Document of The World Bank Report No: ICR00004651 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H9870) ON A GRANT IN THE AMOUNT OF SDR 4.9 MILLION (US$ 7.5 MILLION EQUIVALENT) AND A CREDIT IN THE AMOUNT OF SDR 3.6 MILLION (US$ 5 MILLION EQUIVALENT) TO THE INDEPENDENT STATE OF SAMOA FOR A PROGRAMMATIC SERIES OF TWO FISCAL AND ECONOMIC REFORM DEVELOPMENT POLICY OPERATIONS March 14, 2019 Macroeconomics, Trade and Investment Global Practice East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective 22 February 2019) Currency Unit = Samoan Tala (WST) WST$ 2.61 = US$1 US$ 0.72 = SDR 1 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank MTDS Medium Term Debt Strategy ASYCUDA Automated System for Customs Data NCD Non-Communicable Disease Cat-DDO Catastrophe Deferred Drawdown Option NHS National Health Service CBS Central Bank of Samoa NPS National Payments System CPIA Country Policy and Institutional Assessment OAG Office of the Attorney General DMU Debt Management Unit PAPRI Pacific Payments, Remittances and Securities Settlement Initiative DPO Development Policy Operation PAYE Pay As You Earn DSA Debt Sustainability Analysis PDO Program Development Objective EPC Electric Power Corporation PEN Package of Essential Needs GDP Gross Domestic Product PFI Public Financial Institution GNI Gross National Income PFM Public Financial Management GOS Government of Samoa PFMA Public Financial Management Act HIES Household Income and Expenditure Survey PPP Public-Private Partnership HRPP Human Rights Protection Party PSDI Private Sector Development Initiative IDA International Development Association RFQ Request for Quote IFC International Finance Corporation SDS Strategy for the Development of Samoa IMF International Monetary Fund SME Small and Medium Enterprises JPAM Joint Policy Action Matrix SOE State-Owned Enterprise MAPS Method for Assessing Procurement Systems SBS Samoa Bureau of Statistics MFR Ministry for Revenue STA Samoa Tourism Authority MOF Ministry of Finance UNCTAD United Nations Conference on Trade and Development MP Member of Parliament WB World Bank MPE Ministry for Public Enterprises VAGST Value-Added Goods and Services Tax Global Practice Director: Lalita Moorty Sector Manager: Ndiame Diop Project Team Leader: Kim Edwards ICR Team Leader: Anna Robinson The World Bank (P149770 and P155118) INDEPENDENT STATE OF SAMOA First Fiscal and Economic Reform Operation Second Fiscal and Economic Reform Operation CONTENTS DATA SHEET……………………………………………………………………………………………………………………………………………………………………. iv 1. PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN ...............................................................................................1 2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES..............................................................................................5 3. ASSESSMENT OF OUTCOMES ................................................................................................................................................ 15 4. ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME........................................................................................................... 20 5. ASSESSMENT OF BANK AND BORROWER PERFORMANCE ................................................................................................... 21 6. LESSONS LEARNED ................................................................................................................................................................ 24 7. COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS .................................................... 25 ANNEX 1: TRIGGERS AND PRIOR ACTIONS FOR DPO 2, AS SET OUT IN PROGRAM DOCUMENT IN AUGUST 2016 ...................... 27 ANNEX 2: BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES ............................................................ 29 ANNEX 3: SUMMARY OF BORROWER'S ICR AND/OR COMMENTS ON DRAFT ICR ....................................................................... 32 ANNEX 4: LIST OF SUPPORTING DOCUMENTS .............................................................................................................................. 33 M A P ............................................................................................................................................................................................. 34 iii The World Bank (P149770 and P155118) A. BASIC INFORMATION Program 1 Samoa First Fiscal and Country Samoa Program Name: Economic Reform Operation Program ID: P149770 L/C/TF Number(s) IDA-H9870 ICR Date: 02/28/2019 ICR Type: 02/28/2019 INDEPENDENT STATE OF Financing Instrument: DPL Borrower SAMOA Original Total Commitment USD 7.50M Disbursed Amount USD 6.93M Implementing Agencies: Cofinanciers and Other External Partners: Program 2 Second Fiscal and Economic Country Samoa Program Name: Reform Operation Program ID: P155118 L/C/TF Number(s) IDA-59010,IDA-H9870 ICR Date: 02/28/2019 ICR Type: Core ICR Financing Instrument: DPL Borrower MINISTRY OF FINANCE Original Total Commitment USD 5.00M Disbursed Amount USD 5.08M Implementing Agencies: Cofinanciers and Other External Partners: B. KEY DATES Samoa First Fiscal and Economic Reform Operation P149770 Process Date Process Original Date Revised / Actual Date(s) Concept Review: 06/09/2014 Effectiveness: 06/24/2015 06/12/2015 Appraisal: 07/14/2014 Restructuring(s): Approval: 09/22/2014 Mid-term Review: Closing: 09/30/2015 09/30/2015 Second Fiscal and Economic Reform Operation P155118 Process Date Process Original Date Revised / Actual Date(s) Concept Review: 05/25/2016 Effectiveness: 03/22/2017 12/31/2017 Appraisal: 07/11/2016 Restructuring(s): Approval: 09/13/2016 Mid-term Review: Closing: 12/31/2017 12/31/2017 C. RATINGS SUMMARY C.1 Performance Rating by ICR Overall Program Rating Outcomes Moderately Satisfactory iv The World Bank (P149770 and P155118) Risk to Development Outcome Moderate Bank Performance Moderately Satisfactory Borrower Performance Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Satisfactory Agency/Agencies: Overall Borrower Overall Bank Performance Moderately Satisfactory Moderately Satisfactory Performance C.3 Quality at Entry and Implementation Performance Indicators Samoa First Fiscal and Economic Reform Operation P149770 Implementation Indicators QAG Assessments (if any) Rating Performance Potential Problem Program No Quality at Entry (QEA) None at any time (Yes/No): Problem Program at any Quality of Supervision No None time (Yes/No): (QSA) DO rating before Closing/Inactive status Second Fiscal and Economic Reform Operation P155118 Implementation Indicators QAG Assessments (if any) Rating Performance Potential Problem Program No Quality at Entry (QEA) None at any time (Yes/No): Problem Program at any Quality of Supervision No None time (Yes/No): (QSA) DO rating before Closing/Inactive status D. SECTOR AND THEME CODES Samoa First Fiscal and Economic Reform Operation P149770 Original Actual Major Sector Public Administration Central Government (Central Agencies) 33 33 Financial Sector Other Non-bank Financial Institutions 9 9 Industry, Trade and Services Other Industry, Trade and Services 49 49 Services 9 9 v The World Bank (P149770 and P155118) Major Theme/Theme/Sub Theme Economic Policy 25 25 Fiscal Policy 8 8 Fiscal sustainability 8 8 Trade 17 17 Trade Facilitation 17 17 Finance 17 17 Financial Stability 17 17 Financial Sector oversight and policy/banking 17 17 regulation&restructuring Private Sector Development 33 33 Business Enabling Environment 33 33 Investment and Business Climate 33 33 Public Sector Management 26 26 Public Administration 9 9 Transparency, Accountability and Good Governance 9 9 Public Finance Management 17 17 Debt Management 8 8 Public Expenditure Management 9 9 Second Fiscal and Economic Reform Operation P155118 Original Actual Major Sector Public Administration Other Public Administration 14 14 Central Government (Central Agencies) 58 58 Financial Sector Banking Institutions 14 14 Industry, Trade and Services Tourism 14 14 Major Theme/Theme/Sub Theme Environment and Natural Resource Management 14 14 Climate change 14 14 Adaptation 14 14 Finance 17 17 Financial Infrastructure and Access 14 14 Payment&markets infrastructure 14 14 Private Sector Development 33 33 Jobs 14 14 Job Creation 14 14 Public Private Partnerships 14 14 Public Sector Management 26 26 Public Administration 9 9 State-owned Enterprise Reform and Privatization 14 14 vi The World Bank (P149770 and P155118) Public Finance Management 17 17 Debt Management 8 8 Domestic Revenue Administration 29 29 Urban and Rural Development 14 14 Disaster Risk Management 14 14 Disaster Risk Reduction 14 14 E. BANK STAFF Samoa First Fiscal and Economic Reform Operation P149770 Positions At ICR At Approval Vice President: Victoria Kwakwa Axel van Trotsenburg Country Director: Michel Kerf Franz R. Drees-Gross Practice Manager/Manager: Ndiame Diop Mathew A. Verghis Task Team Leader: Kim Alan Edwards Virginia Ann Horscroft ICR Team Leader: Anna Elizabeth Robinson ICR Primary Author: Anna Elizabeth Robinson Second Fiscal and Economic Reform Operation P155118 Positions At ICR At Approval Vice President: Victoria Kwakwa Victoria Kwakwa Country Director: Michel Kerf Michel Kerf Practice Manager/Manager: Ndiame Diop Mathew A. Verghis Task Team Leader: Kim Alan Edwards Kim Alan Edwards ICR Team Leader: Anna Elizabeth Robinson ICR Primary Author: Anna Elizabeth Robinson F. RESULTS FRAMEWORK ANALYSIS Program Development Objectives (from Program Document) The Program Development Objectives are: (i) to improve fiscal management in the areas of debt, procurement and revenue; (ii) to strengthen the payments system, tourism sector policy and private sector development opportunities as foundations for more robust economic growth over the medium term; and (iii) to strengthen the monitoring, reporting, and coordination of climate resilience activities in Samoa, as an important step toward increasing its resilience to the effects of climate change. Revised Program Development Objectives (as approved by original approving authority) Indicator(s) Samoa First Fiscal and Economic Reform Operation P149770 Original Target Values (from Formally Revised Actual Value Achieved at Indicator Baseline Value approval Target Values Completion or Target Years documents) vii The World Bank (P149770 and P155118) Second Fiscal and Economic Reform Operation P155118 Original Target Values (from Formally Revised Actual Value Achieved at Indicator Baseline Value approval Target Values Completion or Target Years documents) Indicator 1 : Compliance with the MTDS provisions on external loan concessionality and economic return. Value Partial Full Compliance, Full compliance, FY16-18 quantitative or Compliance, FY11- FY16-18 Qualitative 13 Date achieved 06/28/2013 12/31/2018 12/28/2018 Comments Achieved. Although a new non-concessional loan was contracted in late 2014, after the (incl. % Board approval of DPO1 (see the discussion in Section 2.1), the only new loans contracted achievement) over FY16-18 were two IDA credits which complied with the MTDS. Indicator 2 : An increase in the extent to which commonly procured items are procured through framework arrangements within and across line ministries. Value No such Framework Five framework quantitative or framework arrangements for arrangements had been Qualitative arrangements three of the established by June 2018, commonly with two more in place by procured December. categories of items have been Overall unit prices for established (by medicines have significantly June 2018), with reduced compared with demonstrated 2014/15. benefits in terms of lower unit costs and/or reduced time to undertake procurement. Date achieved 08/29/2014 12/31/2018 12/28/2018 Comments Achieved. Seven framework arrangements are in place. All arrangements so far are with (incl. % the NHS. The first order made under the July 2017 medicines framework arrangement achievement) cost 40 percent less than if 2014/15 contract unit prices had been used. Indicator 3 : Improved tax compliance as measured by on-time filing, on-time payment and arrears collection for large enterprises. viii The World Bank (P149770 and P155118) Value FY13 - FY18 - Filing on time: 75% of large quantitative or On-time filing less On-time filing enterprises and 39% of Qualitative than 80 percent; greater than or SMEs (below target). Paying on-time payment equal to 90 on time: 85% of large less than 70 percent; on-time enterprises and 87% of percent; payment greater SMEs(exceeds target). outstanding than or equal to 57% of returns outstanding returns collected 80 percent; in January 2016 received by or resolved by year outstanding December 2016 (exceeds end less than 50 returns collected target) percent or resolved by year end greater than or equal to 50 percent Date achieved 07/31/2013 12/31/2018 12/28/2018 Comments Mostly achieved. Targets for payment and outstanding returns were achieved but on-time (incl. % filing is below-target for large enterprises (and significantly below target for SMEs). achievement) Indicator 4 : A more efficient payments system as measured by an increased prevalence of electronic payments. Value Number of Number of Between 2014 and 2017: quantitative or payments in 2013 - payments in 330 percent increase in Qualitative Interbank manual FY2018 - interbank manual cheque cheque Interbank manual settlements 9 percent settlements cheque decrease in interbank credit (260,307); settlements transfers 40 percent Debit and credit (decrease by 10 decrease in mobile banking card payments percent) transactions (109,819); Credit transfers Debit and credit No verified data on (149,875); card payments, intrabank debit and credit Mobile payments credit transfers card payments (76,819) and mobile payments (increase by 10 percent) Date achieved 12/31/2013 12/31/2018 12/28/2017 Comments Not achieved. The Central Bank of Samoa (CBS) has identified issues with its payment (incl. % system data which mean that the 2013 baseline data is inaccurate. Therefore 2014 is achievement) taken as the baseline. Debit and credit card data are also not verified as accurate. Indicator 5 : Improved performance of the tourism industry as measured by an increase in proportion of the tourist and sports tourist segments in overall visitor arrivals and an expansion of employment in the accommodation, restaurants and general commerce industries. ix The World Bank (P149770 and P155118) Value Average decrease Average increase Holiday arrivals grew 51% quantitative or in proportion of in proportion of between 2013-17, Qualitative target segments of target segments increased 36 to 43%of total 1.3 percent per of 0.5 percent visitor arrivals (increase of year 2009-13, and per year 2013-18, 1.8 percentage points per 5,992 people and 6376 people year). Employment in employed in employed in accommodation, tourism-related tourism-related restaurants & general industries in 2011 industries in 2016 commerce industries increased from 4873, June 2013 to 