY07/08 level (J$923 billion at FY07/08 prices) in FY15/16. Pitfalls remain in various areas: (i) labor market and poverty indicators have deteriorated; (ii) external vulnerability has become more acute; (iii) risks to fiscal and debt sustainability continue to be high; and (iv) weaknesses in the financial system continue to pose a threat to financial stability. These constraints are discussed below in greater detail. 7. Poverty has gone up substantially since the beginning of the crisis, and unemployment remains high. Labor market conditions remain weak with unemployment increasing markedly to 14.1 percent in January 2012 from 12.9 percent a year earlier. Furthermore, unemployment rates among youths aged 14-24 years remain high at 47.6%. Poverty, which had fallen as low as 9.9 percent in 2007, rose to 17.6 percent in 2010 due to the negative effects of the crisis on employment and private consumption. 8. External vulnerability has worsened as shown by large external imbalances and declining reserve coverage. The current account deficit widened to 14.1 percent of GDP 1 See PNP Manifesto- Leading the Agenda for Progressive Change. 5 by end of December 2011 from 6.9 percent at the end of 2010 on the back of increasing oil prices. The deficit is estimated to have closed FY11/12 at around 11.2 percent of GDP (2.3 percentage points above FY10/11 level). The current account deficit is not expected to recover to single-digit figures before FY15/16. Interventions in the foreign exchange market, sluggish FDI, and lower-than-expected official inflows partly associated to delays in completing the IMF SBA reviews, have contributed to a significant decline in the reserve coverage. By end- April 2012, net international reserves amounted to US$1.8 billion, just over three months of imports. Reserves may decline further should investor confidence in Jamaica fall. Under this scenario, international reserves are projected to be severely depleted to less than 20 percent of their current level by FY15/16. Table 1: Selected Economic Indicators Projections 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Annual percentage change GDP, Prices, and Employment Real GDP -1.7 -2.6 -0.6 1.2 0.9 1.1 1.2 1.3 Consumer Price Index (end of period) 12.4 13.3 7.8 7.3 6.8 6.5 6.5 6.5 Exchange Rate (end of period, J$/US$) 88.0 89.0 85.4 86.9 … … … … Unemployment Rate (in percent) 10.8 12.0 12.2 12.8 … … … … In percent of GDP Government Operations Budgetary Revenue 27.0 27.1 26.4 24.9 24.4 24.4 24.6. 24.6 of which Tax Revenue 24.5 24.2 23.5 22.5 22.6 22.9 23.1 23.1 Budgetary Expenditure 34.4 38.1 32.8 31.3 32.5 32.9 33.8 34.6 of which Wage Bill 10.9 11.4 10.7 10.8 10.8 11.4 11.2 11.0 Interest Payments 12.3 17.1 11.0 9.5 11.0 10.9 11.8 12.8 Budget Balance -7.4 -11.0 -6.4 -6.4 -8.1 -8.4 -9.1 -10.0 of which Central Gov Primary Balance 4.9 6.1 4.5 3.1 3.0 2.5 2.7 2.8 Public Sector Balance -9.3 -12.4 -6.9 -7.0 -8.5 -8.4 -9.0 -9.8 Public Debt 2/ 125.0 138.3 140.5 139.2 145.5 147.8 149.1 153.0 External Sector Current Account Balance -18.5 -7.6 -8.2 -11.2 -12.6 -12.3 -10.3 -9.2 Net International Reserves (millions US$) 1,629 1,762 2,549 1,751 1,302 832 521 291 Memorandum Item: Nominal GDP (billions of J$) 1,024 1,106 1,193 1,295 1,400 1,511 1,631 1,760 1/ Fiscal years run from April 1 to March 31. 2/ Central Government direct and guaranteed only, including PetroCaribe debt and projected IMF disbursements Source: World Bank and IMF staff. 9. Public sector performance has worsened amid fiscal slippages prior to the elections. The primary balance worsened from a Government-projected 5 percent of GDP to an estimated 3.1 percent of GDP in FY2011/12, as a result of developments on both the 6 spending and revenue sides. First, primary expenditure rose during FY11/12 due to a wage settlement with public sector workers and additional spending related to the early elections. Second, tax revenues were below expectations due to slower-than-anticipated recovery. The combination of increased external vulnerability and fiscal slippages has made the objective of achieving debt sustainability more challenging. In this context, Standard & Poor’s revised the outlook for Jamaica from ―Stable‖ to ―Negative‖ in October 2011. Although Jamaica’s sovereign spreads had declined substantially since the successful JDX, they have increased to above 600 bps in recent months reflecting rising uncertainties in the global market, the deterioration in fiscal performance, and delays in completing the reviews under the IMF SBA and in negotiating a new agreement with the IMF 2. The central Government’s primary surplus is projected to decline to 2.5 percent of GDP by FY13/14, and to recover somewhat to 2.8 percent of GDP by FY15/16. The overall budget balance is currently projected to deteriorate further to a 10 percent of GDP deficit by FY15/16. The debt burden limits fiscal space and weighs heavily on Jamaica’s fiscal performance. While the wage bill as a share of GDP is projected to stabilize around 9 percent in the period through FY15/16, interest payments are projected to increase from 11 percent of GDP in FY12/13 to 12.8 percent of GDP in FY15/16. Projected debt servicing costs are expected to account for 54 percent of total expenditure under the 2012-13 budget. 10. The Government of Jamaica has taken important steps to improve fiscal and debt sustainability, but higher fiscal primary surpluses and improved debt management are needed. Significant reforms have been undertaken in the area of public expenditure management. In addition, the Government divested a number of assets in 2010- 2011 which represented a significant drain on the budget, including Air Jamaica, and remaining interest in the sugar industry. The Government also sought to institute measures to cap discretionary tax expenditures. However, it is still unclear as to whether this decision had the intended effect on the budget. Recognizing that this would represent significant fiscal savings, the Government has also incorporated tax expenditure reform under the broader tax reform proposal which is being deliberated by a sub-committee of Parliament. Going forward, achieving fiscal and debt sustainability will require a more comprehensive, multi-front effort in a number of areas, including tax policy and tax administration reform; public wage policies; public pension reform; public financial management; and broader public administration reform. 11. While the implementation of reforms of the financial system has advanced, financial sector vulnerabilities remain high. Although the financial system remains well capitalized and appeared to have weathered well the economic downturn, the recent deterioration in banks’ loan portfolios – reflected in the increase in the level of non- performing loans to 9 percent – needs to be carefully monitored. Structural reforms aimed at strengthening the financial system are proceeding broadly on schedule, including the phased implementation of risk-weighting of foreign currency-denominated Government securities. However, the financial sector remains heavily exposed to sovereign risks, which could limit the banking system’s ability or willingness to extend credit to the Government. Further efforts will be required to strengthen the regulatory and supervisory framework of the financial sector. In considering that there has been no request for funding under the Financial System Support Fund (FSSF), the authorities proposed to gradually unwinding the 2 Despite the rise, spreads remain below the 800 bps at the time of the JDX and around 1,000 bps a year before the debt exchange was launched. 7 FSSF beginning in the first quarter of 2012. 