PROGRAM INFORMATION DOCUMENT (PID) CONCEPT STAGE October 29, 2012 Report No.: AB7157 (The report # is automatically generated by IDU and should not be changed) Operation Name Second Growth and Competitiveness Grant (GCG-2) Region AFRICA Country Burkina Faso Sector General public administration sector (40%); General agriculture, fishing and forestry sector (35%); Other industry (20%); Primary education (5%) Operation ID P132210 Lending Instrument Development Policy Lending Borrower(s) Republic of Burkina Faso Implementing Agency The Ministry of Economy and Finance Date PID Prepared October 29, 2012 Estimated Date of Appraisal Estimated Date of Board February 14, 2013 Approval Corporate Review Decision Following the corporate review, the decision was taken to proceed with the preparation of the operation. Key development issues and rationale for Bank involvement Burkina Faso is a low-income landlocked country facing significant economic vulnerability and has been facing twin food and refugee crises in 2012. A poor, landlocked country in West Africa, Burkina has maintained economic stability in the face of many structural obstacles and economic shocks, including recurring droughts. Strong reserves of gold and a vibrant cotton sector have supported a respectable economic growth rate (Table 2.1), despite vulnerability to commodity price movements and terms of trade shocks. Burkina has also received significant aid flows in the last decade, being a relatively good performer as measured in CPIA scores. Yet, partly because of a high population growth rate and a non-inclusive pattern of growth, poverty incidence has registered only a moderate decline since the 1990s and remains at 46.7 percent in 2009 (compared with 51 percent in 2003). Burkina has been handling the food shocks and refugee crises in 2012. An inflow of Malian refugees in 2012 has put fiscal pressure on Burkina’s budget. Government has responded by allocating close to $ 30 million to pay for food and schools for the Malian refugees. Latest estimates from October, 2012 suggest that there are 107,000 Malian refugees who have crossed over into Burkina in the aftermath of the Malian political unrest. The UN continues to be in charge of the coordination of emergency humanitarian assistance to the refugees. Multilateral and bilateral development agencies, together with non-governmental organizations, have mobilized more than US$100 million to address financing shortfalls. In relation to the food crisis, government has spent close to $ 80 million as of September 30, 2012 to help feed the vulnerable population. So far, close to 50 tons of food have been sold or distributed to the rural population by the two key agencies, SONAGESS and CONASUR, and the fourth of four phases of food security relief is underway. Major famine has been averted, although there have been execution bottlenecks. The government is strengthening its institutional framework to address the food security issue, facilitated access to strategic grain reserves, strengthened the early warning system to identify vulnerable population, and embarked on an ambitious program of subsidized sale of foods in food-deficit areas. Proposed Objective(s) The development objectives of the GCG-2 are the following: (1) Catalyze private sector growth and employment with three intermediate results: (a) development of an input fund for cotton and improved competitiveness of cotton sector; (b) improvement in production of cash crops through easier access to fertilizer for the non-cotton sector; and (c) improved customs efficiency to reduce cost and waiting time for transit; (2) Improve governance and public resource management with three intermediate results: (a) greater transparency in the mining sector and compliance with EITI; (b) improved justice sector efficiency and transparency; and (c) greater efficiency and transparency of public resource use through increased delegation of authority to line ministries and institutional strengthening of the external audit agency; and (3) Build resilience and reduce vulnerability with three intermediate results: (a) improved transfer of funds to decentralized communities; (b) stronger microfinance access, especially for women; and (c) a strengthened institutional framework for monitoring food security and greater food distribution to poor vulnerable areas. Preliminary Description The proposed operation will be the second in a series of four programmatic DPOs from May 2012 to December 2014. The third and fourth operations are envisaged for December 2013, and 2014, respectively, to be synchronized with national annual budgets. The proposed operation will be financed under Burkina Faso’s allocation under IDA 16. Policy actions have been defined in advance through an extensive consultative process under the joint donor framework. The overarching objective of the series is private-sector growth. While the series consolidates past reforms in the cotton sector, transit facilitation, public finance management, and mining sector transparency, it also introduces new areas, notably judicial reforms, decentralized services, and food security. Poverty and Social Impacts and Environment Aspects Poverty and Social Impacts The proposed series is expected to have a positive direct impact on poverty reduction. The impact will be through an expected strengthening of the government’s policy making and institutional capabilities to ensure an enabling environment for the private sector (pillar 1), improved governance in the management of public resources (pillar 2), and reduced vulnerability of poor populations (pillar 3). The operational design of the program and wide range of sectoral coverage is such as to address issues of growth and resilience up front to maximize impact on poverty. Although the Government of Burkina Faso has made recent strides in combating poverty, there remains much room for greater poverty reduction. Results from the forthcoming poverty assessment, conducted jointly with the Government of Burkina Faso’s national statistics institute (INSD), point to a moderate decline in overall poverty. The national poverty headcount was estimated to be 46.3% of the population in 2009, while a comparable 2003 estimate hovered around 51 percent. Yet poverty incidence remains concentrated in rural areas, where rates have been more than double those of urban areas (although the pace of poverty reduction is higher in rural areas). There are also considerable regional disparities: the share of the population living below the poverty line is less than 30 percent in two regions, Centre (Ouagadougou) and Cascades, while two other regions (Est and Nord) face poverty rates in excess of 60 percent. Environment Aspects The activities supported by the proposed operation are not likely to have significant negative effects on the environment, forests, and other natural resources. Three prior actions, namely the plan for the creation of an input fund, transport sector reforms, and the institutional strengthening of the agency responsible for food security, are expected to have favorable environmental impact. In the cotton sector, the GCG-2 continues to support government's efforts to improve the sector’s competitiveness. The action plan on the creation of the price stabilization fund and the input fund is not expected to have negative impacts on environment. The Government’s broader strategy is anticipated to have a number of environmental effects which are being tracked. In particular, the Government has authorized the scaling up of GM cotton seeds; 66 percent of national plantings were realized during the 2010/11 cropping campaign. Expansion of this seed technology is resulting in a reduction in pesticide use, which is positive for the environment and for human health. Fertilizer use in aggregate and per hectare is anticipated to increase as a result of the GCG-2 supported actions, but this input provision will be conducted with better planning, so it is anticipated that actual fertilizer application will stay within technical norms. The development of cotton growing areas is expected to take into account the existing ecosystems, and continue the implementation of environmental-friendly techniques, including through the protection of water sources, land, soil fertility and sustainable land management. To this end, the IDA-financed West Africa Regional Biosafety Project is enhancing regulatory capacity to manage environmental aspects of this activity. Tentative financing Source: ($m.) BORROWER/RECIPIENT 0 International Development Association (IDA) 70 Borrower/Recipient IBRD Others (specifiy) Total 70 Contact point World Bank: Contact: Ali Zafar Title: Senior Economist Tel: +1 202-473 9869 Email: azafar@worldbank.org Recipient: Contact: Mr. Karim Traore Title: Secrétaire / SP-PPF Tel: + (00226) 50.49.29.99 Email: tk_traore@hotmail.com For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop