The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) MD Second Competitiveness Enhancement Project (P144103) EUROPE AND CENTRAL ASIA | Moldova | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Investment Project Financing | FY 2015 | Seq No: 9 | ARCHIVED on 23-Apr-2019 | ISR36655 | Implementing Agencies: Ministry of Finance, PIU under Ministry of Economy, Credit Line Directorate under Ministry of Finance, Ministry of Economy and Infrastructure, ODIMM, Government of Republic of Moldova Key Dates Key Project Dates Bank Approval Date: 11-Jul-2014 Effectiveness Date: 02-Oct-2014 Planned Mid Term Review Date: 17-Oct-2016 Actual Mid-Term Review Date: 17-Oct-2016 Original Closing Date: 31-Jan-2020 Revised Closing Date: 31-Jan-2020 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The project's development objective is to increase the export competitiveness of Moldovan enterprises and decrease the regulatory burden they face. This PDO will be achieved through a set of measures that aim to: (i) improve the business environment through regulatory reforms that reduce the cost of doing business; (ii) help SMEs and exporters to get access to business development services;and (iii) improve access to medium and long term finance for export oriented enterprises. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Regulatory Reform:(Cost $6.24 M) SME Development:(Cost $8.04 M) Access to Finance:(Cost $30.00 M) Project Management:(Cost $0.72 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Substantial Substantial Implementation Status and Key Decisions Regulatory reform: There is progress with One-Stop-Shop (OSS) for online issuance of permits and licenses. System is online and active since July. This is a critical reform for the Government to undertake, with many government agencies involved. Integration of Mpay and online banking payments should be done, as well as completion of digitizing all permits. Finally, business registration should be digitized and made online. 4/23/2019 Page 1 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) The ministry of Economy needs to take more proactive role and ownership over Performance indicators for government authorities with a business regulatory function as this is also part of DLIs. This activity is delayed. It is critical to establish performance indicators for inspection functions, and then to publish results of performance indicators for RIA, OSS and inspections Progress on amending RIA methodology. The first stage of amending the RIA methodology in line with WBG recommendations was completed, the Government by the Decree nr. 23 from 18.01.2019 approved the new Methodology for Impact Assessment, which unifies RIA and ex-ante mechanisms. The Decree was published in the Official Gazette on 19.01.2019. The second stage envisages revision of the Gov. Decree # 1429 and Laws #235 & #100 which is ongoing. RIA Secretariat moved to the State Chancellery (SC). This is a notable improvement compared to previous ISR. A comprehensive program for RIA and SCM capacity building within ministries will need to be set up. RIA compliance improved. Some progress with the technical assistance to the Competition council, but overall progress with market assessments is very slow and this needs to be improved. SME development: Delays with ODIMM in setting up its export promotion department as well as the M&E and Internal Audit Department. This is causing delays in project activities with ODIMM. It is urgently needed to speed up activities on completing internal reorganization of ODIMM and start export readiness program. MIEPO is restructured and merged into new Investment agency. Investment agency is very active and progressing in meeting project goals and PDO. MGF facility is progressing well and the first impact evaluation is in the process of being performed. Access to Finance: The credit line has disbursed 74%, which is an improvement compared to the previous ISR. New PFI has been added. ODIMM implemented Credit Guarantee software in several banks Overall: Although the overall progress of the project is good, government restructuring slowed progress in some areas and thus project implementation progress still moderately satisfactory. Therefore CEP 2 is restructured. Overall business environment in Moldova is not improving in 2018. Since 2015, businesses confirmed improvements in business environment through annual Cost of Doing Business survey. Strong Government push for reforms in 2016 and 2017 when inspections and permits were reforms, was not followed by even a stronger push in 2018. OSS for permissive documents was launched in second half of 2018, but its effects will be felt in 2019. Therefore, 2018 business environment is at 2005 levels, and Government has to make even stronger push to improve the conditions and meet PDO. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance -- Substantial High Macroeconomic -- Substantial Substantial Sector Strategies and Policies -- Substantial Substantial Technical Design of Project or Program -- Substantial Substantial Institutional Capacity for Implementation and Sustainability -- High High Fiduciary -- Moderate Moderate Environment and Social -- Low Low Stakeholders -- Moderate Moderate Other -- Low Low Overall -- Substantial Substantial 4/23/2019 Page 2 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) Results PDO Indicators by Objectives / Outcomes Improve the business environment through regulatory reforms that reduce costs of doing business IN00692119 ►Reduction in management time spent meeting regulatory regulatory requirements (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 10.70 -- 10.20 8.50 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 To be measured by Annual Cost of Doing Business survey Comments: Help SMEs and exporters to get access to business development services IN00692118 ►Percentage of matching grant recipients that are engaged in a new export oriented activity (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 20.00 50.00 Date 02-Oct-2014 -- 31-Dec-2018 30-Jul-2021 As of 31st of December 2018, 38 enterprises of 190 receiving MGF were engaged in a new export Comments: oriented activity. Improve access to medium and long term finance for export oriented companies IN00692121 ►Acerage annual percentage increase in lending to export oriented enterprises by participating financial institutions (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 11.30 5.00 Date 02-Oct-2014 -- 31-Dec-2018 30-Jul-2021 13.9% data from end 2016; 33.7% data from end 2017. Since inception, we managed to meet this indicator until 2018, where increase was not 5% over previous year. But 2017 saw notable increase as Comments: compared to baseline and 2016 (basically surpassing the entire PDO target). IN00692059 ►Cumulative amount of medium and long term lending by participating financial institutions under the line of credit (>24 months) (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 75.00 60.00 Date 02-Jun-2014 -- 31-Dec-2018 30-Jul-2021 4/23/2019 Page 3 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) This indicator measures percentage of total disbursement and not absolute USD amounts. the indicator accurately captures the impact on medium/long-term lending without duplication with the Intermediate indicators that tracks overall disbursement in absolute terms. Comments: As of December 31, 2018, actual cumulative amount of medium and long term lending by participating financial institutions under the line of credit (>24 months) was $16.2million, or 75%. Overall Comments PDO Solid progress towards meeting PDO. Intermediate Results Indicators by Components Regulatory Reform IN00692136 ►Cummulative number of reforms enacted according to the Action Plan to reduce regulatory barriers and remive anti- competitive elements of legislation and regulation (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 7 cumulative actions Value 0.00 -- have been 6.00 implemented Date 02-Jun-2014 -- 31-Dec-2018 30-Jul-2021 7 reforms have already been implemented Comments: IN00692137 ►Percentage of laws and sub-laws affecting businesses that are assessed by the RIA Secretariat before approval by Parliament (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 35.00 -- 70.00 75.00 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 This indicator is showing continuous progress (35% baseline; 40% in 2016; 55% in 2017, and now 70%). Comments: IN00692080 ►Establish and apply perfromance indicators for Government authorities with business regulatory function (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Performance indicators established for all the Recipient’s RIA and OSS authorities with a indicators established. business regulatory Performance based function that are indicator for included in the action Value Don't exist -- inspections needs to plan agreed on with be established and the World Bank; monitored. Good progress so far on all The performance three. indicators are monitored and publicly reported per the action 4/23/2019 Page 4 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) plan agreed on with the World Bank; and The targets for each performance indicator are revised and validated for 2020 and the following years, per the action plan agreed upon with the World Bank Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 RIA and OSS for permissive documents indicators established, but would need to be published in 2019; Comments: inspections performance based indicators being prepared. Access to Finance IN00692153 ►Volume of PFI funding for exporters through Line of Credit (Amount(USD), Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 20.60 29.40 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 Slowdown in disbursement as a result of interest rate setting mechanism by the MoF that resulted in too Comments: high interest rates. This was amended in March 2019, but effects will be reflected in the next ISR. IN00692154 ►Portfolio at risk (NPLs) under the Line of Credit (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 0.00 5.00 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 IN00692155 ►Number of sub-loans disbursed from the Line of Credit (cummulative) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 123.00 83.00 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 In terms of cumulative number of sub-loans disbursed the results of the Y.1 -Y.4 are significantly above the targets (71 targeted vs. 123 de facto). As of December 