Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16845 PROJECT COMPLETION NOTE BURUNDI AGRIBUSINESS PROMOTION PROJECT (Credit 2419-BI) June 30, 1997 Agriculture TechnicalCluster II CountryDepartment 9 AfricaRegion This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 16845
PROJECT COMPLETION NOTE
BURUNDI
AGRIBUSINESS PROMOTION PROJECT
(Credit 2419-BI)
June 30, 1997
Agriculture Technical Cluster IICountry Department 9Africa Region
This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.
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Currency Equivalents
Calendar Year - Burundi Francs per US$1992 - 208.301993 - 242.781994 - 252.661995 - 249.761996 - 302.75
Weights and Measures
Metric System
Abbreviations and Acronyms
ADF Agri-business Development FundCOGERCO Cotton Company (Compagnie du gerance du coton; seed-cotton production and
ginning)ERR Economic Rate of ReturnOTB Burundi Tea Board (Office du the du Burundi; tea production and processing)PCN Project Completion NotePSD Private Sector Development Project (Cr. 2359-BI)SAR Staff Appraisal ReportSRDI Imbo Regional Development Company (SRDI, Societe regionale de
developpement de I 'Imbo; rice production and processing)SOSUMO Moso Sugar Company (SOSUMO, Societe sucriere du Moso; sugar production
and processing)
Fiscal Year of Borrower
January 1 - December 31
Vice President - Madavo Callisto and Jean-Louis SarbibCountry Director - Nils 0. Tcheyan
Technical Manager - Joseph Baah-DwomohTask Team Leader - Dirk Nicolaas Prevoo
FOR OFFICIAL USE ONLY
PROJECT COMPLETION NOTEBURUNDI
AGRIBUSINESS PROMOTION PROJECT(Credit 2419-BI)
Table of Contents
Preface .................................................................................................. I ...........................
Project Implementation AssessmentIntroduction .IProject Objectives .IImplementation Experience and Results .2Findings, Future Operations, and Key Lessons Leamed .3
Statistical Tables
Table 1. Summary of Assessments ..... 5.............................5Table 2. Related Bank Loans/Credits ................................... 7Table 3. Project Timetable .................................. 8Table 4. Estimated and Actual Cumulative Disbursements ................................... 8Table 5. Key Indicators for Project Implementation ................................... 9Table 6. Key Indicators for Project Operation .................................. 10Table 7. Studies Included in Project .................................. 10Table 8. Project Cost .................................. 11Table 9. Project Financing .................................. 12Table 10. Compliance with Legal Covenants .................................. 13Table 11. Compliance with Operational Manual Statements .15Table 12. Bank Resources -- Staff Inputs .15Table 13. Bank Resources -- Missions .16
Maps IBRD No. 23199 - Burundi, Regional Specialization of Principal IndustrialCrops
Vice President - Madavo Callisto and Jean-Louis SarbibCountry Director - Nils 0. Tcheyan
Technical Manager - Joseph Baah-DwomohTask Team Leader - Dirk Nicolaas Prevoo
This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.
PROJECT COMPLETION NOTEBURUNDI
AGRIBUSINESS PROMOTION PROJECT(Credit 2419-BI)
Preface
This is the Project Completion Note (PCN) for the Agribusiness Promotion Project, forwhich credit 2419-BI in the amount of SDR 2.3 million (US$3.1 million equivalent) wasapproved on September 3, 1992 and made effective on January 8, 1993.
The credit was closed on June 12, 1997 at Government's request, almost two yearsbefore its scheduled closing date of March 31, 1999, and the cumulative undisbursed balance ofSDR 2,046,362 (US$2,830,589 equivalent) was canceled effective April 15, 1997.1 Parallelfinancing for the project was to be provided by the Government of Belgium in the amount ofUS$0.1 million equivalent, the Caisse Centrale de Cooperation Economique (now CaisseFrancaise de Developpement) in the amount of US$0.1 million equivalent and the EuropeanUnion in the amount of US$1.2 million equivalent.
The PCN was prepared by Dirk Nicolaas Prevoo, Agricultural Cluster 3, and reviewedby Joseph Baah-Dwomoh, Technical Manager, Agricultural Cluster 2 and Nils Tcheyan,Director, Country Department 9.
The PCN has been prepared in lieu of an Implementation Completion Report, because ofthe short period of implementation and low disbursements. Preparation of the PCN was based onmaterial in the project files and discussions with Bank staff involved in the project's preparationand supervision.
A first cancellation in the amount of SDR 2,046,325 was made effective April 19, 1996; a secondcancellation in the amount of SDR 37 needed to be made for administrative reasons effective April15, 1997.
PROJECT COMPLETION NOTEBURUNDI
AGRIBUSINESS PROMOTION PROJECT(Credit 2419-BI)
Implementation Assessment
Introduction
1. As part of its structural adjustment program, the Government of Burundi designed a newagricultural sector policy in 1988. The new approach signaled a shift in the role of Government fromproducer and processor to one of regulator and promoter, and emphasized the development of the privatesector by simplifying the regulatory framework constraining it. However, progress was slow orunsatisfactory in the reform and privatization of public enterprises and in the broadening of private sectoractivities in processing and exports. Progress in the two areas is closely linked because the private sectorcould not compete in areas where public enterprises dominated the market, as it was denied the tax andduty privileges, as well as the preferential credit access and subsidies which public enterprises enjoyed.
2. As part of the third phase of the adjustment program, supported by the Third StructuralAdjustment Credit (Cr. 2376-BI), the Government had decided to accelerate the public enterprise reformprogram and the liberalization of private sector activities. The Government, which had initially decidedto limit privatization of key agro-industries to management only, now supported privatization ofownership or leasing of assets. The Government issued a Letter of Agribusiness Development Policy,which included the following measures: (i) action plan and timetable for privatization of: the BurundiTea Board (OTB, Office du the du Burundi; tea production and processing), the Cotton Company(COGERCO, Compagnie du gerance du coton; seed-cotton production and ginning), the Moso SugarCompany (SOSUMO, Societt sucriere du Moso; sugar production and processing) and the ImboRegional Development Company (SRDI, Societt regionale de developpement de l 'Imbo; rice productionand processing); (ii) promotion of private sector investment in subsectors that were traditionally a publicmonopoly, while placing a moratorium on new public investments; (iii) allow mixed-capital agro-industries to set producer prices, select their own markets and control their extension system; and (iv)limit public investments in mixed-capital agro-industries to maintain production levels only.
Project Objectives
3. The project's objectives were to increase and diversify agricultural exports and induce greaterefficiency in agricultural production, processing and marketing, by supporting the Government's effortsto privatize publicly held agro-industries and by assisting small private entrepreneurs to establishthemselves and develop agri-businesses.
4. The project included two components: privatization of publicly held agro-industries andassistance to small private entrepreneurs. The privatization component was to focus on four enterprises:OTB, COGERCO, SOSUMO, SRDI, and was to provide: (i) consulting services in investment bankingfor preparation and conclusion of leasing of assets and sale of shares; and (ii) training activities toprepare employees for privatization. The assistance to the private enterprises component was to create
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an Agri-business Development Fund (ADF) which would share up to half the cost of marketing andproductivity improvement activities with eligible private entrepreneurs and their professionalassociations.
5. The project was to be implemented over a five year period and was to cost US$6.2 million.Financing was to be provided by IDA (US$3.1 million), the European Union (US$1.2 million), theGovernment of Belgium (US$0.1 million) and the Caisse Centrale de Coopdration Economique (nowCaisse Francaise de Developpement, US$0.1 million), private enterprises (US$1.4 million) and theGovernment (US$0.3 million).
6. The project's design was based on the conclusions of an agricultural sector memorandum andwas designed in support of Government's adjustment program and consistent with Government's Letterof Agribusiness Development Policy, and the Bank's country strategy and experience with private sectorpromotion. The project's objectives were clearly defined and the implementation schedule was in linewith expectations at the time and with the framework of the adjustment program. The design of the ADFwas based on successful experiences in India and Kenya. It seems, however, that the managementstructure of this relatively small project was top heavy.
Implementation Experience and Results
7. The credit supporting the project was approved by the Board on September 3, 1992 and madeeffective on January 8, 1993. Project implementation was slow from the beginning, especially for thepreparatory studies for the privatization of the public enterprises. The two exceptions were SOSUMOand COGERCO, where the time table for the studies and preparatory activities was adhered to with onlyminor delays. In the case of SOSUMO, a management contract was awarded in September 1992. Theselection of consultants for the management of the ADF was also carried out by the Borrower.
8. After October 1993, the project (like all other projects in the Bank's portfolio in Burundi) wasgreatly affected by the deteriorating security situation following an attempted army coup, which resultedin the assassination of the president, the president of the National Assembly, and other elected officials.Although the coup faltered in the face of international opprobrium, it destabilized Burundi's politicalsituation and rekindled ethnic strife.
9. Following these events, both foreign and domestic interest in investing in the sector was greatlyreduced, given the perceived high risk profile of the country. Despite this constraint, preparatory studiesfor privatization were finalized for all but OTB. Signature of the contract with the consultant companyselected to be manager of the ADF was delayed by the Bank because it felt that even though the technicalproposal by the selected company was sound, the manager proposed by the company lacked the requiredprivate sector experience. Furthermore, the Bank was concerned about the high cost of the contract andproposed to merge the management of the ADF with the ongoing Private Sector Development Project(PSD, Cr. 2359-BI), which had a well functioning project unit. The Bank therefore refused to give anon-objection to the contract. Signature of a contract with an independent manager of the ADF, was acondition of disbursement for the ADF and the stalemate that arose between the Bank and Governmenton the contract issue effectively blocked the fund from becoming effective.
10. Given the rapidly deteriorating socio-political environment and the associated reduced desire toinvest in the country, compounded with the high likelihood that pursuit of privatization could exacerbateexisting divisions within the society given the existing socio-political and class structures, it was agreed
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with Government and the cofinanciers in November 1995 that the privatization component would becanceled. It was also agreed with Government that following the PSD's mid-term review, arrangementswould be made with the PSD for the management of the ADF. Despite the difficult country conditions,there was still a surprisingly high demand for the kind of activities supported by the ADF. This washighlighted during seminars held by the World Bank Resident Mission outside of Bujumbura in 1995. Itwas subsequently agreed in February 1996, at the time of the mid-term review of the PSD, that theDevelopment Credit Agreement of this project would be amended to establish an ADF-like fund, but notlimited to the agricultural sector only, and that the credit supporting the Agribusiness DevelopmentProject would be canceled. These agreements were in line with the Bank's policy to streamline andincrease the synergy of its portfolio. The undisbursed balance of SDR 2,046,325 was therefore canceledat Government's request on April 19, 1996. For administrative reasons, a second cancellation in theamount of SDR 37 needed to be made, effective April 15, 1997. The credit was closed on June 12, 1997.The Burundi portfolio was suspended later in 1996 and the required amendments to the credit supportingthe PSD were therefore not enacted. As of June 30, 1997, the credit supporting the PSD was stillsuspended.
11. Project disbursements amounted to only SDR 253,675 or slightly over 10 percent of the credit.The main expenditures under the project were related to project management, the preparatory study forthe privatization of SRDI and audits of OTB. Total project costs are not known, as it is not known howmuch the cofinanciers contributed in terms of consulting services. No ex-ante economic evaluation ofthe project was carried out. The Staff Appraisal Report did identify as benefits that the ADF relatedproject activities were expected to generate incremental fiscal revenue of about 1.5 times the value of theADF grant over a period of five years. As the ADF never became effective, this did not occur. No ex-post economic evaluation was therefore carried out.
12. Bank performance during preparation and appraisal of the project was satisfactory. Performanceduring supervision was, however, deficient. There was a high turnover of task managers, who were slowto react to the problems related to the ADF or take decisive action on the privatization component. TheBorrower's performance during project preparation was satisfactory, but deficient during projectimplementation, as it was unable to implement the privatization program as agreed from the start, makethe required counterpart funding available to the project or take a pro-active stand on the ADF. Projectmanagement was weak, with a project manager who was slow in following up on problems or keepinghimself informed on developments related to the privatization component, despite his low work load.Moreover, audit reports were routinely late and progress reports were not issued as required. Hiscontract was, however, written in such a way that disciplinary action was difficult.
Findings, Future Operations, and Key Lessons Learned
Assessment of Outcome.
13. The project's overall outcome is highly unsatisfactory. None of the project's objectives wereattained. The preparatory studies that have been carried out to prepare three of the four publicenterprises for privatization will need to be redone if a new privatization program is adopted at somepoint in the future, as they no longer reflect the present state of these enterprises. Moreover, the ADFnever got off the ground. Given the lack of accomplishments, sustainability is unlikely.
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Future Operations.
14. No future operations are planned. Given the lack of accomplishments under the project, no planwas developed by the Bofrower for the continued operation of the project. It is unlikely that publiclyowned agro-industries can be successfully privatized in the near to medium-term future, given the highrisk profile of the country and the relatively low profitability of the companies.
Key Lessons Learned.
15. Two important lessons learned from this project are:
1. The need to maintain at all times an open dialogue with Government and donors thathave an active interest in privatization activities given their own past or ongoing investmentprograms. In the case of this project, the cofinanciers were reluctant to speed up theprivatization process, because of their desire to ensure that past large investments in the publicenterprises were safeguarded and different sensitivities to a changing socio-politicalenvironment. It is important for the Bank to be sensitive to this issue during implementation of aprivatization program.
2. Project management has to be in line with project activities. In the case of this project, itwas unnecessary to have an implementation unit outside of the technical ministry, because of thevery limited work load (even if the ADF had become effective). Moreover, the duration of thecontracts for project managers must be limited to allow for timely evaluation. In the case of theproject, the contract was for the duration of the project, with only limited scope for performanceevaluation and disciplinary action.
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PROJECT COMPLETION NOTEBURUNDI
AGRIBUSINESS PROMOTION PROJECT(Credit 2419-BI)
Statistical Tables
TABLE 1: SUMMARY OF ASSESSMENTS
A. Achievement of objectives Substantial Partial Negligible Not Applicable
Macro policies WSector policies
Financial objectives Z WInstitutional development WPhysical objectives WPoverty reduction WGender issues WOther social objectives
Environmental objectives
Public sector management WPrivate sector development WOther (specify) _____
Likely Unlikely Uncertain
B. Project sustainability W
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C. Bank performance Highly Satisfactory Deficientsatisfactory
Identification EIZ Preparation Assistance F EC1
Appraisal W [II
Supervision m IID. Borrower performance Highly Satisfactory Deficient
Preceding operations1. Kirimoro project (Cr. Increase food crops production; 1981 Closed on June1165-BI) improve rural living conditions; 30, 1988
and improve coffee quality2. Third Ngozi project Increase food crops production; 1981 Closed on(Cr. 1192-BI) improve rural living conditions; December 31,
and improve coffee quality 19893. Second Forestry Strengthen the Forestry 1985 Closed on MarchProject (Cr. 1620-BI) Department, promote tree 31, 1993
planting, and establish plantations4. Muyinga Agricultural Increase quantity and improve 1987 Closed on MarchDevelopment Project (Cr. quality of food crops and coffee 31, 19961857-BI) production and increase rural
incomes5. Agricultural services Rationalize and strengthen the 1989 Closed onsupport project (Cr. capacity of MOAL to deliver December 31,2024-BI) services to farmers 19966. Coffee Sector Project support to policy changes and an 1990 Closed on July(Cr. 2123-BI) industry restructuring investment 31, 1996
program in coffee to maximizeexport earnings
7. Private Sector Support to the development of 1992 OngoingDevelopment Project (Cr. especially export oriented private2359-BI) sector8. Third Structural Support to adjustment program 1992 Closed on JuneAdjustment Credit (Cr. and consolidation of policy 30, 19952376-BI) reforms started under SAL I and
II. Emphasis on agricultural andexport promotion reforms
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TABLE 3: PROJECT TIMETABLE
DateSteps on Project Cycle Date Planned actual/latest estimate
Total Project Costs 2,070 4,161 6,231 n.a.(of which taxes) 590 590
2 Numbers may not add up due to rounding.
3 The consultancies related to the preparation of the privatization of OTB, COGERCO and SUSOMO werefinanced by the EU, CCCE/CFD and the Belgian Government respectively, no information is available on theamnounts spent. IDA did finance outstanding audits for OTB as part of the preparation process in the amountof US$45,000.
