World Bank Document · management contract. SIRAMA: no launch of privatization process; 15 public...

Document of

The World Bank

Report No: ICR00002005

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-35670, IDA-3567A)

ON A

CREDIT

IN THE AMOUNT OF SDR 19 MILLION

(US$23.8 MILLION EQUIVALENT

TO THE

REPUBLIC OF MADAGASCAR

FOR THE

SECOND PRIVATE SECTOR DEVELOPMENT PROJECT

June 30, 2011

Finance and Private Sector Development

AFCS4

Africa Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective December 31, 2010

Currency Unit = Malagasy Ariary (MGA)

US$1.00 = MGA 2,174

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ACM Aviation Civile de Madagascar / Civil Aviation Authority

ADEMA Aéroports de Madagascar / Madagascar Airports

ADF Airport Development Fund

AGOA African Growth and Opportunity Act

ATI African Trading Insurance

BPI Business Partners International

CAPE Comité d‘Appui au Pilotage de la relance de l‘Entreprise / Support

Committee for Enterprise Relaunch Pilot

CAS Country Assistance Strategy

CFEC Center for Facilitation of Enterprise Creation

CP Comité de Privatisation / Interministerial Privatization Committee

CRC Comité de Réflexion pour la Compétitivité / Competitiveness Review

Committee

DCA Development Credit Agreement

EDBM Economic Development Board of Madagascar

EMP Environmental Management Plan

EPZ Export Processing Zone

FASP Fonds d'Appui au Secteur Privé / Private Sector Support Fund

FDI Foreign Direct Investment

FIAS Foreign Investment Advisory Services

FMI Financial Management Initiative

FSADR Fond Social d'Appui au Développement Régional / Social and Regional

Development Fund

GDP Gross Domestic Product

GOTICOM Groupement des Opérateurs des Technologies de l'Information et

Communication / Private Sector Association of ICT Operations

GOM Government of Madagascar

GUIDE Guichet Unique des Investissements et du Développement des Entreprises /

One-Stop Shop for Business Development and Investment Promotion

HASYMA Hasy Malagasy / Cotton Company

HIPC Heavily Indebted Poor Country

ICB International Competitive Bidding

ICR Implementation Completion and Results

ICT Information and Communication Technology

IDA International Development Agency

IFC International Finance Corporation

IMF International Monetary Fund

IMS Information Management System

IPP Independent Power Producer

I-PRSP Interim Poverty Reduction Strategy Paper

IVATO International Airport of Antananarivo

JIRAMA Jiro Sy Rano Malagasy / Power and Water Company

KPI Key Project Indicators

M&E Monitoring and Evaluation

MAP Madagascar Action Plan

MDSPP Ministère du Développement du Secteur Privé et de la Privatisation /

Ministry of Private Sector Development and Privatization

MSE Micro and Small Enterprises

NBC National Competitive Bidding

NPV Net Present Value

OECD Organisation for Economic Cooperation and Development

ONE Office National de 1'Environnement / National Environment Agency

OMERT Office Malgache pour l'Etude et la Régulation des Télécommunications /

Telecoms Regulator

OMH Office Malgache des Hydrocarbures / Petroleum Regulator

OPCS Operations Policy and Country Services

PAD Project Appraisal Document

PASERP Programme d'Appui Social et Economique pour la Réinsertion

Professionnelle /

Retraining Program

PATESP Private Sector and Capacity Building Project

PCU Program Coordination Unit

PDO Project Development Objective

PIU Project Implementation Unit

PMR Project Monitoring Reports

PNSP Programme National d'Appui au Secteur Privé / Private Sector Support

National Program

PPP Public Private Partnership or Purchasing Power Parity

PSD Private Sector Development

PSDP2 Second Private Sector Development Project

PTF / FPP Privatization Trust Fund / Fonds de Portage et de Privatisation

SADC Southern Africa Development Community

SIRAMA Siramamy Malagasy / Sugar Company

SME Small and Medium-sized Enterprises

SODIP Société pour le Développement Industriel des Plantes de Madagascar /

Madagascar Company for the Industrial Development of Plants

SOE State-Owned Enterprise

SOLIMA Solitany Malagasy / National Oil company of Madagascar

STP Secrétariat Technique à la Privatisation / Privatization Secretariat

TELMA Telecom Malagasy

TOR Terms of Reference

UCP Unité de Coordination du Projet / Project Implementation Unit

USF Universal Service Fund

VOIP Voice over Internet Protocol

Vice President: Obiageli Katryn Ezekewesili

Country Director: Haleh Bridi

Sector Manager: Michael J. Fuchs

Task Team Leader: Josiane V. Raveloarison

ICR Team Leader: Michael O. Engman

MADAGASCAR

SECOND PRIVATE SECTOR DEVELOPMENT PROJECT

CONTENTS

Data Sheet

A. Basic Information

B. Key Dates

C. Ratings Summary

D. Sector and Theme Codes

E. Bank Staff

F. Results Framework Analysis

G. Ratings of Project Performance in ISRs

H. Restructuring

I. Disbursement Graph

Contents

1. Project Context, Development Objectives and Design ............................................................... 1

2. Key Factors Affecting Implementation and Outcomes .............................................................. 9

3. Assessment of Outcomes .......................................................................................................... 17

4. Assessment of Risk to Development Outcome ......................................................................... 23

5. Assessment of Bank and Borrower Performance ..................................................................... 24

6. Lessons Learned........................................................................................................................ 27

Annex 1. Project Costs and Financing .......................................................................................... 30

Annex 2. Outcome by Component................................................................................................ 32

Annex 3. Economic and Financial Analysis ................................................................................. 58

Annex 4. Bank Lending and Implementation Support/Supervision Processes ............................. 61

Annex 5. Beneficiary Survey Results ........................................................................................... 64

Annex 6. Privatization transactions supported by the Project in 2002-2010 ................................ 66

Annex 7. Summary of Borrower‘s ICR and/or Comments on Draft ICR .................................... 69

Annex 8. Comments of Co-financiers and Other Partners/Stakeholders ...................................... 78

Annex 9. List of Supporting Documents ...................................................................................... 79

Annex 10. Map of Madagascar ..................................................................................................... 80

A. Basic Information

Country: Madagascar Project Name: MG - Prviate Sector

Development II

Project ID: P072160 L/C/TF Number(s): IDA-35670,IDA-3567A

ICR Date: 06/30/2011 ICR Type: Core ICR

Lending Instrument: SIL Borrower: REPUBLIC OF

MADAGASCAR

Original Total

Commitment: XDR 19.0M Disbursed Amount: XDR 15.7M

Revised Amount: XDR 15.7M

Environmental Category: B

Implementing Agencies:

Secretariat Technique a la Privatisation (STP)

Cofinanciers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 08/07/2000 Effectiveness: 11/12/2002 11/12/2002

Appraisal: 01/12/2001 Restructuring(s):

11/12/2002

03/06/2003

04/28/2005

06/14/2006

12/21/2007

05/03/2010

Approval: 08/28/2001 Mid-term Review: 07/18/2005 07/25/2005

Closing: 06/30/2006 12/31/2010

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Moderately Unsatisfactory

Risk to Development Outcome: Moderate

Bank Performance: Moderately Unsatisfactory

Borrower Performance: Moderately Unsatisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Moderately Satisfactory Government: Moderately

Unsatisfactory

Quality of Supervision: Moderately

Unsatisfactory

Implementing

Agency/Agencies: Moderately Satisfactory

Overall Bank

Performance:

Moderately

Unsatisfactory Overall Borrower

Performance:

Moderately

Unsatisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments (if

any) Rating

Potential Problem Project

at any time (Yes/No): No

Quality at Entry

(QEA): None

Problem Project at any time

(Yes/No): Yes

Quality of Supervision

(QSA): None

DO rating before

Closing/Inactive status:

Moderately

Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 95 67

General finance sector 2 5

General industry and trade sector 2 26

Micro- and SME finance 1 2

Theme Code (as % of total Bank financing)

Regulation and competition policy 40 17

Small and medium enterprise support 20 33

State enterprise/bank restructuring and privatization 40 50

E. Bank Staff

Positions At ICR At Approval

Vice President: Obiageli Katryn Ezekwesili Callisto E. Madavo

Country Director: Haleh Z. Bridi Hafez M. H. Ghanem

Sector Manager: Michael J. Fuchs Demba Ba

Project Team Leader: Josiane V. Raveloarison Marie-Ange Saraka-Yao

ICR Team Leader: Michael Olavi Engman

ICR Primary Author: Michael Olavi Engman

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document)

The objective of the project is to assist the Borrower to improve access, reliability and

affordability of key utilities, through completion of the divestiture program of key state-owned

enterprises, and capacity building initiatives to strengthen the capacity of autonomous regulators

and privatization agencies, and facilitate entry of new operators in the deregulated sectors.

(DCA).

To enable the Government of Madagascar (GOM) to improve access, reliability, and

affordability of key utilities, including transport (PAD).

Revised Project Development Objectives (as approved by original approving authority)

The objective of the Project is to assist the Borrower to improve access, reliability and


enterprises, and capacity building initiatives to strengthen the capacity of autonomous regulators

and privatization agencies, and facilitate entry of new operators in the deregulated sectors and

increase the competitiveness of Malagasy companies. (as approved by the Board in November

2002)

(a) PDO Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 : Private investment in the targeted sectors increased by US$100 million annually from

2004 to 2007

Value

quantitative or

Qualitative)

NA Annual increase by

$100 million

Private investment in

telecoms increased

from $13 million in

2004 to $120 million

in 2007. Data for

private investment in

the petroleum sector

were not available

but anecdotal

evidence indicates

that the target was

not reached.

Date achieved 08/01/2001 12/31/2007 12/31/2010

Comments

(incl. %

achievement)

Political uncertainty made investment a poor indicator of success. Roughly one-third of

the target was achieved in telecoms. Team monitored FDI/GDP but there was

insufficient causality between this measure and project for it to be considered in ICR.

Indicator 2 : Improve access to reliable, affordable, and quality services for key utilities

Value

quantitative or

Qualitative)

# of telephone lines (mobile

+ fixed) per 100 inhabitants:

0.8 percent in 2000.

# of Internet users 10,000 in

# of telephone lines

(mobile + fixed) per

100 inhabitants: 1.5

percent in 2004

# of telephone lines

per 100 inhabitants:

2.3 percent in 2004,

26.2 percent in 2008.


Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years

2000

Telecom services rates as

for 2000

# of Internet users

60,000 in 2005

Telecom services

rates reduced by

2006 in line with the

average rate of

telecom services of

other countries in

region

# of internet users

100,000 in 2005 and

316,000 in 2008.

Price of a 3-min local

call in 2006

(Mada/SSA):

$045/0.68 for mobile

and $0.18/0.09 for

fixed, down from

$3.19/

Date achieved 08/01/2001 12/31/2006 12/31/2009 12/31/2010

Comments

(incl. %

achievement)

Access: targets exceeded - 100%.

Affordability: achieved for mobile but nor fixed services.

Indicator 3 : Strengthen the capacity of autonomous regulators and privatization agencies and

facilitate entry of new operators

Value

quantitative or

Qualitative)

Insufficient capacity of

Privatization Secretariat

(STP) and Telecom

regulator (OMERT)

Capacity building of

Privatization

Secretariat (STP)

and Telecom

regulator (OMERT)

The STP was

strengthened

significantly during

the course of the

project and became

the de facto PIU in

2006. OMERT

received training.

Date achieved 08/01/2001 12/31/2010

Comments

(incl. %

achievement)

STP was dismantled upon project closing. Industry insiders and civil servants argue that

the technical capacity of OMERT is rather good but it lacks meaningful autonomy.

Indicator 4 : Complete divestiture program of key state-owned enterprises

Value

quantitative or

Qualitative)

Complete/Implement

divestiture strategy for

TELMA, HASYMA,

JIRAMA and SIRAMA

Privatize TELMA

by 2002;

SIRAMA by 2002;

International Airport

of Antananarivo

(IVATO) by 2003;

HASYMA by 2003

The

Government

made several

changes to the

list, including

dropping and

adding

companies.

TELMA and

HASYMA privatized

in 2004. JIRAMA

partly under private

management

contract. SIRAMA:

no

launch of

privatization

process; 15 public

enterprises liquidated

and 12 partly

liquidated.

Date achieved 08/01/2001 12/31/2010

Comments

(incl. %

The work of preparing and executing this process was satisfactory but the lack of

commitment by the Government made it impossible to complete the agenda.


Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years

achievement) Significant achievements still made.

Indicator 5 : Increase competitiveness of Malagasy companies

Value

quantitative or

Qualitative)

None (Total value of

investments. Job

created. Job sustained

Number of MSMEs assisted

- were mentioned)

Number of

investments in

SMEs: Year 1

(2007): 15 Year 2:

18; Year 3: 18 Year

4 24 and Year 5: 27)

There is little

evidence that the

activities helped

increase the

competitiveness of

Malagasy companies.

EDBM helped to

significantly reduce

the transaction costs

of starting a business

and obtaining

permits. It is

impossible to

establish any causal

link

Date achieved 11/12/2002 12/31/2010

Comments

(incl. %

achievement)

The indicators for this sub-section of the PDO were ill-defined and causality unclear.

Data were often not available or collected.

(b) Intermediate Outcome Indicator(s)


Original Target

Values (from

approval

documents)

Formally

Revised Target

Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 :

Carry out environmental audit of petroleum sites in order to assess environmental

impact, identify risk sharing arrangements, and propose a remedial action plan and risk

mitigation measures

Value

(quantitative

or Qualitative)

No baseline audit available

Core team of trained

qualified individuals

in place at OMH

(petroleum

regulator). Establish

procedures to

monitor

environmental

hazards

Target partly

achieved. 2005:

environmental audit

for phase I delivered.

2006: committee

decides to develop an

action plan to protect

and minimize risk.

2007: 79% of service

stations cleaned up.

2008: Galana

Refinery terminal is

renovated.

Date achieved 08/01/2001 12/31/2004 12/31/2010


Original Target

Values (from

approval

documents)

Formally

Revised Target

Values

Actual Value

Achieved at

Completion or

Target Years

Comments

(incl. %

achievement)

The output targets were largely met but the Government did not adequately address all

the recommendations of the audit.

Indicator 2 : Reduce the steps to create a firm (60 days and 10 steps at mid term review)

Value

(quantitative

or Qualitative)

157 days and 17 steps in

2002

Ease of doing

business ranking in

2010 report is better

than 144th (in DB

report 2009)

The project was

catalytic in achieving

these results during

the first years when it

established the one

stop shop (GUIDE)

that was later

incorporated into

EDBM, which

reformed the process

significantly.

Date achieved 12/01/2003 12/31/2009 12/31/2010

Comments

(incl. %

achievement)

Indicator 3 : Reduce the steps to create a firm (60 days and 10 steps at mid term review)

Value

(quantitative

or Qualitative)

157 days and 17 steps in

2002

Ease of doing

business ranking in

2010 report is better

than 144th (in DB

report 2009)

Date achieved 12/01/2003 12/31/2009 12/31/2010

Comments

(incl. %

achievement)

Sources: Doing Business report and EDBM

Indicator 4 : Facilitate growth exports through setting up EPZ. Implementation of the pilot zone in

Tsarakofafa - Tamatave

Value

(quantitative

or Qualitative)

Off-site infrastructure

investments are completed:

electricity, water and

telecommunication network

Partnership

agreement between

GoM and developer

concluded

Date achieved 08/01/2005 12/31/2009 12/31/2010

Comments

(incl. %

achievement)

Sources: Ministry of Economy and Industry. FILATEX

Indicator 5 : Encourage participation of nationals in the privatization process

Value

(quantitative

or Qualitative)

Shares not shared.

a) 10% of shares of

the targeted private

enterprises have

been transferred to

the Privatization

This activity did

neither achieve

significant results not

its targets


Original Target

Values (from

approval

documents)

Formally

Revised Target

Values

Actual Value

Achieved at

Completion or

Target Years

Trust Fund (PTF) at

the closing of each

transaction;

b) PTF has offered

these shares for sale

to local small

investors.

Date achieved 08/01/2001 12/31/2010

Comments

(incl. %

achievement)

Privatization Trust Fund was created, and staffed with a Fund Manager. Although

GOM took years to make progress on this activity, since its creation a few Government

shares in privatized companies have been transferred to PTF.

Indicator 6 : Increase ROI of the targeted companies: ADEMA. HASYMA, SIRAMA and TELMA

Value

(quantitative

or Qualitative)

None None

Unclear. ISR:

HASYMA ROI: -

0.2% in 2004; -

55.5% in 2005; -

3426% in 2006; 1.3%

in 2007 and -31.7%

in June 2008.

TELMA ROI: -

84.2% in 2004;

10.5% in 2005; 2.8%

in 2006; 1.2% in

2007; -5.4% in 2008

and 0.6% in 2009.

Date achieved 12/31/2010

Comments

(incl. %

achievement)

This indicator was insufficiently estimated and monitored

G. Ratings of Project Performance in ISRs

No. Date ISR

Archived DO IP

Actual Disbursements

(USD millions)

1 01/29/2002 Satisfactory Satisfactory 0.00

2 05/20/2002 Satisfactory Unsatisfactory 0.00

3 12/19/2002 Unsatisfactory Unsatisfactory 0.00


5 11/25/2003 Satisfactory Unsatisfactory 3.00
















21 12/23/2009 Moderately Satisfactory Moderately Satisfactory 24.47

22 06/30/2010 Moderately Satisfactory Moderately Satisfactory 24.47

23 01/11/2011 Moderately Unsatisfactory Moderately Unsatisfactory 24.84

H. Restructuring (if any)

Restructuring

Date(s)

Board

Approved PDO

Change

ISR Ratings at

Restructuring

Amount

Disbursed at

Restructuring

in USD millions

Reason for Restructuring & Key

Changes Made DO IP

11/12/2002 Y S U 0.00

03/06/2003 N U U 0.75

Second order restructuring for

amending project description,

allocation of funds to credit

components, and the financial and

institutional arrangements

governing project implementation

04/28/2005 N S S 11.69


utilizing project savings to fund a

technical assistance facility

targeting local SMEs, to finance

an insurance facility component of

the Project, following

Madagascar# s admission as

member of ATI, and amending

various procurement thresholds

06/14/2006 S S 16.79


extending the closing date of the

Project to December 31, 2007, and

reallocating some project funds

12/21/2007 N S S 22.20



Project to December 31, 2009, and

reallocating project funds

05/03/2010 MS MS 24.47



Project to December 31, 2010

within the framework of OP 7.30

Dealing with de facto government.

If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body)

enter ratings below:

Outcome Ratings

Against Original PDO/Targets Unsatisfactory

Against Formally Revised PDO/Targets Moderately Unsatisfactory

Overall (weighted) rating Moderately Unsatisfactory

I. Disbursement Profile

1

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

1. Country context: Madagascar was one of the poorest countries in the world at the turn

of the century. In 2001, the country‘s gross domestic product (GDP) per capita at purchasing

power parity (PPP) was US$848; or 59 percent of the average value in Sub-Saharan Africa.1

Following Board approval of the Second Private Sector Development project (PSDP2) (or, the

Project), on August 28, 2001, the economy has mostly expanded, partly as a result of increased

exports of agricultural and garments products, debt service relief under the enhanced Heavily

Indebted Poor Countries (HIPC) Initiative, and two major investments in the mining industry.2 In

the past decade, the Malagasy economy stood up reasonably well to environmental and economic

shocks, such as devastating cyclones and deteriorating terms of trade, as well as currency

volatility. In 2002-2008, the country embarked on an ambitious reform path that brought

improvements in social, economic and governance indicators. However, the Malagasy economy

contracted in 2002 and 2009 due to political turmoil.

2. Rationale for Bank assistance: The Project‘s interventions aimed to lock in earlier

achievements and to strengthen the reform process embarked upon by the country in the second

half of the 1990s. An earlier reform program, supported by the (first) Private Sector

Development and Capacity Building Project (PATESP, CR.2956, 1997-2002), encouraged

private sector development through changes in the legal business environment. Markets were

liberalized and some 50 companies privatized, including eight of the largest state-owned

enterprises (SOEs) and two financial institutions, and the Government of Madagascar (GOM)

established regulatory agencies before the transactions of the privatization process were

concluded. Hence, the Project was prepared and designed in a positive environment categorized

by expectations that the Second Private Sector Development Project would be able to capitalize

on the momentum enjoyed by the Private Sector Development and Capacity Building Project.

3. The Project‘s interventions were designed to support the objectives of the Country

Assistance Strategy (CAS) (16249-MAG), of January 17, 1997, which aimed to reduce poverty

through high growth and ―quantum leaps in investment‖. According to the Interim Poverty

Reduction Strategy Paper (I-PRSP), of November 28, 2000, economic performance was expected

to improve by completing the GOM‘s ongoing financial and economic reform program. It

included the implementation of a new legal framework that would promote transparent business

rules, private investment, and local enterprise development in sectors with high growth potential

such as tourism, mining, manufacturing, telecommunications and seafood. It also covered the

finalization of the privatization program and the expansion of infrastructure. The Project

supported these goals and aimed to improve efficiency and expansion of key infrastructure

services that were identified in the I-PRSP as the main constraints to potential sources of growth.

1 World Bank (2011a).

2 IMF (2000), IMF (2004).

2

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

4. According to the Project Appraisal Document (PAD), the principal objective of the

project was ―to enable the Government of Madagascar to improve access, reliability, and

affordability of key utilities, including transport‖. The Development Credit Agreement (DCA)

dated October 5, 2001, was somewhat more comprehensive in definition and stated that the PDO

was ―to assist the Borrower to improve access, reliability and affordability of key utilities,

through completion of the divestiture program of key state-owned enterprises, and capacity

building initiatives to strengthen the capacity of autonomous regulators and privatization

agencies, and facilitate entry of new operators in the deregulated sectors.‖

5. The Project was designed to achieve two specific goals. The first goal was to complete

the divestiture of four key state-owned enterprises (SOEs) and 30 small and medium-sized

enterprises (SMEs) as well as to liberalize the agro-industry, air transport, energy, finance, and

telecommunications markets. This was meant to improve efficiency of the companies and create

opportunities for new private entry and investment. The second goal was to strengthen the

capacity of GOM to regulate privatized sectors. See Table 1 for the original key indicators to

assess the achievement of the development objectives.

1.3 Revised PDO and Key Outcome Indicators

6. Shortly after the Project was approved by the Board of Directors on August 28, 2001, a

lengthy political crisis erupted that paralyzed the public sector, plunged the economy into

decline, and delayed Project effectiveness. Following the installation of a new Government and

upon its request to the World Bank, on October 22, 2002, the President of the World Bank called

for the Board of Executive Directors to approve several proposed changes to the World Bank

portfolio in the post-conflict environment, including the DCA of the Project, through the

approval of the Regional Vice President.3

7. The Project‘s DCA was thus amended on November 12, 2002 to better reflect the

priorities of the new Government. The amendment led to Project effectiveness and was the actual

starting point for the Project as no disbursements had been made prior to the restructuring. The

Project Development Objective (PDO) was amended with a slight addition to the original PDO

with the final words in bold: ―to assist the Borrower to improve access, reliability and


enterprises, and capacity building initiatives to strengthen the capacity of autonomous

regulators and privatization agencies, and facilitate entry of new operators in the deregulated

sectors and increase the competitiveness of Malagasy companies‖. In addition, the outcome

indicator on ‗transport‘ was dropped from the Project at the restructuring mission and this change

was thereafter reflected in the second amendment to the DCA.

8. On May 6, 2003, the Country Director and the Government agreed to amend the DCA a

second time with modifications to introduce miscellaneous changes to the project description, the

allocation of funds to credit components, and financial and institutional arrangements governing

project implementation. These amendments were not resubmitted to the Board but they followed

3 World Bank (2002).

3

the requests outlined by the World Bank President and that had been submitted to the Board of

Directors in the fall of 2002.

Table 1. Key performance indicators

Outcome indicators

Private investment in the targeted sectors increased by US$100 million annually from 2004 to 2007

Telecommunications

The number of telephone lines (fixed line + mobile) per 100 inhabitants (penetration rate) increased from 0.8

percent in 2000 to 1.5 percent in 2004;

Internet users increased from 10,000 in 2000 to 40,000 in 2004, and 60,000 in 2005;

Telecom services rates will be reduced by end 2006 in line with the average rate of telecom services of

countries in the region facing a level of competition in their telecom sector similar to that of Madagascar

Transport

Cost of international and regional airline tickets reduced in line with published economy and charter fares for

competing destinations (such as Reunion) by 2004;

Ground handling fees will be reduced by 8 to 10% by 2004

Output Indicators

Regulatory framework

The regulatory framework for the insurance sector comprising of application decrees mentioned in the

insurance code has been adopted in 2003

Capacity Building

The regulatory agencies responsible for civil aviation, petroleum, and telecommunications are fully

operational by December 2003 and have established monitoring procedures to ensure compliance with

technical and economic regulations and national environmental norms and World Bank Group (WBG)

policies;

The council of insurance and the authority in charge of oversight and monitoring of the insurance sector are

fully operational in 2004, have established yearly procedures to ensure compliance of insurance institutions

to international standards and are disclosing a yearly statistics report on the sector's activities by Dec. 2004;

The Center for Facilitation of Enterprise Creation (CFEC) is adequately funded, staffed and fully operational

by December 2003

Privatization

Privatization transactions are completed in the time-frame below, in compliance with transparency and competition

rules acceptable to the WBG:

Telecoms Malagasy (TELMA) completed by 2002;

Sugar Company (SIRAMA) completed by 2002;

International Airport of Antananarivo (IVATO) completed by 2003;

Cotton Company (HASYMA) completed by 2003;

Ten percent of shares of the targeted private enterprises have been transferred to the Privatization

Trust Fund (PTF) at the closing of each transaction; and

PTF has offered these shares for sale to local small investors

New PSD activities

New strategies in priority sectors identified by Government adopted by 2003;

The Center for the promotion of micro and small enterprises (OMPE) is fully operational in 2003, adequately

staffed and has established adequate procedures to support MSEs;

Product development and training services provided to ten local start-ups by 2005

4

1.4 Main Beneficiaries

9. The PAD did not identify specific beneficiaries. The rationale was that the Project would

benefit the overall economy through increased competition, adoption of productivity enhancing

initiatives by the private sector, and investments boosting access and lowering prices of utility

services. The ceding of control of loss-making companies to the private sector was expected to

generate cost savings that could be reinvested to expand basic services. For the local private

sector, benefits were expected to be significant as the reforms would facilitate the development

of local entrepreneurship. By targeting backbone services, such as transport and telecoms, the

PAD explicitly assumed that the benefits of improved access and competitive rates would spill

over into other sectors, thereby giving rise to a significant multiplier effect. Simplified

procedures for enterprise registration, and easier and cheaper access to key business services,

would benefit entrepreneurship.