12. Going forward, significant vulnerabilities and continued weaknesses in the global and domestic environment are likely to constrain the pace of Jamaica’s recovery. The outlook for growth remains very constrained and reflects risks of a slowdown in the economic activity of the major trading partners. The increased uncertainties in international markets arising from recent developments in Europe represent important risks to growth. Large fiscal deficits, growing external and public financing requirements, and high public debt ratios create significant risks for fiscal and debt sustainability, particularly in light of Jamaica’s vulnerability to rollover and interest rate risks on public debt. A concerted effort at fiscal consolidation – as evidenced by larger primary fiscal surpluses – is critical to place Jamaica’s public debt ratios on a more sustainable path. C. PROGRAM IMPLEMENTATION AND PROGRESS TOWARDS RESULTS 13. The Bank’s active portfolio consists of nine operations amounting to US$147.4 million. During the course of CPS implementation, the fiscal constraints facing the Government have affected Bank portfolio as some projects and Trust Fund activities have either been delayed or underfunded. The Government is committed to resolve the delay and fully fund the projects for the remaining CPS period. More than fifty percent of the active lending portfolio is currently rated ―Marginally Satisfactory‖ for achieving the Development Objectives and Implementation progress, with an overall disbursement percentage of 18.3. Fiduciary risk is also high due to the perceived level of Governance and corruption. IFC’s investment portfolio consists of eight active operations, and five advisory service projects supporting MSMEs, Credit Bureau, Investment Climate and Public Private Partnerships for a total of US$3.9 million. As of June 30, 2012, IFC's disbursed and committed portfolio totaled US$193 million and US$214 million, respectively. Syndicated loans outstanding (B loans) for which IFC is lender of record amounted to US$82 million. Since end 2009, IFC committed US$147 million in new financing including US$37 million from syndicating banks for three projects (one in transport and two in energy). Jamaica has currently IFC’s largest outstanding exposure in the Caribbean. 14. Progress towards CPS outcomes has been mixed. Under the first Results Area of Supporting Economic Stability, the CPS aims at supporting the Government’s efforts towards fiscal and debt sustainability. Important steps were achieved with the support of the Bank, including the passage of the Fiscal Responsibility Framework, the abolition of the practice of deferred financing, and the presentation of a consolidated public sector budget to the Parliament. The latter, presented as part of the Fiscal Policy Paper which lays out the fiscal and debt outlook for the next five years, represents an important step towards enhancing transparency and improving Parliamentary oversight over the budget process. Bank support in this area included two DPLs ($300 million), institutional capacity and communication Technical Assistance ($1.4M), a Trust Fund for Statistical Capacity Building Technical Assistance for the National Statistical Institute ($347,000) and a Country Economic Memorandum focusing on unlocking growth potentials in Jamaica. However, results under the second DPL are not achieved and the Debt Management Law is still pending, as it has not passed prior to the arrival of the new administration and due to the 8 requirement for the legislation process to restart. The Bank delivered an Economic and Sector Work on employment growth effects of investment. The Bank is currently following up on the reforms supported under the DPL through a US$1.6 million DFID grant to strengthen debt management, improve parliamentary oversight of the budget, upgrade the Government’s communication strategy on policy reforms, and advance recent efforts at medium-term budgeting and public investment prioritization. Working together with the Bank under its crisis response pillar, IFC contributed towards improving Jamaica’s financial sustainability. IFC provided advisory services for the privatization of Air Jamaica, relieving the Government’s fiscal accounts of a monthly average expense of $15 million. Furthermore, IFC’s investments are helping generate additional fiscal revenues. As an illustration, IFC investment in Transjamaica Highway Ltd. - a toll road project (TJH), is expected to generate US$1 billion over the life of the project as a result of taxes, profit sharing, and concession fees paid to the Government of Jamaica. 15. Promoting Inclusive Growth. The CPS aims at: (i) strengthening human capital; (ii) enhancing crime and violence prevention; and (iii) promoting rural development. Transformation of the education sector to improve management and quality of education is progressing well. A National Education Trust and National Education Inspectorate have been legally established and are operational, and the draft bill for the Jamaica Teacher Council is ready for public consultation. Resources have been allocated to these agencies to operate. Further, the establishment of the Department of School Services offers a direct line for enforcing systems of accountability and performance at the school level. In collaboration with other development partners, the results-based disbursement approach for the Early Childhood Development Project was put in place to enhance the quality of early childhood services through registration and inspection of early childhood institutions and enforcement of minimum service standards. 16. In the area of social protection, the Government has institutionally strengthened its Conditional Cash Transfer Programme (Programme of Advancement through Health and Education-PATH) which reached 390,000 beneficiaries to date, including establishment of welfare to work program. There is room for further improvements in terms of benefit adequacy, increasing human capital impacts, and opportunities for ―graduation‖ of beneficiaries and youth generally, by improving their skills and employability. Programs that complement PATH, to help people handle short-term shocks (for example, through temporary employment and training) would also need strengthening. 17. In the health sector, the analytical work on Managing Nurse Migration II and Non-Communicable Disease provided detailed recommendations to improve NCD and Human Resources for Health (HRH) policies, discussed at a regional workshop on the NCDs prior to the UN High Level Meeting on NCDs, which helped Jamaica as well as other Caribbean Countries to determine their positions on NCDs. The Bank continues its support through policy dialogue on implementing the recommendations on NCDs through its regional technical assistance. Jamaica was the champion for the first phase of HRH work focused on nurse migration, and broad consensus was reached on the priority policy areas of strengthening workforce monitoring, improving and expanding training capacities, managing migration, and the need for a regional Caribbean approach. In the second phase, existing international legal agreements were reviewed, and a non-legally binding Memorandum of Understanding was developed as a framework for regional action. 9 Jamaica is one of the focus countries of a regional HRH study that the Bank is leading to examine policies and practices that generate incentives and accountability mechanisms for health workers in the Latin America and Caribbean region. 18. In the area of citizen security, selected inner city communities are now better places to reside, but more efforts are needed. The Bank’s Inner Cities Project is the flagship of the recent Community Renewal Program. The activities financed under the public safety enhancement component (mediation and conflict resolution, training on alternative livelihoods and skills development, liaisons to link groups at risk with existing family support programs), are designed to reinstate Government presence in conflict areas thereby strengthening governance and security. Public safety enhancement component included basic infrastructure built using crime prevention through environmental design methodology such as roads, community centers, street lighting and electricity regularization, and access to water and security of tenure. This methodology links crime and spatial planning, urban and architectural design, and the use and management of the physical environment. Within an extension of two years and the associated JSDF Crime and Violence prevention grant, the Bank will support setting-up the National Violence Observatory/Integrated Crime and Violence Information System of the Ministry of National Security, which will increase the capacity of the Government to collect and analyze data on crime and violence in order to improve their ability to design successful and evidence-based policies and programs on crime and violence prevention. The Bank also contributed to support the preparation of the national anti-crime strategy and a roadmap based on the global knowledge of successful interventions in post-conflict areas. 