31, 2018 a total of 123 exporters received sub- Comments: loans (60 direct + 63 indirect) , which is very good SME Development IN00692134 ►Adoption and implementation of a Strategy for ODIMM that promotes organizational effectiveness and reflects segmentation of delivery assistance mechanisms and enterprise needs (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 4/23/2019 Page 5 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) Delays in implementing ODIMM strategy in terms of ODIMM strategy is establishing export implemented, readiness and M&E budgeted, monitored department. this is and evaluated affecting effectively in 2018, implementation of 2019, 2020. ODIMM ODIMM strategy as it strategy is updated Value No strategy -- relates to providing and adopted by the more support to SMEs appropriate and export oriented government authority companies. ODIMM and Government has adequate budget allocates adequate and staffing and this is budget based on the increasing each year updated strategy. to allow for implementation of strategy. Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 Some delays in implementing the strategy in terms of setting up export readiness department and Comments: supporting SMEs and export oriented enterprises. IN00692135 ►Increased outreach of ODIMM (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 2.00 -- 4.00 2.60 Date 31-Dec-2015 -- 31-Dec-2018 30-Jul-2021 This indicator is showing negative trend for three years in a row, and ODIMM outreach is decreasing (15% three years ago; 6% two years ago, and 4% last year). While the end target is already met, organizational and management changes in ODIMM as well as delays in starting to support other segments of Comments: enterprises in Moldova aside from micro ones (which was ODIMMs focus for many years) are showing negative trend. ODIMM urgently needs to set up export readiness and M&E departments and start serving other segments of companies in Moldova. IN00692138 ►Increase effectiveness of ODIMM (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 73.00 -- 80.00 94.80 Date 31-Dec-2015 -- 31-Dec-2018 30-Jul-2021 And while there is an improvement in 2018 as compared to 2017, ODIMM is more-less at 2016 level where effectiveness was 81%. Organizational as well as institutional changes in ODIMM as well as Comments: delays in supporting other segments of companies in Moldova are affecting bigger improvements in effectiveness for ODIMM. IN00692139 ►Adoption and implementation of a Strategy for Investment Agency that promotes organizational effectiveness and reflects market segmentation and improved export promotion delivery assistance mechanisms (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value No Strategy -- Investment agency is Investment agency implementing strategy. strategy has been Adequate budget has adopted by the MoEi or Government. 4/23/2019 Page 6 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) been allocated for Investment Agency 2017, 2018 and 2019 has been given increased budgets for 2017, 2018, 2019, 2020, 2021. This is important to ensure the implementation of the institutional strategies and time bound plans for the organization, as well as precondition to meet the requirement on adequate budgeting with regard to DLIs foreseen under this component. Date 02-Jun-2014 -- 31-Dec-2018 30-Jul-2021 IN00692122 ►Increase outreach of Investment agency (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.20 -- 0.20 0.30 Date 31-Dec-2015 -- 31-Dec-2018 30-Jul-2021 The Government restructured MIEPO and replaced it Investment agency in 2018. Since Investment agency is basically continuing work of MIEPO, baseline is still valid. The restructuring in 2018 and constant changes in MIEPO in previous years took its toll now. Agency's Comments: outreach is continuously decreasing (from 20% three years ago, to 5% two years ago, and same result as baseline last year), while in contrast, effectiveness is notably increasing (please see effectiveness indicator) IN00692123 ►Increase effectiveness of Investment agency (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 35.00 -- 65.00 52.50 Date 31-Dec-2015 -- 31-Dec-2018 30-Jul-2021 Despite decrease in outreach, effectiveness is notably increasing as agency is providing better and more focused services to those they are serving. Agency is not already meeting end project target in terms of Comments: effectiveness. IN00692141 ►Percentage of event participants reporting satisfied or very satisfied with workshops, training, seminars, conferences, study tours, etc (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 90.00 80.00 Date 01-Jul-2014 -- 31-Dec-2018 30-Jul-2021 IN00692146 ►Cummulative number of SMEs receiving Matching Grants (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 193.00 250.00 4/23/2019 Page 7 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 As of December 31st, 2018 there were 205 grant applications registered, of which 193 approved (of which 3 were terminated), 1 canceled, 11 rejected. Also, 5 in the pipeline (companies that initiated the application process). Total committed amount to beneficiaries constitute the equivalent of USD 1,82 Mil*, Comments: of which USD 736 thousand* have been already disbursed to