Document of The World Bankdocuments.worldbank.org/curated/en/307441484080556225/pdf/ICR392… · Document of The World Bank. ... nationale de la promotion des investissements et

Document of The World Bank

Report No: ICR00003926

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-H6580)

ON A

GRANT

IN THE AMOUNT OF SDR8.40 MILLION (US$13 MILLION EQUIVALENT)

TO THE

REPUBLIC OF TOGO

FOR A

PRIVATE SECTOR DEVELOPMENT SUPPORT PROJECT

December 30, 2016

Trade & Competitiveness Global Practice Africa Region

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 Group authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective June 30, 2016)

Currency Unit = CFA US$ 1.00 = 0.71 SDR

US$ 1.00 = 589

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

API-ZF L'Agence nationale de la promotion des investissements et de la Zone Franche (National Agency for the Promotion of Investment and the Free Zone)

ARMP Autorité de Régulation des Marchés Publics (Public Procurement Regulation Authority) CCMP Commission de Contrôle des Marchés Publics (Public Procurement Control Committees) CEM Country Economic Memorandum CFE Centre de Formalité des Entreprises (One Stop Shop) CGA Centre de Gestion Agréé (Licensed Management Center) DNCMP Direction Nationale de Contrôle des Marchés Publics (National Publics Procurement’s Control Direction) DNPM Direction de Passation des Marches (National Directorate for Procurement) ERR Economic Rate of Return GoT Government of Togo ECOWAS Economic Community of West African States F-PRSP Full Poverty Reduction Strategy Paper ICPN Investment Climate Policy Note IFC International Finance Corporation IE Impact Evaluation IMF International Monetary Fund ISN Interim Strategy Note M&E Monitoring and Evaluation MDGs Millennium Development Goals MSE/MPE Micro and Small Enterprise OECD Organization for Economic Cooperation and Development OHADA L'Organisation pour l'Harmonisation en Afrique du Droit des Affaires (Organization For The Harmonization Of Business

Law In Africa) PAD Project Appraisal Document PCU Project Coordinating Unit PDO Project Development Objectives PPP Public Private Partnership PS Private Sector PSC Project Steering Committee RCCM Registre du Commerce et du Crédit Mobilier (The Trade and Personal Property Registry SAZOF Free Zone Management Company

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SEZ Special Economic Zone SIL Specific Investment Lending TFZ Togolese Free Zone TORs Terms of References UEMOA/ WAEMU

Union Economique et Monétaire Ouest Africaine/West African Economic and Monetary Union

WBG World Bank Group WTO World Trade Organization

Senior Global Practice Director: Anabel Gonzalez Practice Manager: Rashmi Shankar

Project Team Leader: Magueye Dia ICR Team Leader: Jeremy Strauss

ICR Author: Tanangachi Ngwira

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TOGO

Private Sector Development Support Project

TABLE OF CONTENTS

DATA SHEET A. Basic Information ............................................................................................................................................................... iv B. Key Dates ........................................................................................................................................................................... iv C. Ratings Summary ............................................................................................................................................................... iv D. Sector and Theme Codes .................................................................................................................................................... v E. Bank Staff ........................................................................................................................................................................... v F. Results Framework Analysis .............................................................................................................................................. v G. Ratings of Project Performance in ISRs............................................................................................................................. ix H. Restructuring (if any) ......................................................................................................................................................... ix I. Disbursement Profile ............................................................................................................................................................ x

1. Project Context, Development Objectives and Design ............................................................................................................ 1 2. Key Factors Affecting Implementation and Outcomes ............................................................................................................ 6 3. Assessment of Outcomes ....................................................................................................................................................... 12 4. Assessment of Risk to Development Outcome ...................................................................................................................... 16 5. Assessment of Bank and Borrower Performance .................................................................................................................. 16 6. Lessons Learned .................................................................................................................................................................... 18 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ........................................................................ 19 Annex 1. Project Costs and Financing ....................................................................................................................................... 20 Annex 2. Outputs by Component .............................................................................................................................................. 21 Annex 3. Economic and Financial Analysis .............................................................................................................................. 24 Annex 4. Bank Lending and Implementation Support/Supervision Processes .......................................................................... 26 Annex 5. Beneficiary Survey Results ........................................................................................................................................ 29 Annex 6. Stakeholder Workshop Report and Results ................................................................................................................ 30 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR .................................................................................. 31 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders .................................................................................... 35 Annex 9. Changes in Results Framework following Restructuring ........................................................................................... 36 Annex 10.Togo Doing Business Indicator Rankings (2011 and 2016) ..................................................................................... 37 Annex 11: Togo Private Sector Development Level I and Level 2 ........................................................................................... 38 Annex 12. List of Supporting Documents ................................................................................................................................. 40 MAP ........................................................................................................................................................................................... 41