19. In the area of Gender support, Jamaica was included in the regional knowledge exchange program on ―Keeping Boys out of Risk‖ Initiative. This initiative focused on knowledge exchange about the determinants of boys’ under performance at school as well as policies and programs to prevent and address this issue. This initiative was funded by the South-South Trust Fund. Activities included a Regional high level conference in May 2009, a good practices contest, and the preparation and dissemination of a resource kit. The main conclusion of the high level conference was the lack of evidence about what works within existing policies and programs. Through the Social Development Trust Fund, Jamaica Country Office organized a call for proposals to improve Monitoring and Evaluation for grass roots organizations working on youth at risk, including a gender perspective. In addition, the Office organized training sessions via Video-conference on the fundamentals of Monitoring and Evaluation for Non-Government Organizations. 20. In the area of rural development, the impact of the financial crisis on the Coffee Board and its members prevented extending coverage to targeted levels. However, the insurance product is ready (for the coffee growers on the famous Blue Mountain), and is expected to be activated when members recover financially and are able to afford premium payment. 21. Sustained Growth. The CPS aims at: (i) strengthening non-labor competitiveness; and (ii) contributing to climate resilience and vulnerability reduction. Progress towards outcomes has been mixed with some progress in achieving efficiency in the allocation of budget expenditures. 10 22. Reducing energy losses was not achieved as the utility company’s planned investment did not take place. The target in the Results Framework has been revised to reflect 20 percent of energy losses as opposed to 15.8 percent originally planned in the CPS. Two regional studies that included Jamaica were completed (energy and implications of the financial crisis on the energy sector) and provide options for Jamaica and other Caribbean countries to reduce their dependence on oil. The recently approved Energy Security and Efficiency Enhancement project is expected to assist in improving Jamaica’s competitiveness by focusing on short-term measures to improve energy efficiency and reduce the reliance on high and volatile oil imports by gradually increasing the diversification of electricity supply through the import of natural gas and through the development of domestic renewable energy resources (hydro, wind, and solar). The IFC supported investments in the first two years of the CPS to West Kingston Power Partners which provided severely needed upgrade to Jamaica’s ageing generation capacity. IFC’s involvement also mobilized an additional $37 million for the project. In support of the WBG objectives in energy, IFC has two additional outstanding projects in the energy sector: (i) The Jamaica Public Service Company Ltd (US$45.8 million outstanding), which aims at reducing distribution loss, and expanding generation via small hydro and wind energy, thereby promoting energy diversification and reducing external vulnerability, (it is currently facing implementation delays); and (ii) The Jamaica Energy Partners (US$50 million outstanding, including US$30 million via syndication) is generating additional electricity with the goal of reducing the average cost of energy. 23. The ease of paying taxes outcome is not on track. However, recent reforms in the form of amalgamation of payroll taxes and broadening the availability of online payment to all taxes and to all taxpayers are expected to help reduce the number of days required for tax payments and meet the CPS target of 20 days by 2013. 24. The Rural Economic Development Initiative (R.E.D.I) seeks to increase the earning potential of rural communities through the enhancement and development of agricultural supply chain linkages and community-based tourism initiatives. As the project is initially funding primary level of production, the target related to the movement of farmers in the supply chain is not yet achieved, as expected. 25. IFC is expanding advisory services to help Jamaica strengthen competitiveness and growth. The IFC was the transaction advisor to the Government for the successful Air Jamaica privatization in 2010. IFC is now advising on the privatization of the Norman Manley International Airport (NMIA) in Kingston; and Credit Bureau legislation, as part of a regional harmonization plan. The NMIA privatization is the first transaction under a Memorandum of Understanding signed in early 2011with the Development Bank of Jamaica for joint transaction execution on privatization policy and knowledge transfer. Support to microfinance institutions to increase their efficiency is expected to better adapt loan products to the local market and increase average loan size, opening previously underserved market segments, such as small business owners and low income households. 26. MIGA continues to provide guarantee insurance coverage for two foreign private investments in Jamaica and is exploring new opportunities. 11 27. In the area of climate change, the CPS sought to achieve an increased capacity to integrate climate resilience to development strategies. Jamaica developed its Strategic Program for Climate Resilience (SPCR, 2011-30) under the Pilot Program for Climate Resilience (PPCR) approved in November 2011 3 . The Bank also supported vulnerability reduction through several initiatives such as the Community-based landslide risk reduction Grant ($2.375M). Responding to a Government request, the Bank channeled EU grant funds towards reconstruction efforts after the passage of Tropical Storm Gustav ($1.8M). The Hurricane Dean Economic Recovery Loan ($9.99M) facilitated: (a) rehabilitation/construction of critical public infrastructure; (b) provided disaster response equipment, disaster simulation software, coastal multi-hazard maps and vulnerability assessment for three poor communities at risk; and (c) trained community members and youth first responders in community maintenance and disaster preparedness. 28. Strengthening Governance. The CPS seeks to contribute to achieving more efficient financial management and allocation of budget expenditures. Outcomes under this theme are on track to be achieved. The Government has initiated medium-term budgeting and is introducing a new prioritization tool for the public investment program of the six ministries that account for 91 percent of the central Government budget. The Auditor- General submitted a report of the Fiscal Policy Paper as per the new Fiscal Responsibility Framework. In the education sector, the Bank supported strengthening institutions to improve management and quality of education and Early Childhood Development (ECD) services. D. MOVING FORWARD 29. In the next 18 months, the WBG will continue implementing the existing portfolio and preparing planned activities, while maintaining its flexibility to address the current uncertainties with the Government’s program and respond to new Government requests. The Bank will be selective in its program going forward, while fostering partnerships (with IMF and other development partners), and leveraging regional programs. The attached Table 2 describes what has been planned under the CPS for the most recent years (FY11-13), what will be delivered, and what will change. The DPL planned in FY12 will no longer materialize, and instead, the Bank is in dialogue with the Government and the IMF on a new IMF agreement that would guide the program for the next CPS. The key elements of IFC’s strategy for private sector development in Jamaica will continue to be based on the four pillars of its Caribbean Strategy: (i) Crisis Response, (ii) Financial Inclusion and Job Creation, (iii) Regional Integration and Competitiveness and (iv) Climate Change. Cross- cutting themes include: (i) Leveraging the capital and capacity to create entities; (ii) reaching the poor via private sector investments, and (iii) addressing climate change issues (raising the benchmark in environmental standards and expanding the cleaner energy matrix). IFC’s investments will be targeted to infrastructure, financial sector, health, education and growth sectors (e.g. agriculture, tourism). 