5610, June 2018 Date achieved 12/31/2013 12/31/2018 12/28/2018 Comments Achieved, based on alternative data. It was not possible to replicate the baseline for the (incl. % proportion of target segments. For employment, the 2016 Census used different industry achievement) categories to the 2011 Census, making a direct comparison impossible. Indicator 6 : Greater private participation in the SOE sector, as measured by the number of new PPPs. Value No new PPPs in At least two new No new PPPs in FY17 or quantitative or FY2016 PPPs (by June FY18. The PPP Handbook Qualitative 2018), with all hasn't been applied yet. new PPPs arranged in accordance with the new framework Date achieved 07/29/2016 12/31/2018 12/28/2018 Comments Not yet achieved. The PPP guidelines were recently simplified and reissued as a PPP (incl. % Handbook. Three multiyear performance contracts are currently under preparation in achievement) accordance with the Handbook. Indicator 7 : Increased integration and monitoring of climate resilience actions and indicators in sector plans and annual reviews. Value Ad hoc reporting (in FY18): All new All four new sector plans in quantitative or on climate sector plans to FY18 include indicators Qualitative resilience and incorporate relating to climate/disaster disaster risks climate resilience resilience. across sectors. actions, and all sector plan Copies of sector plan annual annual reviews to reviews prepared in FY18 monitor disaster were not available to risk and climate assess. resilience results indicators as per the new SDS results framework. x The World Bank (P149770 and P155118) Date achieved 08/31/2016 12/31/2018 12/31/2018 Comments Partially achieved. All new sector plans prepared in FY18 incorporate climate resilience (incl. % actions and indicators, but it was not possible to assess the sector plan annual reviews as achievement) these were not provided to the ICR team. G. RATINGS OF PROJECT PERFORMANCE IN ISRs H. RESTRUCTURING xi The World Bank (P155118) 1. PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN 1.1 Context at Appraisal 1. Samoa is a remote small island economy with a population of 195,000 people, spread across two main islands in the South Pacific. Samoa is an Upper Middle Income country, with GNI per capita of US$4,120 in 2016 (at the time of the second operation). Samoa’s small population and remoteness from major markets prevent economies of scale in production and limit export opportunities, while also contributing to high per capita costs of public service delivery. The external sector relies on tourism, aid and remittances from workers in Australia, New Zealand and the United States to finance large merchandise trade deficits. 2. Samoa has a stable political system and strong institutional capacity compared to other Pacific and IDA- member peers, as measured by Country Policy and Institutional Assessment ratings. 1 Samoa is a parliamentary democracy with a constitutional legal system, although only matai (traditional chiefs of extended families, the majority of whom are male) can stand for election. The Human Rights Protection Party (HRPP) has held a near- continuous majority in Parliament since 1982, and in the March 2016 elections gained 47 of the 50 seats (including 12 independent MPs who aligned with the HRPP). Prime Minister Tuilaepa Sailele Malielegaoi has been in power since 1998. 3. Extreme poverty is low in Samoa. The food poverty and basic needs poverty rates were estimated at 4.3 percent and 18.8 percent respectively in the 2013/14 Household Income and Expenditure Survey (HIES). The latest US$1.90/day poverty estimate is from the 2008 HIES, at just 0.8 percent, while 8.3 percent were below the US$3.10/day line. According to the 2014 Demographic Health Survey, 89 percent of the population had access to an improved source of drinking water, 99 percent had electricity at home and 96 percent had access to improved, unshared household sanitation. However, inequality was estimated to be relatively high in the 2008 HIES, with a Gini coefficient of 42.7. 4. Progress is being made towards gender equality. The Constitution was amended in 2013 to reserve a minimum of 10 percent of Parliamentary seats for women (a measure which was binding in the 2016 elections), and a National Policy for Gender Equality was in place at the time of the DPO series. Secondary school attendance for girls exceeds boys, and there are slightly more women than men in the public service, including in senior positions, although employment rates overall are much lower for women (19 percent of women aged 15-49 were employed in 2014, compared with 37 percent of men). 2 Gender-based violence remains a widespread issue, with 30 percent of men and 37 percent of women agreeing that a man can be justified in hitting or beating his wife. 3 5. The Samoan economy is highly exposed to natural disasters and external economic conditions and experienced several major shocks in the years prior to the DPO series. An earthquake and tsunami in 2009 resulted in the loss of 143 lives and contributed to a sharp economic contraction in FY2009, along with the impacts of the GFC and the global food price shock (which saw 12 percent inflation in Samoa in 2008). Cyclone Evan in December 2012 claimed 14 lives, caused extensive economic damages and led to another recession in FY2013. Samoa also faces the prospect of significant negative impacts from climate change due to changing rainfall patterns and sea level rise. 1 Samoa’s overall CPIA rating was 4.00 in 2016, the year of the second DPO in the series, compared with an IDA average of 3.19. 2 Demographic Health Survey 2014; Ministry of Finance Annual Report 2016/17. 3 Demographic Health Survey 2014 Page 1 of 34 The World Bank (P155118) 6. The fiscal position deteriorated significantly over FY2009-2015, as the government carried out new borrowing for planned development projects and took on an expansionary fiscal policy stance in response to the recent disasters. The overall fiscal balance (including budget support grants) registered an average deficit of five percent of GDP over FY2009-2015, while nominal external debt rose from 32 to 55 percent of GDP over the same period. Figure 1: Real GDP growth, fiscal balance and nominal public debt, 2003-2017 Rationale for Bank assistance 7. The programmatic DPO series was designed in 2014 to: (i) help strengthen the fiscal position in the wake of the recent economic shocks (through the budget support financing as well as through fiscal reform policy actions); and (ii) support economic reforms to place the economy on a “more robust growth path.” The Bank prioritized a multi-year series of DPOs in the 2012-2016 Country Partnership Strategy, recognizing demand from both the Government of Samoa (GOS) and other partners as well as the Bank’s comparative advantage in economic and fiscal reform dialogue. The programmatic series was well aligned with the economic development pillar of the Strategy for the Development of Samoa (SDS) 2012-2016, especially the priorities to maintain macroeconomic stability and achieve sustainable tourism development. The programmatic series followed on from two previous stand-alone DPOs: one in 2010 to support the immediate recovery from the 2009 tsunami; and another in 2013 to support the recovery from Cyclone Evan and build resilience to future shocks. 8. The macroeconomic policy framework was assessed as adequate for the purposes of the two operations. This judgement was supported by IMF staff, as outlined in IMF Assessment Letters. Bank staff’s assessment at the time of appraisal noted that the GOS’s monetary and fiscal policies were consistent with the prevailing economic conditions and the GOS had a credible plan to consolidate its fiscal position and reduce debt to more sustainable levels over the medium-long term. However, staff noted at the time of the second operation that the fiscal consolidation, and in particular compliance with the Medium Term Debt Strategy (MTDS), would be challenging, given the possibility of pressure to take on non-concessional loans in future. Staff also highlighted the need to establish an on-lending policy for SOEs and to reform public financial institutions in order to contain risks from contingent liabilities, which totaled 24 percent of GDP in FY2014. 9. The Bank’s DPO series was delivered under the Joint Policy Action Matrix (JPAM) mechanism, in coordination with the Governments of Australia and New Zealand, the Asian Development Bank, and the European Page 2 of 34 The World Bank (P155118) Union. The Bank engaged in a joint policy dialogue with the Government and other partners through the JPAM, and the policy actions supported in the programmatic series represent a subset of the broader JPAM matrix. The World Bank has been the “lead partner” under the JPAM, with the Bank Task Team Leader being the focal point for communications between the Government and JPAM partners. Table 1: World Bank DPOs in Samoa Name Financing US$M Approval Effectiveness Samoa Economic Crisis Recovery Support Credit Credit 20 May 2010 Jun 2010 Samoa Development Policy Operation Grant 15 Jul 2013 Sep 2013 Samoa First Fiscal & Economic Reform Operation Grant 7.5 Sep 2014 Jun 2015 Samoa Second Fiscal & Economic Reform Operation Credit 5 Sep 2016 Mar 2017 Samoa First Resilience Development Policy Operation Grant 5 Oct 2017 Dec 2017 Samoa Second Resilience Development Policy Grant 5 Oct 2018 Operation with a CAT DDO CAT DDO 8.7 1.2 Original Project Development Objectives (PDO) and Key Indicators 10. The original PDOs and Results Indicators as approved by the Board in September 2014 were: (1) To strengthen public financial management in the areas of debt, procurement and revenue. (i) Compliance with the Medium Term Debt Management Strategy provisions on external loan concessionality and economic return. (ii) An increase in the extent to which commonly procured items are procured through framework arrangements within and across line ministries. (iii) Improved tax compliance as measured by on-time filing, on-time payment and arrears collection for large enterprises. (iv) Expanded coverage of high risk groups by the PEN Package of interventions to prevent NCDs. (2) To strengthen the payments system, tourism sector policy and private sector development opportunities as foundations for more robust economic growth over the medium term. (v) A more efficient payments system as measured by an increased prevalence of electronic payments. (vi) Improved performance of the tourism industry as measured by an increase in the proportion of tourist and sports tourist segments in overall visitor arrivals and an expansion of the employment of women in the accommodation, restaurants and general commerce industries. (vii) Greater private participation in the SOE sector, as measured by the proportion of new PPPs that conform with the new PPP policy framework. 1.3 Revised PDO and Key Indicators, and Reasons/justification 11. There was one significant change between the first and second operations, to add a third PDO focusing on the coordination of climate resilience activities. This addition reflected the priority placed on climate and disaster resilience by GOS in the wake of the 2009 tsunami and Cyclone Evan in 2012, and the need to address the growing fragmentation of climate-related projects. The climate resilience PDO and corresponding results indicator was: Page 3 of 34 The World Bank (P155118) (3) to strengthen the monitoring, reporting, and coordination of climate resilience activities in Samoa, as an important step toward increasing its resilience to the effects of climate change. (viii) Improvement in coordination of resilience activities and in national monitoring and reporting on climate resilience indicators. 12. Results indicator (iv) on NCD prevention was dropped for the second operation, due to slower-than- expected progress in this area (which had meant that the relevant indicative trigger could not be included as a prior action to yield the intended result), while some minor refinements were also made to indicators (vi) and (vii) to better measure the intended results (namely, focusing on total employment in tourism rather than the employment of women only; and measuring the absolute number of PPPs implemented, rather than the proportion that conform to the PPP policy framework). 1.4 Original Policy Areas Supported by the Program 13. The original policy areas as defined in the first DPO were: (i) public financial management reform in the areas of debt, procurement and revenue; and (ii) economic policy, including tourism sector policy, reform of the national payments system, and SOE reform. The chosen policy areas reflected the priority that GOS placed on macroeconomic stability and resilience, and were also supported by other JPAM development partners. The first pillar included actions to strengthen the fiscal position and provide space to respond to future shocks, while the second pillar aimed to put Samoa on a more robust growth path by strengthening planning in the key tourism sector, reducing vulnerabilities in the banking system, and opening up opportunities for private sector participation in the management of SOE assets. 1.5 Revised Policy Areas 14. For the second operation, approved in September 2016, GOS and the Bank added a new policy area focusing on the coordination of climate resilience activities and the integration of climate resilience across GOS’s sector planning framework (in support of the new climate resilience PDO described in Section 1.3). The policy focus of the program was otherwise unchanged. Appendix 1 summarizes the full set of prior actions and indicative triggers set out in DPO 1, compared with the prior actions supported under DPO 2. 1.6 Other significant changes 15. The schedule for the second operation was delayed by about one year compared with the original timetable. This was due to concerns over debt management reform, in response to which the Bank delayed its declaration of effectiveness for the first operation. Other development partners responded in a similar fashion and as a consequence the JPAM budget support dialogue was deferred. The circumstances surrounding this are described in Section 2.1 below. 16. While the first operation was provided on 100 percent grant terms, the second DPO was on 100 percent credit terms. Samoa’s WB-IMF debt sustainability assessment (DSA) rating changed between the first and second operations, from ‘high’ to ‘moderate’ risk of debt distress. This was primarily due to a change in the DSA methodology and the rebasing of Samoa’s GDP statistics, rather than a major change in fundamentals. Consequently, the terms of Samoa’s access to IDA financing were revised from 100 percent grant financing to a 50/50 mix of grants and credits across the portfolio. Page 4 of 34 The World Bank (P155118) 2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES 2.1 Program Performance 17. The prior actions for both operations were completed at the time of the respective board approvals (September 2014 and September 2016) and both operations were disbursed before the closing date. Most prior actions have been successfully implemented, but progress has been slower than expected in some policy areas (national payments system and PPPs). Design issues meant that one reform (the Ministerial Climate Resilience Committee) was approved but not implemented. Of the seven triggers identified at the time of the first operation, two were met; two were met and extended (reflecting additional progress achieved after the second operation was delayed by one year); one was not converted to a prior action due to slow progress by both GOS and the World Bank (the technical assistance provider); one was partially met; and one was replaced with a more relevant alternative. A comparison of triggers and prior actions is included as Appendix 1. Fiscal reform pillar Debt management 18. As a prior action for the first operation, Cabinet approved formal procedures for contracting new loans and issuing government guarantees on debt. This was a key recommendation of the Debt Management Reform Plan developed with technical assistance from the World Bank (along with the development of an on-lending policy, which is due to be finalized in early 2019). Given the recent rapid increase in Samoa’s external indebtedness at the time of the operation, robust loan contracting procedures were a priority to ensure that new borrowing was justified, consistent with the GOS’s debt management objectives and secured on the best possible terms. The guarantee procedures were also important to limit fiscal risks from contingent liabilities, which had grown with new public financial institution lending schemes post- Cyclone Evan. 19. The loan contracting procedures were not followed for a new external loan taken out in November 2014, and the Bank responded by delaying effectiveness of the first operation by about six months. A US$55m loan was contracted for the construction of a new international airport terminal as part of the Faleolo Airport Upgrade. The loan contracting procedures require that potential loan-funded projects are reviewed by the Cabinet Development Committee and the Aid Coordination Committee, and that the Ministry of Finance’s (MOF) Debt Management Unit (DMU) review the draft loan agreement and assess its consistency with the Government’s debt management strategy criteria and borrowing plan (i.e. the Medium Term Debt Management Strategy, MTDS) and provide this analysis to the Minister of Finance before Cabinet approval and signing. The key criteria in the MTDS were (i) a minimum grant element of 35 percent and (ii) a “minimum positive economic return sufficient to cover interest and repayment costs.” In the case of this particular loan, the grant element was 27 percent, and an economic analysis to assess the expected economic return and affordability of debt service costs was not carried out before the loan agreement was signed. As the loan contracting procedures (including assessment against MTDS criteria) that had been supported by DPO1 were not followed, the Bank decided to delay the declaration of effectiveness of the first operation on the basis that implementation of the program being carried out by the Government was not satisfactory. 4 The Bank, GOS and other JPAM development partners deferred preparation of the next budget support operation until an economic analysis of the airport upgrade project was completed and 4 This was a condition of Effectiveness, stated in clause 5.01 of the Financing Agreement. Page 5 of 34 The World Bank (P155118) endorsed by the Cabinet Development Committee (at which point the Bank also declared effectiveness of the first operation). 20. Feedback from MOF officials and Bank staff highlighted that the experience with the airport terminal loan raised the profile of the MTDS and loan contracting procedures and ultimately helped to ensure that Samoa’s debt management reforms were successful. The delay in declaring effectiveness – and corresponding actions taken on the part of other JPAM partners – had a cashflow impact on GOS and was difficult for the policy dialogue in the short term, particularly as MOF felt that the link between the loan contracting decision and partners’ budget support was not sufficiently clear at the time. 5 Nonetheless, the actions taken by the Bank and others helped to raise awareness of the MTDS and its provisions at the political level and to reinforce MOF’s policy advice on debt. The prior action for the second operation in the series helped to add further weight to the MTDS, with an amendment to the Public Financial Management Act to require that debt operations “are to be consistent with the Government’s debt management strategy.” The amended Act also requires that the Treasury’s annual report to Parliament include reporting on the implementation of the MTDS, and that the MTDS be reviewed annually and submitted to Cabinet for approval. In addition, the prior action supported Cabinet approval of the new MTDS for the period 2016-2020, including a review of the implementation of the previous MTDS. 21. There has been full compliance with the new MTDS to date. The only new borrowing since FY16 has been an IDA credit for the second DPO in this series and an IDA credit for the Faleolo Airport upgrade. Both loans met the minimum concessionality criteria, and an economic analysis had already been prepared for the Faleolo Airport project (and was not applicable to the budget support credit). MOF’s annual reporting has included a statement of the MTDS provisions and its implementation (as per the amended legislation), but this reporting is yet to be tabled in Parliament (the reporting for FY2016 was delayed and included with the FY2017 report, which is yet to be tabled). The MTDS has not been formally reviewed and submitted to Cabinet on an annual basis as prescribed in the Act, but the MOF Annual Report (including the section on the MTDS) is submitted to Cabinet and MOF considers this to be sufficient in practice. 22. The loan and guarantee procedures remain in place and have not been updated since the first DPO in 2014. The guarantee procedures predate the establishment of the Ministry for Public Enterprises (MPE) in 2015. However, MOF and MPE confirmed that ministries’ roles and responsibilities are well understood informally. New guarantees issued since 2014 have followed the procedures but with MPE taking on the actions of the former SOE Monitoring division in MOF. Procurement 23. As a prior action under the first operation, GOS approved new Treasury Instructions, Procurement Guidelines, and standard bidding documents and contract conditions for minor requests for quote (RFQs). This represented a substantial reform to the public procurement system. The existing Treasury Instructions dated from 1977, and were in practice supplemented with guidelines and model documents that were not part of the formal legal framework for procurement. The new Treasury Instructions included a new section (Part K) on procurement which formalized current practice and made the procurement rules legally enforceable by defining breaches as misconduct under the Public Service Act 2004. The Instructions also explicitly prohibited ‘fractioning’ of contracts to avoid procurement thresholds. The introduction of standard templates was recognized as a priority in the 2014 MAPS self-assessment, to avoid the need for bidding documents and contracts to be reviewed by the Office of the Attorney General (OAG) for all procurements. 5 MOF’s feedback has also highlighted the importance of the Airport Upgrade project to the country’s infrastructure, and the fact that GOS was assured of its ability to meet the debt servicing costs. Page 6 of 34 The World Bank (P155118) 24. As a prior action for the second operation, minor revisions were made to the Treasury Instructions and Procurement Guidelines for Goods, Works and General Services to allow for the use of framework arrangements, and standard templates were also introduced for major works. The World Bank provided technical assistance for the framework arrangement revisions, which facilitated pharmaceutical procurement reforms that the National Health Service (NHS) was working on with the support of the Australian Government. MOF Procurement Division identified pharmaceuticals as a promising area to pilot framework arrangements and provide a proof of concept for other applications, given that bidders are international businesses with experience of framework contracting. The NHS has now implemented a number of framework contracts and the Samoa Water Authority is currently developing a framework arrangement for raw materials (the first application by another agency). Implementation of the standard templates for major works was delayed, as the OAG had developed its own templates which differed from the templates developed by the Procurement Division and adopted by the Tenders Board. This duplication was later resolved, and the major works templates were made available to ministries (although they have not been published online). 25. With support from the Australian Government, the Procurement Division is currently reviewing and updating the Treasury Instructions, Guidelines and standard templates. The Guidelines will be replaced with manuals, and will include more in-depth guidance for procurement officers (including on framework arrangements). Revenue 26. The first operation in the series supported submission to Parliament of a new customs bill to replace the Customs Act 1977, and the introduction of the ASYCUDA World customs management system. This reform was mainly focused on trade facilitation, but was included under the fiscal reform pillar because of its potential second- order effects, to improve revenue collection at the border through more effective procedures. The Customs Act 2014 significantly modernized the customs legal framework and was required for Samoa to comply with the Revised Kyoto Convention, which aims to simplify and harmonize customs procedures while promoting the core objectives of trade facilitation and effective customs controls. The new Customs Act, supporting regulations and Standard Operating Procedures have now been fully implemented. The new Act also provided for the introduction of ASYCUDA World, which replaced the ASYCUDA++ system that had been in use since 1999. ASYCUDA World is web-based, allowing clients to easily access the system to make lodgments or review their records. The new system went live in May 2014 and has received positive feedback from the private sector. 6 The data collected allows for more effective risk management for Customs, and Samoa Bureau of Statistics is able to extract ASYCUDA data for constructing economic statistics. ASYCUDA World offers significant potential for integration with other systems (e.g. Quarantine and Immigration), and discussions on this are ongoing. 27. As a prior action in the second operation, GOS introduced a web-based platform for tax registration, tax filing and payment. The Samoa E-Tax system was intended to boost compliance by simplifying and reducing the time required for taxpayers to meet their obligations. The system has been in place for VAGST, PAYE and income tax since 2016, but take-up has been relatively limited, with only 24 percent of large enterprises registered online and 602 of 18,868 returns filed online in FY18. This is despite a substantial investment by the Ministry for Revenue (MFR) in training sessions for taxpayers on Samoa E-Tax. Private sector feedback identified issues with the functionality of the system and the time taken to receive responses to requests for information or assistance on the platform, making it simpler to go to MFR’s physical office. 7 6,5 As per the ICR team’s discussions with Samoa Chamber of Commerce members. Page 7 of 34 The World Bank (P155118) Non-communicable diseases 28. At the time of the first operation in 2014, the Bank included the issuance of a new Non-Communicable Diseases (NCD) Policy as a trigger, to replace the existing policy which was due to expire. This was included under the PFM/fiscal reform pillar due to the growing fiscal cost of NCD treatment, although any savings from more effective NCD prevention would only be realized in the long term. This trigger was not converted to a prior action in the second operation due to delays in the preparation of the policy. GOS had requested analytical support from the World Bank in July 2014 for an NCD costing study to help inform the new policy, but this analysis was not finalized until 2017, partly because of delays in obtaining the necessary raw data from GOS (owing to privacy and intellectual property concerns). Economic reform pillar National Payments System 29. The first operation in the series supported the enactment of the National Payments System (NPS) Act 2014, to lay the legislative foundations for a modernized and efficient payments system. Interbank settlements for systematically important payments are currently done by a manual exchange of cheques on the following business day, exposing the banking system to significant credit and liquidity risks. The current system for retail payments is also not interoperable, requiring retailers to invest in different ATM and EFTPOS terminals for each bank. The Central Bank of Samoa (CBS) first began scoping the potential to move to a real-time clearance system in 2009, and joined the World Bank – IFC Pacific Payments, Remittances and Securities Settlement Initiative (PAPRI). The Bank provided technical assistance for the NPS Act, which was successfully introduced in 2014 as a precursor to the adoption of new payments system infrastructure. 30. Full implementation of the NPS regulatory framework is proceeding more slowly than expected. Supporting regulatory instruments are needed to define several critical aspects, including the details of how payments providers and their agents will be licensed and overseen by CBS. The second operation in the series supported the submission of draft regulations on Oversight and Agents to the OAG in 2016, as an interim step towards implementation of the regulatory framework. The draft regulations were prepared with World Bank technical assistance and significant further work was needed to revise the drafts according to Samoan drafting standards. This has been a lengthy process, partly due to capacity constraints in the OAG. The Agents regulation will now be issued as a CBS directive, while the Oversight regulation has been through public consultations and will be submitted to Cabinet for approval in early 2019. 