1.5 Original Components

10. The PAD outlined three broad project components: (i) regulatory capacity building; (ii)

transaction implementation; and (iii) ‗new Private Sector Development (PSD) activities‘. These

project components are summarized below with a brief assessment of the causal linkages

between component activities and PDO outcomes.

(i) Regulatory Capacity Building

11. The first component would strengthen the regulatory capacity of autonomous sector

regulators for air transport, petroleum and telecoms, and in particular: (i) improve their

efficiency in undertaking technical and economic regulation; and (ii) monitor environmental

hazards in compliance with national legislation, sector standards and World Bank Group (WBG)

policies. In addition, it would build in-house capacity of the Center for Facilitation of Enterprise

Creation (CFEC), and strengthen the insurance sector.

12. From a causality perspective, strengthening regulatory capacity to enhance competition,

improve policy and monitor markets was an essential requirement in order to achieve the PDOs

of enhancing access, reliability and affordability of targeted utility sectors. It was also a key pre-

condition for a successful outcome from the privatization and reform program of public

enterprises. The CFEC was a worthwhile initiative to support market entry in the newly

liberalized and other sectors.

(ii) Transaction Implementation

13. The second component would provide support for institutional capacity building, a local

ownership development scheme, and privatization implementation. First, it would strengthen the

Privatization Secretariat (STP) through technical assistance, including for environmental

screening and auditing, retraining through the Programme d'Appui Social et Economique pour la

Réinsertion Professionnelle (PASERP), and through arbitration. Second, it would help divest of

Privatization Trust Fund (PTF) shares to local investors, provide financial advisory services to

PTF to implement regulations and safeguards, hire a private fund manager to oversee and

manage the fund, create a registry for shares, explore the feasibility of developing mutual funds,

and launch a communications campaign. Third, it would support completion of the remaining

5

key companies and small and medium-size enterprises (SMEs) of the ongoing privatization

program (telecoms, the main airports, sugar and cotton). It would also provide financing to assist

in the structuring and closing of the transactions, including legal advisory support to resolve land

and title issues pertaining to ownership transfers, and carry out environmental audits of select

companies.

14. The successful implementation of the activities in this component was essential in

boosting competition, freeing up GOM time and resources wasted on mostly unproductive and/or

failing enterprises to be invested elsewhere, and in allowing for the restructuring of these

businesses. By attacking some of the vested interests, including between civil servants,

politicians and executives, and imperfect markets, the proposed activities were likely to reduce

inefficiencies and waste, boost competition, provide a fairer and more conducive investment

climate, and strengthen the Malagasy economy in the long-term.

(iii) Developing new PSD activities

15. The third and final component would: (i) provide support to the operational set up and

efficient development of a center (OMPE) created to coordinate activities of micro and small

enterprises (MSE); and (ii) develop strategies to support the implementation of activities

identified in the I-PRSP. In addition, it would provide advisory services to develop a strategy to

promote MSEs and use OMPE to allow MSEs to access market information and technology. It

was also expected to help jump-start the development of priority sectors identified by GOM

using pilot projects, including by assisting GOM in developing new PSD strategies, and provide

assistance to new local business start-ups.

16. The causal link between the activities in this third component and in facilitating entry of

new operators in the deregulated sectors—the relevant part of the PDO—was clear. Yet the

anticipated reduction of transaction and information costs would have benefited in particular

MSEs. The large investments and expertise generally required to enter utility markets indicate

that the activities in component 3 were insufficient to have any significant contribution to

achieving the PDO.

17. In summary, successful implementation of the activities would have improved access and

reliability to services critical in achieving higher growth (CAS objective).4 It is also highly likely

that they would have helped reduce poverty through private sector-led growth (CAS goal) in the

long-term. The link to affordability was not obvious, however. Effective regulation—a high

priority in the PAD—would help alleviate some of the potentially negative effects and so would

the training program aimed at facilitating the transfer of retrenched workers into new productive

activities. The activities and selected outputs are therefore likely to have had a positive impact on

achieving some of the PDO outcomes, as analyzed in detail below. Causality for the

interventions of the transport component and its associated outcome indicators were not

convincing given the limited investment and technical assistance interventions as well as

ambitious price reduction targets (see Table 1 for indicators and Annex 1 for budget allocation).

This component was cancelled before implementation begun; thus it is not explored in this

report.


6

1.6 Revised Components

18. The three headline components remained unchanged during the course of the Project.

However, modifications were made to sub-components: some were dropped and others added as

the management team sought to adjust the project design to reflect evolving political and

economic priorities, simplify a comprehensive and complex undertaking, and incorporate new

development tools that were perceived as effective means to achieve the objectives. The

restructuring in November 2002 was initiated by a formal letter sent by the President of the

World Bank in which he requested approval for a number of modifications, as noted in the

previous section. These and some other modifications were then recorded in the amended DCA

of May 2003. The amendment to the DCA at the mid-term review in 2005 was minor and added

two sub-components to the third component. Table 2 presents and explains the changes made to

individual subcomponents during the course of the Project. Table 3 then presents a summary of

the three components and the changes in their sub-components.

Table 2. Revised project components

Original component New component and nature of

modification [year]

Comment

1 – REGULATORY AND CAPACITY BUILDING

Telecoms:

(i) technical assistance to OMERT to strengthen

its regulatory capacity (training and advisory

assistance),

(ii) acquisition of frequency spectrum

management equipment, and

(iii) advisory services to design a rural telecom

policy and funding mechanism

Item (ii) dropped [2002]

A TF (PPIAF) financed most of

the TA identified for (i).

(ii) was to be self-financed by

OMERT. (iii) Project financed the

rural telecom strategy. DCA

amendment in 2002. Requested

by WBG President.

Air transport:

(i) technical assistance for designing and

implementing an information management

system to improve monitoring/regulatory

capacity and

(ii) training for the utilization of the IMS and

enhancement of the regulatory capability of the

personnel.

Component dropped [2003]

The decision by GOM to

restructure Air Madagascar via a

management contract with

Lufthansa Consulting made this

component irrelevant.

Center for facilitating enterprise creation:

(i) advisory services for training of staff,

(ii) purchases of equipment for center set-up

One stop shop for business development

and investment promotion [2002]:

(i) recruitment of staff;

(ii) technical assistance for design of most

adequate structure,

(iii) equipment for center set-up,

(iv) promotion to companies

Creation of GUIDE, one stop

shop for business facilitation.

Strengthening the financial system

Provision of TA and other material support to

establish a regulatory framework governing the

insurance sector, strengthen capacity to control

and supervise the insurance sector, and

undertake reform of the CNaPS

Component dropped [2002]

Requested by WBG President

Sequence of events: (i) decision

made to undertake first the joint

Bank IMF FSAP (2004) and (ii)

launch the financial sector reform

with the current Financial

Services Project.

7

Original component New component and nature of

modification [year]

Comment

2 – TRANSACTION IMPLEMENTATION / PRIVATIZATION5

Privatization capacity building:

(i) TA for streamlining procedures of PA

capacity building to carry out complex

transactions,

(ii) TA for legal assistance,

(iii) international environmental expert for in

the field training at STP, and

(iv) liaison environmental expert at ONE.

Supporting the privatization process

[2002]:

(i) operating expenses of STP,

(ii) TA for legal assistance,

(iii) TA for environmental assistance,

(iv) communication campaign on

privatization.

Original component had budgeted

too much for the privatization unit

while ignoring public

communication. Requested by

WBG President

3 – DEVELOPING NEW PSD ACTIVITIES

OPME is operational

Component dropped [2002] Support to micro enterprises is

done through existing and

separate projects. Requested by

WBG President.

Strategies to support PRSP and incubators in

place

Component dropped [2002] Activities to support business

incubators were not considered a

priority. Strategy work was

considered part of CAPE (below).

Requested by WBG President.

New component: Developing Export

Processing Zones [2002]:

(i) feasibility studies,

(ii) TA to implement strategy on EPZs,

(iii) infrastructure investments

The objective was to support the

Malagasy export industry

following the crisis that had a

negative effect on investment,

including some 80,000 lost jobs in

EPZs and build an industrial zone

close to the country‘ s main port.


New component: Strengthening

Madagascar’s image to attract FDI

[2002]:

(i) hiring of an international expert to

represent Malagasy interests abroad,

(ii) marketing and promotion actions,

(iii) set-up of an internet based database


New component: Supporting the tourism

industry [2002]: design and implementation

of a tourism master plan.


New component: Developing a long-term

strategy on PSD issues [2002]:

(i) assistance to CAPE,

(ii) animation of a private/public sector

dialogue forum.

CAPE was a forum established by

GOM to articulate reform

strategies within the framework of

a public private dialogue.


New component: Insurance facility [2005]:

Provision of support for an insurance

facility against Covered Risks that will be

implemented by ATI in accordance with the

Agreement Establishing ATI

As approved by the Board and

recorded in DCA amendment

letter dated May 18, 2005.

New component: SME Risk Capital Fund

[2005]:

Provision of support to the Risk Capital

Fund through provision of TA Loans to the

Fund‘s SME beneficiaries

As approved by the Board and

recorded in DCA amendment

letter dated May 18, 2005.

5 In the WBG President‘s request for Project restructuring in October 2002, it was suggested that section (iii) ‗TA

for executing a large communication campaign‘ under the ‗Local ownership development scheme (PTF)‘ sub-

component would be dropped; however, this activity was kept.

8

1.7 Other significant changes

19. In addition to the Project restructuring in November 2002, the DCA was amended on: (i) May 6, 2003, by the Country Director for amending project description, allocation of funds to

credit components, and the financial and institutional arrangements governing project

implementation; (ii) April 18, 2005, by the Board for utilizing project savings to fund a technical

assistance facility targeting local SMEs, to finance an insurance facility component of the

Project, following Madagascar‘s admission as member of Africa Trading Insurance (ATI), and

amending various procurement thresholds; (iii) June 14, 2006, by the Country Director for

extending the closing date of the Project to December 31, 2007, and reallocating some project

funds; (iv) December 21, 2007 by the Regional Vice-President for extending the closing date of

the Project to December 31, 2009, and reallocating project funds; and (v) May 3, 2010, by the

Vice President of Operations for extending the closing date of the Project to December 31, 2010

within the framework of OP 7.30 Dealing with de facto government. The extensions of the

closing dates were requested by the Government to lend support to ongoing activities (see Figure

1).

Table 3. Summary table of changes to sub-components

Project

Appraisal

Project

restructuring

12/11/2002

Mid-term

review

18/04/2005

1 - Regulatory capacity building

Petroleum regulator (OMH) X X X

Telecoms regulator (OMERT) X X X

Civil aviation authority X - -

CFEC X - -

Strengthening of the financial system X - -

2 - Transaction implementation

Institutional capacity (STP) X X X

Local ownership scheme (PTF) X X X

Privatization transactions X X X

3 - New PSD Activities

Center for the promotion of micro and

small enterprises (OMPE)

X - -

PSD Strategies in support of PRSP X - -

One Stop Shop (GUIDE) - X X

Develop EPZs - X X

Trade and Investment promotion - X X

Support to the tourism sector - X X

CAPE / PPD forum - X X

African Trading Insurance (ATI) - - X

SME support (BPI) - - X

Note: ‗X‘ implies that the sub-component was included and ‗-‗ implies that the sub-component was excluded.

9

Figure 1. Project timeline

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

20. The background analysis was sound, lessons learned from the first project were stressed

in project design, private sector consultations were organized and recorded, and the rationale for

the Bank‘s intervention was clear. The Government had prior to project design developed a

strategic vision for private sector development as part of its National Support Program for the

Private Sector. Project preparation and design also benefitted from the extensive expertise

developed in the PATESP Project that was approved by the Board on May 29, 1997, which

closed on December 31, 2002.6 The Project focused on deepening the market deregulation and

divestiture activities that were undertaken in PATESP. Concerns and priorities were well

identified, and several analytical reports underpinned the project, including on environmental

safeguard issues.7 The volatile political context and the fragility of local institutions were

prominently acknowledged in the PAD as political turmoil had affected PATESP.

21. The PAD stressed the importance of ensuring improved transparency and increased local

participation in the privatization process but also highlighted the significant risk associated with

political instability and limited capacity of local institutions. The PAD dedicated significant

attention to improving transparency in the reform process: for example by proposing separation

of the policy-making and regulatory functions of public agencies, by providing modern

management information systems, by moving toward financial autonomy of the regulatory

agencies, and by applying best practices in the privatization process. The Project also intended to

scale up local private participation in the divestiture program to make necessary reforms

palatable to a public audience who too often associated privatization with foreign takeovers of

domestic assets. It proposed that local investors would be invited to bid in a joint venture with

foreign equity and technical partners. It also aimed at establishing procedures for distributing

shares or mutual funds which would contain a stipulated share of each divested firm. Finally, it

would facilitate the expansion of indigenous local firms, in particular micro-enterprises which

would be provided start-up services. These initiatives were taken amid great political uncertainty

and with acknowledged weaknesses in governance.



2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Board

approval

1st political

crisis erupts

Restructuring

& Project

effectiveness

DCA

amendment

Mid-term

review

DCA

amendment

and PIU

restructuring

DCA

amendment

DCA

amendment

Project

closing

2nd political

crisis erupts:

OP/BP 7.30

10

22. The high complexity and comprehensive scope of the Project coupled with its sensitive

nature required a high level of government commitment and collaboration between several

public institutions. The project was highly demanding of the Government and the

implementation team and it came at a high political cost. The privatization agenda was unpopular

among many stakeholders and the Government was concerned about the loss of labor. The

incumbent Government was committed at least on paper at the time of project preparation and

project design but reform pressure was also applied by the International Monetary Fund (IMF)

through its programs. Project documentation highlighted the high risk associated with reform

fatigue. Key issues such as political fragility, political economy concerns, and limited

government capacity to build solid institutions within tight deadlines were indicators that the

risks were high. The significant complexity of the Project could have been reduced if the new

PSD activities component had been left out at the design stage and left aside for another Project

that focused on SME support. The project did not include external partners and co-financiers

outside of GOM and the attention to environmental and social safeguards was high.

23. The PDO of improving access, reliability and affordability of key utilities was highly

relevant for private sector development, investment promotion and shared growth. The

regulatory capacity building and privatization components were both essential building blocks in

GOM‘s development agenda. Market liberalization, competition and effective regulation are

necessary components to improve market performance. By focusing on key factor markets

(finance, telecoms, transport) as well as inefficient monopolies (airports, cotton, sugar), GOM

would have been well placed to achieve its development objectives if reforms were properly

implemented with attention to competition and effective regulation. Significant progress had

already been made in the 1990s, particularly through the PATESP project, to prepare and start

the liberalization process. Thus, the main objective was consistent with the prevailing economic

priorities of the Government.

24. The ‗new PSD activities‘ component was not closely associated with the PDO before it

was restructured in November 2002. The title of the third component, ‗New PSD Activities‘, was

somewhat misleading: ‗SME promotion‘ could have been more appropriate. One of the three

sub-components—‗New strategies in priority sectors identified by Government‘—for ‗New PSD

Activities‘ was not defined at the start. While the establishment of the one stop shop (GUIDE)

was a targeted and practical sub-component that benefited all prospective entrepreneurs, the aim

to train only ten local startups was largely irrelevant and the aim to support future priority sectors

of the Government offered flexibility but limited guidance to the team. While this added

flexibility to adapt part of the Project to GOM‘s evolving agenda may have been appreciated by

the client, this component that performed particularly poorly as the new activities were weak

either in design or implementation. The initial resources allocated for the third component were

less than 6 percent of total resources. In addition, the limited resource allocation (US$0.28

million) for the transport sub-component covering some narrow technical assistance

interventions was unlikely to achieve the ambitious outcome indicators on transport prices. In

transport, it would also have been difficult to determine causality between identified

interventions and the two outcome indicators (Table 1).

11

25. Some targets should have been more specific and performance indicators more

comprehensive. The combined targets of improving access, lowering prices and improving

quality/reliability were ambitious despite the lack of quality and poor access as well as relatively

high prices of services. While the experiences from many other countries show that access and

quality often improve substantially as a result of market liberalization, absolute price changes are

often marginal. Large improvements in access, choice, and quality raise the utility for

consumers. Competition facilitates price segmentation which by extension can result in both

lower and higher prices depending on the service in question. Price is also closely related to

taxation as illustrated in the petroleum sector. Potential efficiency gains can therefore be

captured by increased rents and increased taxes can neutralize any efficiency gains and even

raise the overall price. The retail price is therefore an imperfect target. There was furthermore no

performance indicator defined for reliability. In addition, the outcome indicator of significantly

increasing private investment in targeted sectors was not a useful measurement of the successful

reforms because political uncertainty scared off investors for years following each crisis.

26. Proactive measures to ensure competitive markets could have been more prominent in

project design. Market liberalization and privatization do not necessarily ensure competitive

markets. Proper phasing and sequencing of reform measures are critical and so is the autonomy

of regulatory bodies. The existing literature on market liberalization does pay much attention to

ensuring a healthy dose of competition in order to boost reliability and affordability. While an

important body of this literature was developed in the years subsequent to project launch, the

project could have highlighted these issues more upfront in the design. The PAD mentioned

competition as a byproduct resulting from a strengthened regulator; however, ensuring autonomy

was arguably just as important as building technical expertise in order to induce a higher level of

market competition. In addition, the design of the privatization process could have promoted the

breakup of national monopolies into two or more providers in order to stimulate competition.

Transparency clauses could have conditioned transaction support: openness and simplicity would

have been the key principles in an approach that particularly stressed competitive markets. Clear

rules and punishments would have been established. Price caps could have been considered for

some sectors. These types of initiatives are often necessary but not sufficient to promote

competition.

2.2 Implementation

27. Political developments beyond the control of the Project team had serious implications

for the Project. Project implementation was severely delayed at the start due to the unraveling of

a political crisis that paralyzed the Government and the civil service; and at the end due to a

similar political crisis. In December 2001, shortly after the Project was approved by the Board of

Directors and the signing of the Credit Agreement, the incumbent President (Didier Ratsiraka)

and his main opponent (Marc Ravalomanana) both claimed victory in the presidential elections.

In April 2002, after months of sporadic violence and considerable economic disruption, the High

Constitutional Court pronounced Ravalomanana as President following a recount of votes. In

July 2002, Ratsiraka left the country and Ravalomanana effectively gained control of power. The

new political context and harsh economic environment left the new Government unwilling to

implement painful new reforms and divest politically sensitive enterprises.

12

28. In November 2002, soon after the new cabinet had been installed, the country project

portfolio was restructured, including the Project, to better reflect the priorities of the new

administration. This was a necessary step to enhance Project ownership in the new

administration. Significant reallocation of funds was made and some components were dropped

and others introduced. The outcome was a project that better responded to the priorities in the

aftermath of the crisis with a less ambitious agenda on privatization and a more ambitious

agenda on rebuilding the private sector and promoting business. At the time, these initiatives

must have been regarded as rather drastic but it would turn out that these amendments did not go

far enough to reflect the evolving priorities of the new administration. In particular the

Government‘s commitment to the privatization agenda was weak.

29. The supervision reports reveal a sense of frustration of progress: on privatization in

general and on New PSD Activities in particular. The project faced significant challenges in

building new institutions such as the One Stop Shop for Investment and Business Development

(GUIDE) and CAPE (see Annex 2, component 3); in strengthening the existing implementation

units; and in creating an environment conducive to collaboration between public agencies. The

willingness by the Government to take difficult decisions was often lacking. The new

Government hesitated over further privatization and supervision records raise questions of

ownership in this process. No doubt, the privatization of enterprises took longer than anticipated

and Madagascar Airports (Aéroports de Madagascar, ADEMA), Madagascar Power and Water

Company (Jiro Sy Rano Malagasy, JIRAMA) and Madagascar Sugar Industry (Siramamy

Malagasy, SIRAMA) were never privatized. The fact that several of the public enterprises were

poorly managed did not help. For example, SIRAMA was already bankrupt, many companies did

not have accounts, environmental audits had to be done, assets identified and recorded, etc. In

addition, a combination of insufficiently allocated counterpart funding and bureaucratic

procurement procedures adopted by the Project Implementation Unit (PIU) led to significant

arrears that slowed down progress as contractors and consultants faced great uncertainty about

remuneration. The economic crisis left the Government short of funds and the International

Development Association (IDA) credit was therefore increased to 100 percent.

30. To regain momentum, the Client and the World Bank developed a short-term action plan

to closely monitor progress and new staff was recruited to accelerate implementation. The results

achieved under this plan in six months were to decide the future of the Project and in December

2003, the supervision team concluded that this initiative had brought significant improvements.

The supervision reports indicate that several experts were hired to help alleviate shortages of

manpower and guidance was provided in action plans, including several recommendations to

establish frequent meetings and bring all parties to the table. The initiatives to enhance the

institutional capacity of the Privatization Secretariat (Secrétariat Technique à la Privatisation,

STP) in the fall of 2003—following resignations of key staff members transferred from PATESP

to PSDP2 due to salary reductions—were decisive to complete the privatization of the Cotton

Company (Hasy Malagasy, HASYMA) and the Telephone Company (Telecom Malagasy,

TELMA). A program of staff training in privatization and public-private partnerships (PPPs) was

launched and study tours organized with focus on practical aspects of implementing programs

and divestiture. The capacity building activities at STP was later key for the success of the public

enterprise reform program.

13

31. Project implementation was impeded by the organizational structure during the first half

of the Project. The initial project management structure could have been more supportive to

effectively address the multitude of challenges that the complex project posed to the team. The

Government official who was appointed head of the Implementation Agency (or Unité de

Coordination du Projet, UCP) could have been more proactive and results oriented (PIU = UCP

+ STP + PSD units). The first professional who was hired to be in charge of the crucial

monitoring and evaluation (M&E) activities did not have the training and experience for the role.

The two advisory and implementation units—STP for components 1-2 and the PSD unit for

component 3—that the UCP oversaw did not communicate and coordinate as necessary (see

Figure 2). STP, a ministry unit, was more responsive to the Ministry of Finance and Budget than

to the head of PIU. It worked closely with the ministries in charge of the state-owned enterprises

(SOEs) during divestiture preparation. The PSD unit—an implementation unit created inside the

Project—was more responsive to the Ministry of Economy and Industry (previously Ministry of

Industry, Trade and Private Sector Development) than UCP. This organizational structure was

implemented to strengthen the commitment of various ministries but it also imposed high

coordination costs, as highlighted in the government Report in Annex 7.

32. The PIU was initially over staffed and bureaucratic and the organization was drastically

restructured to a slimmer and more efficient implementation unit in June 2006. Each unit (UCP,

STP, PSD) in the PIU had its own procurement and accounting team; and the PIU counted 69

staff on renewable one-year contracts by the end of 2005. Many of these staff members were

government officials transferred to the new institutions originally hosted under the PIU umbrella.

They were not paid by the PIU and performed public services, such as issuing work permits and

business licenses at the GUIDE. This arrangement was meant to offer flexibility in future staff

decisions. While the supervision records highlight organizational weaknesses, and there was

some trimming of unnecessary staff that was transferred from PATESP to PSDP2 and more

reliance was transferred to World Bank staff, decisive action to correct the situation would take

until early 2006. As the Project was heading towards closing in December 2005, and there was

significant uncertainty whether the Project would be extended or not, some high-level officials

left the PIU, including the head of UCP. Many staff members also left as a natural result of the

completion of sub-components such as the Support Committee for the Enterprise Relaunch Pilot

(Comité d‘Appui au Pilotage de la Relance de l‘Entreprise, CAPE) (11 staff) and GUIDE (13

staff). The PSD unit (AGEX B in Figure 2) was removed from the organizational chart and the

government-sponsored civil servants at UCP were transferred back to the Ministry of Finance

and Budget. The team took this opportunity to significantly restructure the organization, which

resulted in a much slimmer organization (see Figure 2). Several sub-components in the PSD unit

were also removed and none of the Project staff associated with this unit had their contracts

renewed. The number of staff was thus cut from 69 to 11.

14

Figure 2: Organizational structure in 2002-2006 (left) vs. 2006-2010 (right)

Source: STP Director‘s report (2011).

33. The mid-term review was used to add two new sub-components and provide advice on

how to reactivate some non-performing sub-components. It offered an opportunity to the Project

to disassociate itself from some sub-components that were not progressing and focus support on

those that were more promising. However, no sub-component was removed and the opportunity

to cut losses was not seized at this time. Instead, the supervision records of the mission following

the mid-term review (January 2006) were more candid, emphasizing disappointments and lack of

achievements, and suggesting more drastic measures to address existing problems. For example,

the Privatization Trust Fund (PTF) was a non-performing sub-component and the supervision

mission in January 2006 recommended dropping this sub-component from the project. The same

held for the privatization of SIRAMA. It also recommended GOM to cancel the contract with the

Export Processing Zone (EPZ) property developer (GETIM) given a number of irregularities and

weaknesses in performance (see Annex 2, component 3). It advised that EDBM would take over

GUIDE and implicitly adopt the role of CAPE, which had exhausted its effort in enhancing

public private dialogue.

34. The most recent political crisis and the ensuing non-replenishment of the project special

account under OP/BP 7.30 led to a standstill of the project‘s implementation from March 17,

2009, to the project closing date of December 31, 2010. This development led to a freeze of most

Project activities and necessary action to conclude ongoing initiatives could not be taken. During

this crisis, the country was suspended by the African Union (AU, then the Organisation of

African Unity) and the Southern African Development Community (SADC). Another outcome

was that as of January 1, 2010, Madagascar is no longer designated as beneficiary of U.S. trade

preferences offered in the African Growth and Opportunity Act (AGOA).8 The country‘s

eligibility of AGOA preferences, starting October 2000, helped it establish a significant textiles

and clothing sector—export processing zone (EPZ) exports were worth US$0.82 billion in 2008

(EIU, 2010)—that has been seriously damaged in the last two years. As of April 2011, the

international community including several governments, bilateral and multilateral donors still

does not recognize the current de facto Government (i.e. Haute Autorité de la Transition).

8 U.S. Government (2009).

15

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

35. The design of the M&E framework should have been better tailored to the PDO and to

existing baseline data sources. While performance in the telecom sector was adequately

measured, outcome indicators for other sectors were left out from the M&E framework,

including the petroleum sector. To measure progress on access, reliability and affordability of

key utility services, a more comprehensive set of indicators would have been required and more

independent data collection would have been necessary. The restructuring in November 2002

partly addressed this issue as a number of new performance indicators were added to the

monitoring framework and others modified. The PIU also modified the M&E framework to keep

it more relevant and easier to monitor. The M&E framework remained weak, however, and the

supervision teams struggled with the M&E function. Most aide-memoires of supervision

missions did not measure performance according to the pre-defined performance indicators.

36. The M&E framework could have been used more extensively during the first half of the

Project. Data for several of the key project indicators (KPIs) were not systematically collected,

partly due to the fact that they were not easily accessible in standard databases. For example, one

of the KPIs was sector specific inflows of private investment. While these variables are reported

in central World Bank databases and by the Central Bank, the information is not available for all

years and it is particularly lacking for Madagascar. Many KPIs were output indicators and to

measure progress on competitiveness, the project could have made more use of indicators on

enterprise creation and private sector productivity. The first person who was hired for the M&E

activities had no prior experience or training in monitoring or evaluation. The M&E function

suffered as a result. It was not until a new person was recruited in the mid-term of the Project

that the PIU became more proactive in collecting data and monitoring project performance

according to the indicators. But it was then too late to retrieve some of the historical data and the

complexity of some of the existing indicators and a general lack of data left the M&E function

underutilized.

2.4 Safeguard and Fiduciary Compliance

37. The respect of safeguard issues is rated satisfactory. The Project was originally rated as

environmental category B (partial assessment). Three main provisions were incorporated in

Project design to ensure compliance with safeguards. First, the Project would prepare

environmental partial and full audits for listed candidates. Second, the project would offer

capacity building to the privatization agency and the national environmental agency. Third, the

project would support public involvement through comprehensive consultations and a

communications campaign. Safeguard policies were deemed applicable only to environmental

assessment (OP 4.01, BP 4.01, GP 4.01). An environmental pre-audit was conducted for each

listed privatization candidate following a comprehensive consultation process.

38. Environmental audits were conducted for ADEMA, HASYMA, SIRAMA and the

National Oil Company of Madagascar (Solitany Malagasy, SOLIMA) (post-audit) as planned in

project design. They were approved by World Bank teams with technical assessments provided

by the World Bank‘s Environment and Natural Resource Management Unit for the Africa

Region (AFTEN) and publicly discussed and disclosed. These environmental audits were very

16

large undertakings that recorded and assessed the situation in reports several hundred pages long.

For example, the SOLIMA report was 833 pages long not including addendums. In the

privatization of SOLIMA, which had by far the most critical environmental impact, the

environmental cleanup was assigned to the new private companies, in particular by Galana,

which was required to take care of the issues linked to the main pipeline and old refinery and this

was arguably a good solution.

39. The PAD dedicated significant attention in assessing the client‘s procurement and

financial management capacity, and in providing recommendations to boost this capacity.

Procurement is rated satisfactory because the PIU followed the rules, procedures and guidelines

according to the World Bank‘s Procurement Specialist. Financial Management is rated

moderately satisfactory because payment schedules were not adequately respected for parts of

the Project; in particular during the first years when the inflow of counterpart funding was

irregular and the PIU organization contained two layers of procurement and financial

management personnel. The PIU cleared outstanding arrears during the last two years of the

Project and it also expediently produced detailed and exhaustive accounts requested by the

Implementation Completion and Results (ICR) Report author. Disbursement lagged due to the

political crises of 2001/2002 and 2009/2010 but disbursement caught up rapidly once the Project

was allowed to operate.

2.5 Post-completion Operation/Next Phase

40. There is no proposal to implement a third PSD project. The World Bank‘s Finance and

Private Sector Development Department in the Africa Region is implementing a US$170 million

Integrated Growth Poles Project (effective September 28, 2005; closing December 31, 2012) that

is covering several activities that both complement and sustain some of the Project‘s previous

activities (e.g. EDBM). A second Growth Poles Project would be particularly relevant given the

priorities of private sector-led growth. The Government still holds a portfolio of poorly

performing public enterprises that would benefit from initiatives that would strengthen

management. Some of them need to be financially restructured or closed down. Developing a

stronger public private partnership framework is a high priority that the World Bank currently is

being drafted into providing support for.

41. Continuing efforts to strengthen the regulatory capacity of key sectors would be useful to

lock in the Project‘s achievements in building institutions. Capacity building of the telecom

regulator is part of the IDA financed Madagascar Communications Infrastructure Project

(PICOM). Future activities may benefit from conditions that regulators are made meaningfully

independent, that competition plays a greater role in its objectives, and that revenues are

accounted for transparently. The establishment of the EDBM, which incorporated GUIDE and

role of CAPE, is an institution that has achieved very positive results and sustaining this

institution through permanent staff and a financial commitment by GOM is essential for

promoting entrepreneurship and investment.

17

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

42. The relevance of objectives, design and implementation is rated moderately satisfactory.

43. The PDO of improving access and reliability of key utilities was highly relevant for

private sector development, investment promotion and shared growth. It remains highly relevant

until this day. Market liberalization, competition and effective regulation are necessary

components to improve market performance. By focusing on key factor markets (energy,

finance, telecoms, transport) as well as inefficient monopolies (airports, cotton, sugar), GOM

would have been well placed to achieve its development objectives in case reforms were

properly implemented. The current CAS (2007-2011)9 is organized around two main pillars:

activities that will help remove constraints to investment; and activities geared toward improving

the scope and quality of service delivery. Both pillars were the focus of the Project. In addition,

the CAS supports the Government‘s Madagascar Action Plan (MAP) 2007-2012, which was

prepared through extensive dialogue with the private sector and civil society, and includes eight

commitments of which the second commitment ―connected infrastructure‖ and sixth

commitment ―high growth economy‖ commensurate with the Project. Significantly increasing

investment to promote high growth is one of the key priority areas in this plan.10

Finally, the

World Bank Country Economist noted in April 2011 that achieving this PDO will remain a high

priority in the years to come.

44. The original design of focusing primarily on strengthening regulatory capacity and

divesting of poorly performing public enterprises was also highly relevant but the case for

including the new PSD activities component was less apparent to achieve the PDO. These first

two components were essential for achieving the PDO and the project design reflected proper

diagnosis of a development priority that remains relevant. The design could have included more

concrete provisions for mechanisms controlling for market competition and ensuring that

regulatory agencies gained sufficient autonomy. The third component, in the PAD, ―New PSD

activities‖, was a weak and vaguely designed component. While establishing a center for the

promotion of MSEs (GUIDE) was useful in general, the design of the enlarged ‗New PSD

Activities‘ component following both the 2002 restructuring and the 2005 mid-term review

lacked in terms of demand analysis and few interventions did effectively address the

―competitiveness‖ of Malagasy companies. The redesign of this component affected the Project

negatively during implementation. In addition, the causality of some activities and PDO

achievement was vague and the PAD lacked an economic and financial analysis section.

45. The actions taken in the implementation process were proactive and flexible but some

difficult decisions could have been taken earlier. The World Bank‘s implementation assistance

was adaptive to change, as the Project underwent one major and several minor restructurings,

and it was responsive to the needs of the country, as the priority of private sector competitiveness

was elevated. However, the willingness to add sub-components resulted in a Project that lost


10 Government of Madagascar (2006).

18

some focus and covered too many activities. The focus on output indicators and limited

usefulness of the M&E framework led to lenient ratings of progress

3.2 Achievement of Project Development Objectives

46. The achievement of the PDO, as summarized and derived in Tables 4-5, and analyzed in

detail in Annex 2, is rated moderately unsatisfactory. This rating is in line with the final

Implementation Status Report (ISR) rating that stressed that no progress towards PDO

achievement had been recorded following the implementation of OP/BP 7.30 in March 2009.

Table 4 presents a summary of achievements of the PDO based on the lengthy analysis in Annex

2. The first column divides the PDO up into five separate sections and presents the perceived

level of importance. The second column presents the achievement of key indicators while the

third column summarizes the achievement of PDOs and the ICR author‘s ratings.

Table 4. Summary of ratings and achievements of PDOs

PDO Achievement of indicators (see

Annex 2 for details)

Achievement of PDO (see Annex 2 for details)

1. Assist the

Borrower to improve

access, reliability

and affordability of

key utilities

[High relative

importance]

1.) Telecoms

The KPI targets on access and

reliability were met and even

generously exceeded;

The KPI target on affordability was

partly met (on mobile telephony but

not on fixed telephony);

2.) Petroleum

KPIs were partly met as (i) training

program was developed (but not

implemented); and (ii) the

environmental audit was completed in

February 2005. The recommendations

in the Environmental Impact

Assessments were partially

implemented such as treatment sludge

in dumping sites in Toamasina.

1.) Telecoms [moderately satisfactory]

Access: moderately satisfactory (mobile: highly

satisfactory; fixed: unsatisfactory; Internet:

moderately unsatisfactory)

Affordability: moderately unsatisfactory (mobile:

moderately satisfactory; fixed and internet:

unsatisfactory)

Reliability: satisfactory

2.) Petroleum [moderately satisfactory]

Access: moderately satisfactory (but lacking data)

Affordability: unsatisfactory (but a high level of

taxation)

Reliability: satisfactory

(quality/presentation/packaging improved)

(The causality for this activity and PDO targets is

very vague)

2…through

completion of the

divestiture program

of key state-owned

enterprises,

[Activity output]

Privatization partially completed:

Two SOEs (HASYMA, TELMA) out

of four SOEs (SIRAMA, International

airport of Antananarivo) covered in

PAD were privatized. The Project

supported the privatization process of

eight additional public enterprises that

the Government later decided not to

privatize: ADEMA, Air Madagascar,

CIBA, JIRAMA , SIRAMA, Sofitrans,

SBM, South RNCFM Network.

TELMA: Privatized in June 2004.

HASYMA: Privatized in October

2004.

Liquidation partially completed:

Out of 30 PEs covered in the original

PAD, and other companies added

Moderately unsatisfactory

The work done by the PIU and the Project team in

preparing and executing this privatization process

would be rated satisfactory. However, the lack of

commitment and inaction by the Government made

it impossible to complete the agenda: first, when

the new administration took over in 2002 (reduced

priority) and then when the latest administration

took over in 2009 (financial difficulties leading to

non-payment of arrears to creditors of liquidated

companies).

Overall, the results of the privatization and

liquidation activities are most evident in 2003-2005

when some large SOEs were privatized and in

2008-2010 when several smaller PEs were

liquidated. 2006-2007 were used to prepare this

liquidation process.

19




along the course of the Project:

15 PEs liquidated: AAA, AFM, ANM,

ARS, CMN, FEB, Forestas, Fesa,

Serdi, Sevima, SIB, Socomi, Somadex,

Somalac, Sopraex and Torginol.

12 PEs liquidated but GOM yet to

clear debt to creditors (MGA 28.9

billion on December 31, 2008):

Sumatex, Sogedis, Lansu, Somapalm,

Bcl, Famama, Fev, Sice, Roso,

Kafema, Somacodis and Soama.

2 PEs suspended in 2007 by Prime

Minister Office: SORIMA and

FABABE;

6 PEs transferred to MoF due to

ongoing litigation: SOLIMA, FIMA,

DARRIEUX, SMTM, SINPA and

COROI.

The two additional KPIs were

unfulfilled:

The KPIs of (i) 10% of shares of the

targeted private enterprises have been

transferred to the Privatization Trust

Fund (PTF) at the closing of each

transaction; (ii) and PTF has offered

these shares for sale to local small

investors.

Outstanding arrears by the Government to several

creditors reduce the overall impression of the

achievement. The achievements by the Project to

support enhanced management of public

enterprises were not possible to assess for the ICR

given lack of data.

The Privatization Trust Fund was created, and fully

staffed with a Fund Manager hired from the private

sector. Although GOM took years to make

progress on this activity, since its creation a few

Government shares in privatized companies have

been transferred to PTF. Since the Project has

stopped its financing, GOM is currently covering

all the operational costs of PTF including financing

of studies.

3…and capacity

building initiatives to

strengthen the

capacity of

autonomous

regulators and

privatization

agencies,

[Activity output]

The target was provision of technical

assistance to strengthen effective

regulatory capacity: partially met

(i) Privatization Secretariat (STP): this

institution was essential for the

execution of the privatization and

liquidation process and the Project

achieved its objective of capacity

building; however, the institution has

now been dismantled.

(ii) Telecommunication regulator

(OMERT): capacity building activities

strengthened the institution but it is

insufficiently autonomous.

(iii) Petroleum regulator (OMH):

capacity building activities

strengthened the institution but it is

insufficiently autonomous.

Moderately satisfactory

The role of STP in the Project was to provide

advisory services and execute the decisions of

GOM. This institution has been dismantled since

project closing and the institutional memory risks

being lost. It performed its tasks in a difficult

political environment and without the freedom to

take key decisions.

There is anecdotal evidence from industry insiders

and civil servants that the technical capacity of

OMERT and OMH is rather good, although it

should be strengthened further, and that they both

lack autonomy to adequately address some

outstanding issues. Important decisions are still

largely up to the discretion of relevant ministries.

4…facilitate entry of

new operators in the

deregulated sectors,

[Activity output]

One Stop Shop with capacity to assist

MSEs: target met.

Moderately satisfactory Telecom: one fixed line operator, two broadband

operators, four mobile telephony operators

Petroleum: one storage provider, three logistics

companies (of which two controlled by storage

provider), four retailers. New retailers must

establish a minimum of eight service stations. Two

Chinese companies have licenses to build service

stations but they have not invested in the last three

20




years. New storage providers must have a certain

level of national coverage.

Electricity and water: monopoly. The overall

ambition for this part of the PDO of the Project

was lowered following the 2002 restructuring.

5…and increase the

competitiveness of

Malagasy companies

[High importance]

Increased competitiveness of Malagasy

companies: Unmet

Facilitate growth exports through

setting up EPZ: Unmet.

The revised KPI framework adopted

by the PIU notes that:

(i) # of investments: in 2007: 14; 2008:

15; 2009: 8 and September 2010: 5.

(ii) Cumulative investments at end of

2009 were 37 against 51 targeted.

(iii) Total value of investments: $2.4

million in 2007 to $6.6 million

September 2010.

(iv) Jobs created: 146 in 2007 to 359

September 2010. Jobs sustained: 293

in 2007 to 576 September 2010.

Number of SMEs assisted: 12 in 2007

to 22 September 2010.

The indicators for this sub-section of

the PDO were vague and confusing.

Unsatisfactory

There is little evidence that the Project‘s activities

helped increase the competitiveness of Malagasy

companies.

On the positive side: EDBM helped to significantly

reduce the transaction costs of starting a business

and obtaining permits as well as some information

costs, in particular for entrepreneurs in the regions.

The promotion and marketing activities may or

may not have generated new investment, raised

Madagascar‘s international standing and boosted

the dialogue between the public and the private

sectors, but it is impossible to establish any causal

link between these activities and the

―competitiveness of Malagasy companies‖.

On the negative side: the sub-components on (i)

developing EPZs, (ii) supporting the tourism

sector, establishing (iii) an insurance facility and

(iv) an SME Risk Capital Fund did not fully

materialize, were insufficiently designed, or not in

demand—thus, while intentions were good, they

had no or little impact.

The investments in the left column were financed

by IFC and partners and the Project financed the

technical assistance.

47. The PDO following project effectiveness contained two sections that made up the core

PDO: (i) ―assist the Borrower to improve access, reliability and affordability of key utilities‖;

and (ii) ―increase the competitiveness of Malagasy companies‖ (see Table 5). The activities of

the first and second components (regulatory capacity building and transaction implementation)

addressed the former core PDO and the third component (new PSD activities) addressed the

latter core PDO. As noted in Tables 4-5, the achievement of the first core PDO is rated

moderately satisfactory and 66.3 percent of total disbursements (component 1: 16.7 percent;

component 2: 49.6 percent) were dedicated to this objective. The achievement of the second core

PDO is rated unsatisfactory and 33.7 percent of total disbursements were dedicated to this

objective. The conclusion is that the overall PDO achievement is moderately unsatisfactory

largely thanks to the poor performance of component 3.

21

Table 5. Derivation of the overall rating for achieving the PDO

Project Development

Objective

Component 1:

Regulatory Capacity

Building (Disbursement:

16.7%)

Component 2:

Transaction

Implementation

(Disbursement: 49.6%)

Component 3:

New PSD Activities

(Disbursement:

33.7%)

“Assist the Borrower to

improve access, reliability

and affordability of key

utilities”

Moderately satisfactory Moderately satisfactory

“ increase the

competitiveness of Malagasy

companies”

Unsatisfactory

48. In addition, the achievement of the main outcome indicator—“private investment in the

targeted sectors increased by US$100 million annually from 2004 to 2007”—was far not

achieved. Annex 2 presents data on both sector and aggregate levels and the analysis concludes

that this indicator was unfit the highly volatile political situation in Madagascar. The PIU

broadened the scope and monitored FDI as a share of GDP but this change drastically reduced

the causality between interventions and investment.

3.3 Efficiency

49. Project efficiency is rated moderately unsatisfactory for the following reasons. First,

Annex 1 presents a cost breakdown by component and sub-component. It reveals that the initial

estimates in the PAD for supporting regulatory capacity building were greater than necessary, in

particular for OMERT, and the Project cut funding for several activities that performed poorly.

The regulatory capacity building component consumed 36 percent of the appraised funds and the

transaction implementation component made use of 79 percent of the appraised funds. The new

PSD activities component disbursed significantly more than the PAD had forecast; however, it

still disbursed slightly less expected at project restructuring.

50. Second, according to STP, in 1999-2010, the total cost of the privatization process was

MGA 107.8 billion and the total income was MGA 118.5 billion, which resulted in a small but

positive balance of MGA 10.7 billion. Of the total income, roughly MGA 67.5 billion was

generated during the Project‘s effectiveness, in 2003-2010, and the cost was an estimated MGA

18.2 billion (see Annex 6). The TELMA privatization generated a large surplus in 2004 (see

Annex 2). The liquidations of ROSO, SINPA and SOMACODIS also generated large surpluses.

A net present value (NPV) calculation for the privatization and liquidation process starting in

2003 is an estimated MGA 39.0 billion for a discount rate of 10 percent and MGA 33.9 billion

for a discount rate of 15 percent (see Annex 3). However, these calculations do not take into

account US$3.9 million of expenditures of the Privatization Secretariat (STP). The privatization

did attract new investments but data are not readily available.

51. Third, implementation efficiency was negatively affected by the political crises, which

produced new administrations, of which the first was less committed to the privatization process.

According to STP estimates, Government indecision on privatization led to MGA 56 billion

spent on studies and legal fees for the eight SOEs that were not privatized (see Annex 2). While

22

the Project covered a modest proportion of these expenditures, and some of these investments

may have been value for the companies at large, they did not help achieve the objectives that

they were meant to do. Finally, more than eight years passed between project effectiveness and

project closing. An earlier closing date, as originally planned, would have allowed the

Government to assess the costs and benefits, and design a new follow up Project that would

better have reflected the Government‘s priorities.

3.4 Justification of Overall Outcome Rating

52. The overall outcome is rated moderately unsatisfactory. It takes into account the

relevance of objectives, design and implementation that was rated moderately satisfactory

(section 3.1), the achievement of the project development objectives that was rated moderately

unsatisfactory (section 3.2), and project effectiveness that was rated moderately unsatisfactory

(section 3.3). The rating is partly a reflection of the wavering commitment by the new

Government to follow through and implement the agreed privatization agenda, the unsatisfactory

results of the new PSD activities component, and prolonged period of project implementation

(including under OP/BP7.30). A more narrow interpretation of output components may have

warranted the moderately satisfactory rating of consecutive ISRs, but a strict interpretation of

actual outcomes lowers the overall impression.

53. The Project can count several important achievements that were attained in a difficult

political environment: in particular the privatization of TELMA and HASYMA, the full

liquidation of 15 public enterprises and nearly full liquidation of another 12 public enterprises,

the establishment of one of Sub-Saharan Africa‘s first one stop shops (GUIDE) and its

incorporation into EDBM, which drastically reduced the time and procedures of starting a

business, and the strengthening of technical capacity at OMERT and OMH. The analysis and

arguments are developed at length in Annex 2.

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

54. The project was gender neutral and the Project‘s poverty impact is difficult to assess.

Annex 2 covers the achievements in terms of access, reliability and affordability of telecom

services and petroleum products. The PAD highlighted that the expected beneficiaries were all

agents in the economy, thus no particular interest group was identified. Arguably, the two most

important contributions to the poor are: (i) the direct impact that accessible, affordable and

higher quality telecom services as well as accessible, secure and higher quality petroleum goods

will have on poor consumers; and (ii) the increased scope for the Government to invest in for

example health and education resulting from its strengthened fiscal position after the divestiture

of loss making public enterprises.

(b) Institutional Change/Strengthening

55. During the course of the project, the regulatory agencies OMERT and OMH were

strengthened considerably through new equipment, training, etc. This impact will have a positive

23

impact on the telecom and energy sectors for future generations. The outcome is far from perfect,

however, as both agencies need meaningful autonomy from the central Government. Increased

transparency in budget and decision making would lead to increased trust, broader support, and

healthy scrutiny of activities and decisions.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

56. A Stakeholder Workshop with a group of Malagasy investors was organized during the

November 2010 ICR mission. The aim of the discussion was to get a clearer understanding of

how the privatization and liquidation process had been received by local investors—in particular

with regards to transparency, openness and fairness. In short, the group argued that the sale of

assets had been sufficiently open, transparent and equitable. It was not a perfect environment in

which to privatize and liquidate companies but STP and the liquidators did a good job and the

Ministry of Finance and Budget achieved a lot in a severe fiscal crisis. Annex 5 presents the

issues that were raised during the workshop and the participants‘ recommendations for any

future divestiture of publicly held assets.

4. Assessment of Risk to Development Outcome

57. The risk that development outcomes will not be maintained is rated moderate. The

Project‘s main accomplishments in key areas such as regulatory capacity building and

privatization of public enterprises are to some extent irreversible. The main risk is that the

political and economical crises deepen further, or reach a steady state, which would dilute the

motivation of the civil service, compel leading staff to search for opportunities abroad, worsen

governance in regulatory agencies, EDBM and public enterprises, and bring the reform process

that Madagascar embarked upon in the 1990s to an indefinite standstill. In addition, some sub-

components, in particular for ‗New PSD Activities‘, did not deliver intended results and are

unlikely to do so in the short- or medium-term, including the EPZ and PTF.

a. On regulatory capacity building, the establishments of OMH and OMERT, and the

investments in activities to strengthen these institutions, have helped build significant

technical expertise. The challenge is for GOM to strengthen these regulatory agencies

and in particular increase their autonomy in order to avoid political interference and raise

their effectiveness in achieving their goals. The situation is challenging for STP, which

was first slimmed down and then left without staff from May 2011 onwards. It has put

institutional memory of privatization and management of public enterprises at serious

risk of being permanently lost. This would make future divestiture of public enterprises

unnecessarily costly.

b. On privatization, the telecoms market is now contested by four mobile telephony

companies, two fixed broadband companies, and one fixed line operator. Accessibility

and reliability are highly unlikely to deteriorate in the future. Similarly, there are four

petroleum retailers, three logistics providers and one storage facility. There is a risk that

high country risk will slow down investment necessary to further improve access and

reliability of key utilities. As the analysis in Annex 2 of the telecoms sector highlighted,

24

constant improvements are required only to stand still since almost all countries are

implementing reforms and improving performance.

Companies that were liquidated or privatized are unlikely to be taken over by GOM; thus

the overall achievements of this component are unlikely to be reversed. There is a risk,

however, that it will take a long time before divestiture of the remaining enterprises

controlled by GOM will be a priority unless they bleed to the extent that GOM is forced

to close them down—potentially in an uncontrolled manner. In addition, the aim of

broadening private ownership of existing assets was seemingly never a priority of GOM,

given the timid interest in empowering the PTF agency. Finally, there is a risk that

creditors of several liquidated companies will have to wait for compensation as GOM

faces a prolonged fiscal crisis.

c. On new PSD activities, EDBM remains an important institution for entrepreneurs and

investors and the two main risks it faces are: (i) finding a financially sustainable solution

for the operation of its One Stop Shop offices; and (ii) ensure that performance is

maintained. The original plans of establishing an EPZ in Tsarakofafa is unlikely to be

realized anytime soon because the area is taken over by squatters.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

58. Rated moderately satisfactory. The Project‘s objectives addressed high-priority issues

highlighted in the CAS and I-PRSP. The analytical foundation was solid and almost the entire

envelope of resources focused on building effective regulatory agencies and completing the

privatization agenda, which ensured adequate focus on two complementary areas of strategic

importance and great sensitivity. The long-term economic impact of these two activities is

positive. Environmental safeguards were adequately addressed and building upon the PATESP

Project ensured continuity in institutional capacity building and implementation support.

59. The appraisal team dedicated significant attention to fiduciary aspects and the risk

assessment rightly identified the critical risk elements—including those that would subsequently

cause some havoc in implementation—in particular wavering GOM commitment for

privatization and introduction of competition (rated high), weak technical capacity of agencies

involved in program executing (rated substantial) and resistance of specific local groups to

liberalization (rated substantial). While the appraisal team also proposed a number of risk

mitigation measures for each risk factor, these were not protecting the Project from new

Government priorities. In hindsight, it would have been useful to wait some months for the

election to take place to ensure that the Project reflected the key priorities of the new

administration. Yet the ownership of the Project may have been limited at the outset given

GOM‘s negotiations with the International Monetary Fund and associated conditionality of

support.

25

60. The weaknesses at entry were linked to the causality of some activities and the PDO and

outcome indicators; the M&E results framework, which should have been better designed, and

the new PSD activities component, which was small and inadequately linked to the original

PDO. The ambition was high at entry as the Government sought to leverage the existing

momentum but the Project was complex for a country with limited government capacity. Given

the substantial risks associated with privatization, there was a high risk that any mitigating

initiatives proposed at entry would be insufficient in a crisis.

(b) Quality of Supervision

61. Rated moderately unsatisfactory. The supervision missions were adequately used to

provide guidance and to take stock of achievements but the weak M&E framework failed to

effectively guide implementation. The records reveal that the supervision teams had a clear

appreciation of the issues and provided practical and realistic recommendations on how to move

forward. The action items emanating from the supervision documents could at times have been

more forceful, in particular since some sub-components failed to perform, and certain key

decisions should have been taken earlier. ISR ratings seemingly reflected the achievement of

outputs rather than outcomes and this approach may have reduced the incentives for more drastic

reform.

62. The mid-term review was an ideal but missed opportunity to take action in reforming and

dropping underperforming sub-components. The EPZ sub-component is a case in point: contracts

could have been annulled earlier as there were clear indications that parties failed to deliver; and

the Project could have cancelled this item entirely at the mid-term review following the

outstanding issues—just like the supervision team later did with public enterprises stifled by

litigation and land issues (see Annex 2). Nevertheless, the supervision did take several important

and bold decisions, including the project restructuring in 2002 and the restructuring of the PIU in

2006. By greatly boosting the new PSD activities component in 2002 and 2005, the team

responded to the request of GOM but added complexity to an already very challenging project.

63. The aide-memoires show that supervision was most intense at the beginning of the

project and that supervision was limited in 2005-2006 and 2009-2010; the latter period was a

result of the Project being under OP/BP 7:30. The supervision could have been more dedicated in

2005-2006, when the Project was in the late, critical stages of the original lifecycle, but the

Project benefited greatly from the fact that the TTL was based in Antananarivo for most of the

time; thus there was close interaction between the World Bank team and the PIU during the

course of the Project.