3 Preparation for a 7.8 million grant for climate change data management is underway. 12 Table 2. Planned and Revised Lending/AAA/TF Pillar FY11 Ongoing/ FY12 Ongoing/ FY13 Ongoing/ Revised/New Revised/New FY12 Revised/ FY11 New FY13 1. Supporting FS DPL II ($200 DPL Split into FS DPL Dropped Economic M) two $100M Stability CEM Done Tax IDF Ongoing Debt IDF Ongoing DFID TF on Debt Ongoing DFID TF on Debt Ongoing Ongoing Management, Management, Public Investment Public Investment Program, and Program, and MTEF MTEF PER Dropped PKS on Fiscal Policy 2. Promoting JSDF Ongoing Skills for Inclusive Will be delivered in Dissemina- Inclusive Growth PATH Growth FY14 tion of WDR on Gender New: FPD Policy Note and reform memo on Investment Climate and Competitiveness New : Youth Empowerment through ICT and creative Industries (Digital Jam 2.0) New: Diaspora Bond 3. Promoting PER Dropped Sustained Energy Program Ongoing Growth Agriculture Moved to FS DPL II (100M) Delivered PPCR Ongoing Risk next CPS 30. Following initial consultations with the Government, the WBG will leverage its knowledge, financial, and convening services to accompany the country in achieving quick gains and laying the ground for enhanced competitiveness and growth. Building on results achieved to date, the WBG will continue to provide support on public sector modernization, fiscal and debt management, medium-term budgeting and public investment prioritization, and tax reforms through technical assistance and policy dialogue (funded by a Trust Fund from DfID) and planned programmatic knowledge services (PKS) focusing on fiscal reforms. Through ongoing and planned activities (Skills project), the WBG will also support Jamaica in contributing to improving its human capital by strengthening the quality, relevance, and efficiency of education, and by stepping up investment in the skills needed for the jobs today and tomorrow. 31. As Jamaica advances on a critical set of policy measures, it will be important to enhance the social protection (SP) system to mitigate adverse social impacts. The WBG will support efforts to strengthen the PATH conditional cash transfer program, the core of Jamaica’s SP system, through improvements in the skills and employability in households with PATH beneficiaries, particularly the youth. The WBG will also explore opportunities to engage further in the dialogue on gender issues. 32. The Government of Jamaica requested support from the Bank in exploring innovative financial instruments for engaging with its diaspora. It is estimated that Jamaican migrants save about $5.4 billion per year and remittances account for approximately 15 13 percent of GDP. In addition to the emotional bond that migrants feel for their country, they also have a deep interest in participating in the development of their country. Diaspora bonds could provide a financial instrument to the diaspora overseas to begin an active and tangible engagement in Jamaica’s development. Once this link is established, it can be harnessed for a longer-term strategy of diaspora engagement – through remittances, investments, skill and technology transfer, and trade promotion. The Bank has been providing technical assistance to the Government in developing a strategy for a diaspora bond and on how the Government can inform and engage with the Jamaican potential investors. It has completed an assessment of the legal and regulatory framework, undertaken a debt sustainability analysis, and facilitated diaspora focus group meetings/consultations in the US, Canada and the UK. 33. The Energy Security and Energy Efficiency Project (approved on March 10, 2011) is supporting the identification of alternative energy sources that could lower the high cost of energy that has been hindering many growth initiatives over the past few decades. The lack of fiscal space makes it particularly important for the Government to broaden the scope of Public Private Partnerships to support both public sector modernization and growth and competitiveness activities. The Bank and the IFC will continue to collaborate in this area. E. PARTNERSHIPS 34. The World Bank Group has a successful track record of collaboration with partners in lending and Trust Fund activities and in stimulating a dialogue on growth and competitiveness with the Government of Jamaica and the civil society. Collaboration amongst development partners on a growth and competitiveness agenda supported by improving fiscal policies and social protection programs is an important national priority. The Bank is currently working closely with the IMF and other development partners in the context of structuring a new IMF arrangement with the Government that can be supported by the development partners. The Jamaica Fiscal and Debt Sustainability Development Policy Loan (I & II) where the World Bank (through the DPLs), the IMF, and the CDB supported the Government of Jamaica with low interest loans is a good example of technical cooperation and knowledge sharing. IFC advisory program is also funded by both CIDA and USAID. F. RISKS 35. The risks highlighted in the CPS remain valid and high. These risks are related to: (i) global economic context; (ii) fiscal and debt sustainability; (iii) natural disasters; (vi) fiduciary risks; (v) perceived governance and human security issues; and (vi) continued institutional capacity weaknesses. 36. Global Economic Context. The increasing uncertainty in the international economic environment and a potential worsening of the Euro Zone debt crisis are likely to 14 have a significant negative effect on Jamaica’s economic performance in the near term. In a mild crisis scenario, real GDP could fall by 0.8 percent in 2012, while in an extreme scenario, the contraction could be as large as 2.4 percent. Jamaica’s initial conditions today are generally worse than prior to the 2008-09 crisis and internal vulnerabilities—high external exposure, large debt burden, and worsening fiscal performance—could be substantially exacerbated by external shocks should the global economic situation deteriorate. The external and fiscal channels are likely to be the principal modes of transmission of a new crisis, but the severity of a potential new downturn will be directly related to the impact of a possible new crisis on the US. Already low policy rates do not provide scope for further monetary easing while low revenue collection and high primary expenditure leave the Government with no fiscal space to implement countercyclical policies. Ongoing macro-monitoring and country dialogue by the World Bank, IMF, and other partners to identify and address emerging issues will help mitigate the risks. A concerted effort by the CDB, IDB, IMF and the World Bank over the medium-term will also contribute to mitigate economic risks and strive to protect critical social expenditure, while pursuing the objectives of achieving fiscal consolidation and unlocking growth. 37. Fiscal and Debt Sustainability. There are significant risks related to fiscal and debt sustainability, particularly in light of Jamaica’s vulnerability to rollover and interest rate risks on public debt, and given the country’s large fiscal deficits and high public debt ratios. As acknowledged by the authorities, a concerted effort at fiscal consolidation is critical to place Jamaica’s public debt ratios on a more sustainable path. In support of this process, policy dialogue and technical assistance will continue in the areas of debt management, medium-term budgeting, parliamentary oversight of budgeting process, prioritization of public investments, and improved communication on policy reforms. Planned Programmatic Knowledge Services will inform fiscal reforms and intend to support the preparation of the FY13/14 budget, in close coordination with the IMF and other partners. 