Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: AC2391 Date ISDS Prepared/Updated: 06/18/2008 I. BASIC INFORMATION A. Basic Project Data Country: Central Africa Project ID: P099833 Project Name: CEMAC Regional Institutions Support Project Task Team Leader: Andres D. Jaime Estimated Appraisal Date: June 26, 2008 Estimated Board Date: September 23, 2008 Managing Unit: AFTFP Lending Instrument: Specific Investment Loan Sector: General finance sector (100%) Theme: Other financial and private sector development (P);Infrastructure services for private sector development (S) IBRD Amount (US$m.): 0.00 IDA Amount (US$m.): 50.00 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: BORROWER/RECIPIENT 22.00 Bilateral Agencies (unidentified) 1.00 Foreign Multilateral Institutions (unidentified) 2.00 25.00 B. Project Objectives [from section 2 of PCN] The objective of the project is to improve financial integration and intermediation in the CEMAC region which will help increase economic activity and reduce poverty over time. Project outcomes will include enhanced regional integration, increased credit (particularly for investment) and deposit mobilization in the region, as well as improved governance on financial matters. Indicators will be further developed during project preparation. C. Project Description [from section 3 of PCN] A sector investment credit is proposed. The credit would finance technical assistance, studies, training and related investments to support strengthening of institutions so that they are able to efficiently carry out their mandate. A line of credit for investments in regional projects which are too small to be financed through other means is also being considered. The preliminary project components are summarized below. The activities listed are priorities where the Bank has a comparative advantage. However, the agenda for financial sector and regional integration is very broad, and it is likely that the program to be supported by all donors will be larger. For instance, Page 2 activities associated with improving the OHADA business legislation and the insurance regulatory body (CIMA - Conf?rence Interafricaine des marches d'Assurance) which cover both west and central Africa are likely to be financed by other donors, such as the Government of France. Also, it is not yet certain that BEAC will be in a position to transfer funds on a grant basis as may be required for non income generating entities such as CEMAC and the Regional Court of Justice system . The full program including those activities financed by other donors will be included in the Project Appraisal Document. A. Developing policies and mechanisms to better manage the regional monetary union The project will provide assistance so that the regional authorities are in a better position to appropriately manage liquidity, carry out effective monetary policy, and improve macroeconomic management, including the ongoing effort towards reaching economic convergence . This is also central to an effective use of petroleum surpluses so that these can be channeled for investment. BEAC is a well run institution, and support will focus on areas which will enhance its ability to conduct monetary policy and ensure currency stability. The project would, inter alia, support improvements in monetary policy formulation, the establishment of the Treasury bill market, assistance in the management of foreign exchange reserves, and regional macroeconomic management. B. Strengthening regional institutions The project will help strengthen regional institutions so that they can carry out their mandates of ensuring the soundness of the regional economic and financial system and promote economic development. The regulatory framework for banking institutions was updated in 2001 although the principal prudential regulations are less strict than international norms (for instance capital adequacy requirements are too low) and it is very difficult for a bank to in practice operate regionally which is a serious obstacle to integration. Regulations governing microfinance institutions were enacted in 2002 and while they are in line with international best practice, they have not yet been adopted because of the large number of small institutions involved renders the task complex and time-consuming. As supervision requirements have expanded without a concomitant increase in resources for recruitment and training of staff, the ability of COBAC to supervise banks and microfinance institutions is grossly inadequate, which represents a threat to the already small deposit base. The project will also support the further preparation of the basic framework for a regional securities market which is in principle to be supervised by the Central African Financial Supervision Commission (COSUMAF - Commission de Surveillance du March? Financier de l'Afrique Centrale), and the needed activities to develop the Regional Anti- Money Laundering capacities under the aegis of the GABAC (Groupe d'Action contre le Blanchiment d'Argent en Afrique Centrale). Tighter regulation and supervision of financial institutions, markets and operations will significantly contribute to the governance improvement agenda of the countries in the sub-region. Expansion of finance in the region will require increased knowledge of and information about clients. To this end a regional credit bureau, possibly at BEAC, would represent an important step. The project will support the establishment of such a credit bureau. The project could also provide institutional support to the Executive Secretariat of CEMAC which is charged with Page 3 making the customs union effective; enforcing macro-economic policy convergence and pursuing financial sector integration. CEMAC remains weak and understaffed particularly in light of its broad mandate. The project would strengthen CEMAC and help it define a work program so that it can gradually fulfill its mandate. C. Facilitating the financing of integration investments The project would support the institutional strengthening of BDEAC, the regional development bank, and could finance a pilot line of Credit to support regional investments, primarily in infrastructure. BDEAC has been appointed by CEMAC countries to manage a Community Development Fund (FODEC-Fonds de D?veloppement de la Communaut?) and is also expected to receive substantial funding from increased petroleum revenues to finance regional infrastructure investments such as cross-border electricity supply and the construction of the regional road network. Despite progress in strengthening its financial position, BDEAC would have difficulties managing the resources that are expected to eventually flow through it, and has requested Bank assistance. The project would support the design and implementation of an institutional strengthening program, which would focus on strengthening financial management, operational practices, including project analysis, and staffing. Completion of an agreed program in the early years of project implementation would enable BDEAC to subsequently manage a pilot line of credit from the Bank, and would be a condition of disbursement of the IDA line of credit should the line of credit be included in the project. Projects financed under the line of credit would promote economic integration among CEMAC countries. The funds would be on-lent to BDEAC; as in the case of the lines of credit to the West African Development Bank, IDA funding would be allocated only to public sector components of investment projects which require long-term financing and have high economic return. The on lending arrangements would be in line with standard practice for lines of credit. D. Project location (if known) CEMAC Region E. Borrower’s Institutional Capacity for Safeguard Policies [from PCN] Nature of safeguards analysis strongly dependent on possible inclusion of line of credit, which will be clarified in the next 4 months. F. Environmental and Social Safeguards Specialists Mr Warren Waters (AFTQK) II. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4.01) X The nature of the Environmental Assessment and the Environmental Category of the project will be determined after the decision is made on the possible inclusion of a line of credit. Page 4 Safeguard Policies Triggered Yes No TBD Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Indigenous Peoples (OP/BP 4.10) X Involuntary Resettlement (OP/BP 4.12) X Safety of Dams (OP/BP 4.37) X Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X Environmental Category: C - Not Required III. SAFEGUARD PREPARATION PLAN A. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared: 02/15/2007 B. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS: N/A C. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing 1 should be specified in the PAD-stage ISDS. To be determined depending on environmental category (which in turn depends on decision on line of credit) IV. APPROVALS Signed and submitted by: Task Team Leader: Mr Andres D. Jaime 06/05/2006 Approved by: Regional Safeguards Coordinator: Mr Warren Waters 06/16/2008 Comments: Sector Manager: Mr Peter J. Mousley 06/16/2008 Comments: 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons. Page 5