SMEs. (*official exchange rate on 31.12.2018 - 1 USD = 17,1427 MDL). IN00692147 ►Cummulative number of business development services provided to SMEs (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 625.00 500.00 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 The cumulative number of business development services under the approved BIPs, as of 31.12.2018 Comments: was 1343, of which 625 BDSs has been delivered to MGF beneficiaries. IN00692124 ►Number of MGF benefitiaries creating or improving products (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 182.00 150.00 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 IN00692125 ►Number of MGF benefitiaries improving production processes (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 87.00 150.00 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 IN00692151 ►Number of MGF benefitiaries improving business management (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 145.00 150.00 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 IN00692152 ►Percentage of MGF benefitiaries that are women-owned or have female CEO (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 43.00 0.00 Date 30-Jun-2014 -- 31-Dec-2018 30-Jul-2021 Disbursement Linked Indicators IN00692878 4/23/2019 Page 8 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) ►DLI 1 Establish and apply performance indicators for Government authorities with a business regulatory function (Text, Intermediate Outcome, 484,500.00, 33.33%) Baseline Actual (Previous) Actual (Current) December 2019 Government restructuring process resulted in some of the agencies involved in Second DLI December PBI measurement don't 2017 is not met. exist anymore. As a part Government restructuring of CEP 2 restructuring it process resulted in some was agreed that this DLI of the agencies involved will cover RIA system, in PBI measurement OSS for permissive Value System does not exist don't exist anymore. Due Dec 2020 documents and Inspection Government is trying to performance indicators, so set up more elaborate combining three sub- PBI system at the level of indicators for government State Chancellery. At the agencies with business moment, little progress regulatory function. there on this DLI is a good progress on this DLI. DLI to be met by Dec 2020 Date -- 31-Aug-2018 17-Apr-2019 -- IN00692879 ►DLI 2 Cumulative number of reforms enacted according to the Action Plan to reduce regulatory barriers and remove anti- competitive elements of legislation and regulation (Text, Intermediate Outcome, 484,500.00, 66.67%) Baseline Actual (Previous) Actual (Current) December 2019 Value 0.00 4.00 7.00 6.00 Date -- 31-Aug-2018 17-Apr-2019 -- IN00692880 ►DLI 3 Adoption and implementation of a Strategy for ODIMM that promotes organizational effectiveness and reflects segmentation of delivery assistance mechanisms and enterprise needs (Text, Intermediate Outcome, 484,500.00, 66.67%) Baseline Actual (Previous) Actual (Current) December 2019 While there is adequate budget allocated to ODIMM strategy is ODIMM (an increase implemented, budgeted compared to previous and monitored and years), and ODIMM evaluated effectively in effectiveness and 2016 and 2017. outreach increased (albeit, Value No Strategy Adequate budget outreach is on decreasing due Dec 2020 allocated to ODIMM (an trend, but still above increase compared to target), there is delay in previous years), and implementing ODIMM ODIMM effectiveness strategy in terms of and efficiency increased serving medium size companies and export readiness. Date -- 29-Jun-2018 17-Apr-2019 -- IN00692966 4/23/2019 Page 9 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) ►DLI 4 Adoption and implementation of a Strategy for MIEPO that promotes organizational effectiveness and reflects market segmentation andimproved export promotion delivery assistance mechanisms (Text, Intermediate Outcome, 484,500.00, 66.67%) Baseline Actual (Previous) Actual (Current) December 2019 The strategy is implemented, budgeted MIEPO strategy is and monitored and implemented, budgeted evaluated effectively in and monitored and 2016 and 2017. MIEPO evaluated effectively in increased effectiveness 2016 and 2017. MIEPO andefficiency. Budge Value No Strategy increased effectiveness allocation for Investment Due dec 2020 andefficiency. Budge Agency (successor of allocation for MIEPO MIEPO) notably notably increased, and increased, and new staff new staff hired. 2017 DLI hired. Effectiveness met. increased notably, while outreach remained the same. Date -- 29-Jun-2018 29-Jun-2018 -- Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P144103 IBRD-84000 Effective USD 30.00 30.00 0.00 22.12 7.88 74% P144103 IDA-55090 Effective USD 15.00 15.00 0.00 7.57 5.98 56% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P144103 IBRD-84000 Effective 11-Jul-2014 15-Jul-2014 02-Oct-2014 31-Jan-2020 31-Jan-2020 P144103 IDA-55090 Effective 11-Jul-2014 15-Jul-2014 02-Oct-2014 31-Jan-2020 31-Jan-2020 Cumulative Disbursements 4/23/2019 Page 10 of 11 The World Bank Implementation Status & Results Report MD Second Competitiveness Enhancement Project (P144103) Restructuring History Level 2 Approved on 02-Apr-2019 Related Project(s) There are no related projects. 4/23/2019 Page 11 of 11