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A. Basic Information

Country: Togo Project Name: Togo - Private Sector Development Support Project

Project ID: P122326 L/C/TF Number(s): IDA-H6580 ICR Date: 12/23/2016 ICR Type: Core ICR Lending Instrument: SIL Borrower: MINISTRY OF FINANCE Original Total Commitment: XDR 8.40M Disbursed Amount: XDR 3.15M Revised Amount: XDR 3.39M Environmental Category: B Implementing Agencies: Ministry of Trade and Private Sector Promotion Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual Date(s) Concept Review: 06/21/2010 Effectiveness: 12/30/2011 12/15/2011 Appraisal: 02/09/2011 Restructuring(s): 05/11/2016 Approval: 03/29/2011 Mid-term Review: 01/08/2014 Closing: 12/15/2016 06/30/2016 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Unsatisfactory Risk to Development Outcome: Moderate Bank Performance: Unsatisfactory Borrower Performance: Unsatisfactory

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

Quality at Entry: Unsatisfactory Government: Unsatisfactory Quality of Supervision: Unsatisfactory Implementing Agency/Agencies: Unsatisfactory Overall Bank Performance: Unsatisfactory Overall Borrower Performance: 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 Unsatisfactory

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D. Sector and Theme Codes Original Actual

Sector Code (as % of total Bank financing) Public administration- Industry and trade 60 60 Other Industry, Trade and Services 40 40

Theme Code (as % of total Bank financing) Micro, Small and Medium Enterprise support 40 40 Other Private Sector Development 39 39 Personal and property rights 9 9 Regulation and competition policy 12 12 E. Bank Staff

Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Pierre Frank Laporte Madani M. Tall Practice Manager/Manager: Rashmi Shankar Paul Noumba Um/Marilou Jane D. Uy Project Team Leader: Magueye Dia Leonardo Iacovone ICR Team Leader: Jeremy Strauss ICR Primary Author: Tanangachi Ngwira F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The proposed project development objective was to contribute to an improved investment climate in Togo, including in a New Free Zone, and to an improved performance of targeted micro and small businesses. Revised Project Development Objectives (as approved by original approving authority) (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 : The number of days required to create an enterprise has been reduced

Value quantitative or Qualitative)

75 5 2

Date achieved 09/19/2011 06/30/2016 06/30/2016 Comments (incl. % achievement)

The original target was fully achieved by 100% by Restructuring. The indicator was not revised and 160% achieved by the end of the project.

Indicator 2 : The performance of MSEs supported by the project has been improved compared to the firms in control group (as measured by increased turnover)

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0

10

0


The original target was 0% achieved before restructuring and cancelled during the Restructuring in 2016.

Indicator 3 : A Public Private Partnership (PPP) legal, regulatory and institutional framework applicable to the Free Zone and to Special Economic Zones is established.


No Yes Yes


The original target was fully achieved by 100% in 2012 which was before the Restructuring and cancelled during the Restructuring in 2016.

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(b) Intermediate Outcome 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 : Number of procedures to start a business

Value (quantitative or Qualitative)

7 4 6 3

Date achieved 09/19/2011 06/30/2016 05/11/2016 06/30/2016 Comments (incl. % achievement)

Original target of 4 days was achieved by 67% before the restructuring. The target was revised to 6 days during the Restructuring in 2016 and the revised target was 150% achieved by project closing date.

Indicator 2 : The first CGA is providing services to an increasing number of micro and small businesses Value (quantitative or Qualitative)

0 250 53


Original target of 250 was partially achieved by 8% prior to restructuring and reached 21% after the restructuring. The indicator was not revised at Restructuring.

Indicator 3 : Number of land titles issued


1041 4000 0


Original target was 0% achieved and indicator was cancelled during the Restructuring in 2016.