38. Natural Disasters. Jamaica is highly vulnerable to multiple natural disaster risks--particularly floods and hurricanes. The fiscal cost from past events has been high and natural disasters have the potential to derail economic growth and poverty reduction efforts. They also pose a heavy fiscal burden, increasing indebtedness and redirecting public resources away from long-term development objectives. The Government has insurance against catastrophic natural disasters and is exploring the expansion of its scope. Major private sector enterprises would be partly covered by their own insurance. Jamaica participates in the Caribbean Catastrophe Risk Insurance Facility (CCRIF), which helps to offset financing costs in the case of a significant, 1-in-15 year disaster. The Bank is also assisting Jamaica through: (i) investments in natural disaster risk mitigation; (ii) development of a risk atlas; (iii) a community-based risk reduction pilot; and (iv) exploration of weather-related risk insurance for agriculture. 39. Fiduciary risk is high because of the perceived governance and corruption issues. This risk is mitigated by having the same fiduciary team cover all Bank projects in the country; undertake "sweeping" missions to cover all projects and arranging regular training for implementing agencies. The Bank will also continue ring fencing projects under supervision, including regular supervision and examination of procurement transactions. 15 40. Institutional Capacity. Years of fiscal constraint negatively affected Government services, constrained resources, and deteriorated skills and motivation. Many Ministries and agencies have staff but no resources to provide services in some cases, or that the staff does not have the right skills and motivation. The Bank will continue to coordinate with other development partners to support a project management team with adequate staff, and provide the required training to ensure efficient and effective implementation and monitoring. 16 ANNEX A1: KEY ECONOMIC & PROGRAM INDICATORS - CHANGE FROM CPS As Of Date 4/4/2012 Current Forecast in Last CPS Actual CPS Economy (CY) a b b c cA 2010/11 2011/12 2012/13 2010/11 2011/12 2012/13 b GDP growth rate (%) 0.6 1.9 1.9 -0.6 1.2 0.9 Exports as % of GDP (f.o.b.) 12.0 12.6 12.9 10.2 11.5 11.3 Imports as % of GDP (f.o.b.) 39.0 39.5 39.0 35.7 38.2 38.5 Inflation (%) 11.2 7.1 6.7 7.8 7.3 6.8 National accounts (% GDP) Current account balance -8.8 -6.6 -5.9 -8.2 -11.2 -12.6 Gross investment Public finance (% GDP) 140.2 132.7 124.2 140.5 139.2 145.5 Fiscal balance -6.5 -4.3 -2.6 -6.4 -6.4 -8.1 Foreign financing International reserves 1078.0 1325.0 1450.0 2549.0 1751.0 1302.0 a. Estimated year b. Projected year c. Actual outcome cA. Estimated outcome 17 ANNEX A2: JAMAICA AT –A-GLANCE Jamaica at a glance 4/4/12 Latin Upper Ke y D e v e lo pm e nt Indic a t o rs A merica middle Jamaica & Carib. inco me Age distribution, 2010 ( 2 0 10 ) Male Female P o pulatio n, mid-year (millio ns) 2.7 583 2,452 75-79 Surface area (tho usand sq. km) 11 20,394 59,328 60-64 P o pulatio n gro wth (%) 0.2 1.1 0.7 Urban po pulatio n (% o f to tal po pulatio n) 54 79 57 45-49 30-34 GNI (A tlas metho d, US$ billio ns) 13.0 4,505 14,429 15-19 GNI per capita (A tlas metho d, US$ ) 4,800 7,733 5,884 GNI per capita (P P P , internatio nal $ ) 7,31 0 10,926 9,970 0-4 10 5 0 5 10 GDP gro wth (%) -0.6 6.2 7.8 percent of total population GDP per capita gro wth (%) -0.8 5.0 7.1 ( m o s t re c e nt e s t im a t e , 2 0 0 4 – 2 0 10 ) .25 P o verty headco unt ratio at $ 1 a day (P P P , %) <2 6 .. Under-5 mortality rate (per 1,000) P o verty headco unt ratio at $ 2.00 a day (P P P , %) 5 12 .. Life expectancy at birth (years) 73 74 73 60 Infant mo rtality (per 1,000 live births) 20 18 17 Child malnutritio n (% o f children under 5) 2 3 3 50 40 5 A dult literacy, male (% o f ages 1 and o lder) 81 92 96 30 5 A dult literacy, female (% o f ages 1 and o lder) 91 90 91 Gro ss primary enro llment, male (% o f age gro up) 91 1 19 1 11 20 Gro ss primary enro llment, female (% o f age gro up) 87 1 15 1 11 10 0 A ccess to an impro ved water so urce (% o f po pulatio n) 93 94 93 1990 1995 2000 2010 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 80 79 73 Jamaica Latin America & the Caribbean N e t A id F lo ws 19 8 0 19 9 0 2000 2 0 10 (US$ millio ns) Net ODA and o fficial aid 125 271 9 141 Growth of GDP and GDP per capita (%) To p 3 do no rs (in 2010): Euro pean Unio n Institutio ns 4 7 33 106 15 B elgium 0 0 0 4 Canada 8 28 5 4 10 5 A id (% o f GNI) 5.1 6.5 0.1 1.0 A id per capita (US$ ) 59 1 13 3 52 0 Lo ng- T e rm E c o no m ic T re nds -5 95 05 Co nsumer prices (annual % change) 27.3 22.0 8.2 8.8 GDP implicit deflato r (annual % change) 18.3 25.1 10.6 10.6 GDP GDP per capita Exchange rate (annual average, lo cal per US$ ) 1.8 7.2 42.7 86.1 Terms o f trade index (2000 = 100) .. .. .. .. 19 8 0 – 9 0 19 9 0 – 2 0 0 0 2 0 0 0 – 10 (average annual gro wth %) P o pulatio n, mid-year (millio ns) 2.1 2.4 2.6 2.7 1.1 0.8 0.4 GDP (US$ millio ns) 2,679 4,592 9,009 14,252 2.3 1.6 1.2 (% o f GDP ) A griculture .. 8.0 7.0 6.3 2.0 -0.6 -0.2 Industry .. 37.1 25.5 22.4 2.4 -0.8 -0.3 M anufacturing .. 17.2 10.6 9.2 2.7 -1.8 -1.5 Services .. 54.9 67.4 71.3 -0.3 3.8 1.7 Ho useho ld final co nsumptio n expenditure 63.8 64.9 74.2 80.5 .. .. .. General go v't final co nsumptio n expenditure 20.2 13.0 14.3 16.6 .. .. .. Gro ss capital fo rmatio n 15.9 25.9 29.2 20.6 .. .. .. Expo rts o f go o ds and services 51 .1 48.1 39.1 25.6 .. .. .. Impo rts o f go o ds and services 51.0 51.9 51.9 43.3 .. .. .. Gro ss savings 10.8 18.5 16.7 10.3 No te: Figures in italics are fo r years o ther than tho se specified. .. indicates data are no t available. Develo pment Eco no mics, Develo pment Data Gro up (DECDG). 18 Jamaica B a la nc e o f P a ym e nt s a nd T ra de 2000 2 0 10 Governance indicators, 2000 and 2010 (US$ millio ns) To tal merchandise expo rts (fo b) 1,555 1,450 To tal merchandise impo rts (cif) 3,429 5,887 Voice and accountability Net trade in go o ds and services -822 -2,580 Political stability and absence of violence Current acco unt balance -356 ,1 8 -1 1 Regulatory quality as a % o f GDP -4.0 -7.8 Rule of law Wo rkers' remittances and co mpensatio n o f emplo yees (receipts) 892 2,011 Control of corruption Reserves, including go ld 1,049 2,610 0 25 50 75 100 2010 Country's percentile rank (0-100) C e nt ra l G o v e rnm e nt F ina nc e higher values imply better ratings 2000 (% o f GDP ) Source: Worldwide Governance Indicators (www.govindicators.org) Current revenue (including grants) 25.1 25.6 Tax revenue 22.8 22.6 Current expenditure 24.8 27.6 T e c hno lo gy a nd Inf ra s t ruc t ure 2000 2 0 10 Overall surplus/deficit -1.7 -6.2 P aved ro ads (% o f to tal) 70.1 73.3 Highest marginal tax rate (%) Fixed line and mo bile pho ne Individual .. 25 00 subscribers (per 1 peo ple) 33 128 Co rpo rate 33 33 High techno lo gy expo rts (% o f manufactured expo rts) 0.1 0.6 E xt e rna l D e bt a nd R e s o urc e F lo ws E nv iro nm e nt (US$ millio ns) To tal debt o utstanding and disbursed 4,724 13,865 A gricultural land (% o f land area) 44 41 To tal debt service 704 ,1 1 86 Fo rest area (% o f land area) 31.5 31 .1 Debt relief (HIP C, M DRI) – – Terrestrial pro tected areas (% o f land area) 18.9 18.9 To tal debt (% o f GDP ) 39.9 61.4 Freshwater reso urces per capita (cu. meters) 3,593 3,489 To tal debt service (% o f expo rts) 15.5 12.2 Freshwater withdrawal (% o f internal reso urces) 6.2 6.2 Fo reign direct investment (net inflo ws) 468 228 CO2 emissio ns per capita (mt) 4.0 4.5 P o rtfo lio equity (net inflo ws) 0 0 GDP per unit o f energy use (2005 P P P $ per kg o f o il equivalent) 4.4 5.7 Composition of total external debt, 2010 Energy use per capita (kg o f o il equivalent) 1,482 1,208 IBRD, 579 IDA, 0 Short-term, IMF, 785 1,180 Wo rld B a nk G ro up po rt f o lio 2000 2 0 10 Other multi- lateral, 1,768 (US$ millio ns) Bilateral, 912 IB RD To tal debt o utstanding and disbursed 415 579 Disbursements 98 222 P rincipal repayments 60 41 Private, 8,641 Interest payments 22 12 US$ millions IDA To tal debt o utstanding and disbursed 0 0 Disbursements 0 0 P riv a t e S e c t o r D e v e lo pm e nt 2000 2 0 11 To tal debt service 0 0 Time required to start a business (days) – 7 IFC (fiscal year) Co st to start a business (% o f GNI per capita) – 7.2 To tal disbursed and o utstanding po rtfo lio 58 176 Time required to register pro perty (days) – 37 o f which IFC o wn acco unt 20 108 Disbursements fo r IFC o wn acco unt 0 5 Ranked as a majo r co nstraint to business 2000 2 0 10 P o rtfo lio sales, prepayments and (% o f managers surveyed who agreed) repayments fo r IFC o wn acco unt 5 11 A ccess to /co st o f financing .. 