Document of The World Bank FOR OFFICIAL USE ONLY Report No. 27132 PROJECT COMPLETION NOTE (Credit No. 346%COM) ONA CREDIT IN THE AMOUNT OF SDR8.8MILLION (USiGll.4 MILLION EQUIVALENT) TO THE UNION OF COMOROS FOR A INFRASTRUCTURE, WATER AND ENVIRONMENT PROJECT October 31,2003 Transport Division Africa 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 ,bedisclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit Comorian Franc (KMF) US$l .oo 420KMF (October31,2003) SDR 1 604 KMF SYSTEM OF WEIGHT AND MEASURES Metric System FISCAL YEAR January 1 - December 31 ABBREVIATIONS CAS CountryAssistanceStrategy GDI General Directorate for Infrastructure GOC Governmentof theComoros ISS Interim Support Strategy KMF ComorianFranc Vice President: Callisto Madavo Country Director: Hafez Ghanem Sector Manager: Maryvonne Plessis-Fraissard Task TeamLeaders: SusanneHolste FOR OFFICIAL USE ONLY PROJECT COMPLETION NOTE UNION OF COMOROS INFRASTRUCTURE, WATER AND ENVIRONMENT PROJECT Cr. 346%COM) 1 The project was identified by the government and the Bank in 1996, was appraised in dctober 2000andnegotiatedin January2001. TheBoard approvedthe credit for US$ 11.4 million on March 1, 2001. The Development Credit Agreement was signed on April 25, 2001. The creditbecameeffective on July 1, 2001 The unusually long time of 54 months for project l preparation was due to a two-year suspension of IDA disbursements to Comoros and one year of political turmoil. Project Objectivesand Description 2. The objectiveof the project was to assistthe Governmentof Comoros (COM) to improve living conditions and stimulate economic growth, while protecting the environment through investments in basic infrastructure. Theprojectfocusedon two priority sectors(roads and urban water supply), and the specific objectives were to (i) maintain road infrastructure andimprovethe safetyof roadtransport,(ii) upgradeandexpandurbanwater infrastructure and significantly increase access to clean water for people living on the Anjouan and Mohbli islandsby 2004-2005,and(iii) improvedecentralizedmanagementof roadtransportandwater supply through strengthening of public sector institutions, increased public awareness, stakeholderparticipation,andimplementationof cost-recoverymeasures. 3 Dueto the volatilepolitical situationandcontinuedconflict, theBankhasnot prepared a' Country Assistance Strategy (CAS) since 1993. The Board discussed an Interim Support Strategy(ISS) on November 14, 2000. The main strategicobjectivesof the ISS were to support the Government of Comoros while attempting to integrate Anjouan into the federation, createthe conditionsfor improvedeconomicmanagementandgovernance.Theprojectwas the only new credit considered for the Comoros at the time. By supporting urgent periodic maintenanceandwater supplyinfrastructureit was to contributeto economicrecoveryand help provide essential social services. By supporting, improved decentralized project implementationand managementon all three islands,it was to support the government's efforts to create a federation within which all three islands enjoy considerable autonomy. 4 The project included three components: (A) Transport: roads periodic maintenance, rdadsafetyandengineeringstudies,expertise,andinstitutionalstrengthening;(B) Urbanwater supply: urban water works and engineering studies, expertise, and institutional strengthening; and(C) Supportto sectorsandprogramcoordination. Theproject wasto be implemented over a five-year period, closing on December 31, 2005. The total project cost was estimated at US$ 13.3 million equivalent,including a foreign exchangecomponentof about US$ 10 million, or 75 percent of the total project cost. The IDA credit of $11.4 million was to finance about 86 percent of the total project cost, comprising civil works, consulting services, goods and equipment. The French Cooperation and Government were to finance the remaining US$ 1.9million equivalent.Theprojectwasanintegralpart of amulti-donorfinancedinfrastructure program that was to include the European Union and UNICEF. 5 The project was to be implemented through the General Directorate for Infrastructure (GDI) of the Ministry of Equipment, Energy and Urban Development. The GDI was to integrate the previously independent Directorate of Public Works, Directorate of Energy and Directorateof UrbanDevelopment.Thegeneraldirectoratewasto be decentralizedto eachof the islands. The GDI was to be supported by a designated coordination unit headed by an international expert. The French Cooperation was to finance the coordination unit, technical assistanceand the institutional training program for the central and regional directorates. 6 The project team identified the high risk associated with investing in Comoros before the political situation had fully stabilized,particularly becausea substantialportion of the disbursements were planned for Anjouan which had been involved in a lengthy separatist struggle and remained outside effective government control at the time of appraisal. The Development Credit Agreement (DCA) therefore provided for a separate disbursement category and disbursementconditionfor works in Anjouan. The DCA also stipulatedthe following legal covenants for implementation: (i) a sliding three-year investment and maintenance program for the road sector would be prepared by the Infrastructure Directorate General and submitted annually to IDA by October 15, for its review and comments; (ii) government would not undertake or order from any entity or contractoranypublicinvestment for the road sector over US$500,000 equivalent, which is not part of the approved three-year investmentandmaintenanceprogram,and(iii) the governmentwould (a) maintainthe road maintenance fund under terms and conditions which would be at all times satisfactory to IDA, (b) undertakemeasuresrequiredon its part to ensurethat the level of road userfeesto be channeled into the road maintenance fund are promptly adjusted according to the agreed provision under the Sector Policy Letter, and (c) ensurethat the proceedsof the road maintenance fund shall be used solely for the purposes of defraying the cost of expenditures incurredfor roadmaintenanceandrehabilitationoperationsin theComoros. Reasons for cancellation 7 Hopes for reconciliation and a renewal of government have not materialized despite the Fbmboni Agreement that was reached in February 2001 and which outlined the path to reunification and democratization of the country. The new constitution was adopted on December 23, 2001 and with it, the country changed its name to the Union of Comoros. The constitution contained provisions for electing a president and forming a government on each of the three islands as well as at the central level. During April and May 2002, in elections that were surroundedby controversy,the existingleadersof Anjouan,Moheli and of the Union were elected presidents, and a political opponent of the Union was elected as president of Grande Comore. It was not before long that new lines of confrontation emerged as the agreementshadleft room for interpretationand negotiation on the specific responsibilities and prerogatives of the four governments. Since July 2002 disagreements over budget issues emerged, particularly with respect to modalities of tax collection and customs administration. 