Indicator 4 : The procedures to register a property have been significantly simplified


295 100 0


Original target was 0% achieved and indicator was cancelled during the Restructuring in 2016.

Indicator 5 : 3,000 micro and small entrepreneurs have benefited from training (including at least 15% of female)


0 3,000 (15%) 991 (54%)


Original target was partially achieved by 33% before the restructuring. The indicator which was in the PAD was, however, not monitored in ISRs and not included in Restructuring paper. Results obtained from the IE training provided to traditional firms.

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Indicator 6 : Improvement in the organization of production (i.e. control of stocks, keeping organized accounts) of the MSEs compared to the firms in control group.


N/A 10% by MTR N/A


Original target was 0% achieved and the indicator was cancelled during the Restructuring in 2016.

Indicator 7 : The performance of MSEs that received a matching grant has significantly improved (by 10%) compared to the firms in control group (as measured by profitability).


N/A 10% by MTR N/A



Indicator 8 : SAZOF has been restructured and Free Zone Management is separate from Free Zone regulation.


No No Yes



Indicator 9 : Single window for the issuance of construction permits in place


No Yes Yes


Original indicator was achieved by 100%. The indicator was added during the Restructuring in 2016.

Indicator 10 : Direct project beneficiaries


0.00 3,000.00 2,000.00 2991

Date achieved 05/30/2016 06/30/2016 06/30/2016 06/30/2016

Comments (incl. % achievement)

Original target was partially achieved by 33% before restructuring in 2016. The target was revised to 2, 000 during restructuring which resulted in achievement of 150% by project closing date. Note. This indicator was not in listed in the PAD Results Framework. However, the indicator was added to the ISR monitoring to comply with internal WB mandatory requirements.

Indicator 11 : Female Beneficiaries

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0.00 450.00 20.00 530.00

Date achieved 06/30/2015 06/30/2016 06/30/2016 06/30/2016 Comments (incl. % achievement)

Original target was 0% achieved before restructuring and fully achieved by 117% after restructuring. The end target was revised to 20 during restructuring which was unrealistic. Note: This indicator was not in listed in the PAD Results Framework. However, the indicator was added to the ISR monitoring to comply with internal WB mandatory requirements.

G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP Actual Disbursements

(USD millions) 1 09/19/2011 Satisfactory Satisfactory 0.00 2 04/13/2012 Satisfactory Satisfactory 0.19 3 06/11/2012 Satisfactory Satisfactory 0.89 4 12/30/2012 Moderately Satisfactory Moderately Satisfactory 1.22 5 07/10/2013 Moderately Satisfactory Moderately Satisfactory 1.46 6 01/07/2014 Moderately Satisfactory Moderately Satisfactory 1.88 7 06/23/2014 Moderately Unsatisfactory Unsatisfactory 2.66 8 01/06/2015 Moderately Unsatisfactory Unsatisfactory 3.71 9 07/08/2015 Moderately Unsatisfactory Moderately Unsatisfactory 4.02

10 12/28/2015 Moderately Unsatisfactory Moderately Unsatisfactory 4.23 11 06/29/2016 Moderately Unsatisfactory Moderately Satisfactory 4.36

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

05/11/2016 MU MS 4.36

The changes included (i) change of the project closing date (early closing); (ii) partial cancellation of proceeds; (iii) changes to components and costs, specifically, cancellation of Component 2, and only a set of limited activities continued for components 1 and 3, (iii) changes in the Results Framework, specifically: deletion of indicators for dropped activities and introduction of one new Intermediate Indicator for new activity; (v) changes to disbursement estimate; (vi) change in implementation schedule, (vii) change in economic and financial analysis, and (viii) change in technical analysis.

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I. Disbursement Profile

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1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Country Context. Togo had experienced political and economic instability since its independence in 1960. The signing of a comprehensive political accord (Accord de Politique Global) on August 20, 2006 was a breakthrough and provided for a transitional government of national unity charged with organizing legislative elections in October 2007. These were deemed free and transparent by the international community, and marked a milestone in Togo’s democratization process. The new government proclaimed a commitment to political and economic reforms, and sought to re-engage with the international community, in particular with the Bretton Woods institutions, whose activities in the country had been modest over the preceding fifteen years. 2. Sector Background. Private sector development in Togo was hindered by an unfavorable investment climate. Togo ranked 165th out of 183 countries in the 2011 Doing Business Report. Togo’s performance was particularly weak on the “Starting a Business” indicator. Togo ranked 169th. Starting a business required seven procedures, 75 days and cost 178 percent of per capita income. By comparison, the Organization for Economic Cooperation and Development (OECD) country averages were respectively: 5.6 procedures, 14 days and 5.3 percent. There had been limited improvement from 2010 to 2011. After the incumbent president’s reelection in 2010, the new government reiterated its commitment to improving significantly Togo’s performance in the Doing Business Report. 3. The importance of unleashing the potential of micro and small businesses. The Investment Climate Policy Note (ICPN) based on a quantitative survey of micro, small, medium and large firms in Lomé suggested that: (a) micro and small business employment growth was weak; and (b) there were large productivity gaps between larger companies and MSEs (Micro and Small Enterprises). Success appeared strongly correlated with the managerial capacities of the entrepreneurs such as education and use of information, communication and technology (ICT) to communicate with clients. The evidence suggested that MSEs required targeted support to become more productive and enabled to create more jobs. 4. At that time, business training was extremely limited in Togo. First, only a few private firms provided entrepreneurial and business training services. Second, the large majority of small-scale entrepreneurs in Togo had received very little formal business training, if any. Third, in addition to few providers, the supply of business training services was of uneven quality in the absence of a quality certification system. Thus, there was no easy way to know if a business training service provider was worth engaging prior to hiring them. Finally, if the availability of general training was scarce, the supply of management and business training was even scarcer because the little training routinely supplied by trade associations and trade unions to their members was almost always limited to technical skills. 5. The urgent need to develop a new Togolese Free Zone to attract dynamic firms. The ICPN and the Country Economic Memorandum (CEM) carefully analyzed the Togolese Free Zone (TFZ) as having a potential role in economic growth. Two key conclusions were drawn: (a) through a set of generous tax incentives, the TFZ had been relatively successful during the previous decade in attracting investments and creating a manufacturing nucleus in the country; and (b) analyses of the performance of the TFZ highlighted several important weaknesses. First, average value added in TFZ enterprises had dropped from 51 percent, in 2000-2001 to 36 percent in 2007-2008. Second, during the same period, linkages with the local economy had weakened, as measured by a reduction in the use of local inputs, from 32 percent in 2000-2001 to 12.5 percent in 2007-2008. Third, capacity to compete on the global market was limited: more than 80 percent of TFZ exports were oriented towards the regional market. Fourth, compared with exporters located outside the TFZ, companies in the TFZ appeared to be less productive. Additionally, the strategy of the TFZ – which focused on the regional market – was not sustainable because it benefitted significantly from the lax implementation of ECOWAS trade rules. Since mid-2009, the World Bank had been engaged in a dialogue with the Togolese authorities, and at the time of project development, a consensus had been

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reached to help develop a new Free Zone. In parallel, the World Bank had provided guidance on the review of the Free Zone law and investment code. 6. Rationale for World Bank involvement. The World Bank had approved an Interim Strategy Note (ISN) for Togo in May 2008. This ISN, developed in close collaboration with the International Monetary Fund (IMF), supported the Interim Poverty Reduction Strategy Paper (I-PRSP) approved by the Government in March 2008. The Government of Togo completed in May 2009 a full PRSP (F-PRSP) which was based on four strategic pillars: (a) improvement of governance; (b) consolidation of the foundations of strong and sustainable growth; (c) development of human capital; and (d) reduction of regional imbalances and promotion of community development. The goal of the ISN was to help Togo recover from a long period of instability and suspension of aid, and begin laying the foundations for sustained, shared growth over the medium term. This was to be achieved through: (i) normalization of relations with the World Bank through the clearance of arrears which would facilitate Togo’s efforts to re-establish relations with the rest of the international community and pave the way for Togo toward debt relief; (ii) improving public financial management and governance in key sectors and public institutions; and (iii) addressing critical and social needs on the ground.