72.2 Tax rates .. 60.0 M IGA Gro ss expo sure 93 72 Sto ck market capitalizatio n (% o f GDP ) 39.8 46.5 New guarantees 0 37 B ank capital to asset ratio (%) 9.2 .. No te: Figures in italics are fo r years o ther than tho se specified. 4/4/12 .. indicates data are no t available. – indicates o bservatio n is no t applicable. Develo pment Eco no mics, Develo pment Data Gro up (DECDG). 19 With selected targets to achieve b etween 1990 and 2015 (estimate clo sest to date sho wn, +/- 2 years) J a m a ic a 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 .25 P o verty headco unt ratio at $ 1 a day (P P P , % o f po pulatio n) <2 <2 <2 .. P o verty headco unt ratio at natio nal po verty line (% o f po pulatio n) 28.4 19.9 18.7 9.9 Share o f inco me o r co nsumptio n to the po o rest qunitile (%) 5.9 6.4 5.5 .. P revalence o f malnutritio n (% o f children under 5) 4.0 4.0 3.8 1.9 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, %) 98 95 93 82 P rimary co mpletio n rate (% o f relevant age gro up) 95 92 88 73 Seco ndary scho o l enro llment (gro ss, %) 70 66 87 93 Yo uth literacy rate (% o f peo ple ages 1 5-24) .. .. 92 95 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 (%) 103 100 100 99 Wo men emplo yed in the no nagricultural secto r (% o f no nagricultural emplo yment) 47 47 45 48 P ro po rtio n o f seats held by wo men in natio nal parliament (%) 5 12 13 13 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) 38 34 30 24 Infant mo rtality rate (per 1,000 live births) 31 28 25 20 M easles immunizatio n (pro po rtio n o f o ne-year o lds immunized, %) 74 90 88 88 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) 66 76 91 89 B irths attended by skilled health staff (% o f to tal) 92 90 96 98 Co ntraceptive prevalence (% o f wo men ages 1 5-49) 55 66 69 72 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) 2.1 2.2 1.9 1.7 Incidence o f tuberculo sis (per 100,000 peo ple) 7 7 7 7 Tuberculo sis case detectio n rate (%, all fo rms) 79 68 75 72 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) 93 93 93 93 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 80 79 80 80 Fo rest area (% o f to tal land area) 31.9 .. 31.5 31.1 Terrestrial pro tected areas (% o f land area) 10.2 14.1 18.9 18.9 CO2 emissio ns (metric to ns per capita) 3.3 3.9 4.0 4.5 GDP per unit o f energy use (co nstant 2005 P P P $ per kg o f o il equivalent) 5.1 5.4 4.4 5.7 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 00 Telepho ne mainlines (per 1 peo ple) 4.4 1 1 .7 19.1 9.7 00 M o bile pho ne subscribers (per 1 peo ple) 0.0 1.8 14.2 1 1 7.8 00 Internet users (per 1 peo ple) 0.0 0.1 3.1 26.5 00 Co mputer users (per 1 peo ple) .. .. .. .. Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 125 100 140 100 120 75 100 75 80 50 50 60 25 40 25 0 20 2000 2005 2010 0 0 1990 1995 2000 2010 2000 2005 2010 Primary net enrollment ratio Fixed + mobile subscribers Ratio of girls to boys in primary & secondary Jamaica Latin America & the Caribbean education Internet users No te: Figures in italics are fo r years o ther than tho se specified. .. indicates data are no t available. 4/4/12 Develo pment Eco no mics, Develo pment Data Gro up (DECDG). 20 ANNEX B2: SELECTED INDICATORS OF BANK PORTFOLIO PERFORMANCE AND MANAGEMENT As Of Date 7/13/2012 Indicator 2010 2011 2012 0 Portfolio Assessment Number of Projects Under Implementation a 7 7 7 0 Average Implementation Period (years) b 2.1 2.6 3.6 0.0 Percent of Problem Projects by Number a, c 14.3 14.3 0.0 0.0 Percent of Problem Projects by Amount a, c 11.1 10.7 0.0 0.0 Percent of Projects at Risk by Number a, d 14.3 14.3 0.0 0.0 Percent of Projects at Risk by Amount a, d 11.1 10.7 0.0 0.0 Disbursement Ratio (%) e 25.1 23.3 33.2 0.0 Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 60 3 Proj Eval by OED by Amt (US$ millions) 1,481.6 151.8 % of OED Projects Rated U or HU by Number 40.7 0.0 % of OED Projects Rated U or HU by Amt 38.3 0.0 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. 21 ANNEX B3: IFC INVESTMENT OPERATIONS PROGRAM 2009 2010 2011 2012* Original Commitments (US$m) IFC and Participants 25.00 148.46 IFC's Own Accounts only 25.00 111.41 Original Commitments by Sector (%)- IFC Accounts only ELECTRIC POWER 46.44 FINANCE & INSURANCE 80.00 TRANSPORTATION AND WAREHOUSING 20.00 53.56 Total 100.00 0 100.00 0 Original Commitments by Investment Instrument (%) - IFC Accounts only Equity 4.13 Loan 60.00 86.45 Quasi equity*** 40.00 Quasi loan 8.08 Risk product 1.35 Total 100.00 0 100.01 0 * Data as of June 30, 2012 22 ANNEX B4: SUMMARY OF NON-LENDING SERVICES As Of Date 4/4/2012 Product Completion FY Cost (US$000) Recent completions JM CEM FY11 175 Underway JM PSIA FY12 52 Planned JM (PBS) FY13 142 Youth Empowerment FY14 97 23 ANNEX B5: SOCIAL INDICATORS Latest single year Same region/income group Latin Upper- Am erica m iddle- 1980-85 1990-95 2005-11 & Carib. incom e POPULATION Total population, mid-year (millions) 2.3 2.5 2.7 582.6 2,452.1 Grow th rate (% annual average for period) 1.6 0.7 0.4 1.2 0.7 Urban population (% of population) 48.4 50.6 53.7 79.3 57.4 Total fertility rate (births per woman) 3.3 2.7 2.3 2.2 1.8 POVERTY (% of population) National headcount index .. 27.5 9.9 Urban headcount index .. 22.8 .. Rural headcount index .. 42.2 .. INCOME GNI per capita (US$) 940 2,130 4,980 7,733 5,884 Consumer price index (2005=100) 6 58 290 126 127 INCOME/CONSUMPTION DISTRIBUTION Gini index .. 35.7 .. Low est quintile (% of income or consumption) .. 6.8 .. Highest quintile (% of income or consumption) .. 42.8 .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. 2.2 2.8 4.0 3.0 Education (% of GNI) .. .. .. 4.4 4.8 Net prim ary school enrollm ent rate (% of age group) Total 97 95 82 94 94 Male 96 96 83 94 93 Female 98 94 81 94 95 Access to an im proved w ater source (% of population) Total .. 93 93 94 93 Urban .. 98 98 98 98 Rural .. 88 88 81 86 Im m unization rate (% of children ages 12-23 months) Measles 64 90 88 93 96 DPT 60 90 99 93 96 Child malnutrition (% under 5 years) .. 4 2 3 3 Life expectancy at birth (years) Total 71 70 73 74 73 Male 69 68 70 71 71 Female 73 73 76 77 75 Mortality Infant (per 1,000 live births) 34 28 20 18 17 Under 5 (per 1,000 live births) 43 34 24 23 20 Adult (15-59) Male (per 1,000 population) .. .. 189 181 161 Female (per 1,000 population) .. .. 117 98 100 Maternal (per 100,000 live births) .. 62 110 86 60 Births attended by skilled health staff (%) .. .. 98 90 98 CAS Annex B5. This table w as produced from the CMU LDB system. 7/1 07/1 2 Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one year of age or at any time before the survey. 24 ANNEX B6: KEY ECONOMIC INDICATORS Actual Estimate Projected Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 100 Agriculture 5 5 6 6 6 6 6 6 6 Industry 25 23 22 22 21 21 21 21 21 Services 69 71 72 71 73 73 73 73 73 Total Consumption 96 106 97 96 96 97 97 96 96 Gross domestic fixed investment 26 24 21 20 24 25 26 24 23 Government investment .. .. .. 5 4 4 4 4 4 Private investment .. .. .. 16 19 18 18 18 18 Exports (GNFS)b 40 37 35 30 30 30 31 32 33 Imports (GNFS) 67 65 57 49 51 53 54 53 52 Gross domestic savings 1 -5 3 3 4 6 7 7 6 Gross national savingsc 15 5 13 14 15 13 14 14 14 Memorandum items Gross domestic product 12877 13853 12276 13492 14807 15569 15876 16309 16757 (US$ million at current prices) GNI per capita (US$, Atlas method) 4600 4730 4650 4780 4970 .. .. .. 