31. The new payments system infrastructure will be installed, tested and implemented in 2019, after a long procurement process. The IFC-led procurement process has been completed more slowly than anticipated, which has affected Samoan banks’ planning for the new system. The new operations, oversight and policy functions that CBS will need to carry out under the new NPS will be integrated within CBS’s existing organizational structure in the short term. CBS will reevaluate this once the system is in place and, if the workload demands are sufficient, may create a dedicated unit for the NPS. Tourism 32. As a prior action for the first operation, the Cabinet Development Committee approved the Tourism Sector Plan 2014-2019, prepared by Samoa Tourism Authority (STA). The Tourism Sector Plan followed on from the Tourism Sector Development Plan 2009-2013 and identified priority objectives in the areas of marketing, workplace training, product development, the business enabling environment, and transport infrastructure and access. Page 8 of 34 The World Bank (P155118) 33. As a prior action for the second operation, STA completed the FY14/15 annual review of the Sector Plan, and commissioned independent reviews of air access and marketing arrangements with support from IFC. Subsequent annual reviews have not been prepared (STA produces an annual corporate report, but this doesn’t report specifically against the Sector Plan objectives). Take-up of the findings from the IFC-supported independent reviews was quite limited, with the GOS taking a different position on air access arrangements. There was limited scope to take up the findings of the marketing review, as most of Samoa’s tourism marketing budget is implemented through a New Zealand Aid Programme activity which was already being designed based on a separate analysis. State-owned enterprises (SOEs) and Public-Private Partnerships (PPPs) 34. As a prior action for the first operation, Cabinet approved Guidelines for the Planning and Implementation of Public-Private Partnerships (PPPs). The Guidelines were prepared with support from IFC, and covered advance planning, procurement and contracting of PPPs, as well as guidance for assessing unsolicited PPP proposals. Compared with the operation and maintenance of assets by SOEs themselves or with regular outsourcing contracts, it was hoped that the creation of PPP contracts in accordance with the Guidelines would generate efficiencies and increase opportunities for private sector development. After the establishment of MPE in 2015, the Guidelines were simplified and updated with assistance from the ADB Office of PPPs and published as a PPP Handbook in 2017. The Handbook also introduced a PPP Steering Committee consisting of the MPE and MOF CEOs, Attorney General and CEO of the agency responsible for the PPP. The Handbook will be applied for the first time in 2019, after Cabinet approved plans in late 2018 to establish new multiyear performance-based contracts under Samoa Airports Authority (duty-free retail and parking services), Samoa Port Authority (stevedoring) and the Land Transport Authority (road maintenance, mowing and drainage). 35. As a prior action for the second operation, Cabinet approved a revised Policy on the Ownership, Performance and Divestment of Public Bodies and approved the sale of the Agriculture Store Corporation. The revised policy adopts the recommendations of an ADB Private Sector Development Initiative (PSDI) review of the existing 2003 policy. The most notable change from the 2003 policy is to remove the concept of “strategic SOEs” and instead consider which aspects of an SOE’s operations constitute natural monopolies that should be regulated and potentially remain in state ownership. For example, the Electric Power Corporation (EPC) is no longer classified as a strategic SOE and GOS is looking to facilitate competition in power generation from independent power producers; however, EPC’s operation of the national grid is a regulated monopoly activity. The 2014 Public Bodies policy has not been published, and was endorsed by Cabinet as a PSDI report, rather than a standalone policy document. The Cabinet decision also identified the Agriculture Store Corporation, Samoa Housing Corporation, Samoa Post Ltd, and the Public Trust Office as priorities for divestment in 2015 and 2016. The sale of the Agriculture Store Corporation (an agricultural hardware store) was later approved in December 2015 and ownership has been successfully transferred. The store is still in business and trading under the same name. Samoa Post and Samoa Housing are now being considered for PPP opportunities rather than divestment, and the Public Trust Office has implemented performance enhancement measures based on a study of the New Zealand Public Trust Office but is no longer in the divestment pipeline. Climate resilience pillar 36. As a prior action in the second operation, Cabinet approved the creation of a ministerial committee to monitor climate resilience projects, and MOF committed to integrate climate risk and resilience indicators in the Strategy for the Development of Samoa (SDS) 2016-2020. Disaster and climate resilience has become a key priority for GOS, especially following the recent natural disasters. However, climate-related interventions were growing in Page 9 of 34 The World Bank (P155118) number and becoming fragmented. While there had been successful efforts to increase oversight and coordination at the officials’ level (including the introduction of a CEO-level Climate Resilience Steering Committee, supported by the World Bank) there was demand from Cabinet Ministers to introduce a ministerial-level oversight function. 8 The ministerial committee was to include the Ministers and CEOs of the Finance; Natural Resources and Environment; Works, Transport and Infrastructure; and Women, Community and Social Development portfolios. The second component of the prior action sought to mainstream climate resilience in the SDS and sector planning framework. 37. The ministerial committee has not been operationalized, but climate resilience has been successfully integrated into the SDS and sector plans. CEO-level meetings are carried out monthly through the Climate Resilience Steering Committee, so there has been limited impetus from officials to convene the ministerial committee supported under the DPO. In practice, ministers have oversight of climate projects through the existing Cabinet Development Committee and Aid Coordination Committee processes, and it is not clear whether there remains an unmet demand from ministers for an additional oversight mechanism. The Bank could have gained greater clarity on these issues at the time of appraisal, by requesting information on the committee’s terms of reference and proposed linkages to the other existing committees. On the sector planning front, the final approved SDS and all new sector plans include climate resilience indicators. However, the 2015 Sector Planning Manual already requires the integration of climate and disaster resilience as a cross-cutting issue in sector plans, so the prior action mainly served to reinforce this existing initiative. First Operation in the Programmatic Series Prior action Status The Recipient, through its Cabinet, has approved: (a) Prior action completed and implemented. The loan formal procedures for contracting loans; and (b) procedures were not followed for a loan contracted in formal procedures for issuing government 2014 but there has subsequently been full guarantees, in order to strengthen the Recipient’s compliance. debt management. The Recipient, through its Ministry of Finance, has Prior action completed and implemented. The new issued: (a) new Treasury Instructions on procurement; Treasury Instructions, Guidelines and templates were (b) a new set of Procurement Guidelines; and (c) new implemented in 2014 and are available on the MOF standard templates for minor works, minor goods and website. All documents are currently undergoing a related services, and minor general services, in order periodic review and update. to improve the quality of public expenditure. The Recipient, through its Cabinet has submitted to Prior action completed and implemented. The Parliament a Bill for the amendment of the Customs Customs Act is in force, along with supporting Act in order to facilitate trade. (b) The Recipient, regulations and Standard Operating Procedures. through its Ministry of Revenue, has implemented ASYCUDA World went live in May 2014, and was ASYCUDA World in order to enhance the customs upgraded to version 3.4.1 in August 2018. information system and facilitate trade. The Recipient’s Parliament has enacted the National Prior action completed but not fully implemented. Payments System Act in order to facilitate and The National Payments System Act is in force, but will not be fully implemented until the supporting 8 According to feedback from Bank staff. Page 10 of 34 The World Bank (P155118) regulate electronic payments and emerging regulations and directives are issued (expected in innovative payment instruments. 2019). The Recipient, through the Cabinet Development Prior action completed. The Tourism Sector Plan Committee, has approved a revised tourism sector 2014-2019 was approved by the Cabinet policy designed to provide for more effective tourism Development Committee in August 2014. promotion and market access. The Recipient, through its Cabinet, has approved a Prior action completed and implemented. After MPE public-private partnerships policy framework in order was created in 2015, the PPP policy was updated and to facilitate increased opportunities for private sector reissued as a PPP Handbook which is available on the participation in the state-owned enterprise sector. MPE website. Three new PPPs are currently being prepared in accordance with the Handbook. Second Operation in the Programmatic Series Prior action Status The Recipient has (a) passed the amendment to the Prior action completed and implemented. The MTDS Public Finance Management Act that sets out is in force. The PFMA requirement for MOF to report government borrowing purposes, debt management annually to Parliament on the implementation of the objectives, consistency of operations with the MTDS is being complied with but with delays (the Medium Term Debt Strategy, and requirements for 2015/16 reporting was delayed and included with the annual reporting to Parliament; and (b) through its 2016/17 report). Cabinet, approved an updated Medium Term Debt Strategy for the period 2016-2020, which is designed to strengthen debt policy and debt management and includes an assessment of the implementation of the previous medium term debt strategy. The Recipient, through its Ministry of Finance, has Prior action completed and implemented. The issued: (a) revised Treasury Instructions which allow Revised Treasury Instructions and Guidelines are in for the use of framework arrangements in public place. The standard procurement templates are not procurement; (b) new guidelines for the use of said on the MOF website but are available to line ministries framework arrangements; and (c) new standard on request. All documents are currently undergoing a procurement templates for major works, general periodic review and update. services, and goods. The Recipient, through its Ministry for Revenue, has Prior action completed and implemented. The introduced electronic systems for filing and paying electronic tax system for tax registration, VAGST, taxes, including income tax. PAYE and income tax has been live since 2016. The Recipient’s Central Bank of Samoa has submitted Prior action completed but not yet implemented. The draft regulations to the Office of the Attorney- draft regulations were submitted to the OAG, albeit at General, in accordance with the National Payment an early draft stage. There will now be only one System Act, relating to the regulation of agents that regulation, on oversight, with other issues covered by provide payment services, and oversight by the CBS Directives. The Oversight regulation is expected Central Bank of Samoa. to be approved by Cabinet in 2019. Page 11 of 34 The World Bank (P155118) The Recipient, through the Samoa Tourism Authority, Prior action completed. Subsequent annual reviews of has completed the first annual (FY2014/15) status the Tourism Sector Plan haven’t been carried out, but report on the Tourism Sector Plan, and has STA produces an annual corporate report. The commissioned independent reviews of its air access independent reviews of air access and marketing were and marketing arrangements. completed. The Recipient, through its Cabinet, has approved a Prior action completed and implemented. The revised revised policy on ownership, performance, and SOE policy is now being applied, although the policy divestment of Public Bodies, and completed the statement has not been published. The Agriculture privatization of the Agriculture Store Corporation. Store Corporation was successfully privatized. The Recipient has (a) through its Cabinet, established Prior action completed and partially implemented. a Ministerial Committee to monitor Climate Resilience The Ministerial Committee was established by Cabinet Projects with a coordination and clearance function decision but never operationalized. Disaster risk and for climate finance; and (b) committed to integrating climate resilience is being integrated in new sector disaster risk and climate resilience into all sector plans plans, in accordance with the 2015 sector planning in the Recipient’s Strategy for the Development of manual and the SDS. Samoa, with monitoring to occur through the new results framework of the Strategy for the Development of Samoa. 