(c) Justification of Rating for Overall Bank Performance

64. The overall bank performance is rated moderately unsatisfactory given the moderately

satisfactory rating (5.1 (c)) and moderately unsatisfactory (5.1. (b)) rating. The Project was

politically sensitive and implemented in an environment that was complex to navigate and results

were hampered by a lack of Government ownership. In this context, the Project still counted

several important achievements. It was technically well prepared and the Project acted swiftly to

Government requests and changing conditions despite some unfortunate additions of sub-

26

components that subsequently failed to perform. Looking back, the third component on new PSD

activities would probably have been better left to a separate World Bank Project and the

performance indicators should have been better designed and applied. Supervision was adequate

but uneven in intensity. The Project was arguably allowed to run for too long although

implementation was interrupted by political crises at the start and end of the Project. The mid-

term review opportunity to thoroughly restructure the project was not made use of but

interventions from 2006 onwards show a heightened urgency to focus on results.

5.2 Borrower Performance

(a) Government Performance

65. Rated moderately unsatisfactory. The political crisis that broke out only a few months

after board approval had a profound impact on the Project and its ability to achieve its objectives.

While the Project was restructured before effectiveness, this ICR has made it clear that the new

Government was unwilling, and sometimes unable, to effectively implement the agreed agenda,

and that Government ownership in the difficult economic and political environment was low.

While it remains unclear to what extent GOM‘s privatization agenda was a response to internal

priorities vs. external pressure, the GOM did insist on repeatedly extending the closing date of

the Project, which is a sign that it did value the activities. The government report in Annex 7 also

highlights that it is fairly content with the Project outcomes given the many challenges. The

rating is based on the following main arguments. First, the privatization agenda was reduced in

scope and after some early gains in terms of HASYMA and TELMA in 2004, the remaining list

of SOEs were never privatized due to political decisions. The PIU was also meant to carry out an

extensive public communications campaign in support of the privatization process but GOM

insisted on controlling this function and the dedication by ministries was poor.

66. Second, the regulatory agencies OMH and OMERT were strengthened through the

support of the PIU but they remain toothless as important decisions are taken by relevant

ministries. Thus, the critical issue of allowing these agencies some autonomy to effectively carry

out their mandates was ignored. Third, broadening local private ownership was a key goal of the

Project. The Government‘s refusal to transfer more than a small proportion of agreed assets to

the PTF that was technically in charge of managing this equity process was another sign of a lack

of commitment. Fourth, the significant number of creditors whom the Government has yet to

reimburse following corporate liquidation is perhaps more a sign of the fiscal crisis lately

afflicting the country; but it is nevertheless inconsistent with standard procedures. Finally, the

Government did not resolve implementation issues in a timely manner and counterpart funding

was disbursed late in the early years, which subsequently led to the Project financing 100 percent

of the portfolio activities. These issues impeded the PIU to effectively implement the agenda and

achieve development objectives.

(b) Implementing Agency Performance

67. Rated moderately satisfactory. On the positive side, the agency was highly committed to

achieving the development objectives. There was plenty of beneficiary and stakeholder

consultation although this engagement was partly a result of the nature of the Project and its sub-

27

components of public private dialogue, privatization and liquidation, and trade and investment

promotion. There was also seemingly a strong commitment to properly arrange for transition

towards the end. Books were kept in order. The head of the PIU prepared a lengthy and detailed

account of both failures and achievements. The next generation of reformers will greatly benefit

from reading this report. Although the PIU struggled with the resignations of a few key staff

members, it was active in recruiting new staff that were adequately trained. In addition, the PIU

followed agreed guidelines in the privatization process and paid sufficient attention to detail and

procedures, for example in preparing environmental audits and studies.

68. On the negative side, during the first half of the Project, the PIU was a bloated

bureaucracy, which slowed down progress and effectiveness. The appointment of a person

without M&E experience to be in charge of the M&E framework negatively affected the

monitoring and evaluation activities during the first half of the Project. In addition, during the

first half of the Project, the lack of timely payments of consultants adversely affected the

effectiveness of these consultants‘ work and gave the Project a poor reputation among external

experts. While this mismanagement of payments may have been due to the lack of timely

disbursements of counterpart funding, it lowers the overall impression of the performance.

(c) Overall Borrower Performance

69. Overall borrower performance is rated moderately unsatisfactory. This rating is due to the

lack of commitment on the part of the Government to take proper action to allow the Project to

progress according to existing agreements. Insufficient government attention did not reflect the

commitment by the PIU that largely performed its tasks in a timely and professional fashion

notwithstanding very difficult political and economic circumstances and a suboptimal

organizational structure. As per Operations Policy and Country Service (OPCS) guidelines,

overall borrower performance is rated on the basis of the moderately unsatisfactory rating of

government performance, the moderately satisfactory rating of Implementing Agency (PIU)

performance, and the outcomes of the Project.

6. Lessons Learned

70. This ICR stresses some old but equally important lessons. Some of the lessons are not

original but mistakes are repeated because the incentive structure and the political environment

in which the World Bank and the client operate seldom change. The ICR recorded how the

challenges include: (i) the aversion to decentralize decision making and cede control of public

assets; (ii) the risk of reform fatigue; (iii) the inclination to influence staff appointments; (iv)

coordination failures between public agencies; and (v) the difficult task of remaining both

responsive to evolving client needs and ensuring focus and simplicity in project design.

Managing long-term projects successfully in politically turbulent countries requires not only

experience and smart project design but also timing and effective public communication.

71. Securing government ownership and commitment are paramount and can never be

underestimated. While the Project was substantially restructured to better reflect the priorities of

the new government‘s priorities in 2002, it did not go far enough to reengage the new

administration to the extent necessary to privatize all companies or empower autonomous

28

regulatory agencies. The experience offers three main lessons. First, it may be advisable to

design and agree on a politically sensitive project post-election if an election is imminent in a

politically turbulent environment. Second, if there are clear signs of a lack of political

commitment—to the extent that several components are performing weakly—a comprehensive

adjustment according to the Government‘s agenda may be necessary to get the project on track;

tinkering with smaller ad hoc adjustments is less likely to achieve the required momentum.

Third, the mid-term review is the ideal opportunity to comprehensively restructure projects. The

mid-term review was here a missed opportunity. In addition, securing counterpart funding from

the client may be one way of strengthening political commitment.

72. In least developed countries with weak government capacity, simplicity and prioritization

are essential in project design. Pleasing all ministries will lower the effectiveness of

implementation and the likelihood of success. Remaining attentive to the Government‘s shifting

priorities is essential for a good bank-client relation but adding new activities that are beyond the

original scope of the project may reduce the chance of successful implementation. For private

sector development activities, it is particularly important to only incorporate components that are

demand driven from the private sector‘s perspective. Establishing export processing zones, or

special economic zones, are particularly difficult in a developing country environment and a

five-year project is unlikely to achieve major results in terms of employment and investment

unless all conditions are in place and the activity already under way.

73. A coherent and realistic M&E framework that is aligned to the PDO adds clarity, purpose

and guidance throughout a project while a weak M&E framework easily becomes a liability

rather than an asset in implementation. Leveraging existing databases simplifies data collection.

Whenever existing databases are insufficient, developing structured baseline data at the start of

the project is essential for consistency. In addition, the analysis of the M&E framework

concluded that the use of inflows of private investment is a risky outcome indicator in a country

plagued by a high level of country risk (i.e. political uncertainty). The achievement of outcome

indicators should be the focus during project supervision since output indicators may be

insufficiently linked to results.

74. The development of filters that capture political economy risks in project design, and

redesign, would be particularly useful to assess realistic outcomes. It would also allow the World

Bank team to look beyond the reform priorities of what is technically relevant and what

government requests entail. A critical assessment of what is politically feasible given the

political capital of the governing party is likely to help manage expectations and align targets to

achievable results. The ICR highlighted that projects with uncommitted clients should not be

allowed to run for years beyond the original time plan. If there is a case for a new project, the

new design can incorporate recent lessons.

75. The structure of the PIU is essential for effective implementation. Key appointments

must be made on a meritocratic basis and not through discretionary appointments. The

organizational structure and staffing must reflect the objectives and expected workload: it must

be nimble but yet house enough technical expertise. When the organizational structure is

ineffective, the World Bank and the Government must take swift action to remedy the situation.

While these guidelines are rather obvious, it takes leadership and painful negotiations to get the

29

appropriate team and structure in place. Bloated bureaucracies can be less effective than

understaffed ones.

76. Successful privatization is particularly closely linked to establishing a constituency for

reform at the political level. An effective communication campaign is paramount in this process

and communication campaigns are best controlled by the privatization/implementation agency

rather than individual ministries in case there is insufficient ministerial support. The

implementation of a privatization agenda may work better if it is part of a broader reform

program but this does not imply that the same PIU should be in charge of multiple activities

beyond regulatory capacity building and transaction implementation. In case there is strong

resistance to ceding of public ownership, alternative initiatives to privatization, such as private

management contract, may be a useful option. Liquidation of public enterprises must be swiftly

executed since the assets quickly degenerate once employees realize that there is no future for

the enterprise. The privatization process should preferably commence only when the

Government has removed legal uncertainties, including with regards to taxation (federal vs.

provincial). Finally, timely clarity on project extension benefits the PIU since temporary staff

need visibility not to seek new opportunities beyond the project.

30

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components

Appraisal

estimate

(US$

million)

Estimate at

DCA

amendment

06/05/2003

(US$ million)

Estimate at

DCA

amendment

28/04/2005

(US$ million)

Estimate at

DCA

amendment

14/06/2006

(US$ million)

Estimate at

DCA

amendment

21/12/2007

(US$ million)

Actual/latest

estimate

(US$ million)

Percentage

of

appraisal*

1. Regulatory and Capacity Building

(a) Petroleum regulator 4.92 4.82 4.53 3.85 4.55 3.80 77.2%

(b) Telecoms regulator 5.00 1.30 1.30 0.72 0.71 0.50 10.0%

(c) Civil aviation authority 0.28 - - - - - 0%

(d) CFEC 0.64 - - - - - 0%

(e) Strengthening of the financial system 0.95 - - - - - 0%

TOTAL 11.80 6.12 5.83 4.57 5.27 4.30 36.4%

2. Privatization Implementation

(a) Institutional capacity 7.10 4.90 4.96 5.90 6.89 6.63 93.4%

(b) Local ownership scheme 0.44 0.35 0.35 0.35 1.02 0.21 47.7%

(c) Privatization transactions 8.58 6.88 7.45 7.45 7.45 5.93 69.1%

TOTAL 16.12 12.12 12.76 13.70 15.35 12.77 79.2%

3. Development of New PSD Activities

(a) OMPE 0.43 - - - - - 0%

(b) PSD Strategies in support of PRSP 1.30 - - - - - 0%

(c) One Stop Shop (GUIDE) - 1.89 1.36 2.64 5.00 2.77 146.6%

(d) Develop EPZs - 3.97 1.17 1.17 1.47 1.25 31.5%

(e) Trade and Investment promotion - 1.78 2.20 1.30 1.38 1.15 64.6%

(f) African Trading Insurance (ATI) - 0.31 1.25 1.25 1.25 1.23 396.8%

(g) Support to the tourism sector - 0.49 0.46 0.46 0.45 0.46 93.9%

(h) CAPE / PPD forum - 0.96 1.03 1.12 1.12 1.25 130.2%

(i) SME support - - 2.49 2.49 2.49 0.58 23.3%

TOTAL 1.73 9.40 9.96 10.43 13.17 8.69 502.3%

Total Baseline Cost

Physical Contingencies

Price Contingencies

Total Project Costs

31

Components

Appraisal

estimate

(US$

million)

Estimate at

DCA

amendment

06/05/2003

(US$ million)

Estimate at

DCA

amendment

28/04/2005

(US$ million)

Estimate at

DCA

amendment

14/06/2006

(US$ million)

Estimate at

DCA

amendment

21/12/2007

(US$ million)

Actual/latest

estimate

(US$ million)

Percentage

of

appraisal*

Front-end fee PPF 0.00

Front-end fee IBRD 0.00

Total Financing Required 29.65 29.65 29.65 29.65 34.85 26.78 90.4%

Note: * Actual estimate as a share of first estimate (either at appraisal or when new sub-component was inserted)

Source: STP (2011) and PAD.

(b) Financing

Source of funds Type of

cofinancing

Appraisal

estimate

(US$

million)

Actual/latest

estimate

(US$ million)

Percentage of

appraisal

Borrower 5.85 3.54 60.5%

IDA 23.80 23.24 97.6%

Other donors

Total 29.65 26.78 90.3%

32

Annex 2. Outcome by Component

1. The achievement of the main outcome indicator—“private investment in the targeted

sectors increased by US$100 million annually from 2004 to 2007”—was difficult to establish

because of a lack of authoritative data sources. In addition, this indicator was imperfect because

the highly volatile political situation in Madagascar did not lend itself well to the attraction of

investment. The PIU broadened the scope and monitored FDI as a share of GDP. In 2002-2005,

net inflows of FDI as a share of GDP was relatively low as Madagascar slowly recovered from

the twin political and economical crises. It then increased rapidly in 2005-2007 as net inflows of

FDI increased from less than 2 percent of GDP to 11 percent of GDP (see Annex 2). FDI reached

high levels as two major mining operations—Rio Tinto in Fort Dauphin and Sherritt

International Corporation in Ambatovy—developed new mines. However, these investments are

not linked to the activities of the Project.

Figure 3. Foreign direct investment, net inflows (% of GDP), 2000-2009

Source: World Bank World Development Indicators (2011).

2. In 2009, the rate almost halved from a high point in 2008 when the country plunged back

into political turmoil and if the political crisis of 2001-2002 is any indication of the impact on

FDI in 2010-2011 and beyond, FDI is likely to have dropped drastically and it is likely to remain

low for the foreseeable future. On a sector level, investment in the telecom sector increased in

2004-2007; or from $13 million in 2004 to $120 million in 2007 (see Annex 2). For the

petroleum sector, private investment data are not available. The target of annually increasing

private investment by $100 million was not met. The period of relative stability during the

Project—in 2005-2008—private investment in other sectors than natural resources grew rapidly

from low levels. This fact underpins the assumption of the project preparation and design team:

that there is huge scope for Madagascar to increase private investment once it manages to

develop an economy and political system that are more insulated from political shocks.

I. Telecommunications

3. To what extent did the Project succeed in achieving its PDO of improving access,

reliability and affordability of telecommunication services? The data reveal that two of the three

0

2

4

6

8

10

12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

33

KPIs exceeded their targets and the third KPI was partially met (Table 6). An analysis of more

extensive data sources reveals that the Project had a mixed impact on the overall PDO. Access

did indeed improve, reliability improved significantly, but affordability, while improved in

particular for mobile telephony, remains relatively low. Investment in infrastructure did pick up

significantly but only towards the end of the project lifecycle. There is currently only one

provider of fixed line telephony (TELMA), two providers of broadband (Blueline and MOOV –

a subsidiary of TELMA), and three providers of mobile telephony (Life, Orange, TELMA and

Zain). Mobile Internet can also be provided by the mobile telephony companies. The following

analysis draws mainly on data collected from the databases of the International

Telecommunication Union (ITU).11

4. Access: ITU‘s ICT Development Index (IDI) has a sub-

index that measures ICT access.12

It is composed of five indicators

that carry equal weight: (i) fixed telephone line penetration, (ii)

mobile cellular penetration, (iii) international Internet bandwidth

per Internet user, (iv) the proportion of households with

computers, and (v) the proportion of households with Internet

access. Four of the five indicators (1-iii + v) are good measures

for the PDO.

5. In 2002, the year of project effectiveness, Madagascar

ranked 125 out of 154 countries. In 2007, Madagascar‘s score had

increased by 70%—a significant improvement—but its relative

ranking had not changed as other countries also improved ICT

access. In 2008, Madagascar ranked 138 out of 159 countries:

slightly ahead of Comoros, Lesotho, Malawi and Mozambique but

somewhat behind Kenya, Niger, Nigeria and Tanzania (see table

on the right). Thus, Madagascar did not do worse than the average

LDC in the region but that the country has scope to improve

access further.

6. Reliability: In 2000, there was a 79 percent annual fault rate for fixed lines and this

changed little in 2001 (78 percent). However, in 2002-03, the fault rate dropped to 45-60 percent

and by 2006, the fault rate reached 36 percent. Similarly, the share of telephone faults cleared by

the next working day jumped from 32 percent in 2001 to 55 percent in 2006. This data are

confirmed by consistent anecdotal evidence: all Malagasy consulted during the mission argued

that there had been great improvement in reliability during the course of the Project. TELMA

argued that current consumption patterns make use of less than 10 percent of telecom capacity

and that quality as a result has increased.

11

On the existing regulatory framework in telecoms is far from optimal (yet this assessment is beyond the scope of

this assessment). Important measures that have yet to be taken by the authorities are: (i) adoption of Law 2005-03;

(ii) replacement of OMERT by the new regulatory agency ARTEC; and (iii) the end of exclusive rights for TELMA,

which is still partially state-owned (feedback from peer reviewers). 12

The data draw on ITU (2009, 2010).

Ranking Score

Indian Ocean

Maldives 57 4.61

Seychelles 64 4.30

Mauritius 66 4.19

Top-3 SSA

South Africa 94 3.14

Cape Verde 102 2.77

Gabon 103 2.71

Madagascar

Tanzania 137 1.54

Madagascar 138 1.47

Haiti 139 1.47

Bottom-3 SSA

Guinea 156 1.09

Chad 158 1.02

Eritrea 159 0.89

Access (2008)

34

7. Affordability: first, connection fees dropped significantly during the course of the

project. In 2000, the mobile cellular connection charge and the residential telephone connection

charge were US$22 and US$31 respectively. By 2006, the same charges had decreased to US$5

and US$23 respectively. Second, the price for a basket of ICT services (fixed, mobile, internet)

dropped during the course of the project but it still remained among the highest in the world (see

Figure 5). In 2009, Madagascar ranked 156th

out of 161 countries in ITU‘s ICT Price Basket (a

lower ranking indicates lower affordability). In the same year, Madagascar had the fourth least

affordable fixed line services out of the 161 countries (see Figure 7). This was still a minor

improvement from 2008 when it was the least affordable country. TELMA has a monopoly

position for fixed line telephony and the reforms have not been successful in allowing market

forces to function properly. Voice-over-internet-protocol (VOIP) is eating into the business,

copper wire is frequently stolen, and investment in fixed line infrastructure is seemingly not a

high priority.

8. For mobile telephony, in 2009, affordability was almost as low: Madagascar ranked 156th

out of 161 countries (see Figure 6). In Ethiopia and Senegal, mobile telephony was thrice as

affordable while in Bangladesh and Sudan it was 8-10 times as affordable. Finally, for internet

broadband, in 2009, Madagascar ranked 149th

out of 161 countries (see Figure 8). Broadband

was more than ten times as affordable in Bolivia and Sudan than in Madagascar. In Kenya and

Zambia, it was five times as affordable. The comparisons indicate that the reforms were

insufficient to attain the affordability target. Yet taxation plays a role: according to GSMA, and

cited by industry insiders, the tax on total telecom revenue is 45 percent in Madagascar, which is

higher than a Sub-Saharan African average of 30 percent.13

For example, Katz et al. (2009)

defines Madagascar‘s approach to taxation in the telecom sector as protectionism, service tax

maximization and sector distortion.

9. The incumbent, TELMA, which has a monopoly for fixed line telephony, argues that

there are significant issues because of certain rules of retailing: loss making telephone booths

must be maintained; and business-to-business activity is hurt through a technical loophole

allowing fixed line–to-mobile phone calls to be counted as mobile-to-mobile calls. However, for

mobile services, TELMA argues that the last years have seen increased price pressure (95

percent of market is pre-paid and it now charges per second), which has resulted in an explosion

in penetration/access.

10. Investment: the telecom reforms partly aimed at attracting new private investment in

infrastructure and Madagascar did rather poorly in this area during the first half of the project.

Investment increased by 50 percent between 2001 and 2003 but from rather low levels. It then

started to take off in 2006 (there are no data for 2005). In 2007-2009, the average level of

investment in the telecom sector was more than eight times the level in 2001-2003, which

probably was impeded by the political crisis. TELMA argues that it has invested more than its

business plan had forecast and privatization agreement stipulated. There is now a 6,000 km

national backbone of which half is below ground cable and half is fiber optic cable above

ground. However, there is only one fiber optic backbone in the country and OMERT manages

the wholesale price of capacity; thus the competitors are purchasing fiber optic capacity from

TELMA.

13

These figures could not be independently verified by the author.

35

Figure 4. Investment in the telecommunications sector 1995-200914

Source: World Bank World Development Indicators, ITU databases, author‘s calculations.

II. Petroleum

11. To what extent did PDSP2 succeed in achieving its PDO of improving access, reliability

and affordability of petroleum services? Madagascar remains one of the most expensive

countries in Africa and the world to fill up a tank of gasoline or diesel. Coupled with the

country‘s low income per capita, affordability is low and gasoline and diesel prices have

increased significantly during the course of the Project. These increases are attributable to

international commodity prices, the level of energy taxation, and the rents enjoyed by some

players in the value chain. The price of petroleum is a highly sensitive political issue and there is

occasional tension between the private retailers and the Government. This tension has led to both

unilateral and bilateral actions involving the Government, for example related to adjustments of

the exchange rate, tax policy, subsidies and discussions about price controls and increased public

ownership.

12. Since its establishment in 1998, the petroleum regulator OMH has increased its technical

competence and hired new talent. In 2010, it had 67 staff members of whom 30 were technicians.

According to experts consulted for the ICR, OMH has the technical capacity to regulate and

monitor the industry but it is a politicized agency that is perceived to closely follow the orders of

the Ministry of Mines and Energy. The regulator does not maintain a continuous dialogue with

the private sector but representatives meet whenever there is an issue that needs to be solved.

OMH argued during the ICR mission that the Project had provided support in the early years, in

particular for the environmental post-liberalization audit of SOLIMA, which took place over four

years‘ time starting in 2003. A committee was established to respond to the recommendations of

this audit. New construction in the post-liberalization era is well specified and monitored by

OMH.

14

For 2004 and 2007-2009 (‗Investment in telecoms with private participation (current US$)‘ retrieved from World

Bank WDI). For 1995-2003 and 2006 (‗Total annual investment in telecom (US$)‘ retrieved from ITU databases).

0

20

40

60

80

100

120

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

US$

mill

ion

NA

36

Figure 5. ITU’s ICT price basket in 2009 Figure 6. Mobile telephone price basket in 2009

Figure 7. Fixed telephone price basket in 2009 Figure 8. Fixed broadband price basket in 2009

Source: ITU (2010), World Bank HDI, author‘s calculations.

0

10

20

30

40

50

60

70

2.25 2.75 3.25 3.75 4.25 4.75

ICT

Pri

ce B

aske

t

Log (GNI per capita, US$, 2008/09)

Madagascar

0

10

20

30

40

50

60

70

2.25 2.75 3.25 3.75 4.25 4.75

Mo

bile

ce

llula

r su

b-b

aske

t as

a %

of

GN

I p

er

cap

ita


Madagascar

0

5

10

15

20

25

30

35

40

45

50

2.25 2.75 3.25 3.75 4.25 4.75

Fixe

d T

ele

ph

on

e s

ub

-bas

ket

as a

% o

f G

NI

pe

r ca

pit

a


Madagascar

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2.25 2.75 3.25 3.75 4.25 4.75

Fixe

d b

road

ban

d s

ub

-bas

ket

as a

% o

f G

NI

pe

r ca

pit

a


Madagascar

37

Table 6. Telecoms summary

Narrative summary Key Performance Indicators Results Comments

Telecoms:

(i) technical assistance to

OMERT,

(ii) advisory services to

design a rural telecom policy

and funding mechanism; and

(iii) support of the

privatization process of

TELMA

The number of telephone lines (fixed

line + mobile) per 100 inhabitants

(penetration rate) increased from 0.8

percent in 2000 to 1.5 percent in 2004

Target exceeded (ITU data)

2000: 0.8%, 2001: 1.3%, 2002: 1.4%

2003: 2.1%, 2004: 2.3%, 2005: 3.4%

2006: 6.5%, 2007: 12.3%, 2008: 26.2%

(OMERT data – reported by PIU)

2003: 2.0%, 2004: 2.2%, 2005: 3.2%,

2006: 6.4%

2007: 12.7%, 2008: 23.3%, 2009: 31.7%, 2010:

43.7%

The achievement was mainly due to the

rapid growth in mobile subscribers. The

number of fixed line subscribers more than

doubled from a relatively low level.

According to TELMA, there are fewer

than 200,000 fixed lines in Madagascar but

more than 5,000,000 active mobile phone

users.

Internet users increased from 10,000 in

2000 to 40,000 in 2004, and 60,000 in

2005;

Target exceeded (for users, not subscribers)

(ITU estimates)

2000: 30,000, 2001: 35,000, 2002: 55,000

2003: 70,500, 2004: 90,000, 2005: 100,000

2006: 110,000, 2007: 121,000, 2008: 316,100

(OMERT data – reported by PIU - probably)

2003: 15,000, 2004: 10,473, 2005: 9,579

2006: 10,742, 2007: 14,244, 2008: 18,141

2009: 26,292

There is confusion in the PAD with

regards to this indicator. The indicator

―internet users‖ does not correspond to the

PAD numbers. The PAD numbers

correspond to ―internet subscribers‖. There

are limited data on internet subscribers but

PIU indicates that growth has been slow.

The M&E matrix by the PIU reports both

―internet users‖ (noting that data are ―not

available‖) and ―internet subscriber‖.

Telecom services rates will be reduced

by end 2006 in line with the average rate

of telecom services of countries in the

region facing a level of competition in

their telecom sector similar to that of

Madagascar

Target met for mobile telephonyi

(i) Price of a 3-minute mobile local call

(Madagascar/10-country average):

2000: $3.19/0.57, 2001: $3.96/0.58, 2002:

$2.64/0.61 2003: $2.91/0.57, 2004: $3.27/0.62,

2005: $0.48/0.70 2006: $0.45/0.68

Target not met for fixed telephony (ii) Price of a 3-minute fixed telephone local call

(Madagascar/22-country average):

2000: $0.41/0.05, 2001: $0.38/0.05, 2002:

$0.27/0.06 2003: $0.36/0.07, 2004: $1.06/0.10,

2005: $0.19/0.10 2006: $0.18/0.09

The price for mobile telephony dropped by

86% in 2000-2006 but still remains very

high. The price for fixed line telephony

dropped by 56% but also remains very

high. See more under PDO analysis.

PIU used Mauritius, Morocco, Senegal and

Togo as benchmarks. In 2003, PIU noted

that a 3-minute phone call in Madagascar

cost $0.58 compared to $0.51 in the

benchmarked region. In 2006, the

corresponding prices were $0.48 in

Madagascar and $0.78 in the benchmarked

region. In 2009, the prices were $0.14 vs.