5330 Real annual growth rates (%, calculated from 96 prices) Gross domestic product at market prices 0.6 -1.7 -2.6 -0.6 1.3 4.0 2.9 2.9 2.8 Gross Domestic Income .. .. .. .. .. .. .. .. .. Real annual per capita growth rates (%, calculated from 96 prices) Gross domestic product at market prices 0.1 -2.1 -2.9 -0.8 1.0 .. .. .. .. Total consumption .. .. .. .. .. .. .. .. .. Private consumption .. .. .. .. .. .. .. .. .. Balance of Payments (US$ millions) Exports (GNFS)b 5132 5075 4310 4062 4454 4729 4961 5226 5501 Merchandise FOB 2365 2341 1633 1410 1710 1926 2060 2181 2292 Imports (GNFS)b 8577 9021 6978 6607 7486 8212 8577 8687 8768 Merchandise FOB 6305 6757 5031 4757 5499 6079 6346 6408 6455 Resource balance -3445 -3946 -2668 -2544 -3032 -3482 -3616 -3461 -3267 Net current transfers 2006 2063 1940 2004 2073 2135 2201 2268 2337 Current account balance -2176 -2509 -1337 -1092 -1467 -1951 -1974 -1755 -1532 Net private foreign direct investment 751 1361 464 348 610 658 711 650 650 Long-term loans (net) 278 .. 992 .. .. .. .. .. .. Official 31 6 121 867 32 -15 -66 -77 -169 Private 247 .. 871 .. .. .. .. .. .. Other capital (net, incl. errors & ommissions) 481 .. -401 .. .. .. .. .. .. Change in reservesd 440 -106 303 933 -399 -608 -846 -834 -351 Memorandum items Resource balance (% of GDP) -26.8 -28.5 -21.7 -18.9 -20.5 -22.4 -22.8 -21.2 -19.5 Real annual growth rates ( YR96 prices) Merchandise exports (FOB) 5.1 .. .. .. .. .. .. .. .. Primary 5.5 .. .. .. .. .. .. .. .. Manufactures 1.1 .. .. .. .. .. .. .. .. Merchandise imports (CIF) 1.4 .. .. .. .. .. .. .. .. (Continued) 25 Key Economic Indicators Continued Actual Estimate Projected Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015 Public finance (as % of GDP at market prices)e Current revenues 25.3 26.6 27.1 26.3 27.4 26.1 26.4 27.1 27.3 Current expenditures 30.1 34.4 35.0 28.4 27.6 25.9 25.5 24.5 23.5 Current account surplus (+) or deficit (-) -16.9 -18.1 -10.9 -8.1 -9.9 -12.5 -12.4 -10.8 -9.1 Capital expenditure 3.4 4.0 3.1 4.6 4.4 4.0 4.0 4.0 4.0 Foreign financing .. .. 2.6 9.1 -0.2 -2.9 -1.2 -0.1 -0.5 Monetary indicators M2/GDP 34.7 19.8 19.0 20.5 27.4 26.5 26.0 25.7 25.7 Growth of M2 (%) 14.7 -36.7 3.7 16.3 45.3 8.7 6.6 7.1 8.5 Private sector credit growth / 127.2 8.7 13.4 69.6 105.4 108.0 -308.8 172.3 194.1 total credit growth (%) Price indices( YR96 =100) Merchandise export price index 175.4 .. .. .. .. .. .. .. .. Merchandise import price index 211.9 .. .. .. .. .. .. .. .. Merchandise terms of trade index 82.8 .. .. .. .. .. .. .. .. Real exchange rate (US$/LCU)f .. .. .. .. .. .. .. .. .. Real interest rates Consumer price index (% change) 9.3 22.0 9.6 12.6 7.5 6.9 6.8 6.6 6.6 GDP deflator (% change) 11.3 14.5 10.8 10.2 6.5 7.0 5.9 6.6 6.5 a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 26 ANNEX B7: KEY EXPOSURE INDICATORS Actual Estimated Projected Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total debt outstanding and disbursed (TDO) (US$m)a 10421.5 10330.8 10986.8 13865.1 13343.6 12481.6 11926.3 10547.6 8318.8 Net disbursements (US$m)a 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total debt service (TDS) (US$m)a 717.1 700.1 757.7 845.9 834.0 793.0 714.5 648.2 516.1 Debt and debt service indicators (%) TDO/XGSb 138.0 134.6 196.9 240.1 205.9 203.2 190.3 158.6 114.8 TDO/GDP 78.7 77.0 88.3 99.9 88.5 92.2 86.0 71.2 50.7 TDS/XGS 9.5 9.1 13.6 14.6 12.9 12.9 11.4 9.7 7.1 Concessional/TDO 10.9 10.9 10.3 8.7 9.4 10.5 11.3 12.7 15.1 IBRD exposure indicators (%) IBRD DS/public DS .. .. .. 6.4 .. .. 4.3 3.3 3.8 Preferred creditor DS/public .. .. .. 23.4 .. .. 50.0 46.0 25.5 DS (%)c IBRD DS/XGS 0.9 0.9 1.2 0.9 0.6 0.7 0.7 0.6 0.6 IBRD TDO (US$m)d 359.8 327.1 398.2 578.6 564.2 548.8 527.9 504.1 471.4 Of which present value of guarantees (US$m) Share of IBRD portfolio (%) 0.3 0.3 0.3 0.5 0.5 0.5 0.5 0.5 0.4 IDA TDO (US$m)d 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short-term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 27 ANNEX B8: IFC INVESTMENT OPERATIONS PROGRAM Jamaica Committed and Disbursed Outstanding Investment Portfolio As of 6/30/2012 (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 2009 Fgb 0 0 3.93 0 0 0 0 3.93 0 0 2005 Jamaica energ... 11.64 0 7.76 0 29.09 11.64 0 7.76 0 29.09 2003/11 Jps co. 28.33 0 17.5 0 0 28.33 0 17.5 0 0 6/8/2002 Mbja limited 28.05 0 0 1.89 19.22 28.05 0 0 1.33 19.22 2005 Ncbj 5.29 0 0 0 0 5.29 0 0 0 0 0 Panjam 17.19 0 0 0 0 4.69 0 0 0 0 2010/11 Tjh 53.57 4.6 0 12.03 0 46.87 4.6 0 11.45 0 2011 Wkpp 12.74 0 9 0 37.05 12.74 0 9 0 33.3 Total Portfolio: 156.81 4.6 38.19 13.92 85.36 137.61 4.6 38.19 12.78 81.61 * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. 28 ANNEX B8: OPERATIONS PORTFOLIO (IBRD/IDA AND GRANTS) As Of Date 7/13/2012 Closed Projects 74 IBRD/IDA * Total Disbursed (Active) 75.46 of w hich has been repaid 2.44 Total Disbursed (Closed) 570.90 of w hich has been repaid 433.83 Total Disbursed (Active + Closed) 646.36 of w hich has been repaid 436.27 Total Undisbursed (Active) 58.37 Total Undisbursed (Closed) 0.00 Total Undisbursed (Active + Closed) 58.37 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 GRANT Cancel. Undisb. Orig. Frm Rev'd Objectives Progress P112780 Enegy Security & EfficiencySEnhancement S 2011 15 11.04585 -0.45415 P095673 Proj JM Early Childhood DevelopMS -- SWAP MS 2008 15 6.240611 3.2406114 3.1818225 P107407 S JM Education Transformation Capacity Bui S 2010 16 7.53452 3.53452 -2.40048 P091299 MS JM Inner City Basic Services Project S 2006 29.3 8.997764 8.9977638 -0.273 P105122 S JM Rural Economic Development Initiative S 2010 15 12.89345 4.0534518 P106622 JM Second HIV/AIDS Project S S 2008 10 2.881739 2.8817388 P105024 JM Social Protection MS MS 2008 40 8.779765 -1.220235 Overall Result 140.3 58.3737 21.033701 0.5083425 29 ANNEX B. CPS REVISED RESULTS FRAMEWORK Original Revised Milestones Progress to Date WBG Program Expected Expected (Active and Planned) Outcomes/Outputs Outcomes/Outputs Results Area 1. Supporting Economic Stability (i)(a) Medium term fiscal (a) Medium term fiscal (i)(a) Fiscal (i)(a) Milestone FS DPL I (FY10, and debt sustainability and debt sustainability Responsibility partially achieved. Debt $200M), FS DPL II enhanced through fiscal enhanced through Framework Management Law still (FY11, $200M) consolidation and improved fiscal passed. pending. Second set of A decision was taken enhanced fiscal reporting reporting discipline and FRF amendments were to split the 2nd DPL and accountability: accountability and passed in the lower into two $100 million more strategic debt house of Parliament on operations, one which management June 7, 2011. would close the series Parliament approved and another which further amendments in would be a stand- September 2011. alone DPL, which has However associated been dropped. regulations are to be resubmitted given the (b)Consolidated public (b)Consolidated public (i) (b) prorogation of sector fiscal accounts sector fiscal accounts Consolidated Parliament in December presented and discussed presented and discussed public sector 2011 for general AAA: CEM (FY11), in Parliament in Parliament budget elections. Cabinet is TF: Statistics Strategy Baseline: Central Baseline: Central presented in reviewing the TA (FY10), Tax IDF Government and public Government and public Parliament regulations prior to (FY11), Debt IDF bodies budgets are bodies budgets are their resubmission to (FY12), DFID TF presented separately presented separately Parliament. (FY11-FY13) (FY09/10) (FY09/10) (i) (b) Milestone Partners: IMF, CDB, Target: Parliament Target: Parliament achieved. The FY11/12 IDB, USAID received and discussed received and discussed Budget Memorandum consolidated public consolidated public did not publish sector budget (FY12/13) sector budget consolidated public (FY13/14) (still within sector tables, but the CPS period) Fiscal Policy Paper submitted to Parliament as part of the FY11/12 (ii) Improved fiscal and Dropped(as it is budget presentation debt sustainability over difficult to attribute included detailed the medium term changes to Bank accounts of both central through: interventions