2.2 Major Factors Affecting Implementation Adequacy of the government’s commitment, stakeholder involvement and participatory processes: • There was strong government commitment to the reform program. GOS (through MOF) produced the first draft of the policy matrix when the program was designed in 2014, and worked closely with the Bank and other JPAM partners to refine and finalize the policy actions. MOF actively coordinated the participation and feedback of the agencies leading the reforms. • More systematic consultation with the OAG by implementing agencies and the Bank could have resolved some implementation issues; for example, duplication of effort in developing standard procurement templates, and ensuring realistic timeframes for the finalization of NPS Act regulations. Soundness of the background analysis supporting the operations, lessons learned incorporated, and the rationale for the Bank’s intervention: • The joint development partner approach adopted in the operations, including coordination on the choice of prior actions and the provision of technical assistance, reflected lessons learned from previous DPOs in Samoa and other capacity-constrained contexts in the Pacific. However, it proved difficult for the Bank and other partners to fully align internal approval processes and timeframes to minimize transaction costs for GOS. • Like the 2013 (post- Cyclone Evan) DPO, the programmatic series incorporated some prior actions that linked to World Bank and IFC project support. However, the lesson learned from that DPO on the difficulty of aligning project demands and timeframes with the relatively rigid DPO schedule could have been considered more explicitly, particularly for the National Payments System reform. • The programmatic series was supported with a strong intervention rationale and had solid analytical underpinnings at the level of the program development objectives. • There were some weaknesses in the planning and intervention rationale for some policy areas. The team’s intention by including tourism in the DPO series was to broaden the policy matrix to focus on a wider set of Page 12 of 34 The World Bank (P155118) government priorities (as opposed to focusing on central agency PFM reforms). However, the background analysis did not identify specific policy constraints or bottlenecks for the sector but instead highlighted the need for more effective marketing activities and better market access (air connectivity to Samoa). These challenges would arguably have been better addressed through a project engagement rather than a DPO. • The analytical basis for the ministerial climate committee could also have been better documented to ensure that stakeholders understood its value-add compared with existing committees. Assessment of the operations’ design, including its realism and the degree of complexity: • The program design was well-coordinated with other JPAM partners and based on a joint policy matrix led by GOS, helping to ensure that the overall number of reform actions was achievable, while reducing transaction costs for GOS. • Although including more experimental engagements (tourism, climate/disaster resilience, NCD policy) improved the relevance of the DPO series, the analytical basis for policy reforms in these areas was weaker and the risks were higher. In the case of tourism, the team’s approach was to support a relatively weak prior action in the first operation (the tourism sector policy) with the hope that the ensuing policy dialogue would help to identify a stronger action in the second operation. This approach obviously carries a high risk of not leading to results, but there is little downside provided that it does not crowd out discussion of other reform areas that may have a higher chance of success. However, when a stronger action wasn’t identified for the second operation, it may have been better to drop tourism from the matrix rather than continue with another weak prior action. Relevance of risks identified at appraisal and effectiveness of mitigation measures: • At the time of appraisal, the main risks highlighted were (i) the risk of shortfalls in macroeconomic management, e.g. failure to comply with the MTDS; and (ii) the risk of natural disasters diverting focus from the reform program. The first program document also mentions the risks posed by thin institutional capacity and particularly key person risk (which remained relevant for the second operation but was not mentioned), and the dependence of the national payments system reform on securing donor funds for implementation (which had been resolved by the time of the second DPO). A possible mitigation measure for the institutional capacity risks would have been to use the ongoing JPAM dialogue to systematically follow up on implementation of previous years’ actions, which might have helped GOS and the Bank to identify some issues sooner. • Both program documents could have been more candid about the risks of reliance on technical assistance inputs (from other partners as well as World Bank and IFC) for the implementation of many of the reforms, given that delays are frequent and can set back the achievement of development outcomes. However, there are very limited options to mitigate this risk. • The second operation included some intermediate reform steps (production of draft regulations for the NPS Act, and climate resilience content in the Strategy for the Development of Samoa (SDS) that had yet to be finalized). This poses a higher degree of risk that the reform will subsequently be deprioritized, and may have warranted more explicit consideration at the time of appraisal. The SDS reform was carried out, but this risk has been partly realized for the NPS regulations (which are now expected to be implemented in 2019). • The risks that the tourism sector actions would not lead to development outcomes could also have been discussed in the program documents. The policy actions focused on the process for the authorities to manage tourism policy more effectively (supporting an evidence-based sector plan in the first operation, and then an annual review of this plan in the second operation) rather than supporting specific policy or institutional reforms. The link to the end outcomes is therefore weaker, and there was a risk that the sector plan process would not lead to any change in policy settings or in STA’s activities. Page 13 of 34 The World Bank (P155118) 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design: • While it is appropriate to minimize the number of results indicators and use existing data sources where possible, the M&E design may have been overly minimalist. In some policy areas the actions supported under the first and second operations were quite distinct, and the chosen results indicator only captures the intended impact of one of the actions. For example, the revenue results indicator relates to the E-Tax reform and not the customs reform supported under the first operation, and the procurement results indicator focuses specifically on framework arrangements rather than the broader results to be expected from the other reforms. M&E implementation: • MOF has coordinated data collection from the implementing agencies, and the data for some indicators was available online. In all cases, the data had already been routinely collected by the implementing agencies and additional resources were not needed for data collection, indicating that the framework was well-designed to take advantage of GOS’s existing M&E systems. • There are some issues with the quality of payments system data, which CBS is currently working on resolving. • Lack of documentation on data sources made one results indicator, on tourism, difficult to assess. M&E utilization: • Where appropriate, the M&E arrangements for the DPO series are integrated in implementing agencies’ planning and reporting processes and are expected to be sustained going forward and used for decision- making (e.g. reporting on MTDS compliance, annual tracking of tax filing and payment performance by the Ministry for Revenue, and monitoring of tourism arrivals and employment by the Samoa Tourism Authority’s Market Research and Statistics Division). 2.4 Expected Next Phase/Follow-up Operation 38. A new programmatic series of two DPOs is underway (with the second operation being approved by the Board in November 2018) and builds on several of the 2014 and 2016 reforms. The new series focuses on: (i) strengthening macroeconomic and financial resilience (retaining a focus on tax revenue); (ii) enhancing resilience to the effects of climate change and natural hazards (building on the climate resilience pillar introduced in the 2016 DPO); and (iii) reducing vulnerability to non-communicable diseases (including implementation of framework contracts and an inventory management system for pharmaceuticals, following directly from the procurement reforms supported in the 2016 DPO). The new series also includes an innovative Cat-DDO financing component, supporting GOS’s focus on improving climate and disaster resilience by providing quick-disbursing funds in the event of an emergency. 39. Going forward, there would be value in the Bank and MOF continuing to monitor implementation of the 2014 and 2016 reforms through the ongoing JPAM dialogue, and the Bank should continue its engagement in the debt management reform area. Some specific areas for possible follow-up by GOS, the Bank and other JPAM partners are suggested below. Some are minor suggestions, but others require more work and would need to be prioritized against other reform efforts and activities in agencies’ work programs. • Debt management: the Bank should continue to support the DMU’s ongoing review of its organizational structure and functions, including efforts to limit key person risk to ensure sustainability of the recent Page 14 of 34 The World Bank (P155118) reforms. A WB technical assistance mission was carried out January 2019 and provided recommendations for restructuring the DMU. The Bank should also continue to engage with GOS on the finalization of the on-lending policy – one of the main outstanding priorities from the 2014 debt management reform plan – and upcoming work on the development of a domestic bond market. • Debt management: it would be worthwhile for GOS to update the loan contracting and guarantee procedures. The loan contracting procedures only require input from the DMU after the borrowing proposal has been approved by the relevant sector committee, the Cabinet Development Committee and the Aid Coordination Committee and a draft loan agreement has been negotiated. By this relatively late stage, the loan proposal is likely to have significant momentum and may be difficult to amend, and there may also be limited time to prepare an economic analysis before the loan agreement in finalized. MOF does not have the in-house capacity to conduct the required economic analysis, so lead time also needs to be factored in for this to be contracted out. The guarantee procedures should be updated to replace the former SOE Monitoring Division with MPE. MOF has confirmed that these issues will be considered as part of the second phase of the current DMU review. • Revenue: GOS could investigate how to more fully realize the benefits of the Samoa E-Tax system. The Ministry for Revenue had identified internet access costs as the key constraint on uptake, but consultations with some taxpayers suggested that the main issue is the responsiveness of the system and availability of important information on how to make payment. • Customs: GOS could explore whether technical assistance is needed to support the integration of ASYCUDA World with other agencies’ systems, to facilitate intelligence gathering. • National payments system: the Bank and MOF should continue to follow up with CBS on the finalization and issuance of the relevant regulations and directives, and explore with CBS the reasons behind the decline in electronic payments since 2014. • SOE reform: transparency could be improved by publishing the revised Policy on the Ownership, Performance and Divestment of Public Bodies on the MPE website. It would also be more clearly stated as a stand-alone policy, rather than implicitly stated in recommendations of the PSDI review report. 3. ASSESSMENT OF OUTCOMES 3.1 Relevance of Objectives, Design and Implementation 40. Relevance of objectives: Highly satisfactory. The objectives of strengthening fiscal management (especially supporting GOS’s post-disaster fiscal consolidation objectives), building more robust foundations for economic growth and improving climate and disaster resilience remain highly relevant. The climate resilience objective was added at the time of the second operation in the series to better reflect Samoa’s development priorities. The DPO series’ objectives are strongly aligned with Key Outcomes 1, 4, 5 and 14 of the Strategy for the Development of Samoa 2016-2020, covering macroeconomic resilience, tourism development, private sector development and climate resilience. The objectives also remain highly relevant to the Bank’s engagement strategy in Samoa as set out in the Pacific Islands Regional Partnership Framework for FY17-FY21, including: expanded tourism opportunities (Focus Area 1), strengthening resilience and preparedness for climate change and natural disasters (Focus Area 2), and strengthening macroeconomic management (Focus Area 4). 41. Relevance of design and implementation: Satisfactory. The chosen policy areas were strongly owned by GOS and the implementing agencies and generally possessed significant reform momentum. For the fiscal reform pillar, there appears to have been a preference for low-risk prior actions in areas with existing technical assistance Page 15 of 34 The World Bank (P155118) and established momentum (e.g. procurement and customs) or areas that align with other World Bank engagements (NCD policy), potentially at the expense of identifying other central agency reform actions that might have been more directly linked to Samoa’s fiscal consolidation and/or PFM reform objectives, but which would have carried higher risks or greater transaction costs. Indeed, the program documents strongly emphasize fiscal consolidation and the rebuilding of fiscal buffers to respond to shocks as an objective for the fiscal reform pillar, when only the debt management policy area has a direct and immediate link to this objective. Policy areas under the economic reform pillar were also mostly driven by existing Bank engagements but were clearly linked to the objectives and had strong buy-in from GOS. The tourism and climate resilience policy areas were included specifically because of their relevance to GOS priorities. 3.2 Achievement of Program Development Objectives PDO 1: to improve fiscal management in the areas of debt, procurement and revenue Rating: Satisfactory 1. Compliance with the MTDS provisions on external loan concessionality and economic return. 42. Achieved. The only new loans contracted over FY16-18 were two IDA credits (one for budget support under the second DPO in this series, and the other for the Samoa Aviation Investment Project, which is part of the Faleolo Airport Upgrade initiative). Both loans met the minimum concessionality criteria set out in the MTDS 2016-2020. An economic analysis was carried out for the Faleolo Airport Upgrade as per the MTDS provisions, although the IDA credit component of the Airport Upgrade wasn’t known about at the time the analysis was prepared. The economic return requirement is not applicable for the budget support credit. 43. There is a causal link to the DPO series: when the effectiveness of the first DPO was delayed in response to a new semi-concessional loan (in line with the responses of other budget support partners), this substantially raised awareness of the MTDS provisions and facilitated a more robust policy dialogue on debt management. 2. An increase in the extent to which commonly procured items are procured through framework arrangements within and across line ministries. 44. Achieved. Seven framework arrangements are currently in place (see Table 2), with another under evaluation. However, all arrangements so far are with the NHS, so there are no examples of pooling common procurements across line ministries. The first application of framework arrangements outside of the NHS is currently under preparation by Samoa Water Authority. The first order made by NHS under the July 2017 medicines framework arrangement cost 40 percent less than if 2014/15 contract unit prices had been used, indicating that the framework approach is generating substantial savings. However, the NHS is now having some difficulties making orders due to supplier complaints over the time taken to process payments. 