$0.21. PIU‘s price data, while different

from ITU‘s data, indicate that the target

was met for mobile telephony.

38

13. There is currently low visibility for further investment due to the political environment.

For example, following the political crisis in 2002, Shell delayed new investment until 2007.

Since privatization, Galana has invested around US$25 million in a new jetty and more than

US$5 million in modernization on top of US$3-5 million/year in distribution. According to

industry insiders, the local incentives are attractive for operations but the high country risk

impedes new investment.

14. Access: There is currently a single storage facility in Tamatave—by the old refinery—

that handles roughly 95 percent of Madagascar‘s petroleum consumption. It is imported through

the seaport in Tamatave. This quasi-monopoly enjoyed by Galana GRT means that deregulation

remains an unfinished affair. In theory, new storage facilities could be constructed by

competitors but there are rules on the national coverage which makes such an expansion

unattractive. There are three logistics companies that service the petroleum sector—two of which

are controlled by GALANA—and there are logistical challenges related to the single storage

facility, Madagascar‘s poor road network, and the long distances, mountainous landscape and

limited volume. Galana‘s logistics costs constitute around 7-8 percent of total costs and Shell‘s

logistics/distribution costs one-sixth of the import price. There are finally four retailers of

petroleum (Galana, Jovenna, Shell, Total) that manage service stations and market petroleum

products across the country. A retailer needs to operate a minimum of eight service stations

according to the law. Anecdotal evidence points to the fact that there are no queues following the

liberalization of SOLIMA.

15. Reliability: There is too little information available to properly assess the developments

in terms of reliability—quality and supply—but anecdotal evidence indicates that there is a clear

improvement and that the standards of most service stations are high these days. Oil quality is

higher; there is more choice and nicer presentation. While OMH monitors environmental

performance, the oil companies often have higher standards than those imposed. There are some

environmental issues that are yet to be settled for the old refinery, which was closed down in

2004/05. According to the petroleum retailers, the private sector has lived up to its responsibility

but the Government‘s environmental work has lagged. However, OMH argued that there are no

real environmental concerns—before the liberalization process was implemented they used to

have environmental problems in the ports—and that the liberalization process increased the

security of supply. OMH also noted that some deliveries have been delayed, for example due to

cyclones, but there are never any fuel shortages.

16. Affordability: Malagasy diesel and gasoline prices are some of the highest in the world

in absolute terms. In 2002, the year of effectiveness of the project, the super gasoline price in

Madagascar was the highest in the 43 African countries measured by GTZ (see Figure 9). At

US$1.08/l, it was significantly higher than in the second most expensive African country (C.A.R.

at US$1.00/l). In the same year, the Malagasy diesel price, at US$0.65/l, was the sixth highest in

Africa. In November 2008, towards the end of the Project, Malagasy diesel and gasoline prices

remained among Africa‘s (and the world‘s) highest. The price gap in 2002 between the diesel

and gasoline was also almost neutralized. At US$1.43/l, Madagascar‘s diesel price was the fourth

highest out of 47 African countries and more than thrice the price in South Africa (see Figure

10). The gasoline price, at $1.55/l, was the continent‘s seventh highest, but below the price in

some nearby countries such as Malawi, Mozambique and Zambia. In 2002, the price of 252 l of

39

gasoline equaled the output per capita of the average Malagasy citizen while in 2008, the price of

318 l of gasoline equaled the average output per capita.15

Figure 9. African diesel and gasoline prices in 2002 Figure 10. African diesel and gasoline prices in 2008*

* Eritrea‘s price is not shown in the chart (diesel: US$1.07/l and gasoline: US$2.53/l)

Source: GTZ (2009).

17. The increases in the price of diesel and gasoline in Madagascar were not explained solely

by changes in the price of crude oil at world markets and OMH argues that the high price is a

serious concern. As Figure 11 illustrates, the crude price was rather stable in the 1990s and so

were the prices of diesel and gasoline in Madagascar. As the trend price of crude oil rose during

much of the 2000s, the diesel and gasoline prices rose significantly faster, including between

2006 and 2008 when the crude oil price dropped. The cause of the seeming decoupling between

the crude oil price on the one hand and the diesel and gasoline prices in Madagascar on the other

hand was partly due to taxation policy: as Figure 12 below shows, GOM imposes relatively high

fuel taxes as a mean for collecting government revenue but this is not the whole story. OMH

argued that the effective rate of taxation was 30-35 percent for gasoline and 20-25 percent for

diesel; resulting in a weighted average of around 30 percent. Shell noted that the effective tax

rate was 37 percent: 20 percent VAT and 17 percent for the remaining taxes. The storage

monopoly and limited logistics options are the obvious areas where competition is limited; and

hence rents may be enjoyed by the owners.

15

Author‘s calculations using GTZ (2009) and World Bank WDI (2011) data.

0

10

20

30

40

50

60

70

80

90

100

110

0 10 20 30 40 50 60 70 80 90 100 110

Sup

er

gaso

line

(U

S$/l

)

Diesel (US$/l)

0

20

40

60

80

100

120

140

160

180

200

0 20 40 60 80 100 120 140 160 180 200Su

pe

r ga

solin

e (

US$

/l)

Diesel (US$/l)

Madagascar

Madagascar

40

Figure 11. Diesel and Super Gasoline prices in Madagascar vs. International Crude Oil Prices, 1991-2008

Source: GTZ (2009).

Figure 12. Retail fuel prices in Africa in November 2008 ( US$/liter)

Source: GTZ (2009).

0

20

40

60

80

100

120

140

160

1991 1993 1995 1998 2000 2002 2004 2006 2008

Diesel (US$/l) Super gasoline (US$/l) Price of crude oil on world market (US$/l)

41

Table 7. Petroleum summary

Narrative summary Key Performance Indicators Results Comments

Petroleum:

Provision of support and

assistance to build the

capacity of the energy

regulator:

Provision of legal and

technical advisory services

as needed to:

(ii) monitor compliance

with the resettlement

action plan for squatters

on the oil pipeline in

Tamatave; and

(iii) develop

environmental regulations,

and monitor the

application of

environmental standards

and regulations;

Conduct an environmental baseline

audit to identify pre-existing

environmental problems encountered

prior to the privatization of SOLIMA

in order to assess environmental

impact, identify risk sharing

arrangements, and propose a

remedial action plan and risk

mitigating measures

Target partly met

2005: environmental audit for phase I

(Historical Audit and Pollution Diagnostic)

delivered

2006: a committee adopts scenario 3 of the

audit to develop an action plan to protect and

minimize risks

2007: 79% of service stations are cleaned up

2008: The Galana Refinery terminal is

renovated. The expropriation procedures for

the oil pipeline in Tamatave are completed in

June. A private company is hired to take care

of oil.

2009: The work on technical specifications

to rehabilitate aqueducts polluted by the

refinery and other environmental activities

are suspended due to the political crisis.

The output targets—i.e. the

performance indicators—were largely

met but the Government did not

adequately address all the

recommendations of the audit.

Develop a training program for new

officers who will staff the Petroleum

Regulator (OMH)

Target met

A training program for OMH staff was

approved by OMH management in 2008 but

never implemented due to lack of financial

resources.

Prospective benefits of this component

were not realized during the course of

the project and implementation

progress was not monitored due to

insufficient information.

Effective liberalization of the

petroleum sector according to new

law

Target partly met

The privatization had the following outcome:

In 2004, new law (#2004-003) adopted for

liberalization of the petroleum sector and

decree issued for implementation.

Price for kerosene/gasoline (in MGA)

2005: 1387/1968, 2006: 1630/2400

2007: 1780/2297, 2008: 1873/2819

2009: 1618/2905, 2010: 1750/2970

The market is partly liberalized but

storage remains a quasi-monopoly,

logistics is handled by three

companies, and entry barriers remain

relatively high in a small market.

42

Component 2: Transaction implementation

18. The second component had three sub-components: (i) capacity building at the

Privatization Secretariat (STP) and PASERP to support the privatization process; (ii) increasing

local asset ownership through support of PTF; and (iii) providing retraining possibilities through

PASERP. The project financed consulting services and covered operational costs of the technical

agencies STP, PASERP and PTF. In summary, the Project did strengthen STP and PASERP and

help these agencies achieve several of their objectives, in particular PASERP, although STP has

been dismantled following shifting priorities of the Government. The sub-component that aimed

at increasing local asset ownership through support of PTF did not achieve its objective.

PASERP did provide vocational training to a very large number of workers. However, there is

little information about the quality of training and number who found a new job.

(i) Strengthening STP

19. (STP was responsible for the technical preparation and implementation of the

privatization agenda. The following assessment argues that the Project could have done better

but that it acted under extremely difficult circumstances that to a large extent were beyond the

reach of the PIU itself.

20. Main achievements: GOM‘s entire divestiture program included 54 public enterprises

whereas the PAD covered four SOEs (ADEMA, HASYMA, SIRAMA, TELMA) and thirty

public SMEs. Almost all publicly held enterprises were mismanaged and common issues

included absence of audited accounts, undeclared assets, high levels of mortgaged debt, ongoing

litigation procedures, salary arrears, and negative cash flow and/or bankruptcy. Asset sales began

in 1999 and were originally executed directly by the Government. Following the 2002 and 2005

restructurings, the Project provided support to the privatization process of six SOEs of which

three companies were executed during the Project (RNCFM Nord, HASYMA, TELMA) and

three companies that were not effectively privatized (ADEMA, JIRAMA, SIRAMA).

Fifteen public enterprises were liquidated as part of the Project: AAA, AFM, ANM,

ARS, FEB, CMN, FESA, Forestas, Serdi, Sevima, SIB, Socomi, Somadex, Somalac,

Sopraex and Torginol. These companies did not owe any debt to creditors or the income

from the liquidation process covered outstanding debt.

Twelve public enterprises were liquidated but the Government has yet to clear

outstanding debt to creditors: Bcl, Famama, Fev, Kafema, Lansu, Roso, Sice, Soama,

Sogedis, Somacodis, Somapalm and Sumatex. The amount that GOM owes the creditors

amounted to MGA 18.63 billion according to reports issued by the liquidators on

December 31, 2008.16

STP executed all necessary steps of the liquidation process in its

control.

Eight records of liquidation were suspended pending the processing of land issues and

other disputes: Coroi, Darrieux, Fifabe, Fima, Sinpa, Sorima, Smtm, and some assets of

SOLIMA.

16

Data for SOAMA was not available.

43

21. TELMA: The former telecom monopoly was partly privatized already in 1998 when

France Cable Radio (FCR), a subsidiary of France Telecom, procured 34 percent of the

company. The Project supported the second round aimed at divesting 34 percent of GOM‘s

remaining 66 percent of the company. France Telecom was allowed to participate in the

international tendering process under the obligation that it had to sell its shares to the successful

bidder unless it produced the highest bid. In December 2001, Distacom Ltd won the bidding

process and following the protracted political crisis of 2002, negotiations between GOM and

Distacom recovered only by October 22, 2002. France Telecom, which had made the second

most attractive bid, brought a complaint to the Supreme Court of Madagascar to seek annulment

of the interim award. The Supreme Court dismissed this complaint on February 12, 2003. A

purchase agreement was signed on August 26, 2003 and GOM and Distacom agreed to conduct a

due diligence of TELMA to assess any developments since the submission of bids in 2001. The

due diligence process was expected to close in December 2003 but data collection difficulties

delayed this process until March 2004. The auditors hired by Distacom and GOM came to

different conclusions: Distacom argued that it had evidence that diminished the value of the

company while GOM concluded that there were no major obstacles to closing the deal as

originally agreed. The parties negotiated a new deal that was agreed on June 4, 2004, in which

Distacom agreed to pay US$12.6 million each to GOM and France Telecom.

22. The negotiation lasted a full year after which GOM granted Distacom concessions that

were not in the initial offering. The final agreement was complex and some concessions were

unfortunate because they impeded competition, reduced tax revenue, and reduced the scope to

realize productivity improvements. The agreement included among others: (i) a government

allocation of US$15 million to TELMA over three years for the company's acquisition of

hardware and telecommunications equipment for rural areas, (ii) corporate tax exemptions over a

five-year period, (iii) a government commitment not to issue any new fixed telephony or mobile

telephony license until June 30, 2008, (iv) a corporate commitment to start up a mobile

telephony service by June 2007, (v) a government commitment to allocate 4 percent of its shares

to staff of TELMA, and (vi) a corporate commitment to not make any staff redundant during an

initial three-year period. The lengthy negotiations and concessions did not build confidence in

the Government‘s ability to handle the privatization process in a fair and transparent manner.

The concessions to Distacom were due to GOM‘s desire to close the negotiations, some of which

were to the detriment of development objectives in the telecom industry. In hindsight, it would

probably have been wiser to reopen the tendering process.

23. HASYMA: DAGRIS paid US$1.65 million for 51.98% of HASYMA as GOM kept 10%

of the capital. The transaction was agreed in August 2004 following an environmental audit

completed in February 2004 and an international tendering process with three bidders. Despite

some technical difficulties, the transaction closed in October 2004 and the process was largely

within the original timeline and regarded a success. The bidders were satisfied with the conduct

of the operation and transparency of procedures.

24. Northern RNCFM Network: The contract for the northern concession was signed

between GOM and COMAZAR in 2002 but the agreement could not be entered into force until

early July 2003 because of some uncertainties of the responsibility of the two actors. A new

44

timetable was established with a committee headed by STP and the divestiture was completed on

July 1, 2003, with the creation of the company Madarail. The concession fees amounted to

MGA1.18 billion from 2003 to 2009. The PIU was heavily used to sort out post-privatization

issues.

In addition, the Project supported some diagnostics for eight additional public enterprises that

GOM later decided to not privatize. The return on this investment is therefore largely a sunk cost

from the Project‘s perspective but it is likely to benefit other stakeholders in the area in the

future.

25. Air Madagascar: a tender for the privatization of Air Madagascar was launched in 2001

but the new Government canceled it during the evaluation process. GOM subsequently signed a

management contract on a sole source basis with Lufthansa Consulting for the period October

2002 to May 2006. Since then, GOM has made no decision concerning the outcome of the

privatization of Air Madagascar.

26. Sofitrans: a tender for the privatization of Sofitrans was launched in 2001 but GOM

canceled this process and no direction has been given for the future status of this company.

27. Society Batelage Manakara (SBM): the company was added to the list of SOEs to be

privatized in 2003 as part of the concessioning of the port with the network Manakara Southern

RNCFM. A tender was issued by the Ministry of Transport in 2005 but declared void after the

opening of the bids. GOM has not decided what to do with SBM although the Department of

Transport recently proposed its liquidation.

28. South RNCFM Network: has remained under the administration of RNCFM.

29. Centre Industriel du Bois d'Andasibe (CIBA): a tender dossier for the company

producing the wooden sleepers for RNCFM was prepared in 2008, revised in 2009, but the

tendering process had not been launched for sale of the company‘s assets.

30. ADEMA: the Project funded the environmental audit of the company and studies on the

concessioning of ADEMA were conducted by the Ministry of Transport in 2005 with support

from IFC. GOM has not made any decision on the privatization of the company.

31. SIRAMA: GOM owns 72 percent of the company and Sofire, SGR and Sonapar control

28 percent. The company has major financial problems and its industrial and agricultural

infrastructure is largely obsolete. For example, SIRAMA does not keep audited accounts and the

latest financial statement was produced in 2003. In June 2004, SIRAMA signed a two-year

management contract worth 3.6 million euro with Lenferna and Tom & Rey-Sude-MAINTEX

for its four production units. The contract was terminated in September 2006. The company

retrenched 3,304 employees in 2005-2007 out of an initial workforce of 6,551 employees. GOM

took responsibility of the payment of corresponding fees, payment arrears and expenses related

to reintegration activities, for a total of MGA 56.7 billion in 1999-2010.

45

32. The Project funded various studies to a total cost of MGA 1.5 billion in preparation for

privatization of the company. A report on options to privatize SIRAMA was presented to GOM

in December 2005, including a plan for the financial restructuring of the company. However,

GOM has made no decision on the privatization of the company. In 2006 the Project withdrew

from SIRAMA following an agreement between the Office of the President, the Minister of

Economy and the World Bank. In June 2007, a 20-year lease agreement was signed between

GOM and the company Complant for the Ambilobe and Namakia sites following a tender

launched by SIRAMA itself. This contract generates an annual income of US$3.5 million and

GOM made some payments of wage arrears in these two locations. Overall, the half-hearted

attempt by GOM to divest of SIRAMA has been costly and unsuccessful: in 2003-2010, the

expenditures amounted to MGA 86.14 billion while revenue amounted to MGA 19.49 billion. Of

those expenditures, the Project contributed MGA 2.80 billion to social safeguards measures

(MGA 1.6 billion) and studies (MGA 1.2 billion).

33. At project closing, SIRAMA had 700 employees at headquarter and the Brickaville and

Nosy Be locations. The total wage arrears of staff were paid by the Ministry of Finance and

Budget in December 2009 and it paid MGA 6.84 billion in arrears to SIRAMA‘s creditors in

2009-2010. The staff was laid off from that date although 74 people are hired to maintain

services at each site. The factories in Nosy Be and Brickaville that remained under the

management of SIRAMA stopped their activities in 2005 and 2007 respectively. In 2010,

Complant, the company leasing the Namakia and Ambilobe and locations, produced 37,181 tons

of sugar. SIRAMA‘s outstanding debt in November 2010 still amounted to MGA 51.39 billion.

34. JIRAMA: GOM decided in 2003 to evaluate options for reforming the company. In

April 2005, the Project co-funded a two-year management contract signed with Lahmeyer

International. It also funded several consultants for the implementation of the management

contract, audits of performance indicators of the management contract, a task force, and

assessments of the implementation of the reorganization plan of JIRAMA. At the time of closing,

JIRAMA was still in Government hands.

35. In summary, GOM registered a number of companies on the list of SOEs to be privatized

in 1997 but lack a clear decision on its implementation. In the case of SIRAMA, the company

collapsed in this lengthy process. Studies that were supported by the Project were repeatedly

updated without effective implementation.

36. The main challenges faced by this sub-component were due in large part to the

prevarication and change in priorities by the new Government but also to: (i) the legal

uncertainty of the divestiture process; (ii) the frequent changes in the institutional setup; (iii) the

resignation by two key personnel within STP; and (iv) the insufficient external relations and

communications campaigns. STP‘s capacity to effectively implement the original divestiture

process was restrained during the course of the project as it struggled to keep up with the original

timeline of divestiture. The Project had little limited influence in this process as GOM was in

charge of the decision making process.

37. First, during the course of the project, the divestiture of public sector enterprises was

largely governed by Law No. 2003-051 enacted on January 30, 2004. This law, which revised

46

Law No. 96-011 enacted on August 13, 1996, was never decreed. STP helped draft a decree and

it also identified a number of anomalies that were never addressed by GOM.17

STP then

proceeded with the implementation of the new act without proper instructions on procedural

arrangements. Implementation of Law No. 2003-051 in the absence of relevant decrees was a

risky process as third parties at any time could challenge the process, which was also highlighted

at the investor‘s roundtable discussions organized during the ICR mission (Annex 5). At the time

of closing, however, no legal challenge had been recorded.

38. Under the provisions of Law No. 2003-051, STP lost its executive authority to the

various ministries overseeing the activities of each public enterprise. For example, the

preparatory work undertaken for the ADEMA privatization and the tendering process of the

Southern RNCFM Network were carried out directly by the Ministry of Transport. In the case of

SIRAMA, the lease agreements for the sugar factories in Namakia and Ambilobe were executed

by SIRAMA itself. The operations that remained the responsibility of STP were asset and equity

sales, capital increases with waivers of preferential rights of the state, issuing of convertible

bonds, liquidations, mergers and demergers. According to the STP Director, the notion of

transparency in the new Act was not explicit, which leaves questions open about some contracts.

39. Second, since the privatization process was set in motion in 1996 there have been three

changes in the ministerial setup for this process and two changes in technical guidance. In 2002,

the divestiture activities were entrusted to the newly established Ministry of Privatization. In

March 2003, however, the Ministry of Privatization was dissolved and the divestiture activities

were entrusted to the Ministry of Finance and Budget and its Department of Privatization

Operations. In January 2004, Law No. 2003-051 formally abolished the Privatization Committee

established as part of the previous law (Act No. 96-011) as all divestiture activities were reported

directly to the Ministry of Finance and Budget. In 2007, another institutional shakeup within the

Ministry of Finance and Budget resulted in the dissolution of the Department of Privatization

Operations. Adjusting to these reorganizations affected the speed of implementation of the

privatization and liquidation agenda.

40. Third, the Project was off to a rough start in its effort to build capacity at STP. In 1997-

2002, STP had 23 employees that were active in the first major round of privatization. When the

Project became effective and its implementation was due to commence in early 2003, it suffered

a setback as almost the entire STP team left the institution. Disagreements over payments led to

an initial shortage of human capital. Rather than strengthening an institution that was up and

running, the first years of the project were to some extent focused on recruiting new staff and

training them.

41. In 2003-June 2006, STP consisted of 20 professionals. In July 2006-December 2010, as

STP became the Project Executing Agency—in addition to its responsibility of the

privatization/liquidation of public enterprises—the institution was down to 10 professionals,

partly as a result of the number of transaction being reduced. Key staff members also left STP at

times when the Project was coming to a end and before any decision was taken on its extension.

STP was thus left with the task of recruiting new staff members at times when it should have

concentrated its effort in completing remaining items. While this drive to keep the administration

17

Instead, GOM agreed to launch a study for the establishment of a legal and institutional framework for PPPs.

47

streamlined and nimble may have kept costs low, it also slowed down the divestiture process and

the productivity of management. Successive changes in the institutional framework and the

management team of STP affected the institutional memory of privatization. The retrenchment

and swift reallocation of technical experts within the public administration also led to incomplete

archives.

42. Fourth, in 1996-2002, when GOM privatized several large SOEs, it invested significant

resources in public communication campaigns. These communication campaigns were

discontinued during the Project as GOM indicated that public communication should remain

outside STP‘s responsibility. GOM did not renew the contract of the STP manager in charge of

public relations and external communication in early 2004. For example, for TELMA and

HASYMA, public communication was made directly by the Minister of Finance and Budget.

The decision to cut investment in public relations was unfortunate given the sensitivity

associated with the transfer of public enterprises to private management. As GOM came under

intense pressure from employees and the public to slow down the divestiture process, GOM lost

time and resources as redundant and unproductive SOEs were kept in the red. Several of the

SOEs that were left in legal limbo are today in very poor shape.

43. With regards to sustainability of STP, at the time of closing, GOM was still to formulate

its position on the future of the remaining portfolio of public enterprises, including Air

Madagascar, SIRAMA, ADEMA, Sofitrans, Secren, Soavoanio, SBM and JIRAMA. The

contractual arrangements between the Project and the liquidators were terminated in December

2010 but GOM had yet to hone the payment of some creditors as of April 2011.

(ii) Strengthening the Retraining Program (PASERP):

44. PASERP is a unit responsible for handling social issues linked to privatization, including

the support for vocational training offered to retrenched workers. It was established by Decree

No. 97/1242 on October 23, 1998, and located under the Ministry of Finance and Budget. The

two main activities of this sub-component were to handle: (i) retrenchment of staff of public

enterprises and ensure that dismissed staff received outstanding payments owed to them

according to the law; and (ii) implementation of the rehabilitation and retraining program of

affected staff. Overall, output indicators were generally achieved despite some outstanding

claims. The activities were concluded in June 2008 and a summary of PASERP‘s achievements

is presented in Table 8.

45. Some activities were challenging to implement. For example, the railway company had

35 different unions that argued against privatization. Painful negotiations resulted in rather

generous conditions for railway workers. SIRAMA was particularly difficult to

privatize/liquidate. It took several years to complete and retraining workers, many of whom were

analphabets, was not easy. Frequently, the unions had more confidence in PASERP‘s intentions

than did corporate management. Thus, PASERP‘s challenge was to play an honest broker and

bridge the divide between the workers and management. PASERP‘s offer of credit to retrenched

staff who sought to start an own company did not generate many businesses as workers were

suspicious about government loans due to negative experiences in the past when workers who

failed to repay government debt were imprisoned. According to PASERP, an evaluation in

December 2008 of its retraining programs showed mixed results: 30 percent were rated a success

48

(re-education led to jobs), 25 percent were rated as acceptable (re-education led to some form of

jobs), and 45 percent were rated a failure (re-education that largely failed to generate jobs).

Many workers in the latter category preferred to go back to rice cultivation as subsistence

farmers.

Table 8. PASERP achievements

Objective Indicators At closing (June 30, 2008)

Target Result

Transfer workers from old

to new companies

Personnel evaluation, preparation

of transfer process, and execution Transfer 1000 workers

846 workers transferred

from RNCFM to

Madarail

Dismissal of redundant

workers

Audits of Financial Statements,

overseeing the preparation of

layoffs, pilot for the management

of redundancies

The entire staff made

redundant in the

companies to be

privatized or liquidated

Oversaw the dismissal of

4866 redundant workers

to whom GOM paid wage

arrears

Inform affected workers

about options and support

services

Number of outreach events and

workers informed

Reach all workers of

privatized or liquidated

companies

Organized 59 outreach

events and informed

4,383 workers

Provide vocational

training

Organization of training

workshops

80% of the target group

eligible to training, or

3980 worker

Organized 58 training

courses covering 4,277

individuals

Expand support services

available to the public

Number of registered people Entire eligible target

group

4,334 individuals

registered

Reduce processing time

on the basis of four

months provided in the

procedures manual

Delay between dismissal and

payment of the Reintegration

Fund Less than 4 months

SIRAMA: 5 months;

Ciba: 4 months;

SMTM: 2 months

(iii) Strengthening the Privatization Trust Fund (PTF):

46. PTF was established by Decree No. 96-783 on September 4, 1996. It is a state-owned

entity that manages minority-owned corporate assets aimed for future divestiture to local citizens

and employees of recently privatized enterprises. As of December 31, 2010, PTF had not been

able to play any significant role as it was never allowed to operate by the Government. While it

did perform a handful of smaller transactions in the early years of the Project (see Table 9), it has

remained in legal limbo. For example, between 2004 and 2008, PTF had neither a Board of

Directors nor a Director General. On February 28, 2008, a new Director General was appointed,

and the entity was finally staffed in the spring of 2008. The new staff was trained and housed in a

building of the Ministry of Finance and Budget. A detailed action plan was also developed.

47. The project supported PTF activities by funding (i) operating expenses (other than staff

salaries) from February 2008 to March 2009, (ii) office equipment and computers, (iii) staff

training, and (iv) studies and technical assistance. The project had originally planned to fund: (i)

the development of PTF‘s Strategic Plan, (ii) the development of implementation manuals, (iii) a

financial evaluation of targeted companies, (iv) a sectoral analysis of targeted companies in the

telecom and petroleum sector, (v) the development of a communication plan and training plan,

(vi) assistance in implementing the strategy and (vii) the procurement of software for this

purpose. Except for (i), these activities had not been completed at the time of closing.