only) Government and the a) (a)Decline in total public public bodies. debt to GDP ratio Baseline: 139.7% of GDP (FY09/10) Target: 124.2% of GDP (FY12/13) b) (b)Reducing debt service through debt management activities Baseline: Interest payment - 16.0% of GDP (FY09/10) Target: 10.5% ( FY12/13) (iii) Abolition of deferred Unchanged 30 financing for Government (iii) Abolition (iii) Milestone expenditures of deferred achieved. Baseline: Annual financing average deferred enacted financing during FY01/01-FY05/06 was J$497 million. Target: Enactment of legislation abolishing the authority to permit deferred financing. Results Area 2. Promoting Inclusive Growth (i) Enhanced resource Unchanged (i) Legal (i) National Education Active operations: management and quality identity of all Trust established as Early Childhood of education to improve three agencies legal entity and is Development, the quality of education are operational; Education through decentralized established. National Education Transformation, Social decision-making in Inspectorate is Protection education system operational; Jamaica JSDF PATH Grant Baseline: None (2010) Teacher Council draft (FY11) Target: Legal identity Bill is ready for public Partners: IDB, for the National consultations; UNICEF Education Inspectorate, Department of School National Education Trust Services established to Planned operations: and Jamaica Teacher work with schools Skills for Inclusive Council are established directly. Growth (FY13) and resources allocated (2013) (ii) Quality of services by Unchanged (ii) 15% (ii)Exceeded. 95% of the early childhood 30% of all ECIs have 2,840 ECIs have institutions enhanced received permits to received an initial through compliance with operate. inspection and 31% minimum standards already received license required for registered to operate. institutions Baseline: 0% (Registered, FY09/10) Target: 20% (FY12/13) (iii) Enhanced health and Unchanged education services for (iii) Exceeded. Overall children in PATH PATH beneficiaries beneficiary families now stand at 388,747 – 31 8% more than target of (iv) Percentage of poor 360,000. children benefiting from PATH Poor children benefiting Poor children benefiting from PATH was 72% in from PATH was 72% in 2010 (JSLC) 2010 (JSLC) Baseline: 60% (2008), Target: 64% (2012) Households in ICBSP Number of persons that 10,000 21,601 persons Active operations: beneficiary communities have been trained in persons feel safer community-based Public safety Baseline: 27.75% (2006), crime and violence component is Inner Cities Basic Target: 75% (2013) prevention and implementing Services Project reduction (includes satisfactorily. Survey (ICBSP), Crime & skills training, to measure household Violence JSDF Grant alternative livelihoods, perceptions on public mediation programs safety will be and education conducted by end of programs) 2012. Increased national National Violence Government capacity to Observatory/Integrated collect and analyze data Crime and Violence and statistics on crime Information System is and violence to support highly advanced, evidence-based making Jamaica one of policymaking in crime the few countries in and violence prevention the region with such a system. Provide access to New 61,953 ICBS Project improved basic infrastructure and financial services and security of tenure for 60,000 ICBS Inner City residents Baseline: 0 (2006) Target: 60,000 (2013) Results Area 3. Promoting sustained Growth Businesses gain by Caribbean Advanced improved access to Regional reliable energy and lower Communications cost of paying taxes: Infrastructure Program (FY10), Energy (i) Reduce electric utility Target changed from (i) 20% (i)Milestone not yet Program (FY11) company’s energy losses 15.8% to 20% achieved. Loss is to yield significant currently at 23% FS DPLI ($200M, benefits for energy FY10), FS DPL II security and efficiency ($100M, FY11) Base: 23% loss (2010). Target: 20% (2013). (ii) Ease of paying taxes (ii) 30 days (ii)Milestone not yet Baseline: 72 payments Unchanged achieved. Recent and 52 full days to reforms, including 32 comply with tax laws for amalgamation of 14 different taxes (2010). payroll taxes and Target: 20 days to pay broadening the taxes (2013). availability of online payment to all taxes and all taxpayers should help bring this number down over the next year. Budget expenditures are Presentation Milestone achieved. 6 FSDPL I ( $200M, allocated efficiently to of a key ministries FY10) achieve development consolidated representing 91% of FS DPL II ($100M, results: public sector central Government, FY11) budget in the submitted their Progress on multi-year Target Changed. Parliament. medium-term budgets perspective in fiscal Progress on multi-year as part of the FY11/12 Partners: IDB, EU planning, expenditure perspective in fiscal budget process, and policy and budgeting: planning, expenditure also had their Baseline: C+ rating policy and budgeting: investment projects (PEFA indicator 12, Baseline: C+ rating evaluated using a new 2007) (PEFA indicator 12, investment Target: A rating by 2007) prioritization tool. FY2013 Target: B rating by FY2013 Improved transparency Deleted “ Improved of public finance: transparency of public finance� Implementation of Implementation of AG continues to Auditor General Auditor General implement its operation operational plan and operational plan and plan. On May 27, 2011, development of internal development of internal the AG submitted to audit plans for ministries. audit plans for Parliament the report on ministries. the Fiscal Policy Paper, per the new FRF Progress in scope, nature Progress in scope, legislation. and follow up of external nature and follow up of audits: external audits: Baseline: C+ rating Baseline: C+ rating (PEFA indicator 26, (PEFA indicator 26, 2007) 2007) Target: B rating (2013) Target: B rating (2013) Increase efficiency of Improved processes in financial management place for evaluation and prioritization of public investment projects Baseline: No prioritization framework exists (FY2009/10) Target: Investment prioritization framework is used in at least 10 ministries to evaluate and select 33 investment projects (i)Medium-sized farmers Unchanged (i)37 (i) On-track. REDI is in Rural Economic move up the supply chain third year of Development Initiative Baseline: None (2010), implementation. Target: 65 (2013) (ii)Small scale agricultural producers & Unchanged (ii)37 (ii) Milestone achieved. Agricultural Risk tourism product A total of 221 persons Management (FY13) providers received trained, of which 44 capacity training percent were females. Baseline: 0 (2010), Target: 65 (2013) (i)Increased capacity to Unchanged (i) Jamaica’s (i)Milestone on-track JSDF Landslide Risk integrate climate hydro- and the target on Reduction, Hurricane resilience into meteorological Jamaica’s SPCR was Dean ERL development plans and observation achieved ahead of strategies and data schedule. Pilot Program for Baseline: No strategic collection A fully developed Climate Resilience program on climate systems SPCR covering 2011- (with IDB) resilience (2010) upgraded and 2030 was completed Target: Strategic strengthened. and presented to the GFDDR Grant, EC program on climate Pilot Program for Tropical Storm Gustav resilience (SPCR, 2013) Climate Resilience Grant (PPCR) Sub-Committee which considered and approved it in November 2011. The PPCR would finance the SPCR to a tune of $25 million ($15 million in grants and $10 million in IDA-like concessional loan). This program is being jointly implemented with the IDB. (ii)Landslide risks are Unchanged (ii)100 (ii) In progress: 15 reduced in four stakeholders Government officials communities. trained in and 20 community Baseline: None landslide risk stakeholders trained in (FY09/10) reduction the MoSSaic Target: 4 communities methodology. methodology for reduced landslide risk Landslide Risk Reduction. Physical investments in the first community identified (Harbor Heights) are expected to start in May 2012. (iii)Agriculture weather Unchanged (iii) 30 (iii) Milestone not yet risk coverage farmers achieved. Baseline: None (2010), Target: 1000+ farmers (2013) 34