8 The social and general economic climate has been deteriorating noticeably in 2003. A disputeover control of revenuesandthe security forces, and mutual accusations of coup and assassinationplots have charged the atmosphere further, and caused indefinite postponement of legislative elections for the Union and the three islands. The tensions between the Union and the islands are further compounded because Anjouan has been operating much like an independent entity, while Moheli and Grande Comore have never been able to fully exercise their autonomous prerogatives. Comoros is not a war-torn, post-conflict country recovering from heavy loss of human or physical capital. But unconventional business practices have flourished in an institutional vacuum and poor governance, as evidenced by the single-source contracting for the country's telephone code, by Anjouan's "double privatization" of its port, and by the lack of competitive practices for oil or rice imports. The few companies of international standing that were active in the Comoros (Vivendi, Emirates Airlines, and Sun International)haveleft theislandsin recentyears. 9 The setting-up of the Union and of the three independent islands was not properly prepared and to-date there is a significant lack of understanding as to the roles and responsibilities of the different spheres of government. This was illustrated recently when the army of the Union impounded a charter plane becauseit had received landing authorization from Grande Comore but not from the Union. The ministerial set-up varies between the Union and the islands and there is no longer an effective implementing arrangement for this project. At the level of the Union government there is no longer a ministry responsible for transport or infrastructure; instead there is a Ministry for Social Affairs, Solidarity, Decentralization, Post, Telecommunication,andInternationalTransport. In additionthereis aDeputyMinister whose portfolio includes Investments and who could conceivably become a main interlocutor. The General Directorate for Infrastructure is attached to the Ministry of Social Affaires but the decreehas not been signed. In Grande Comore the ministerial set-up provides for a Ministry of Industry,EquipmentandMining; in Anjouanthereis a Ministry of Production,Environment, Equipment, Transport, and Telecommunication; and finally in Moheli there exists a Ministry for Land Planning, Energy, Urban Development, Housing, Transport, and Post and Telecommunication. The level of human resource capacity in all four governments is extremelylimited andqualified staff fills few positions. The GDI doesnot havesufficient human resources at central level to implement a project of this complexity and the departure of the foreignprojectcoordinatortirther weakenedits capacity. Giventhe currentconstellation of authorities and lack of agreement over responsibilities it is impossible to pursue a reform agendathatrequiresgovernmentcommitmentandabilityto implement. 10 The road fund is set-up at the level of the Union and managedby the General Directorate for Infrastructure and payments are authorized by the national director and the directorof Treasury(of the Union). Roaduserleviesshouldbe transferreddirectly from the Oil Authority into the account of the road fund, which is held at the Central Bank. Delays have,however,beencommonsincethe start of the project and currentlythere is a delayof seven months, for a total of FC 238 million, about $US 500,000. The GDI recently signed maintenance contracts for FC 313 million, hoping that the road fund account will be credited shortly but this might also lead to important payment delays. 11 On March 24, 2003 GOC informed the Bank of its decision to close the project. The Bank acknowledged Government's decision and fixed July 31, 2003 as the deadline of receipt for f!inal withdrawal applications. Government agreed with the Bank that the only project to be supported in the new Transitional Support Strategy, to be presented to the Board in October 2003, would be the second phase of the Social Fund which relies exclusively on communities, civil society, NGOs and companies for its implementation. Government requested that periodic road maintenance and urban water supply be transferred from the cancelled credit to this new project because of their strategic importance. A pre-appraisal mission is currently assessingthe feasibility of this request. Lessons learnt 12 Comoros is not a post-conflict country but rather a country that continues to evolve in a highly volatile political situation, with an institutional vacuum, andnon-transparentbusiness practices. Lessons learnt might be unique and are the following: a. Challenged authority: the islands are preoccupied by their autonomy and are unwilling to acceptUnion oversightin anyof their developmentefforts; it appearsunlikelythat a project which depends on a central, or even deconcentrated, institutional structure could succeed because the islands' governments are not accepting such a set-up, insisting instead on fully autonomous regional representations; b. Failure of the road fund: a central tenet of the project was a functioning road fund that, would preserve investments and enable local enterprises to flourish; due to the institutional uncertainties and lack of any organic texts and effective authority, the islandof GrandeComoroshascreatedits own roadfund, the oil importing authority refuses to release road user fees to the Union Road Fund, and the islands of Moheli and Anjouan are starved for resources; c. International expert as project coordinator: a rare point of consensus amongst the Comorians was the criticism of an international expert who managed the project unit; while the need for international expertise was acknowledged, the hierarchical position was challenged; d. Focusof developmentassistance:in asituationof absenceof a functioninggovernment and mutual distrust of the political leaders, it appearsjudicious to focus development assistance on communities and civil society, as proposed by the transitional support strategy.