45. There is a direct link to the prior action supported in the series, which provided the legal basis for the framework procurement approach to be used. Page 16 of 34 The World Bank (P155118) Table 2: Status of Framework Procurements as of end-October 2018 PROCUREMENT APPROVED STATUS Procurement of Medicines 5 July 2017 Contract Procurement of Medical Consumables (Dental) 14 November 2017 Contract Procurement of Medical Consumables (Imaging) 14 November 2017 Contract Laboratory Medical Consumables 24 January 2018 Contract Pharmaceutical Medical Consumables 24 January 2018 Contract Supply and Delivery of Pharmaceutical Medical 04 July 2018 Contract Consumables Food Supplies Tender 25 September 2018 Contract Bulk Cleaning and Disinfection Supplies Under Evaluation (Opening on the 5 November 2018) 3. Improved tax compliance as measured by on-time filing, on-time payment and arrears collection for large enterprises. 46. Mostly achieved. Targets for payment and collection of outstanding returns were achieved and exceeded but on-time filing is significantly below-target. According to MFR, this is mainly due to more lenient rules for filing, with a one-month grace period before penalties are imposed. Some enterprises also request and receive extensions to the filing deadline. By contrast, late payment immediately incurs an 8.7 percent penalty interest charge and 10 percent late payment fee. 47. Although MFR has achieved an impressive improvement in tax compliance in the past few years, these results are not attributable to the introduction of Samoa E-Tax, the take-up of which has been relatively modest. There were 18,862 tax returns across all tax types in FY18, but only 602 returns were filed online through Samoa E-Tax. About one quarter of large enterprises are registered on Samoa E-Tax. PDO 2: to strengthen the payments system, tourism sector policy and private sector development opportunities as foundations for more robust economic growth over the medium term. Rating: Moderately satisfactory. 48. There have been significant implementation delays for two of the three policy areas underpinning this PDO (the national payments system and SOEs/PPPs), but it is likely that the intended results will be achieved once the reforms are fully implemented. Strong results have been achieved with respect to the performance of the tourism sector, but the link to the DPO series and the tourism sector policy framework is relatively modest. 4. A more efficient payments system as measured by an increased prevalence of electronic payments. 49. Not yet achieved. There are some data reliability issues with the baseline data collected in 2013, so this results indicator is instead assessed by comparing 2017 data with a 2014 baseline. Compared with 2014, interbank manual cheque settlements have more than tripled, while the number of electronic payments has declined. The Page 17 of 34 The World Bank (P155118) drivers behind this are not clear, but CBS has indicated that government payment practices heavily influence the overall figures. 50. The new national payments system infrastructure and supporting regulatory framework are yet to be implemented, so the results information doesn’t yet reflect the impact of the reforms supported in the program. However, it is near-certain that the infrastructure and regulations will be put in place in 2019 and will improve the efficiency of the payments system (e.g. by design, it will remove manual overnight clearances between banks). Hence this result is expected to be achieved by FY21. 5. Improved performance of the tourism industry as measured by an increase in the proportion of the tourist and sports tourist segments in overall visitor arrivals and an expansion of the employment in the accommodation, restaurants and general commerce industries. 51. Achieved, based on alternative data sources. This results indicator was difficult to assess due to lack of documentation on its construction and data sources. It appears to be based on CBS visitor arrival data and employment information from the 2011 Census. It was not possible to exactly replicate the baseline for the proportion of target segments, and CBS data would indicate that the results target hasn’t been met. It may also have been unnecessarily complicated to target the proportion of tourists in total visitor arrivals, since the driver of economic growth is the absolute number of tourists. For the employment component, the 2016 Census used different industry categories to the 2011 Census, making a direct comparison impossible. However, reliable alternative data sources (based on official statistics and government administrative databases) indicate that the results indicator has been met: • Target segments: According to STA data, Holiday arrivals have grown by 51 percent between 2013 and 2017, and increased from 36 to 43 percent of total visitor arrivals (an increase of 1.8 percentage points per year). Sports arrivals have been steady at 1 percent of arrivals. • Employment: SBS labor force statistics indicate that total registered employees in the accommodation, restaurants and general commerce industries has increased from 4873 in June 2013 to 5610 in June 2018. STA also carried out Tourism Employment Surveys in 2010 and 2016, and measured an increase in tourism employment from 2825 to 4422, with proportionate growth across men and women. 52. It is not possible to quantify the role of the Tourism Sector Plan 2014-2019 (the prior action for the first operation) in bringing about the improved performance of the tourism sector, although it is likely to have contributed to some extent as the overarching policy roadmap for the sector. The air access and marketing reviews commissioned under the second operation in the series are unlikely to have contributed to this success, as most of the recommendations of these reviews ultimately were not adopted. The annual review process for the tourism sector plan also has not been maintained over time so cannot have contributed to this outcome. 6. Greater private participation in the SOE sector, as measured by the number of new PPPs. 53. Mostly not achieved. New PPPs had not been implemented by December 2018, although three new multiyear performance contracts (a simple form of PPP) are currently under preparation in accordance with the PPP Handbook, for implementation in 2019. The Agriculture Store Corporation has also been successfully privatized as a prior action under the DPO series, although it is not specifically reflected in the results indicator. Thus, there has been some improvement in private participation in the SOE sector, with further modest improvements expected going forward as SOEs adopt more sophisticated outsourcing arrangements consistent with the PPP Handbook. Page 18 of 34 The World Bank (P155118) PDO 3: to strengthen the monitoring, reporting, and coordination of climate resilience activities in Samoa, as an important step toward increasing its resilience to the effects of climate change. Rating: Moderately satisfactory 7. Improvement in coordination of resilience activities and in national monitoring and reporting on climate resilience indicators, as measured by the content of new sector plans and sector plan annual reviews. 54. Partially achieved. All four new sector plans in FY18 include indicators relating to climate/disaster resilience, contributing to national monitoring and reporting on climate resilience. However, the ICR team was not able to obtain copies of sector plan annual reviews so it was not possible to assess this component of the results indicator. The indicator is therefore rated as partially achieved. Improved coordination of resilience activities was not directly measured in the results indicator (as this would be difficult to measure), but feedback from the MOF Economic Policy Division, the MOF Climate Resilience Coordination and Investment Unit and Bank staff suggests that coordination has improved significantly over time. 55. It is a requirement of the 2015 Sector Planning Manual for all Sector Plans to integrate climate change as a cross-cutting issue, and it is not clear whether or not the DPO action (a commitment to include the same requirement in the 2016-2020 Strategy for the Development of Samoa) made an additional contribution to this result. The Ministerial Climate Resilience Coordination Committee created under the 2016 DPO was not operationalized so cannot have led to improved coordination of resilience activities. 3.3 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 56. The program objectives are highly relevant and are well-reflected in the design and implementation of the DPO series. The program design had only minor shortcomings in terms of relevance, in that it may have been possible to select policy areas that linked more directly to GOS’s focus on fiscal consolidation (particularly in the 2014 DPO). The most important PDO, on improved fiscal management in the areas of debt, procurement and revenue, has been achieved. In particular, the DPO series played a significant role in the achievement of outcomes on debt management, which is perhaps the most relevant and urgent reform area given Samoa’s current macroeconomic situation. The economic reform PDO (the payments system, tourism and SOE reform/PPPs) has had more mixed results, with delays on the payment system and PPP reforms meaning that targeted outcomes are yet to be achieved and with only modest attribution of tourism results to the DPO series. However, there is a strong likelihood that the targeted outcomes for the national payments system and PPPs will be achieved in the next one- to-two years, and the DPO series also supported a successful SOE divestment that was not reflected in the results framework. The climate resilience PDO has been mostly achieved, but there is only modest attribution to the DPO intervention (with one of the two actions, establishment of the Ministerial Committee, not having been implemented). Taking these relative strengths and weaknesses into account, the overall outcome rating is moderately satisfactory. Page 19 of 34 The World Bank (P155118) 3.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 57. There were no significant direct impacts on poverty, gender equality or social development. The DPO series was designed to contribute indirectly to poverty reduction through a stronger fiscal position, more robust growth foundations and increased resilience to natural disasters and climate change. For all three channels, the causal impact of the DPO-supported actions cannot be measured. Improved employment performance of the tourism sector was intended to be pro-women, given that women make up a greater share of tourism sector employees than the economy-wide average. Employment in tourism has indeed expanded (see Section 3.2 above), with women maintaining their share of tourism jobs. However, there is no evidence as to whether the DPO actions causally contributed to this success. (b) Institutional Change/Strengthening 58. The DPO series was consistent with long-term capacity and institutional development, supporting significant reforms to debt management, public procurement, customs and SOE management that appear to be contributing to permanent institutional strengthening (with each of these reforms being embedded in legislation, regulation and/or major policy statements that remain effective). There was no explicit capacity development focus in the DPO series, but several of the prior actions represented components of wider reform programs that were focused on capacity development, e.g. the Debt Management Reform Plan. Nonetheless, capacity constraints represent one of the main risks to sustained development outcomes, as detailed in Section 4 below. (c) Other Unintended Outcomes and Impacts N/A 3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 4. ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME Rating: Moderate 59. Risks to the achievement or sustainability of development outcomes are moderate. The development outcomes supported by the DPO series have very strong ownership from both the implementing agencies and from GOS overall, and are likely to remain priorities in future. MOF plays an important role in coordinating and overseeing inputs towards the reform areas supported under the program, meaning that technical issues are likely to be identified and addressed. The Bank and other partners are also engaged in an ongoing dialogue with GOS for the preparation of subsequent policy operations, which provides the opportunity to monitor outcomes from the 2014 and 2016 operations and work with GOS to take corrective action if needed. The 2017 and 2018 DPO series are also directly strengthening achievement of outcomes in some of the same areas (applications of framework procurement agreements in the health sector, tax policy and administration, and climate and disaster resilience planning). Commentary on specific risks in each policy areas is included below. Page 20 of 34 The World Bank (P155118) • Debt management – Although the consequences of non-compliance with the MTDS would be substantial, the political risk of non-compliance is now relatively modest, given increased awareness of the MTDS following the 2014 airport terminal loan, the legal backing given to the MTDS in the amended PFM Act, and the ongoing multi-donor dialogue through the JPAM. The institutional capacity of the DMU poses a risk to outcomes, given its small size and key person risk. MOF has proactively identified this risk and requested Bank technical assistance to review the DMU structure. • Procurement – There is substantial key person risk and risk of capacity constraints to the procurement reforms supported under the DPO series, as there are only two staff in the MOF Procurement Division. Not only is there a risk that substantial institutional knowledge would be lost if a staff member moves on, there is also very limited capacity for the division to invest in training and awareness for line ministry procurement officers, which would be a prerequisite for wide-scale adoption of framework procurements across government. This is somewhat mitigated by ongoing Australian Government technical assistance, which (amongst other things) is helping to produce more detailed procurement manuals. The Australian Government is also supporting NHS’s investment in a pharmaceuticals inventory management system that should enhance the efficiency gains that NHS can achieve from framework procurement of medicines. However, based on NHS’s experience to date, there is a risk that issues with timely payment of suppliers (which is common across line ministries) could deter firms from bidding for framework contracts or result in higher prices. • Customs – The risk to sustaining development outcomes in this area is relatively low. MFR is investing in maintaining and upgrading ASYCUDA World out of its recurrent budget envelope, and