49

48. As of November 24, 2010, GOM had only transferred a very small proportion of the

assets to PTF—or MGA 734.1 million out of more than MGA13 billion planned (see Table 9).

At Project closing, PTF had transferred a fraction of the assets to the target population. Most of

these assets were transferred in 2003. At the time of closing, PTF had finalized its

implementation strategy, which was approved by the Ministry of Finance and Budget in early

2010, and it had begun to prepare in-house activities. However, the budget allocated to PTF for

the 2011 financial year was insufficient and the Ministry of Finance and Budget did not transfer

the remaining assets to PTF. The Project therefore suspended its support of PTF.

Table 9: Assets controlled by PTF

Privatized

enterprise

Enterprise name following

privatization

Control of assets Assets transferred

to PTF

Assets to be

transferred to PTF

GOM PTF Total % Amount (MGA mn) % Amount (MGA mn)

I TELMA TELMA S.A. 22% 6% 28% - - 6% 2,469.4

II HASYMA HASYMA S.A. 5% 5% 10% - - 5% 596.3

III SOMACODIS

III-1 Agence Tsi/didy Nlle SOMACODIS Tsi/didy S.A. - 20% 20% 20%

180.0

- -

III-2 Agence Antsirabe Nlle SOMACODIS Antsirabe S.A. - 20% 20% 20% - -

III-3 Agence Antsohihy Nlle SOMACODIS Antsohihy S.A. - 20% 20% 20% - -

III-4 Agence Mananjary Nlle SOMACODIS Mananjary S.A. - 20% 20% 20% - -

III-5 Agence Toliary Nlle SOMACODIS Toliary S.A. - 20% 20% 20% - -

III-6 Agence Tolagnaro Nlle SOMACODIS Tolagnaro S.A. - 20% 20% 20% - -

III-7 Agence Mahajanga Nlle SOMACODIS Mahajanga S.A. - 20% 20% 20% - -

III-8 Agence Maintirano Nlle SOMACODIS Maintirano S.A. - 20% 20% 20% - -

III-9 Angence Manakara Nlle SOMACODIS Manakara S.A. - 20% 20% 20% - -

III-10 Agence Mananara Nord DISCO Sarl - 20% 20% 20% - - -

III-11 Agence Toamasina TAMA DISTRIBUTION Sarl - 20% 20% 20% - - -

III-12 Agence Maroantsetra DICOTRANS Sarl - 20% 20% 20% - - -

IV SOLIMA

IV-1 Lot 1 : Raffinerie Terminal

GALANA RAFFINERIE TERMINAL

S.A. 10% 10% 20% - - 10% 300.0

IV-2

Lot 2 : Logistique

Pétrolière LOGISTIQUE PETROLIERE S.A. 8% 23% 31% - - 23% 4,574.6

IV-3 Lot 3 : Aviation - - - - - - - -

IV-4 Lot 4 : Distribution

IV-4-1 Distribution A

GALANA DISTRIBUTION

PETROLIERE S.A. 10% 20% 30% - -

20% 1,020.6

IV-4-2 Distribution B Sté Malgache des Pétroles SHELL S.A. 5% 15% 20% - - 15% 540.0

IV-4-3 Distribution C JOVENNA Madagascar S.A. 1,12% 5% 16,12% - - 5% 644.4

IV-4-4 Distribution D - - - - - - - 2,243.4

IV-5 Après fusion de TOTAL TOTAL Madagasikara S.A. 5,56% 15% 20,56% - - 15% -

IV-6 Lot 5 : Lubrifiants MOCO S.A. 5% 15% 20% 15% 156.6 -

IV-7

Lot 8 : Solimotel

Antananarivo MOTEL ANTANANARIVO S.A. - 20% 20% 20% 377.5

- -

IV-8 Lot 9 : Solimotel Mananjary MOTEL MANANJARY S.A. - 20% 20% 20% 20.0 - -

V TORGINOL EUROPAINTS S.A. - - - - - - -

VI SODIP SODIP - - - - - - -

Total 734.1 12,388.8

Source: PTF, November 24, 2010.

50

Table 10. Assets transferred from PTF to target audience

Company to be privatized New company after privatization

Assets sold by

PTF

Transfer date

# of assets

transferred

by PTF

Nominal value

(MGA

thousand)

Unit price

(MGA mn)

Transfer

price (MGA

mn)

Buyer Nation

ality

I TELMA TELMA S.A. - - - - -

II HASYMA HASYMA S.A. - - - - -

III SOMACODIS

III-1 Agence Tsi/didy Nlle SOMACODIS Tsi/didy S.A. - - - - - - -

III-2 Agence Antsirabe Nlle SOMACODIS Antsirabe S.A. - - - - - - -

III-3 Agence Antsohihy Nlle SOMACODIS Antsohihy S.A. - - - - - - -

III-4 Agence Mananjary Nlle SOMACODIS Mananjary S.A. - - - - - - -

III-5 Agence Toliary Nlle SOMACODIS Toliary S.A. - - - - - - -

III-6 Agence Tolagnaro Nlle SOMACODIS Tolagnaro S.A. - - - - - - -

III-7 Agence Mahajanga Nlle SOMACODIS Mahajanga S.A. - - - - - - -

III-8 Agence Maintirano Nlle SOMACODIS Maintirano S.A. - - - - - - -

III-9 Angence Manakara Nlle SOMACODIS Manakara S.A. - - - - - - -

III-10 Agence Mananara Nord DISCO Sarl 16-févr-04 2 60 1.8 3.6 M. TSARA Jean Frédéric M/sy

III-11 Agence Toamasina TAMA DISTRIBUTION Sarl 28-nov-03 8 100 1.0 8.0

M. RAFIDIARISON Jean

Rémi ; Mme

CHRISTELLE Coralie ; Mme NANCYA Laurenne

M/SY

III-12 Agence Maroantsetra DICOTRANS Sarl 25-nov-03 2 60 1,2 2,4 M. Marcel Bernard;

M. ROBY Patrick

M/Sy

IV SOLIMA

IV-1 Lot 1 : Raffinerie Terminal Galana Raffinerie Terminal S.A. - - - - - - -

IV-2 Lot 2 : Logistique Pétrolière LOGISTIQUE PETROLIERE S.A. - - - - - - -

IV-3 Lot 3 : Aviation - - - - - - - -

IV-4 Lot 4 : Distribution

IV-4-1 Distribution A Galana Distribution Pétrolière S.A. - - - - - - -

IV-4-2 Distribution B Sté Malgache des Pétroles SHELL S.A. - - - - - - -

51

Company to be privatized New company after privatization

Assets sold by

PTF

Transfer date

# of assets

transferred

by PTF

Nominal value

(MGA

thousand)

Unit price

(MGA mn)

Transfer

price (MGA

mn)

Buyer Nation

ality

IV-4-3 Distribution C JOVENNA Madagascar S.A. - - - - - - -

IV-4-4 Distribution D - - - - - - - -

IV-5 Après fusion de TOTAL TOTAL Madagasikara S.A. - - - - - - -

IV-6 Lot 5 : Lubrifiants MOCO S.A. - - - - - - -

IV-7 Lot 8 : Solimotel Antananarivo MOTEL ANTANANARIVO S.A. - - - - - - -

IV-8 Lot 9 : Solimotel Mananjary MOTEL MANANJARY S.A. - - - - - - -

V TORGINOL EUROPAINTS S.A. 17-janv-03 2,250 20 0.016 36.0

Mme

RAZANADRAKOTO Marie Baptistine ; M.

RAZAFIMAMONJY Jean

Fidel ; M. RASATA ANDRIANOME De l‘Ile ;

M.

RAZAFINDRATSIMA Mamy Nirina Honoré

M/sy

VI SODIP SODIP 30-nov-99 35,275 21,47 FRF 17,176 FRF 605 883,4

FRF

M. Philippe

RAVELOMANANTSOA

(Délégué des nouveaux

acquéreurs)

M/sy

Source: STP (2011)

52

Component 3: Development of new activities supporting the private sector

49. The third and final component was a number of activities that were meant to increase

the competitiveness of Malagasy companies. While it was a tiny component in the original

PAD (at US$1.73 million), it became more prominent (increased to US$9.40 million)

following the first restructuring of 2002 as the new Government shifted some of its focus

from privatization to activities meant to strengthen competitiveness. The component was

divided into seven sub-components: (i) trade and investment promotion, (ii) the establishment

of industrial zones, (iii) the establishment of a one stop business facilitation center

(GUIDE/EDBM), (iv) provision of trade insurance (ATI), (v) support of the tourism sector,

(vi) support of a public private dialogue mechanism (CAPE), and (vii) provision of technical

assistance to SMEs.

50. Overall, this component is rated unsatisfactory due to its limited impact of the

activities on the competitiveness of Malagasy companies. While the outcome of the third sub-

component can be rated as a success, the second, fourth, fifth and seventh sub-components

failed to achieve its objectives, and the first and the sixth sub-components‘ contribution are

difficult to assess. Most of these initiatives were incorporated following the 2002

restructuring and they were seemingly supply/government driven rather than demand/private

sector driven. The Project agreed to incorporate a number of activities requested by the

Government seemingly without a strategic vision as there was significant time pressure to

launch project activities following the Board approval in August 2001. The Project answered

these calls and provided support but the results were limited.

51. It is impossible to properly measure whether the third component achieved its

objective of increasing the competitiveness of Malagasy companies. It would require

evidence in the form of business surveys conducted at the start of the project and at the

closing of the project. In addition, even if comprehensive data had been collected, the limited

scope of the interventions would arguably have resulted in an almost negligible impact on the

overall private sector. However, the analysis below finds that the transaction costs of starting

a business were cut substantially through the establishment of the one stop business

facilitation centers (EDBMs). While these results must have benefited prospective

entrepreneurs and new investors, they are unlikely to have contributed to the

―competitiveness‖ of existing Malagasy companies.

52. Figure 13 illustrates how new enterprise creation fluctuated throughout the Project.

The number of new enterprises grew between 1995 and 2000 but dropped significantly in

2001-2002 as the political crisis hit the economy. The same downward trend is evident for

2009 and 2010. The total number of enterprises is dominated by the establishment of one

person enterprises, which fluctuated greatly, and it trended downward following 2004 when

GUIDE came into effect. A closer look at one person limited companies (EURL) and limited

companies (SA) reveal that they expanded substantially starting in 2004. The former category

averaged 98 companies per year in 2001-2005 and 445 companies per year in 2006-2010.

The latter category doubled: from an average of 25 enterprises per year in 2001-2005 to 50

enterprises per year in 2006-2010. The number of limited liability companies (SARL) also

grew in the second half of the 2000s but the impact was less pronounced as the number

dropped in 2009-2010. Thus, in short, formation of various forms of limited and limited

liability enterprises increased following the establishment of EDBMs while the number of

one person enterprises dropped.

53

Figure 13. Total number of new enterprises created

Source: National Institute for Statistics of Madagascar (2011).

53. Trade and investment promotion. This US$1.15 million sub-component supported

trade and investment promotion activities to restore investor confidence in the country

following the political crisis in 2002. Two main outputs were produced. The first output was

a study presented in June 2004 that recommended the establishment of an international

investment promotion mechanism. It also included a comprehensive plan for the development

of so called ‗business brokers‘. This plan was never implemented partly because of budget

reasons and inconclusive recommendations. The second output was a series of trade and

promotion activities that covered the production of a brochure promoting the country to

investors and in particular the participation of government and private sector representatives

in some seventy events, meetings and international forums held in Africa, America, Asia and

Europe. In return, seven missions of foreign investors visited Madagascar in 2003-2004 but it

is impossible to evaluate the effectiveness of the participation in these trade and investment

promotion events. Figure 3 illustrated how FDI was very low in 2002-2004, before it started

to pick up in 2005.

54. Export Processing Zone (EPZ) development: The export-oriented garment industry

lost an estimated 80,000 jobs during the political and economical crises of 2002. Supporting

industry to reinvest and rehire workers was therefore a high priority and promoting the

establishment of EPZs became a new sub-component following the restructuring in 2002.

The plan was to provide potential investors with facilitated access to land and infrastructure

and to support the establishment of EPZs in Tsarakofafa Toamasina, the Antananarivo region,

and other provinces. In the end, the Project provided support mainly to the proposed EPZ in

Tsarakofafa Toamasina, as it ran into insurmountable difficulties. This planned EPZ was

strategically located next to a seaport, town, road network and energy supply and its

10000

12000

14000

16000

18000

20000

22000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Tota

l nu

mb

er

of

ne

w e

nte

rpri

ses

cre

ate

d

One person enterprise One person limited company (EURL) Limited company (SA) Limited liability company (SARL) Misc

54

development was part of the Government‘s decentralization and industrialization agenda.

Over the course of the Project, it helped fund: (i) studies related to infrastructure

development, prospective clients and target groups, laws and regulations covering EPZs, land

tenure and contractual options as well as an environmental impact assessment; (ii)

construction of off-site infrastructure worth MGA 1.49 billion to connect the zone with key

utilities, including 80 m3/h of water supply, telecom services with a capacity of 512 lines and

Internet access up to 256 Kbps, and 160 KVA of electricity; (iii) advisory services; (iv)

formalities of land transfer; and (v) property evaluation.18

55. Notwithstanding US$1.25 million worth of support activities, this investment can be

considered a sunk cost from the Project‘s narrow objective but there is a lot of industrial

activity in the wider area and these activities benefit from the connectivity offered by the

investments. During the early years of the project, the supervision missions devoted

significant time and effort to record the problems, disentangle the issues, propose solutions,

and finance response mechanisms. But governance issues and a long list of challenges

impeded progress. At the mid-term review, the sub-component was rated moderately

satisfactory despite a zero percent occupancy rate. The original aim was an 80 percent

occupancy rate. The rating can only be attributable to a strict focus on output indicators

(offsite infrastructure had been delivered). Over the course of the Project, two property

developers were contracted but none of them invested in the area. In hindsight, the plan for

Toamasina Tsarakofafa was never likely to be successfully implemented. First, the

environmental impact assessment had noted problems of flooding and waste treatment and

some population displacement. Second, the land was not secured. Parts of the area had

already been mortgaged to a property developer called Filatex. Illegal settlers increasingly

occupied the dedicated zone area and the Ministry of Education and Scientific Research had

built a school on some of the property. The rapidly growing number of squatters made it

increasingly difficult to demarcate the area and the contractor hired for this task was chased

away by the new inhabitants. Many of these squatters were seemingly not permanent

inhabitants but rather rent seekers hoping for financial compensation upon removal. The local

Government was too worried to take action about the political implications of forced

removals.

56. Third, there was no clear demand for the zone as no potential investors had expressed

any formal interest by May 2004. In addition, since 1990, there was another 200 ha zone

leased for 50 years by Far East Group adjacent to the proposed industrial park that was not

operational and had no industrial tenants. Fourth, there were also a number of contractual

irregularities with regards to the concession to the first property developer (GETIM). For

example, there was neither a competitive bidding process nor an economic feasibility study

involved. There was a lack of clarity and detail in the legal underpinning of the zone and

there was no financial due diligence conducted. The public-private partnership model

indicated that this sub-component should have been avoided. For example, in GETIM‘s

business plan shared by the Ministry, the proposed annual rent of the land (US$0.01/ m2) did

not justify the US$1.6 million invested by GOM in infrastructure (water, power line,

telecoms) in the area. Consequently, the challenges were overwhelming and this sub-

component should have been dropped. The mid-term review team identified several of these

shortcomings but stopped short of cancelling this sub-component. Government officials noted

that there was a coordination failure between the Provincial and Central Governments and

that the ministry in charge was uncommitted to this sub-component. They also noted during

18

Property valued at MGA 6.5 billion.

55

the mission that the WBG team did its best to solve existing problems but that the

Government failed to act decisively.

57. One Stop Business Facilitation Center (GUIDE, later EDBM): This sub-

component of establishing a single window for investment and enterprise development is

arguably the most important contribution of the third component. Created by Decree No.

2003/938 of September 9, 2003, GUIDE was designed as a single centralized institution

providing the necessary formalities for starting a company and other services required by

investors (visa and work permit issuance, guidance with land titles) as well as promotion

activities. The US$2.77 million worth of support of the Project covered (i) the rehabilitation

of offices and procurement of material and equipment, (ii) operating cost coverage, (iii),

extensive technical assistance, including input in the reforms linked to doing business, and

(iv) training activities.

58. In May 2006, GOM established the Economic Development Board of Madagascar

(EDBM) to further facilitate entrepreneurship and promote investment. GUIDE was

thereafter integrated into EDBM through Decree No. 2007-396 on May 7, 2007. GOM

offered an entire 10-storey building to EDBM and the Project agreed to rehabilitate this

building to house EDBM. The idea was for EDBM to rent out some of the space to become a

more independent and financially viable institution. The Project also provided technical

assistance to EDBM in its effort to improve the business climate in Madagascar. It achieved

significant results in reducing red tape in the business start up process. Between 2004 and

2009, the number of formalities required for starting a business was reduced from 15 to 2 (see

below). This helped reduce the time it took to start a business from 67 days to 7 days and the

cost from 59 percent of income per capita to 6 percent of income per capita. The Project was

critical in this process as it initiated GUIDE and provided support in EDBM‘s establishment

and reform work.

Table 11. Starting a business

Year Procedures

(#)

Time

(days)

Cost (% of

income per

capita)

Paid-in min. capital

(% of income per

capita)

DB2004 15 67 59 28

DB2005 13 44 57 25

DB2006 11 38 51 2,158

DB2007 10 21 35 373

DB2008 5 7 23 333

DB2009 5 7 11 290

DB2010 2 7 6 207

DB2011 2 7 13 248

59. At the time of project closing, funding of sub-regional EDBM offices had been

transferred to the World Bank Integrated Growth Poles Project. The rehabilitation and

demolition work had left only three storeys of the Antananarivo EDBM headquarter

inhabitable. The doing business reform program was interrupted following the 2009 political

crisis and Madagascar dropped on the ranking from 134th in 2009 to 140th in 2010. It is

therefore important that GOM takes action to lock in the reforms and achievements and

maintains its efforts in promoting investment. A sustainable funding solution is required to

support EDBM offices located in the provinces.

56

60. African Trading Insurance (ATI): Support for this sub-component sought to

provide enhanced security to traders and entrepreneurs. The Project funded the fee required to

join ATI for a total of US$1 million: US$0.1 million in subscription fee and US$0.9 in a

deposit made in 2005. Unfortunately, this insurance mechanism was never used. GOM later

requested additional World Bank funds (US$3 million) to increase the ability of ATI to meet

the demands of investors but this request was not met. In hindsight, the Project team should

have conducted a more thorough demand analysis in order to identify the needs of local

businesses and design the insurance mechanism according to their needs.

61. Support to the tourism sector: Support for this sub-component (US$0.46 million)

was aimed at providing enhanced administrative support through Regional Tourism Offices

and help prospective investors to get access to land. Potential tourism sites were demarcated

in Anakao, Beheloka and Soalara in the province of Toliara and the Project funded

development plans. The Ministry of Tourism in partnership with EDBM was responsible for

the promotion of these sites to potential investors. The sub-component did not produce any

results and the Project dropped its support in June 2006 as squatters had invaded the

demarcated sites.

62. Establishing a public private dialogue mechanism (Comité d’Appui au Pilotage

de la relance de l’Entreprise, CAPE): This US$1.25 million sub-component encouraged

public-private dialogue after the political crisis in 2002. CAPE was chaired by the Prime

Minister at the national level. It had an executive secretary and permanent secretariats with

fully equipped offices in several cities, which created a parallel structure to the existing

Chamber of Commerce offices. CAPE hosted two national and several regional meetings, in

particular on trade facilitation, the Finance Act of 2004, the draft Competition Act, and the

draft Companies Act. The private sector side was dominated by large enterprises and

multinationals, which made SMEs lose interest. The largest companies already had the ear of

the authorities and the value of CAPE was diluted.

63. CAPE funded various studies and SME training activities on the filing of credit

reports, business management, standards and quality. According to the client, the quality of

the consulting reports and studies varied but the recommendations were generally not

implemented, which reduced the private sector‘s interest in this dialogue mechanism. The

sub-component was closed in June 2006 and the impact of this dialogue mechanism is

impossible to measure; in particular since the recommendations and outcome of the dialogue

initiatives were not all recorded and filed. The scope of the activity was vague, which

affected the focus of studies and training courses, and it allowed unnecessary discretion in the

activities. Boosting public-private dialogue was, and remains, important. Working through

existing mechanisms—the Chamber of Commerce is for example represented in all of

Madagascar‘s regions—may have been sufficient although this institution was closed during

the period. CAPE does not have any remaining staff members.

64. Technical Assistance to SMEs: This sub-component supported the SME Solution

Center (SSC). A contract for provision of technical assistance to SMEs was signed on

September 5, 2005, between the Ministry of Finance and Budget and Business Partners

International (BPI). The contract was for an amount of US$2.0 million and a period of eight

years during which BPI would provide technical assistance to local SMEs. The activities of

BPI started in the middle of 2007 and were adversely affected by the political crisis starting

in 2009. A total of 42 SMEs had benefited from technical assistance at the closing of the

project compared to a target of 75 SMEs. BPI made use of US$475,000, or US$11,300 per

57

SME, in its activities. While the impact of the investment may have been positive for the

beneficiaries—business associations representing SMEs that were consulted during the ICR

mission did indeed give positive feedback—few companies were reached. The overall impact

on the economy must have been limited although individual SMEs may have benefited

greatly. As in some of the other sub-components, a more thorough needs assessment and

design of the support mechanisms could have helped this initiative produce more concrete

results.

58

Annex 3. Economic and Financial Analysis

1. No Cost Benefit Analysis or Economic and Financial Analysis were prepared at the

Project design stage. The PAD noted that the support provided under the project was to

“serve as a catalyst to create an environment sufficiently conducive to attract first class

management and technology know-how, and significant capital investments”. These

investments were expected to bring considerable economic benefits that could be measured in

terms of: (i) increased output from new entrants and privatized entities; (ii) factor cost

savings resulting from competition between operators and better managed companies; (iii)

additional income from net job creation; and (iv) consumer surplus. As the project support

was considered catalytic, the above mentioned benefits were not considered a direct result of

the project. This ICR did not attempt to quantify the gains given the lack of starting point

estimates to measure efficiency against.

2. While the cost of the interventions were well defined at project preparation and well

accounted for at project closing, the prospective or realized benefits of the new institutional

and regulatory capacity are linked to a host of environmental, governance, social, and

economic factors. The intangible non-economic gains will be substantial in the long run.

Table 12 provides an overview of both tangible and intangible gains and positive outcomes

from the Project activities.

3. The interventions in the Project were closely associated with PATESP, which makes

it difficult to disentangle the income and expenditure and accrue them to the activities of the

two projects over time. For example, several of the transactions in the privatization process

were initiated and partly executed in PATESP and the Project finalized this process. The

same holds for the institutional capacity building interventions of regulators: these regulatory

agencies had already been established in PATESP but were admittedly weak and

considerably strengthened in the Project. Thus, the costs and benefits are linked to two

generations of projects.

4. Annex 1 presents a cost breakdown by component and sub-component. It reveals that

the initial estimates in the PAD for supporting OMERT and OMH were greater than

necessary, in particular for OMERT. The first component consumed only 36 percent of the

resources initially allocated. The second component, of privatization implementation, made

use of 79 percent of the appraised funds. For privatization transactions, the Project made use

of 69 percent of appraised funds, which reflects the fact that the new Government lowered the

ambition and removed SOEs from the privatization list. Some of the non-performing sub-

components such as PTF and the development of EPZs did not generate any return on

investment but disbursement was reduced and eventually stopped as there were few signs of

progress.

5. According to STP, in 1999-2010, the total cost of the privatization process was MGA

107.8 billion and the total income was MGA 118.5 billion—resulting in a small but positive

balance of MGA 10.7 billion. Thus, the overall direct financial return on investment of the

Government‘s privatization and liquidation agenda was very limited indeed. By far the

largest cost component in this process was compensation to retrenched employees (MGA 77

billion). Of the total income, roughly MGA 67.5 billion was generated during the Project‘s

effectiveness, in 2003-2010, and the cost was an estimated MGA 18.2 billion (see Annex 6).

The second tranche of the TELMA privatization generated a large surplus in 2004 (see Annex

2). The liquidations of ROSO, SINPA and SOMACODIS generated large surpluses.

59

6. A net present value (NPV) calculation is possible for the privatization and liquidation

process. First, assume that expenditures and incomes were all realized at the year when the

income was recorded in Annex 6. Second, assume that expenditures and incomes for public

enterprises that were partial or suspended (the lower half of Annex 6) were recorded evenly

over the years 2008-2010, then the net present value for the privatization and liquidation

process starting in 2003 was:

MGA 44.5 billion for a discount rate of 5 percent.



7. However, these calculations do not take into account US$3.9 million of expenditures

of the Privatization Secretariat (STP). Thus, the NPVs above only reflect a limited set of

direct expenditures but all the direct income generated from the process.

8. The privatization of these companies did attract new investments but data are not

readily available. Some of the companies were insolvent pre-privatization and new

investment would most likely have been wasted without new management. Post-privatization

and new investment, companies in for example the telecom sector and petroleum sector

upgraded technology, processes and management, which led to revenue growth and taxable

income, a larger consumer surplus, etc. Data on corporate revenues pre- and post-

liberalization were not accessible but it is a reasonable assumption that the long-term benefits

of equipping these companies with a new set of performance-based incentives would be

substantial.

Table 12. Gains from the Project

Activity Gains / outcomes

Enhanced regulatory

capacity

More stringent environmental standards in the energy sector

Higher quality standards enjoyed by consumers in telecom and energy

Liquidation of public

enterprises

Assets tied up in loss making enterprises put to more productive private use

Government resources saved from cuts in subsidies

Privatization of state-owned

enterprises (i.e. large public

enterprises)

Enhanced competition and innovation promotion

Government income from the sale of assets and higher potential tax income

New private investment to enhance accessibility and reliability

Government resources saved from cuts in subsidies

Establishment of the One

Stop Shop and other new

PSD activities

Reduction in transaction cost at entry

Reduction in information costs

Enhanced visibility and investment promotion

9. Implementation efficiency was negatively affected by the political crises, which

produced new administrations, of which the first was significantly less committed to the

privatization process. According to STP estimates, government indecision on privatization

led to MGA 56 billion spent on studies and legal fees for the eight SOEs that were never

privatized (see Component 3 in Annex 2). While the Project only covered a modest

proportion of these expenditures, and some of these investments may have been value for the

companies at large, they did not help achieve the objectives that they were meant to do. In

conclusion, at least for component 2, implementation efficiency was seemingly low given the

lack of government commitment to execute the privatization process.