Source Total TotalIDA 3.1 0.3European Union 1.2 n.a.Government of Belgium 0.1 n.a.CCCE 0.1 n.a.-Private Enterprises 1.4 n.a.Government 0.3 n.a.Total 6.2 n.a.
TABLE 9: ECONOMIC COSTS AND BENEFITS
No ex-ante economic evaluation of the project was carried out. The SAR did identify as benefits that theADF related project activities were expected to generate incremental fiscal revenue of about 1.5 timesthe value of the ADF grant over a period of five years. As the ADF never became effective, this did notoccur.
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TABLE 10: STATUS OF LEGAL COVENANTS
Agreement Section Covenant Present Original Revised Description of covenant Commentstype status fulfillment fulfillment
date dateCredit 3.01 4 NC Government to make available to the Given poor budgetary position
project unit counterpart funds equivalent of Government IDA agreed toto 20 percent of operating costs increase its share of flnding to
institutions set up under the privatizationlaw (CIP, SCEP, CTE)
3.03 (b) 5 C Management of private sector promotion Consultant was selected, butfund to be a consultant (AGF) acceptable contract was never executed
_______ _______ ____ __ to IDA.
3.03 (c) 5 C Project administrator to be appointed byGovernment
3 04 (a) 12 NC 11/30/93 Adopt a program for the privatization ofOTB, COGERCO, SOSUMO, SRDI l
3.04 (b) 12 NE Implement the program following itsI_adoption without delay
3.04 (c) 12 NE Ensure program is implemented in fullcompliance with privatization law anddecree
3 04 (d) 12 NE Inform IDA of any amendments to theprivatization law and decree
3.04 (e) 12 NE Appoint a local counterpart for eachconsultant position involving atechnology transfer
3.05 4 CP Set up and maintain an account in FBu(FDA) in a bank acceptable to IDA onterms and conditions acceptable to IDA.The account to be managed by AGFunder an agreement acceptable to IDA
3.06 13 NE FDA and project beneficiaries to haveunrestricted access to foreign exchangerequired for the implementation of part Bof the project
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3.07 9 NC Submission by project administrator ofquarterly reports on implementationprogress and review progress with IDA by
l ____________ ___________ __________ ___________ ___________ June 30 each year ______________J n_3_e c_y a3.08 9 NE Borrower and IDA to carry out a mid- Discussions on the cancellation
term review not earlier than 15 and not of the credit had already startedlater than 20 months following credit by the time the mid-term revieweffectiveness was to be carTied out
4.01 (a) 1 C Maintain records and accounts adequateto reflect operations, resources andexpenditures of the project and the
l _____________ ____________ __________ ____________ ___________ responsible agencies4.01 (b) 1 CD Records and accounts to be audited within
4 months after the close of each fiscalyear and certified copy of audit report tobe submitted to IDA
4.01 (c) 1 CD For all expenditures under SOE claims,maintain records and accounts, retainrecords for at least one year after creditclosure and have them audited
Covenant types:I = Accounts/audits 8 = Indigenous people C = Covenant complied with
2 = Financial performance/revenue 9 = Monitoring, review and reporting CD = Complied with after delaygeneration from beneficiaries
3 = Flow and utilization of project 10= Project implementation not covered CP = Complied with partiallyfunds by categories 1-9
4 = Counterpart funding 11 = Sectoral or cross-sectoral budgetary NC = Not complied withor other resource allocation
5 = Management aspects of the 12 = Sectoral or cross-sectoral NE = Not effective (dependent on steps that were to beproject or executing agency policy/regulatory/institutional action taken before this covenant could take effect)
6= Enviromnental covenants 13= Other
7 = Involuntary resettlement
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TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS
Statement number and title Describe and comment on lack of compliance
Stage of Month/ Number Days Specialized staff skills Implementation Development Types ofproject year of persons in field represented Status Objectives problemscyclePreparation 11/94 8 26 Sr. Agricultural