receives capacity building support from the United Nations Conference on Trade and Development (UNCTAD) Suva office. • Tax – There is a risk that the functionality issues with Samoa E-Tax may be technically difficult to resolve or would encounter funding constraints. Given the significant tax policy reforms that MFR is currently implementing, there may be also limited human resources available to increase focus on enhancing Samoa E- Tax, meaning that it could be some time before these issues can be ironed out and the intended tax compliance benefits are realized. • National payments system – There are some stakeholder risks, given that the new payments infrastructure will require charging banks substantially higher fees and will entail some adjustment costs. CBS has been actively consulting with the banking sector to mitigate these risks, although delays in the IFC-led procurement of the payments infrastructure have complicated this dialogue. There are some technical risks to the rollout of the new system, as Samoa will be the first Pacific country to implement the new national payments system software. • Tourism – Risks in this area are low, as tourism sector development is a key government priority and the New Zealand Government is also providing support to the sector. • SOE reform and PPPs – Risks in this area are moderate. There is inherent political and stakeholder risk to SOE reforms, and a mismatch in the degree of ambition between decision-makers, officials and technical assistance providers has previously led to delays. However, this risk is relatively limited going forward, given that the PPPs and SOE reforms in MPE’s current work program have been developed with significant Cabinet input and only those with a clear political mandate are being prioritized. • Climate resilience – Risks in this area are low overall, given the very strong degree of ownership and priority placed on climate and disaster resilience across GOS. 5. ASSESSMENT OF BANK AND BORROWER PERFORMANCE Page 21 of 34 The World Bank (P155118) 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory • The programmatic series was an appropriate instrument for delivering on the Bank’s Country Partnership Strategy and responding to GOS priorities. The programmatic approach allowed for incremental steps to be targeted towards medium-term reforms, and the flexibility of the budget support modality, compared with project financing, was valued by GOS in the post-disaster consolidation period (although the credit terms of the second operation were less favorable than the grant terms provided under the first DPO). • The Bank worked collaboratively with GOS to set highly relevant development objectives for the programmatic series, including adapting to add a climate resilience pillar for the second operation. • In terms of the specific policy areas, prior actions and triggers were mostly based on existing technical assistance and project engagements (particularly for the fiscal reform pillar). Although this takes on board lessons learned from successes of past DPOs in Samoa and elsewhere in the Pacific – and reduces risk and transaction costs – it may have reduced the relevance/criticality of the reforms compared with a “top-down” approach of starting from the overall development objectives. An exception was tourism, which was included in the DPO series specifically because of its relevance from a top-down perspective, but for which there wasn’t a strong analytical basis for policy reforms. (Subsequent DPOs prepared through the JPAM have taken more of a top-down approach to the identification of reform priorities.) • The Bank worked closely with MOF and other budget support partners to design and implement the DPO series within the JPAM mechanism, and GOS valued the coordination and liaison role that the Bank played amongst budget support partners. Feedback from MOF highlighted that the Bank struck an appropriate balance between adjusting to changing circumstances and new priorities where appropriate, while still encouraging timely completion of prior actions. • The macroeconomic assessment, fiduciary assessment and poverty, gender and social analysis prepared at the time of appraisal were high-quality. However, the assessment of risks and mitigation options could have been more expansive (see Section 2.2). • There were some shortcomings in the design of the M&E framework. The customs and procurement reforms supported in the first DPO do not map to a results indicator and so constitute gaps in the framework. The tourism results indicator was not well-documented and was hard to replicate and assess. (b) Quality of Supervision Rating: Moderately Satisfactory Page 22 of 34 The World Bank (P155118) • The Bank team engaged effectively in the supervision phase to navigate significant issues on debt management – the key policy area in the program – when a semi-concessional loan was contracted in 2014. Notably, these issues occurred at the same time that the WB-IMF DSA rating moved from ‘high’ to ‘moderate’ risk of debt distress, and the Bank’s own development assistance moved to 50 percent credit terms, making the Bank’s overall policy position on debt less coherent. Nonetheless, the Bank’s decision to delay effectiveness of the 2014 DPO ultimately helped to strengthen the policy dialogue with GOS on debt. • The preparation missions for the subsequent DPO series were used to monitor the implementation of the 2014 and 2016 prior actions, but on a relatively ad hoc basis. One option for improvement could have been to explicitly add monitoring the 2014 and 2016 prior actions to the mission objectives for one mission per year (out of the total of three to four), and include an additional section in the aide memoire to provide a brief status update on each action. Explicit attention on these prior actions his may have identified sooner that the ministerial climate committee had not been convened or that the SOE policy had not been published, and spurred a discussion of the reasons behind this. • An Implementation Status Report (ISR) was not prepared, although it was required by Bank policy as the time between Board approval of the first and second DPOs exceeded 12 months. • Supervision of fiduciary aspects has been adequate. The Bank has received timely confirmation letters on the transfer of funds from the CBS foreign currency account to treasury accounts. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory Overall Bank performance is rated as Moderately Satisfactory, reflecting the ratings for both subcategories. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory • There was very strong ownership and commitment to achieving the overall program development objectives. However, government commitment to the loan contracting procedures supported as a prior action in the first DPO was initially a substantial issue, and the procedures were not followed for a significant new external loan in late 2014. GOS later commissioned an economic analysis for the 2014 loan (in line with the loan procedures), amended the PFM Act to add further weight to the MTDS, and approved a new, high-quality MTDS for the period 2016-2020. GOS is now strongly committed to the debt management reforms. • The macroeconomic policy framework was appropriate. • GOS provided a very good level of resourcing to the DPO engagement. MOF led the JPAM forum with the Bank and other development partners, and the Bank was able to regularly meet with the MOF CEO and management team. MOF, through an assigned focal point, coordinated inputs from the implementing agencies during design, implementation and supervision, as well as for the purposes of this ICR. Page 23 of 34 The World Bank (P155118) (b) Implementing Agency or Agencies Performance Rating: Satisfactory • There was strong commitment and ownership of the policy reform program on the part of the implementing agencies. • Closer coordination between the implementing agencies and the Office of the Attorney General could have helped to resolve implementation issues more promptly in the case of the payments system and procurement reforms. • Agencies’ M&E arrangements were adequate and are being used for decision-making although with some minor issues (e.g. some verification issues for CBS’s payments data). • In some cases, there are opportunities to improve on consultation and feedback from the private sector, especially through forums such as the Samoa Chamber of Commerce. Although agencies devote substantial effort to public consultation processes, the format is often through one- or two-day workshops, which few members of the public or business people can attend (it is likely that shorter sessions might increase participation). (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory Overall borrower performance is rated as Moderately Satisfactory, taking into account the ratings for government performance (Moderately Satisfactory) and implementing agency performance (Satisfactory). 6. LESSONS LEARNED 1. The debt management reforms demonstrated that the DPO engagement can successfully elevate policy issues to the political level and add weight to important reforms, particularly when there is close coordination with other budget support partners. The specific actions taken by the Bank and others to delay effectiveness and disbursement until remedial action was taken strained the relationship with GOS in the short term, especially as the authorities felt that the link between the loan contracting and budget support was not clear ex ante and the consequences for government cash flow were significant. However, it successfully raised the profile of debt management issues with policymakers and ultimately helped to cement the importance of the MTDS. The Bank’s response was also appropriate to ensure the credibility of the wider reform program. The coordinated responses of the other JPAM partners served to reinforce the policy messages on debt management and the importance of following through with budget support- linked reforms. 2. The experience in tourism highlighted that it is important to carefully consider whether a DPO is the right instrument for engaging in certain areas. The priorities identified in the IFC background analysis (improving the effectiveness of STA’s marketing spend and expanding air access arrangements) did not relate to specific policy reform actions and may have been better addressed through a project Page 24 of 34 The World Bank (P155118) engagement. Given the importance of tourism to the Samoan economy (and the lack of a real downside to not succeeding) it was worth taking a risk to engage in this area and establish a policy dialogue, with a view to potentially uncovering a substantive and necessary policy reform amenable to support through the DPO. Nevertheless, the DPO series was ultimately only able to target process-focused actions (a new sector plan and completion of reviews) with little additionality. One of the reviews, on tourism marketing, also had limited scope for influence because the New Zealand Government was already assisting STA to redesign its marketing strategy based on a separate analysis. It may have been better to maintain a dialogue with STA through the JPAM (which is also useful for identifying technical assistance needs) but only introduce tourism-related actions into DPOs once discrete policy reform measures were identified. The experience with tourism also reflects one of the risks with programmatic series, where the first action in the series can be relatively weak but with the intention to build to a more substantial action in the second operation (which doesn’t always eventuate). 3. As seen in previous Pacific DPOs, it is difficult to align Bank project and Analytical and Advisory Services (ASA) modalities and timeframes with the relatively rigid DPO cycle, an issue which should be considered and mitigated more explicitly during the DPO design phase. The national payments system reforms are linked to an IFC project which has been significantly delayed, a risk which was underestimated during the design of the DPO series. The NCD policy (an indicative trigger that was later dropped) encountered some technical delays, but the Bank team may also have allocated insufficient ASA resources towards supporting the DPO policy dialogue. 4. More timely and systematic follow-up on past actions could speed up the feedback loop on implementation issues that are affecting results, help to more clearly articulate the Bank’s requirements for DPOs and potentially provide useful information for future reform actions. More regular dialogue on the implementation of previous actions would help to identify and resolve issues and – over time – may help to generate a better shared understanding between the Bank and the authorities on what constitutes ‘satisfactory’ implementation of the reform program. In practice, DPO missions are often under time constraints and implementation and monitoring discussions occur on an ad hoc basis, mainly as issues relate to the current year’s policy matrix. One option would be to explicitly include discussion of previous actions in the objectives of one mission per year and report specifically on this in the aide memoire. 5. More regular consultation with the private sector could provide valuable feedback to enhance the results of reforms, while the risk of scheduling and implementation issues could be mitigated by more systematic consultation within government. MOF may wish to consider creating a formal budget support committee that includes the relevant line ministries, OAG and private sector representatives. The format of external consultations is also important – it is easier for members of the public and business people to attend a one- or two-hour meeting than a one- or two-day workshop. Private sector consultation has improved over time, and missions for the subsequent DPO series have met on a regular basis with the Samoa Chamber of Commerce. 