60

10. Finally, there were significant implementation delays that to a large extent were

caused by the two political crises, the lack of government commitment to the privatization

agenda, and slow payments of arrears to creditors (by Government) and consultants (by PIU).

More than eight years passed between project effectiveness and project closing. An earlier

closing date, as originally planned, would have allowed the Government and the World Bank

to assess the cost and benefits of the achievements, and design a new follow up Project that

would better have reflected the Government‘s priorities and start without the legacy of the

original Project.

61

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Name Title Unit Responsibility /

Specialty

Lending

Demba Ba Sector Manager AFT

Mourad Belguedj Lead Energy Specialist COC-Oil Oli and gas

Javier Burgos Transport

Yann Burtin Operations Officer CIT Telecoms and ICT

Amy Champion Program Assistant Program Assistant

Judite Fernandes Language Program Assistant Project documentation

Michael Fowler Disbursement Officer Disbursement officer

Olivier Fremond Capital markets

development

Serigne Omar Fye Sr. Environmental Specialist AFT Environment

Simon Gray Lead Country Officer ECC-ECA Peer reviewed

Kristin Ivarsdotter Sr. Social Development

Specialist

AFT Social Specialist

Andres D. Jaime Sr. Financial Specialist ECSPF

Chad Leechor Sr. Economist AFT PSD

Ying Liang Sr. Information Management

Specialist

Telecoms and ICT

Paul Noumba Sr. Telecoms Specialist CIT Telecoms and ICT

Bienvenu Rajaonson Sr. Environmental Specialist AFTEN

Gervais

Rakotoarimanana

Sr. Financial Management

Specialist

AFTFM Financial management

Sylvain Rambeloson Sr. Procurement Specialist AFTPC Procurement

Onno Ruhl Lead PSD Specialist AFT PSD

Marie-Ange Saraka-Yao Senior Financial Officer TTL

Edgar Saravia Lead PSD Specialist MNC-

MNA

PSD, regulation, peer

reviewer

Maryanne Sharp Operations Analyst AFC

Raj Soopramanien Sr. Counsel LEG Legal counsel

Amadou Tidiane Toure Sr. Procurement Specialist AFT

Cecile Wodon Language Team Assistant AFT Project documentation

Irene S. Xenakis Lead Specialist AFT

Supervision/ICR

Jean Charles Amon Kra Country Officer AFCRI

Volana Andriamasinoro Program Assistant AFMMG Mission support

Saholy

Andriambololomanana

Sr. Program Assistant AFCO8 Mission support

Landy Frank

Andrianjatovo

Driver

Sandrika Minah Ateifa Team Assistant AFCO1 Mission support

Slaheddine Ben-Halima Consultant AFTFE

62

Name Title Unit Responsibility /

Specialty

Laurent Besançon Sr. Regulatory Specialist CIT Telecoms

Jyoti Bisbey Operations Analyst FEUFS

Mazen Bouri Sr. PSD Specialist AFTFE

Michael Engman Economist AFTFE ICR author

Jean Paul Feno Safeguards Specialist AFTS1 Safeguards

Marc L. Heitner Consultant

Sidonie Jocktane Program Assistant AFTFP Mission support

Amadou Konare Sr. Environmental Specialist AFTEN

Isabel Neto Policy Specialist ICT

Eavan O‘Halloran Sr. Country Officer AFMMG

Noroarisoa

Rabefaniraka

Sr. Transport Specialist AFTTR Transportation

Ellena Rabeson Operations Officer AFMMG

Aminur Rahman Sr. Investment Policy Officer CICRS

Gervais

Rakotoarimanana

Sr. Financial Management

Specialist

AFTFM Financial management

Nathalie Ramanivosoa Team Assistant AFMMG Mission support

Sylvain Rambeloson Sr. Procurement Specialist AFTPC Procurement

Liliane Randrianarivelo Accounting Expert Consultant Financial management

Vohangitiana Rarivoson Consultant AFMMG Mission support

Ganesh Rasagam Sr. PSD Specialist AFTFE PSD

Lova Ravaoarimino Procurement Specialist AFTPC Procurement

Josiane Raveloarison Sr. PSD Specialist AFTFE PSD, TTL

Fanja Ravoavy Operations Officer FIAS

Ann Christine Rennie Lead Financial Sector

Specialist

AFTFS

Ivan Rossignol Sector Manager AFTFE PSD, TTL

Claude Sorel Sr. PSD Specialist AFT PSD

William F. Steel Consultant AFTEG

63

(b) Staff Time and Cost

Stage of Project Cycle

Staff Time and Cost (Bank Budget Only)

No. of staff weeks US$ thousand (including

travel and consultants)

Lending

FY00 14.03 43.7

Total

Supervision/ICR

FY01 87.6

FY02 38.5

FY03 68.0

FY04 139.4

FY05 91.7

FY06 77.7

FY07 54.6

FY08 76.4

FY09 42.6

FY10 56.9

FY11 59.5 (update)

Total 792.9

64

Annex 5. Beneficiary Survey Results

1. A roundtable discussion with a small group of Malagasy investors was organized

during the November 2010 ICR mission. The focus of the discussion was to get a better

understanding of how the privatization and liquidation process had been received by local

investors—in particular with regards to transparency, openness and fairness.

2. The investors had all taken part in the divestiture process and the group echoed the

messages of STP that most of the public assets were in bad shape. A lack of competition, a

poor business environment and legal uncertainties were their main concerns as business

leaders. Some public assets were split up according to their regional locations, which

facilitated participation in the bidding process by smaller domestic investors. The main initial

concern of the investors was their negative experiences of the liquidation and privatization

process first undertaken in 1996. They argued that the Government had sold some assets,

collected the money, but then refused to cede control of the assets. While the Government has

hitherto failed to pay several creditors of liquidated companies, the roundtable participants

did not have the same negative experience in the 2000s.

3. The group argued that the sale of assets had been sufficiently open, transparent and

equitable. Assets were advertised in journals and prospective investors could buy the bidding

documents for a low price. While the divestiture process in the 1990s had been awarded to

the highest bidder in a single round of bidding, the 2000s divestiture process was organized

as an auction. This revenue maximizing mechanism was much disliked by the investors as it

lowered their chances to strike bargains—although acquired assets had to be held for a

minimum of two years by the new owner. They also complained about the 20 percent VAT

that was collected on the winning bids. It was noted that there was some legal uncertainties

associated with the implementation of the privatization law but it had not stopped the process.

4. The group also argued that the committee established by STP and the Government

had followed rules ―on the dot‖ in the auctions they had participated in: envelopes were

opened in the public and offers could be rejected if the bidder failed to comply with all

conditions. They noted that the President had taken part in the auctioning of one asset and all

competing bids had been rejected due to provision of incomplete information. There were

complaints related to the Government‘s failure to live up to some of its promises to clear all

outstanding arrears as one investor mentioned that she had had to pay tax arrears to the local

tax office in Mahajanga Province for a property she had acquired in an auction (yet it was not

clear as to whether there was any fault of the Government in this case). There were also some

concerns raised that some of these cases had been properly settled by the authorities while

others remained open.

5. Another investor has a bad experience in acquiring land previously held by SOLIMA.

Following the purchase, he learnt that the company lacked proper title to parts of the land,

which put the property in legal limbo, and the situation was made worse due to the perceived

corruptibility of the land titling office. This was apparently not the only situation where STP

auctioned land without proper title. In addition, the investors noted that the divestiture of

SOLIMA had been perceived as less transparent than the other assets. It was unclear,

however, whether these issues occurred in PATESP or PSDP2.

6. Finally, the roundtable participants argued that the divestiture process could be

improved in the future if: (i) remaining legal uncertainties about the implementation law were

65

removed, (ii) the application of rules and tax arrears was more consistent, and (iii) political

involvement and conflicts of interest were tackled. Everybody agreed that political ownership

and meddling had destroyed too many national assets.

66

Annex 6. Privatization transactions supported by the Project in 2002-2010

N° Company Sector Year completed /

situation at closing

Total income

[MGA

thousand]

Income in

2003-2010

[MGA thousand]

Cost*

[MGA thousand]

Mode Acquirer

1 RNCFM Railways Northern network

completed in 2002;

southern network

never done

0 0 76,513 Concession Madarail

2 HASYMA Cotton 2004 3,412,200 3,412,200 1,073,037 Sale of shares DAGRIS

3 TELMA Telecom 2004 24,647,899 24,647,899 2,023,486 Sale of shares DISTACOM

4 SOLIMA Petroleum Assets privatized

pre-2002; liquidation

ongoing

51,220,847 9,258,636 7,509,565 Transfer of assets

and liquidation

Jovenna, Total, Shell, Galana, Moco, Logistique

Pétrolière

5 AAA Hydro-agricultural

network

2008 210,989 210,989 39,530 Liquidation Raherinirina Christian, Tilahizandry, Ratsimandresy,

Amin Hadjee, Rabotso Desiré, Sté ETEMAD, Rakoto

Harivelo, Rafaramalala, Randrianatoandro Dieudonné,

Rabarison

6 AFM Slaughter house 2008 120,000 7,591 Liquidation IDF

7 ANM Slaughter house 2008 73,599 7,591 Liquidation Mahommed

8 FEB Coffee 2008 16,164 Liquidation Randrianarijaona Harson Théophile

9 FESA Farming 2008 48,815 48,815 17,504 Liquidation Fety Alain Patrick, Rabemanantsoa Rado, Rakotovao

Noelison, Manjakavelo

10 SOCOMI Industrial

maintenance,

metallurgy

2008 6,518 Liquidation

11 FORESTRAS Drilling and

exploration


12 SEVIMA Cannery 2009 3,000 4,080 Liquidation Rakotoarisoa Mamiarinjaka

13 SOMALAC Agricultural

development

2009 6,933 6,933 7,999 liquidation Silac, Andriamanja kamahery Edouard, Ranaivo

Samuel, Rajaobelona Lalaina, Razafindrazaka Jacques,

Rakouth Barirandrana

14 SOPRAEX Medical plants and

essential oils


15 ARS Land transport 2010 477,735 477,735 7,591 Liquidation Aremec, Sodiat, Ramamonjisoa Benjamin,

16 CMN Maritime transport 2010 7,999 Liquidation

17 SIB Wood industry 2010 292,000 292,000 5,817 Liquidation Ste Mellis, Ste Vidzar

18 SERDI Design office 2010 7,591 Liquidation

19 SOMADEX Mining 2010 7,999 Liquidation

20 TORGINOL Paint and

derivatives

2010 444,872 5,817 Liquidation

21 BCL Dairy Pending payment of

creditors

13,547 Liquidation

67



Total income

[MGA

thousand]

Income in

2003-2010

[MGA thousand]

Cost*

[MGA thousand]

Mode Acquirer

22 FAMAMA Cashew Pending payment of

creditors

833,000 7,999 Liquidation Rabetso D. Bemanana Remi, Rasoanadrasana Nasolo

Meltine, Harilala Kalidas ….

23 FEV Farming Pending payment of

creditors

16.164 Liquidation Raharimalala Edwige, Ramanadraibe Charlotte,

Ranivohelisoa Henriette, Ramiliarisoa Christine,

Ralinivo Jeanne, Tsaboto Roger

24 KAFEMA Coffee roasting Pending payment of

creditors

500,700 500,700 19,418 Liquidation Sté SIM, Cnaps

25 LANSU Lobster finishing Pending payment of

creditors

4,000 13,547 Liquidation Wuchao Ying Wa Christian

26 ROSO Trading and

distribution

Pending payment of

creditors

7,245,086 7,245,086 157,013 Liquidation TIKO, Ramimpex, Fiavama, Sodiat, Rafidisaona

Nodier, Manesor, Solofo Mandimbisoa, Manantsara,

Rabenatoandro Lantoniaina

27 SICE Trading and

distribution

Pending payment of

creditors

352,320 33,769 4,080 Liquidation Charline Li, Fidhahoussen, Ho Sai Thion,

Ramarosandratana Guy, Andriamasinoro Haja,

Mahomed Hassan, Rajaonary Estein, Herinirina

Patricia, Sahrabano, Rafidisaona Nodier

28 SOAMA Agricultural

development

Pending payment of

creditors

40,404 Liquidation

29 SOGEDIS Trading and

distribution

Pending payment of

creditors

202,650 7,591 Liquidation

30 SOMACODIS Trading and

distribution

Pending payment of

creditors

5,474,629 3,186,765 70,592 Liquidation Claudette Aimée, Ernestine, Jao Manjary Amady, Ets

Nivoniaina, Jean Balbine, Ida François, TIKO, Sté

Transmaika, Sté Alma, Magro, Rafidisaona Georges,

Rakoto Jean Paul, Charline Li, Tadahy Huga,

31 SOMAPALM Palm grove Pending payment of

creditors

13,547 Liquidation

32 SUMATEX Textiles Pending payment of

creditors

821,000 821,000 5,817 Liquidation Mozize

33 SIRAMA Sugar Ambilobe &

Namakia on 20-year

management

contracts signed in

June 2007. Nosy Be

& Brickaville

establishments

pending

12,918,290 12,918,290 1,245,370 Private lease

contract

Complant in Ambilobe and Namakia

34 ADEMA Airport management Suspended 149,645 Undefined

35 COROI Trading and

distribution

Suspended 1,931,755 810,000 177,954 Liquidation Claudette Aimée, Michel, Rafidisaona Georges, TIKO

36 FIMA Land transport Suspended 365,000 7,591 Liquidation Compagnie Vidzar

37 DARRIEUX Trading and Suspended 1,548,888 1,358,339 4,080 Liquidation Sté SIMMA, Hassim Zhora Kathoune, TIKO, Rakoto

68



Total income

[MGA

thousand]

Income in

2003-2010

[MGA thousand]

Cost*

[MGA thousand]

Mode Acquirer

distribution Jean Paul, Charline Li, Seraly Sahrabanou,

Razafimbelo Christian Yolande

38 JIRAMA Water and

electricity

Suspended 4,852,184 Management

contract

Lahmeyer International (2005/03 – 2007/03

39 SINPA Trading and

distribution

Suspended 3,522,416 2,306,863 189,354 Liquidation Arline Marthurine, Fernand Jeannot, Kolotsara, Sté

SIM, Sté ITD, TIKO, Sylvain Rambelo son,

Dennemont, Moustapha

Abdou, Goulamaly Nazar, OTIV DIANA,

Rasolondraibe Christophe…

40 SMTM Maritime transport Suspended Liquidation

41 Air

Madagascar

Air transport Never conducted 355,052 Management

contract

Lufthansa Consulting (2002/10 – 2006/05)

42 SBM Shipping Never conducted 2,153 Undefined

43 SOFITRANS Catering, duty free,

hospitality

Never conducted Undefined

TOTAL 118,459,675 67,529,086 18,216,584

Source: STP (2010; 2011). * The Project also covered some minor arrears remaining from PATESP on Toly in 2004 and SEVMACAM in 2003.

69

Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR

The report: “Contribution de l’état Malgache au Rapport de Fin d’exécution et de Résultat du

PDSP II Prépare par la Banque Mondiale”, was submitted to the ICR author on May 10,

2011.

Le PDSP II ou « Deuxième Projet de Développement du Secteur Privé » (ci-après le « Projet »)

est le prolongement du PATESP ou Projet d‘Appui Technique au Secteur Privé. Signé en octobre

2001, il est entré en vigueur au mois de novembre 2002. Le Projet vise à permettre au

Gouvernement de Madagascar (i) d'améliorer l'accès aux principaux services publics, d'en

accroître la fiabilité et d'en réduire le coût et (ii) de stimuler la compétitivité des entreprises

malgaches. Bien que l‘Accord de Crédit ait été amendé 7 fois, et les activités revues et corrigées

à plusieurs reprises, les objectifs du Projet sont restés les mêmes.

Mis en oeuvre entre deux crises socio politiques majeures, celle de 2002 et celle de 2009, le

Projet a donné des résultats raisonnablement satisfaisants. Les principales réalisations gravitent

autour des activités liées aux indicateurs suivants : augmentation des investissements privés dans

les secteurs ciblés, amélioration de l‘accès à des services fiables, abordables et de qualité dans le

secteur des télécommunications. L‘état d‘avancement du programme de liquidation est

également très appréciable. Les principales lacunes relevées concernent tant la structure de mise

en oeuvre que les modalités d‘exécution de certaines activités du Projet.

Si dans sa conception initiale, le Projet devait être sous la tutelle d‘un Ministère unique en charge

du développement du secteur privé et de la privatisation, à l‘issue de la crise politique de 2002 ce

Ministère a été dissout et ses attributions réparties entre celui chargé des Finances pour la

privatisation, et celui chargé de l‘Industrie et du Commerce pour le développement du secteur

privé. Ce changement institutionnel a impacté l‘opérationnalisation du Projet, dans la mesure où

les deux agences d‘exécution (ci-après les « AGEX ») ont dû entretenir une relation directe avec

leur Ministère de tutelle respectif, tandis que l‘Unité de Coordination du Projet a vu son rôle

devenir superflu. La structure d‘exécution, devenue complexe et inadaptée, n‘a toutefois été

modifiée qu‘à la suite de la restructuration de 2006.

Concernant l‘exécution du Projet, un certain nombre d‘activités n‘a pu être mené à terme suite à

la décision de la Banque Mondiale de suspendre son financement du fait de la crise

sociopolitique de 2009 : ces activités concernent aussi bien des activités de liquidation

d‘entreprises que relevant du développement du secteur privé.

Des activités, notamment dans la Composante Secteur Privé, n‘ont abouti faute de meilleure

préparation et de concertation entre l‘Administration et les responsables du Projet. L‘échec dans

la mise en place « l‘Export Processing Zone » (EPZ) de Tsarakofafa malgré les investissements

réalisés dans les infrastructures (eau, électricité, téléphone), en est le cas le plus marquant. De

même, aucune entreprise malgache n‘a pu réellement tirer profit de l‘adhésion de Madagascar à

l‘African Trading Insurance (ATI).

Concernant la performance du Projet, le Programme de Désengagement des principales

entreprises publiques a été appréciable malgré la suspension du processus de privatisation dans le

70

secteur aérien (cas d‘Air Madagascar et d‘ADEMA) ou la tergiversation de l‘Etat sur le cas de la

SIRAMA. Les résultats dans le cadre du volet développement du secteur privé, sont d‘un autre

côté plus mitigés. Hormis les réalisations dans le cadre de l‘amélioration des indicateurs doing

business, les activités n‘ont pas abouti à des avancées notables. D‘autres réalisations acquises en

cours de projet ont été perdues du fait de la crise de 2009 (AGOA, confiance des investisseurs,

qualité de l‘environnement des affaires, etc.).

1. Analyses et commentaires par composante :

1- Composante 1 : Renforcement des capacités des organes de réglementation.

a- Secteur Pétrolier

Les interventions dans le secteur pétrolier ont permis de libéraliser le secteur et de garantir la

fourniture des produits pétroliers aux consommateurs. Suite à la privatisation de la SOLIMA en

2003, la Loi n° 2004-003 a été sortie en juin 2004 portant sur la libéralisation du secteur

pétrolier. Cette loi a été suivie par un Décret d‘application n° 2004-669 la même année. La vérité

des prix des produits pétroliers à la pompe a pu ensuite être appliquée. Un audit environnemental

a été réalisé en 2005, et a abouti à l‘élaboration d‘un plan d‘action de mise en place des mesures

de protection et mitigation des risques, la remise aux normes des 79% des stations-services dans

l‘île. Le renforcement des capacités des agents de l‘Office Malgache des Hydrocarbures (OMH),

dans la formulation des règlements techniques et économiques, et de surveillance des risques

environnementaux, n‘a pas été effectué faute de budget, suite à l‘amendement du projet.

b- Secteur Télécommunication

Des activités ont été prévues dans ce secteur, mais elles ont été amendées sans avoir jamais été

mises en oeuvre. Il s‘agit des activités de renforcement de capacités des agents de l‘Office

Malgache d‘Etudes et de Régulation des Télécommunications (OMERT), et la gestion de

fréquence. Seule la téléphonie rurale a pu être lancée, mais sa coordination a été pilotée par l‘ex-

Direction Générale de la Technologie d‘Information et de Communication du Ministère chargé

de la Télécommunication, au lieu de l‘OMERT.

2- Composante 2 : Mise en oeuvre des transactions de privatisation

a- Secrétariat Technique à la Privatisation STP

Le STP a joué un rôle important dans la gestion des opérations de privatisation des entreprises

publiques. Malgré la complexité du processus de privatisation, le STP a pu atteindre plus de 72

% des opérations de privatisations. Le renforcement des capacités de l‘équipe (recrutements,

formations) a également beaucoup contribué à cette performance. Le STP a repris la coordination

après la suppression de l‘Unité de Coordination du Projet (UCP) à partir de 2006. Il a pu mener à

terme le Projet, même si sa responsabilité était non négligeable, eu égard aux nombreux dossiers

qu‘il avait à traiter dans la privatisation. Une étude stratégique sur la réorientation et la

réorganisation du cadre institutionnel du désengagement de l‘Etat vers le Partenariat Public Privé

(PPP) a été élaborée par le STP en 2004. Le PPP a pour avantage de favoriser le financement des

investissements et la prise en charge de la gestion par le secteur privé sans recourir au transfert

de la propriété des actifs de l‘Etat.

71

Un projet de loi sur le Partenariat Public Privé (PPP) a été établi en 2008 sur financement de la

Banque Africaine de Développement à travers le Projet de Réforme Institutionnelle pour la

Bonne Gouvernance (PRIBG), mais elle n‘a pas encore été adoptée à ce jour. Elle a déjà été

soumise au Comité de Réflexion sur le Droit des Affaires (CRDA) pour analyse et discussion

avant sa soumission auprès de l‘Assemblée Nationale et le Sénat.

Suite à la crise de 2009 et à la décision de la Banque Mondiale de suspendre ses activités, tous

les contrats des liquidateurs (qui sont tous des experts-comptables et/ou juristes ayant travaillé

sur plusieurs dossiers de liquidation des entreprises) ont été résiliés, mais les actes juridiques de

nomination n‘ont pas encore été dénoncés.

Concernant les processus de liquidation n‘ayant pas abouti, la principale recommandation est de

reprendre les mêmes liquidateurs. En effet, il sera ardu pour de nouveaux liquidateurs

d‘apprendre et de maîtriser l‘historique des dossiers, à cause de leur volume et de leur

complexité, alors que les anciens liquidateurs les maîtrisent déjà, et détiennent les pièces

originales des opérations de liquidation déjà réalisées. De ce fait, ils en constituent la mémoire

institutionnelle incontournable. Enfin, le cas du STP a permis de signaler qu‘il est important

d‘inclure ou d‘associer, dans les structures de mise en oeuvre des projets, des fonctionnaires afin

de permettre le maintien d‘une mémoire institutionnelle et l‘appropriation des dossiers par

l‘Administration à la fin desdits projets. Aujourd‘hui, en cas de clôture du STP, aucune branche

de l‘Administration ne sera en mesure d‘assurer un relais efficace, que ce soit pour les opérations

de désengagement ou les opérations de liquidation.

b- Programme d’Action Sociale et Economique pour la Réinsertion Professionnelle

(PASERP)

Le rôle du PASERP porte sur le traitement des agents licenciés et leur accompagnement en vue

de leur réinsertion professionnelle. A la clôture de ses activités en juin 2008, le PASERP a formé

4 277 travailleurs dans la démarche de réinsertion professionnelle, ce qui a abouti à

l‘établissement de 3 530 travailleurs déflatés en entreprise. Dans sa mise en oeuvre, le projet a

rencontré des problèmes relatifs au volet social. Malgré les activités de communication et de

sensibilisation, ainsi que l‘accompagnement des agents déflatés, ces derniers ont effectivement

suivi les formations dispensées dans le cadre du programme, mais les fonds « coup de pouce »

qui leur ont été octroyés, ont plutôt été dépensés dans des achats matériels, n‘ayant rien à voir

avec les activités qu‘ils auraient dû faire. Les principales leçons à tirer sont :

La mise en oeuvre d‘un programme de réinsertion professionnelle ne peut être confiée

uniquement à une structure de Projet. Les collectivités locales et les Ministères devraient

être impliqués activement dans leur responsabilité respective (résolution des problèmes

fonciers, sociaux, infrastructures…), et s‘approprier la démarche.

Les institutions de micro-finance n‘ont pas pu répondre aux besoins des personnes

établies en entreprise. De ce fait, ces dernières ont eu recours aux usuriers, plus flexibles

et relativement moins contraignants.

Tout programme de réinsertion professionnelle doit aller de pair avec un programme de

réinsertion sociale pour accompagner les personnes dans leur réintégration dans leur

communauté.

72

c- Fonds de Portage et de Privatisation (FPP)

Aucune des activités initialement prévues n‘a été menée à terme, en raison du retard important

dans la mise en place de la structure de gestion, et de l‘arrêt du financement de la Banque

Mondiale, lequel est intervenu quelques temps après la mise en place du FPP. Les activités

réalisées ont plutôt porté sur la dotation en matériel et équipements et l‘appui au budget de

fonctionnement hors salaire du FPP, à compter de la mise en place de la nouvelle structure de

gestion.

Il est toutefois à noter que le soutien (technique et documentaire) du Projet, a grandement facilité

le démarrage du FPP. En effet, le STP, structure financée par le Projet, a assuré la mémoire

institutionnelle de la structure. Les travaux d‘archives réalisés par le STP, depuis 2003, ont été

utilisés pour appuyer le FPP. Par ailleurs, le STP avait anticipé le programme de transfert des

actions des entreprises vendues, et avait déjà élaboré les termes de références des différentes

prestations de service relatives à la mise en oeuvre du Programme de Désengagement de l‘Etat.

Bien que les ressources financières aient été limitées, et la mise en place du FPP basée sur des

travaux d‘archives, la structure a pu démarrer et fonctionner. Jusqu‘à maintenant (fin de

l‘exercice 2010), 37,52 % des actions des entreprises privatisées ont pu être transférées au FPP.

Il s‘agit d‘actions provenant de la privatisation réalisée avant 2005, mais aucune d‘elles n‘a été

offerte aux petits investisseurs nationaux à cause du changement de stratégie. En effet, une

stratégie consistant en l‘achat et la vente des actions des entreprises à privatiser au public a été

adoptée. Cette stratégie, déjà validée par le Ministère des Finances et du Budget en début 2010,

est encore dans sa phase de mise en place.

3- Composante 3 : Elaboration de nouvelles activités d’appui au secteur privé.

a- Guichet Unique des Investissement et de Développement des Entreprises (GUIDE) Le guichet unique a pour mission de faciliter les procédures de création d‘entreprises, ceci afin

de dynamiser le secteur privé, et de favoriser l‘émergence des entreprises ainsi que d‘assurer la

promotion des Investissements Directs Etrangers. Suite à la restructuration du Projet, l‘Etat a

créé une nouvelle structure dénommée Economic Development Board of Madagascar, laquelle a

intégré toutes les activités du guichet unique en son sein. Le GUIDE a rencontré les problèmes

suivants :

Le traitement inégal du personnel au sein de la structure a démotivé les fonctionnaires

affectés par les différents Ministères pour le traitement des dossiers. La présence des

consultants, qui sont souvent mieux payés que les fonctionnaires dans la structure a

entraîné un rythme de travail à deux vitesses.