6 COMMENTS ON ISSUES RAISED BY BORROWER/IMPLEMENTING AGENCIES/PARTNERS (a) Borrower/Implementing agencies Page 25 of 34 The World Bank (P155118) The ICR team has taken note of the authorities’ comments on the Airport upgrade loan and delay to DPO1, particularly the lack of clarity on the link between the loan contracting and budget support disbursement and the impact that the Bank’s decision had on GOS cashflow. This is now reflected in Section 2 and also in the Lessons Learned. The ICR team also agrees that it is important that the Bank’s requirements for effectiveness are clearly articulated, and that more systematic discussion of implementation progress for previous actions during missions would help achieve this. The ICR team agrees that there is room for the Bank and other development partners to align more closely with one another, particularly to streamline internal approval schedules and requirements. We have nuanced the discussion in the report accordingly (under Major Factors Affecting Implementation). The team agrees with GOS’s proposed approach of keeping tourism in the JPAM dialogue as a key sector of the economy, with a view to identifying suitable policy actions. Several other comments and clarifications have been added throughout the document to address feedback on specific points. The team would like to thank the implementing agencies and in particular MOF for their extensive support in the preparation of this ICR. (b) Cofinanciers N/A (c) Other partners and stakeholders No specific comments were received from other JPAM development partners, but the report incorporates feedback from a private sector consultation facilitated by the Samoa Chamber of Commerce. Page 26 of 34 The World Bank (P155118) ANNEX 1: TRIGGERS AND PRIOR ACTIONS FOR DPO 2, AS SET OUT IN PROGRAM DOCUMENT IN AUGUST 2016 Trigger for DPO 2 (as stated in Proposed prior action for DPO 2 Explanation for any material program document for DPO 1) change Fiscal Reform Pillar – to improve fiscal outcomes in the areas of debt, procurement and revenue 1. The Recipient, through its 1. The Recipient has a) passed the Trigger is met. Prior action Cabinet, has submitted to amendment to the Public Finance incorporates and extends trigger, Parliament a Bill for the Management Act that sets out with part (a) including the amendment of the PFM Act in government borrowing purposes, enactment of amendments to the order to encompass borrowing debt management objectives, PFM Act (rather than submission to purposes, debt management consistency of operations with the Parliament of the Bill), part (b) objectives, regular updating of the Medium Term Debt Strategy, and supporting government efforts to MTDS, and annual reporting to requirements for annual reporting to transparently monitor compliance Parliament. parliament; and b) through its and assess the results of previously Cabinet, approved an updated supported debt management Medium Term Debt Strategy for the reforms. period 2016-2020, which is designed to strengthen debt policy and debt management and includes an assessment of the implementation of the previous medium term debt strategy. 2. The Recipient has issued 2. The Recipient, through its Ministry Trigger is met. Prior action guidelines for the use of of Finance, has issued: (a) revised incorporates and extends trigger, by framework arrangements in public Treasury Instructions which allow for including the approval of new procurement. the use of framework arrangements standard templates for major in public procurement; (b) new works. guidelines for the use of the said framework arrangements; and (c) new procurement standard templates for major works, general services, and goods. 3. The Recipient has introduced 3. The Recipient, through its Ministry Trigger is met. electronic systems for filing and for Revenue, has introduced paying taxes, including income tax. electronic systems for filing and paying taxes, including income tax. 4. The Recipient has issued a new Trigger not converted to prior action Issuance of a new NCD Policy has NCD Policy in order to effectively been delayed, as the previous NCD tackle NCDs. Policy is still being reviewed. The WB NCD study which was intended to inform the new policy has also been pushed back (now targeting mid-2016 completion). A number of other measures targeting NCDs have been implemented in the interim, including the pilot of the PEN package of interventions. Page 27 of 34 The World Bank (P155118) Economic Reform Pillar – to strengthen the payments system, tourism sector policy and private sector development opportunities as foundations for private sector-led economic growth over the medium term 5. The Recipient has issued 4. The Recipient’s Central Bank of Trigger is partially met. There has regulations on remittance service Samoa has submitted draft been a delay in issuing the providers. regulations to the Office of the regulations and related guidelines Attorney-General, in accordance with due to the need to comply with the National Payment System Act, legal standards. Issuance is relating to the regulation of agents expected in the third quarter of that provide payment services, and 2016. oversight by the Central Bank of Samoa. 6. The Recipient has conducted 5. The Recipient, through the Samoa Trigger is met. First annual status the first annual assessment of the Tourism Authority, has completed the report on the TSP, which included impact of its new targeted first annual (FY2014/15) status report an assessment of promotional and promotional and marketing on the Tourism Sector Plan, and has marketing arrangements, was arrangements and acted upon its commissioned independent reviews completed in October 2015 and findings, in accordance with the of its air access and marketing discussed at a Tourism Sector review provisions of the revised arrangements. Forum in March 2016. With the tourism sector policy. support of the IFC, the GOS has also commissioned independent reviews of its air access and marketing arrangements which will provide a sound analytical basis for future reforms. 7. The Recipient has put in place 6. The Recipient, through its Cabinet, No further regulatory provisions the necessary regulatory provisions has approved a revised policy on were required to implement the for PPPs to implement the new ownership, performance, and PPP framework, and there is PPP policy framework. divestment of Public Bodies, and nothing currently preventing its completed the privatization of the application to PPP proposals. The Agriculture Store Corporation. proposed prior action supports continued government efforts to facilitate greater private participation in SOEs over time. Climate Resilience Pillar - to strengthen the monitoring, reporting, and coordination of climate resilience activities in Samoa, as an important step toward increasing its resilience to the effects of climate change No trigger – this is a new action 7. The Recipient has a) through its Improving the coordination of Cabinet, established a Ministerial climate finance and the monitoring Committee to monitor Climate of resilience-building activities is a Resilience Projects with a priority of the GOS, and is a coordination and clearance function necessary step toward reducing for climate finance; and b) committed fragmentation of climate financing to integrating disaster risk and and projects. climate resilience into all sector plans in the Recipient’s Strategy for the Development of Samoa, with monitoring to occur through the new results framework of the SDS. Page 28 of 34 The World Bank (P155118) ANNEX 2: BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES (a) Task Team members P149770 - First Fiscal and Economic Reform Development Policy Operation Names Title Unit Responsibility/Specialty Lending Virginia Horscroft Senior Economist GMFDR Task Team Leader Kim Edwards Economist GMFDR Team Member Jinan Shi Senior Procurement Specialist GGODR Procurement Miriam Witana Procurement Specialist GGODR Procurement Stephen Hartung Financial Management Specialist GGODR Financial Management David Knight Economist GMFDR Team Member Tendai Gregan Energy Specialist GEEDR Team Member Maeva Betham-Va’ai Liaison Officer EACNF Team Member Samantha Evans Program Assistant EACNF Team Member Antonia Wong Senior Program Assistant EACNF Team Member William Battaile Senior Economist GMFDR Team Member Carlo Corazza Senior Payments Systems Specialist FFIFI Team Member Eileen Sullivan Senior Operations Officer GHNDR Team Member Xiaohui Hou Senior Economist GHNDR Team Member Nicole Jenner Gender Focal Point EACNF Team Member Haiyan Wang Senior Finance Officer CTRLD Team Member Marjorie Mpundu Senior Counsel LEGES Country Lawyer Ross Butler Senior Social Development Specialist GURDR Team Member Page 29 of 34 The World Bank (P155118) P155118 - Second Fiscal and Economic Reform Development Policy Operation Names Title Unit Responsibility/Specialty Lending Kim Edwards Economist GMF10 Task Team Leader Habiba Gitay Senior Environmental Specialist GCCPT Team Member Eric Blackburn Procurement Specialist GGODR Procurement Virginia Horscroft Senior Economist GMF10 Team Member Marjorie Mpundu Senior Counsel LEGES Country Lawyer Loren Atkins Associate Counsel LEGES Country Lawyer David Whitehead Financial Management Specialist GGODR Financial Management Anthony Obeyesekere Research Analyst GMFDR Team Member Maeva Betham-Va’ai Liaison Officer EACNF Team Member Dahlia Loibl Program Assistant EACNF Team Member Samantha Evans Program Assistant EACNF Team Member P149770 - First Fiscal and Economic Reform Development Policy Operation Names Title Unit Responsibility/Specialty Supervision Kim Edwards Economist GMFDR Team Member David Knight Economist GMFDR Team Member Anthony Obeyesekere Research Analyst GMFDR Team Member Maeva Betham-Va’ai Liaison Officer EACNF Team Member Samantha Evans Program Assistant EACNF Team Member Page 30 of 34 The World Bank (P155118) P155118 - Second Fiscal and Economic Reform Development Policy Operation Names Title Unit Responsibility/Specialty Supervision Kim Edwards Economist GMFDR Team Member Maeva Betham-Va’ai Liaison Officer EACNF Team Member Samantha Evans Program Assistant EACNF Team Member (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending First Fiscal and Economic Reform Development Policy Operation 14.47 60.10 Second Fiscal and Economic Reform Development Policy Operation 0.00 0.00 Total: 14.47 60.10 Supervision/ICR First Fiscal and Economic Reform Development Policy Operation 0.00 0.00 Second Fiscal and Economic Reform Development Policy Operation 5.24 16.44 Total: 5.24 16.44 Page 31 of 34 The World Bank (P155118) ANNEX 3: SUMMARY OF BORROWER'S ICR AND/OR COMMENTS ON DRAFT ICR 1. Government notes in particular the lessons learned which should be taken into consideration by all stakeholders involved. We agree that there is more scope for follow-up on past actions, and would welcome further collaboration with the Bank on options to improve the monitoring of their implementation and results. In addition, given that line ministries’ understanding of the JPAM process has improved over time, it would be sufficient to strengthen the coordination role played by MoF to ensure that all stakeholders are aware of the agreed policy actions and deadlines, without necessarily needing to set up a more formal budget support committee. 2. We acknowledge and note the perspective of the Bank with the disbursement delay of DPO 1 in FY2014/2015 of which has placed high emphasis on the MTDS compliance for better debt management in the long run. Nevertheless, at the time the link between the budget support and the Government’s decision to contract the loan in question was not clear, and the withholding of budget support impacted on Government cash flow. The decision to contract the loan was out of necessity and the need to consider adequate infrastructure for the economic corridor of the country, and attention was always on ensuring that debt servicing was assured. The Airport upgrade project is a lesson in itself as an example of donors working together on one project – because complementarity has been achieved despite the different delivery schedules. Better clarification of verification measures by the Bank should be clearly articulated in future DPOs. 3. Our view is that it was important to include tourism in the JPAM discussions, as one of the most important sectors to Samoa's economy. We will seek to continue to include it in JPAM discussions, with a view to focusing on the potential for beneficial policy reforms, while at the same time avoiding any overlap or duplication of assistance provided by other development partners. 4. We acknowledge the implementation delay by the Bank of the National Payment System, and look forward to continuous engagement (by the Bank) to progress this further. 5. While we acknowledge that the joint development partner approach has worked well overall, there is scope for further coordination of JPAM DPs internal processes to ensure alignment (of approval dates) and agreement on the set of prior actions that needs to be approved by their Boards. 6. Appreciation is extended to the Review team for the preparation of the ICR. Page 32 of 34 The World Bank (P155118) ANNEX 4: LIST OF SUPPORTING DOCUMENTS Department of Foreign Affairs and Trade (2018), Independent Evaluation of DFAT’s Engagement in the Joint Policy Action Matrix in Samoa Government of Samoa (2014), Procedures for Contracting New Loan Government of Samoa (2014), Procedures for Issuing Government Guarantees Government of Samoa (2014), Tourism Sector Plan 2014-2019 Government of Samoa (2016), Medium Term Debt Management Strategy 2016-2020 Government of Samoa (2016), Procurement Guidelines for Goods, Works and General Services Government of Samoa (2016), Strategy for the Development of Samoa, 2016/17-2019/20 Government of Samoa (2016), Treasury Instructions Government of Samoa (2018), Communications Sector Plan FY2018-2022 Government of Samoa (2018), National Environment Sector Plan 2017-2021 Government of Samoa (2018), Samoa Energy Sector Plan 2017-2022 Government of Samoa (2018), Trade, Commerce and Manufacturing Sector Plan 2017/18-2020/21 IFC (2016), Review of Virgin Samoa JV Performance & Strategic Options IFC (2016), Samoa Air Transport and Tourism Market Assessment Independent State of Samoa (2014), Customs Act Independent State of Samoa (2014), National Payments System Act Independent State of Samoa (2015), Public Finance Management Amendment Act MFR (2018), 2017-18 Annual Target Achievement (spreadsheet) MOF (2015), Economic Analysis for the Faleolo International Airport Upgrade MOF (2018), Annual Report 2016/17 MOF and Tenders Board (2014), MAPS Assessment MOF, Annual Report 2014/15 MOF, Annual Report 2015/16 MPE (2017), Public-Private Partnership Handbook NHS (2018), Medicine Prices Compared with International Price Index and Previous RFQ (spreadsheet) Private Sector Development Initiative (2014), Government of Samoa’s Policy on the Ownership, Divestment and Performance of State-Owned Enterprises SBS (2011), Census Report 2011 SBS (2016), 2016 Census Brief No.3 SBS (2018), Employment Tables June 2018 Quarter STA (2012), National Tourism Climate Change Adaptation Strategy for Samoa, 2012-2017 STA (2016), Samoa Tourism Sector Forum FY14/15 Review Report STA (2018), Annual Report 2016/17 STA (2018), Research and Statistics Division Excel datasets (covering 2013 – 2018) World Bank (2012), Country Partnership Strategy for the Period FY2012-2016 World Bank (2013), Samoa Debt Management Reform Plan World Bank (2014), Program Document (DPO1) World Bank (2014), Samoa Debt Management Reform Plan Follow-up World Bank (2016), Implementation Completion and Results Report (IDA-H8710) World Bank (2016), Program Document (DPO2) World Bank (2019), Aide-Memoire on Structure and Functions of Samoa’s Debt Management Unit (draft) World Bank and Independent State of Samoa (2014), Financing Agreement for DPO1 World Bank and Independent State of Samoa (2016), Financing Agreement for DPO2 Page 33 of 34 The World Bank (P155118) MAP Page 34 of 34