Le fonctionnement de la structure a été financé par le Projet, alors qu‘elle aurait sûrement

pu se créer des ressources financières par le biais de ses activités, pour couvrir son propre

fonctionnement.

Etant donné l‘importance d‘une telle structure dans la dynamisation du secteur privé, il est

recommandé de réfléchir sur les mesures de pérennisation de la structure et des acquis du Projet,

en créant des services payants pour financer le fonctionnement de la structure. Les fonctionnaires

détachés par l‘Administration devraient être motivés à travers plus de formations et

d‘indemnités… pour soutenir la performance de toute l‘équipe. Il apparaît tout aussi nécessaire

73

de garder les personnes affectées par l‘Administration publique au sein de la structure pour une

réelle continuité des activités entamées.

b- Export Processing Zone (EPZ)

L‘Export Processing Zone avait pour but de créer une zone industrielle dédiée sur un terrain

aménagé à Tsarakofafa, dans la province de Toamasina. Les activités réalisées ont consisté en la

mise en place d‘infrastructures d‘un coût total de 1,5 milliard Ariary ou 1 million USD (eau,

électricité et télécommunication), pour faciliter l‘installation des sociétés dans la zone. La société

détentrice du bail emphytéotique s‘était engagée en septembre 2008, à travers la signature d‘un

Protocole d‘Accord avec l‘Etat, à mener des activités de développement sur le site. Mais aucune

viabilisation n‘a été réalisée depuis cette date. Selon le rapport de supervision de la Banque

Mondiale en 2010, la zone est actuellement squattérisée dans sa quasi-totalité.

Une démarche visant à la sécurisation de la zone, à travers des études préliminaires sur la

situation juridique et foncière et le transfert du titre de propriété à l‘Etat, aurait dû précéder le

lancement des activités d‘installation des infrastructures. Dans le cas de ce projet, une étude

relative au ciblage des entreprises et usines à implanter dans le site a été menée en 2004, à l‘issue

de laquelle l‘agroalimentaire a été proposé comme secteur d‘activité de base. L‘Etat cherche

aujourd‘hui une alternative pour rentabiliser les infrastructures déjà mises en place dans la zone.

La Société de Gestion du Port Autonome de Toamasina (SPAT) s‘est déjà engagée à annuler

tous les titres de propriété du site et à enlever tous les squatters qui s‘y sont installés.

c- Investissements Directs Etrangers (IDE)

Cette activité consiste en la promotion de Madagascar au niveau international pour inciter les

opérateurs internationaux à investir dans le pays. Le Projet a surtout financé les déplacements et

la participation de la délégation malgache constituée par des opérateurs privés et des

responsables de l‘Administration, dans des événements comme les foires, les tables rondes, les

road shows. Ces activités ont été menées de manière ponctuelle, et étalées sur toute la durée du

projet, en fonction des manifestations et rencontres existantes, sans planification au préalable.

Néanmoins, un des points forts de cette activité a été l‘éligibilité de Madagascar à l‘African

Growth Opportunity Act (AGOA). Ces missions ont par ailleurs favorisé le rapprochement entre

le secteur privé et l‘Administration.

Afin d‘en tirer les meilleurs avantages, il serait indiqué de réaliser les actions de marketing et de

promotion avec des mesures d‘accompagnement pour le suivi des actions de promotion et de

marketing. Les activités de promotion et de communication nécessitent une bonne organisation

et de planification de la part d‘une cellule de coordination (entité qui n‘a pas été mise en place

par le Ministère).

d- Comité d’appui au pilotage de la relance de l’entreprise (CAPE)

Le CAPE est une structure créée pour redynamiser le secteur privé après la crise sociopolitique

de 2002. Il s‘agit d‘une plateforme de dialogue entre le secteur privé et les autorités de l‘Etat

pour la relance économique. Il vise à instaurer un climat de confiance pour attirer les

Investissements Directs Etrangers d‘une part, et pour impliquer le secteur privé dans les

orientations de la politique de développement malgache, d‘autre part. Le volet CAPE a été

clôturé en 2006.

74

Des études sur différents domaines du secteur privé (fiscalité du tourisme, le financement des

Petites et Moyennes Entreprises ou PME…) et des formations transversales (montage de dossiers

crédit, gestion d‘entreprise, normes et qualité) pour les PME ont été réalisées. Le secteur privé a

également pu participer à l‘établissement de la loi de Finances et l‘élaboration des textes

juridiques (loi sur la concurrence, loi sur les sociétés). Le dialogue a permis d‘adopter 49

mesures de facilitation douanières. Malgré cela, le CAPE a été plus orienté vers le financement

des études que dans la gestion d‘une plateforme d‘échange et de concertation entre le secteur

privé et le secteur public. Le secteur privé a plutôt privilégié la concertation directe avec les

dirigeants (Présidence, membres du Gouvernement). D‘autant plus que le Secrétaire Exécutif du

CAPE était perçu par certains groupements du secteur privé comme étant trop proche d‘un

groupement du secteur privé, dont il occupait la vice-présidence.

A la clôture de cette composante, les acquis (études, matériels…) auraient dû être capitalisés

(base des données) et valorisés par une autre structure comme la Chambre de commerce, qui

constitue déjà une plateforme de dialogue et de concertation pour tous les opérateurs privés. Le

renforcement de la Chambre de commerce, au lieu de créer une nouvelle structure, aurait été plus

rentable et efficace puisqu‘il s‘agit d‘une structure pérenne.

e- African Trade Insurance (ATI)

L‘ATI est une agence d‘assurances permettant la couverture des risques politiques, outre ceux

sur les transactions courantes. Cette entité devait sécuriser les investissements mais la

contribution financière versée par l‘Etat Malgache n‘a pas été suffisante. Sur les nombreux

dossiers déposés, aucune entreprise à Madagascar n‘a bénéficié d‘une garantie de la part de

l‘ATI. L‘échec dans le cadre de cette activité aurait pu être pallié par une étude de marché

préalable. Cette démarche aurait pu déterminer la demande d‘un tel produit et la taille des

investissements à assurer avant le lancement. Par ailleurs, il aurait été nécessaire de réaliser une

campagne d‘information et de communication auprès des opérateurs privés sur les objectifs, la

nature des services offerts et les démarches à adopter pour en bénéficier.

f- Business Partners International (BPI)

Cette sous-composante a été créée suite à l‘accord signé entre l‘Etat et Business Partners

International en 2005. Elle participe aux activités du Centre de Solution Petites et Moyennes

Entreprises de la Société Financière Internationale (SFI). La participation de l‘Etat Malgache

porte sur l‘assistance technique aux PME bénéficiaires des crédits octroyés, et le BPI sur le fonds

d‘investissement (10 millions USD) pour les PME à Madagascar. A la clôture du Projet, 53

PMEs ont pu bénéficier de l‘assistance technique.

Sur les 2 millions USD affectés à l‘assistance technique, un peu moins de 200 000 USD ont pu

être utilisés. La crise sociopolitique qui a débuté en janvier 2009, a en effet eu un impact

important sur l‘économie malgache, et par conséquent sur l‘environnement des affaires à

Madagascar. Ainsi, BPI a décidé de clôturer prématurément toutes les activités du fonds

d‘investissement et du fonds d‘assistance technique à Madagascar en juin 2010, si la date de

clôture prévue est en 2013. Une part importante, de 1 525 000 USD, n‘a pas été utilisée et a été

remboursée par le BPI dans le compte du Projet à Washington, en décembre 2010.

75

g- Tourisme

La sous-composante Tourisme a été clôturée en 2006. Elle avait pour objectif de développer une

Réserve Foncière Touristique (RFT) à Anakao, Beheloka et Soalara dans la province de Tuléar.

Les sites touristiques ont été délimités et les travaux de bornage ont été effectués par le Ministère

du Tourisme pour sécuriser les différents sites. Les plans d‘aménagement sont déjà élaborés, et le

Ministère du Tourisme en partenariat avec l‘EDBM ont été chargés de la promotion des sites

auprès des investisseurs potentiels. Suite à la crise sociopolitique, aucune promotion de ces sites

n‘a encore été démarré jusqu‘à ce jour, selon l‘EDBM. Des habitants ont alors commencé à

s‘installer dans la réserve, ce qui aura présenté un surcoût en terme de déplacement et de

régularisation du volet social à la reprise de l‘activité. Il est recommandé à l‘Etat, notamment au

Ministère de tutelle et les autorités locales, de procéder à la sécurisation (juridique, physique) de

ces sites afin de contenir le surcoût dans la relance de cette activité.

2. Bilan des réalisations

2.1. Impact du Projet :

Les principaux indicateurs d‘impact du Projet relatifs à ses activités sont l‘augmentation des

investissements privés dans les secteurs ciblés et l‘amélioration de l‘accès à des services fiables,

abordables et de qualité dans chaque secteur. Augmentation des Investissements Directs

Etrangers Concernant les investissements privés dans les secteurs visés, nous avons enregistré

778 millions USD d‘investissements privés en 2007 contre 95 millions USD en 2004, mais avec

un rapport IDE/PIB de 6,4 % en 2009 contre 10,4% en 2007. Cette augmentation provient en

grande partie des grands projets miniers, mais elle démontre aussi le dynamisme du secteur privé

et l‘effort du Gouvernement dans l‘amélioration de l‘environnement des affaires pour sécuriser

les investissements. Si l‘on ne tient pas compte des investissements dans le secteur minier et des

recettes de la privatisation, la part des investissements se retrouve réduite et le taux IDE/PIB

devient 4,2% en 2007 et 1,1 % en 2009. Il est toutefois difficile d‘apprécier la contribution du

Projet dans le résultat d‘ensemble.

Amélioration de l’accès aux services

L‘analyse s‘est portée sur le secteur des télécommunications où dans l‘ensemble les résultats

sont satisfaisants.

i) le nombre d‘abonnés d‘internet a augmenté de 15 000 abonnés en 2003 à 26 692 abonnés en

2009,

ii) le taux d‘accès aux lignes téléphoniques (fixe et mobile) a connu une augmentation de 31,6%

en 2009 à la fin du projet,

iii) Si l‘objectif de cet indicateur est d‘avoir un « niveau de tarif égal au plus à fin 2006 à la

moyenne appliquée par les opérateurs de la région et pour lesquels la concurrence est équivalente

à celle existante à Madagascar », le niveau de tarif moyen local (mobile local) est passé de 0,58

USD par 3 min (Tarif moyen appliqué par les opérateurs dans la région2 était de 0,51USD/3

min) en 2003 à 0,14 USD par 3 min en 2009, (Tarif moyen appliqué par les opérateurs dans la

région est de 0,21 USD/3 min).

Il a été difficile de collecter le nombre des usagers d‘internet dans la mesure où l‘OMERT ne

dispose pas de ces données. Néanmoins, le nombre d‘abonnés d‘internet a augmenté de 56%

entre 2003 et 2009. L‘amélioration de l‘accès aux services de télécommunications s‘est

76

également traduite par l‘augmentation du taux d‘accès aux lignes téléphoniques (fixe et mobile)

de 31,6% à la fin du Projet, avec un tarif 33% (en 2009) moins cher que le tarif moyen appliqué

par les opérateurs dans les pays comparateurs (Togo, Sénégal, Maurice et Maroc).

2.2. Performance du Projet :

Programme de désengagement des principales entreprises publiques :

Concernant la performance du Projet dans le domaine de la privatisation, la situation des 54

entreprises publiques inscrites dans le programme de désengagement de l‘Etat à la clôture de

celui-ci se présente comme suit : 6 privatisations réalisées, 8 privatisations non réalisées, 21

liquidations effectuées, 12 liquidations en attente du paiement des créanciers par l‘Etat et 7

liquidations suspendues par des problèmes contentieux et fonciers.

Bien que le programme n‘ait pas été mené à terme, les résultats obtenus sont satisfaisants,

notamment dans le traitement des dossiers des entreprises à liquider. Les réalisations en matière

de privatisation d‘entreprises ont par ailleurs permis de redynamiser d‘une manière significative

les secteurs concernés (cas notamment des secteurs des Télécommunications et de

l‘Hydrocarbure). Par contre, la suspension du processus sur les entreprises du secteur aérien (Air

Madagascar et ADEMA) continue d‘affecter la compétitivité de l‘économie malgache et le

développement du secteur du Tourisme. Les différents atermoiements, sur le cas de la SIRAMA,

ont eu des conséquences des plus négatives avec l‘effondrement de la production nationale de

sucre et la perte de plusieurs milliers d‘emplois.

Depuis la clôture des transactions, plusieurs critiques sont entendues sur la pertinence de la

privatisation, la transparence du processus ou les modalités de transfert de certaines entreprises

publiques au secteur privé, cas notamment de TELMA, MADARAIL et HASYMA. Cela relève

l‘importance de la communication de l‘Etat envers le public, la société civile et le monde

politique, tout au long du programme de privatisation dans le but de présenter la situation de

départ, les objectifs de la réforme, les procédures et les modalités de mise en oeuvre, les

conditions de la vente et les résultats obtenus.

Développement du secteur privé

Au niveau du Secteur Privé, la performance du Projet est résumée par les indicateurs de résultats

suivants:

- 2 étapes et 7 jours pour créer une entreprise auprès de l‘EDBM. Ceci concerne

Antananarivo ;

- Nombre d‘entreprises créées : 2005 2006 2007 2008 2009 TOTAL

Antananarivo 882 1,115 1,171 1,138 909 5,218

Antennes 856 329 92

- Taux d‘occupation de la Zone Industrielle : 0%. Activité suspendue.

- Selon le site de ATI, aucune entreprise malgache n‘a bénéficié de la garantie ATI.

- 37 PME ont bénéficié du fonds d‘investissements ; 53 PME ayant bénéficié de

l‘assistance technique ; 319 emplois créés et 1108 emplois soutenus.

Le guichet unique a été intégré au sein de l‘Economic Development Board of Madagascar après

la restructuration en 2006. Les activités ont été ainsi reprises par cette nouvelle institution. Les

étapes et la durée du traitement des dossiers pour la création de l‘entreprise ont été très allégées.

77

Au début du Projet, il a fallu passer par 17 étapes pour 157 jours contre 2 étapes pour 7 jours lors

et après le Projet. Les différentes démarches peuvent être effectuées à un seul endroit. Tout cela a

insufflé un vent nouveau à l‘économie malgache boostée par l‘augmentation du nombre

d‘entreprises créées et qui est resté stable depuis 2005. Les résultats dans le cadre de ce volet

sont également mitigés. Hormis les réalisations dans le cadre de l‘amélioration des indicateurs

doing business, les activités n‘ont pas abouti à des avancées notables.

3. Performance de la Banque Mondiale

L‘équipe de la Banque Mondiale s‘est toujours montrée disponible pour le Gouvernement et

l‘équipe du Projet. Elle a prodigué des conseils techniques d‘importance et a démontré son

soutien dans sa flexibilité et sa capacité d‘adaptation, au vu des modifications fréquentes du

contexte socio-économique et des priorités du Gouvernement. Les discussions entre

l‘emprunteur (Ministères) et le bailleur ont permis d‘instaurer une confiance réciproque et une

bonne relation. Dans le cadre de ces discussions, les structures de gestion du Projet n‘y ont pas

toujours été associées. Les informations sur les décisions et les orientations leur sont parvenues

par l‘intermédiaire de la Banque Mondiale, mais non pas par leur hiérarchie respective.

4. Performance du Gouvernement

De manière globale, les résultats du Projet sont satisfaisants. Toutefois, un grand nombre

d‘activités, dont notamment au niveau de la composante développement du secteur privé n‘ont

pas donné de résultats probants (Export Processing Zone/Tsarakofafa, African Trade Insurance).

De même, les résultats au niveau de la privatisation des grandes entreprises demeurent partiels, le

sort réservé à des entreprises structurantes (Air Madagascar, ADEMA, JIRAMA) restant encore

incertain. Les résultats en matière de liquidation d‘entreprises publiques sont par contre très

positifs. La performance du Gouvernement a été handicapée par les modifications fréquentes

dans le cadre institutionnel avec la séparation du Ministère en charge de la privatisation et du

développement du secteur privé.

78

Annex 8. Comments of Co-financiers and Other Partners/Stakeholders

Not applicable. This project was executed by the Government of Madagascar with funding and

technical support provided by the World Bank.

79

Annex 9. List of Supporting Documents

EIU (2010), ―Madagascar: Country Report‖, March 2010.

Government of Madagascar (2006), ―Madagascar Action Plan 2007-2012‖,

http://siteresources.worldbank.org/INTMADAGASCAR/Resources/MAP_en.pdf.

GTZ (2009), ―International Fuel Prices 2009‖, 6th edition, More than 170 Countries.

International Monetary Fund (IMF) (2000), ―Madagascar to Receive US$1.5 billion in Debt

Service Relief: The IMF and World Bank Support Debt Relief for Madagascar under the

Enhanced HIPC Initiative‖, Press Release No. 00/81, December 22, 2000,

www.imf.org/external/np/sec/pr/2000/pr0081.htm.

——— (2004), ―IMF and World Bank Support US$836 Million in Debt Service Relief for

Madagascar‖, Press Release No.04/219, October 21, 2004,

www.imf.org/external/np/sec/pr/2004/pr04219.htm.

International Telecommunication Union (ITU) (2009), ―Measuring the Information Society‖.

——— (2010), ―Measuring the Information Society‖.

Katz, R.L., E. Flores-Roux and J. Mariscal, (2009), ―The Impact of Taxation on the

Development of the Mobile Broadband Sector‖, available online:

www.gsmamobilebroadband.com/upload/ resources/files/15072010174953.pdf.

World Bank (2000), ―Environmental Pre-Audit of Enterprises: Selection of Enterprises of

Audits‖, No. E-407, November 2000.

——— (2002),―Memorandum and Recommendation by the President of the International

Development Association to the Executive Directors on a Proposed portfolio

Restructuring in a Post-Conflict Environment in the Republic of Madagascar‖, October

22, 2002, Report No. P7561-MAG.

——— (2003), ―Implementation Completion Report (PPFI-P8000; PPFI-P8001; IDA-29560;

PPFI-P8800; PPFI-P8801) on a Credit in the Amount of SDR17.2 Million (US$ 23.8

Million Equivalent) to the Republic of Madagascar for a Private Sector Development and

Capacity Building Project‖, Report No.26256, February 23, 2003.

——— (2007), Country Assistance Strategy for the Republic of Madagascar for 2007-2011,

March 7, 2007, Report No. 38 135-MG, www-

wds.worldbank.org/external/default/WDSContentServer/ WDSP/IB/2007/04/27/

000020953_20070427084117/Rendered/PDF/38135.pdf.

——— (2011a), World Development Indicators.

——— (2011b), ―Madagascar: Country Brief‖, accessed on January 22, 2011,

http://go.worldbank.org/D41QD46W10.

U.S. Government (2009), ―Presidential Proclamation on Actions Under AGOA‖, December 23,

2009, www.america.gov/st/texttrans-

english/2009/December/20091223163633ptellivremos0. 4005657.html#.

80

Annex 10. Map of Madagascar

81

i Data retrieved from the International Telecommunication Union (ITU) database and the World Bank DDP website.

The ten countries for fixed line telephony: Burundi, Congo, DRC, Guinea-Bissau, Malawi, Niger, Nigeria, Somalia,

Sudan and Zimbabwe. Data for Congo and Guinea-Bissau were not available while data for DRC, Nigeria, Somalia

and Zimbabwe were partially available. The 22 countries for mobile telephony: Angola, Botswana, Burkina Faso,

Cameroon, Cape Verde, CAR, DRC, Congo, Eritrea, Ghana, Guinea, Guinea-Bissau, Malawi, Mozambique,

Namibia, Niger, Nigeria, Sierra Leone, South Africa, Tanzania, Zambia and Zimbabwe. Data for Guinea-Bissau

were not available while data for Angola, Botswana, Cameroon, Eritrea, Guinea, Niger, Nigeria, Sierra Leone,

Tanzania, Zambia and Zimbabwe were partially available. The countries were selected based on the conditions

mentioned in the PAD indicator. The 10 countries selected for the fixed line telephony average were those SSA

countries rated as having ―competition‖ in the market for national long distance calls (as supposed to none or partial

competition according to the World Bank ICT database). The 22 countries selected for the mobile telephony average

were those SSA countries rated as having ―competition‖ in the market for either analog or digital mobile telephony

(as supposed to none or partial competition according to the World Bank ICT database). The rate presented are the

simple average prices in US$ for ―peak‖ and ―off-peak‖ rates.

VatomandryVatomandry

MahanoroMahanoro

VarikaVarika

MananjaryMananjary

TsivoryTsivory

BeraketeBerakete

BelohaBeloha

BetrokaBetroka

ManjaManja

MandabeMandabe

MorombeMorombe

AnkazoaboAnkazoabo

BerorohaBeroroha

SakarahaSakaraha

BetiokyBetioky

AndrokaAndroka

AmpanihyAmpanihy

Midongy-Midongy-AtsimoAtsimo

AmbohimahasoaAmbohimahasoa

AntalahaAntalaha

MaroantsetraMaroantsetra

MananaraMananara

MoramangaMoramanga

AntanifotsyAntanifotsy

Ambatofinan-Ambatofinan-drahanadrahana

MiandrivazoMiandrivazo

MalaimbandyMalaimbandy

Belo TsiribihinaBelo Tsiribihina

AndilanatobyAndilanatoby

AndilamenaAndilamena Soanierana-IvongoSoanierana-Ivongo

AndriamenaAndriamena

SoalalaSoalala

BesalampyBesalampy

AntsalovaAntsalova

KandrehoKandreho

AnkazobeAnkazobe

VohimarinaVohimarina

AmbilobeAmbilobe

MandritsaraMandritsaraMampikonyMampikony

BefandrianaBefandriana

BealananaBealanana

AmbanjaAmbanja

AmboasaryAmboasary

ToamasinaToamasina

AmbatondrazakaAmbatondrazaka

AntsirananaAntsiranana

MahajangaMahajanga

ToliaraToliara

FianarantsoaFianarantsoa

ManakaraManakara

FarafanganaFarafangana

AntsirabeAntsirabe

MorondavaMorondava

MiarinarivoMiarinarivoTsiroanomandidyTsiroanomandidy

SambavaSambava

AntsohihyAntsohihy

TolanaroTolanaroAmbovombeAmbovombe

IhosyIhosy

MaevatananaMaevatanana

AmbositraAmbositra

MaintiranoMaintirano

Fenoarivo-AtsinananaFenoarivo-Atsinanana

ANTANANARIVOANTANANARIVO

DIANADIANA

SAVASAVA

SOFIASOFIA

ANALANJIROFOANALANJIROFOBOÉNYBOÉNY

BETSIBOKABETSIBOKA

ANALAMANGAANALAMANGABONGOLAVABONGOLAVA

ITASYITASY

MELAKYMELAKYALAOTRAALAOTRA

MANGOROMANGORO

ATSINANANAATSINANANA

AMORON’I MANIAAMORON’I MANIA

HAUTE-MATSIATRAHAUTE-MATSIATRA

IHOROMBEIHOROMBEATSIMO-ATSIMO-

ANDREFANAANDREFANA

ANOSYANOSY

ANDROYANDROY

ATSIMO-ATSIMO-ATSINANANAATSINANANA

MENABEMENABE

VATOVAVY-VATOVAVY-FITOVINANYFITOVINANY

VAKINANKARATRAVAKINANKARATRA

MayotteMayotte(France)(France)

Ank

arat

a

Massi fMassi fTsaratananaTsaratanana

Androy Plateau

Cli

f f o

f A

ng

av

o

Cl i

f f o

f B o n g o l a

v a

MaromokotroMaromokotro(2,876 m)(2,876 m)

Pic BobyPic Boby(2,658 m)(2,658 m)

TsiafajovonaTsiafajovona(2,642 m)(2,642 m) Vatomandry

Mahanoro

Varika

Mananjary

Tsivory

Berakete

Beloha

Betroka

Manja

Mandabe

Morombe

Ankazoabo

Beroroha

Sakaraha

Betioky

Androka

Ampanihy

Midongy-Atsimo

Ambohimahasoa

Antalaha

Maroantsetra

Mananara

Moramanga

Antanifotsy

Ambatofinan-drahana

Miandrivazo

Malaimbandy

Belo Tsiribihina

Andilanatoby

Andilamena Soanierana-Ivongo

Andriamena

Soalala

Besalampy

Antsalova

Kandreho

Ankazobe

Vohimarina

Ambilobe

MandritsaraMampikony

Befandriana

Bealanana

Ambanja

Amboasary

Toamasina

Ambatondrazaka

Antsiranana

Mahajanga

Toliara

Fianarantsoa

Manakara

Farafangana

Antsirabe

Morondava

MiarinarivoTsiroanomandidy

Sambava

Antsohihy

TolanaroAmbovombe

Ihosy

Maevatanana

Ambositra

Maintirano

Fenoarivo-Atsinanana

ANTANANARIVO

DIANA

SAVA

SOFIA

ANALANJIROFOBOÉNY

BETSIBOKA

ANALAMANGABONGOLAVA

ITASY

MELAKYALAOTRA

MANGORO

ATSINANANA

AMORON’I MANIA

HAUTE-MATSIATRA

IHOROMBEATSIMO-

ANDREFANA

ANOSY

ANDROY

ATSIMO-ATSINANANA

MENABE

VATOVAVY-FITOVINANY

VAKINANKARATRA

Mayotte(France)

Mah

avav

y

Betsiboka

Bemarivo Sofia

LakeAlaotra

Mangoro Mania

Tsiribihina

Mananara

Onilahy

Man

drav

e

Mangoky

Fihere

chana

Menarand

ra

Manambaho

Mahajamba

I N D I A N

O C E A N

Mo z a m

b i q u e C

h a n n e l

Ank

arat

a

Massi fTsaratanana

Androy Plateau

Cli

f f o

f A

ng

av

o

Cl i

f f o

f B o n g o l a

v a

Maromokotro(2,876 m)

Pic Boby(2,658 m)

Tsiafajovona(2,642 m)

45°E 50°E

50°E

45°E

25°S

20°S

15°S

20°S

15°S

MADAGASCAR

0 40 80 120 160

0 120 Miles8040

200 Kilometers

IBRD 33439R

MAY 2011

MADAGASCAR

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.

SELECTED CITIES AND TOWNS

REGION CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

REGION BOUNDARIES

World Bank Document · management contract. SIRAMA: no launch of privatization process; 15 public...

Documents

Transcript of World Bank Document · management contract. SIRAMA: no launch of privatization process; 15 public...