7. Since 2008, the authorities had pursued a significant series of reforms. However, key structural bottlenecks (notably with regard to the investment climate and infrastructure) still needed to be addressed to unleash private-sector led growth. To realize its growth ambitions, the Togolese government needed to strengthen its efforts toward the emergence of a strong, modern private sector which would drive growth, competitiveness, diversification of the economy and export promotion. Based on the CEM and ICPN, the World Bank engaged in a dialogue with Togolese authorities in 2009 which resulted in a project focusing on investment climate reforms and targeted support to MSEs in order to promote job creation – a key priority for the Government of Togo. In addition, the project included a specific focus on the Togolese Free Zone: which was comprised of the largest private sector enterprises operating in Togo. The proposed project’s objectives were consistent with the approved Private Sector Revitalization State and Peace Building Trust Fund. 8. Higher Level Objectives to which the Project Contributed. Togo’s Full Poverty Reduction Strategy Paper (F-PRSP) called for annual economic growth in excess of 7.5 percent in order to meet the Millennium Development Goals (MDGs). The F-PRSP’s second pillar emphasized the consolidation of strong and sustained growth. The challenge for the Government was to ensure that the rising growth rates translated into higher employment levels. The project therefore aimed at tackling two interrelated issues: (a) improving the Togolese investment climate to allow for private sector development and thus economic growth; and (b) improving the performance of Togolese firms in order to create the much needed jobs for the Togolese population and in particular, youth. The project therefore supported reforms in the overall legal, regulatory and institutional environment (and specifically in the business environment of the TFZ), as well as provided direct support to micro and small businesses. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 9. The Project Development Objective (PDO), as stated in the Legal Agreement was to contribute to an improved investment climate in Togo, including in a New Free Zone, as well as to an improved performance of targeted micro and small businesses. Original key performance indicators

10. The original PDO indicators from the Results Matrix were: a) the number of days required to create a business has been reduced; b) the performance of MSEs supported by the project has been improved (as measured by increased turnover); and c) A Public Private Partnership (PPP) legal, regulatory and institutional framework applicable to the Free Zone and to

Special Economic Zones is established.

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1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 11. No revisions were made to the PDO. Revised project outcome indicators and targets 12. During the project restructuring in 2016, two out of the three project development outcome indicators were dropped in order to align with the cancellation of Component 2, and the scaling down of Components 1 and 3. These were:

a) A Public Private Partnership (PPP) legal, regulatory and institutional framework applicable to the Free Zone and to Special Economic Zones is established. However, even though the PPP indicator was dropped it had already been achieved by the project.

b) The performance of MSEs supported by the project has been improved compared to the firms in control group (as measured by increased turnover);

13. Five intermediate results indicators were dropped, namely:

a) Number of land titles issued. b) The procedures to register a property have been significantly simplified (days). c) Improvement in the organization of production (i.e. control of stocks, keeping organized accounts) of the MSEs compared

to the firms in control group. d) The performance of MSEs that received a matching grant has significantly improved (by 10 percent) compared to the

firms in control group (as measured by profitability). e) SAZOF has been restructured and Free Zone Management is separated from Fee Zone regulation.

14. One intermediate indicator was added, namely:

a) Single window for the issuance of construction permits in place. 15. Three intermediate result indicator targets were revised, namely:

a) Number of procedures to start a business b) Direct project beneficiaries1 c) Female beneficiaries2

16. Other Indicators3

(i) Measured by IE: 3,000 micro and small entrepreneurs have benefited from training (including at least 15 percent of female)

Details of the changes and the evolution of the results framework and indicators can be found in Annex 9. 1.4 Main Beneficiaries 17. The direct beneficiaries of the Project were the following: (a) the Centre de Formalité des Entreprises (CFE) which was housed in the Togolese Chamber of Commerce and which sponsored the first Centre de Gestion Agréé (CGA) which reported to the Ministry of Commerce and Private Sector Promotion; (b) the Free Zone Management Company (SAZOF), which reported to the Ministry of Industry, Free Zone and Technical Innovation; (c) the Land registry (Direction des Affaires Domaniales et Cadastrales), which reported

1 Note. The intermediate results indicator was not included in the PAD results framework, however it was monitoring during implementation through ISRs. 2 Note. The intermediate results indicator was not included in the PAD results framework, however it was monitoring during implementation through ISRs. 3 The intermediate result indicator was not included in the ISR results framework, however, has been included in the ICR Results Framework.

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to the Ministry of Economy and Finance; (d) 2,000 informal / “traditional” micro-businesses (30 percent female); and (e) 1,000 registered micro- and small businesses (10 percent female).

1.5 Original Components (as approved) 18. Component 1: Support to investment climate reforms (US$3.0 million). This Component aimed to improve critical aspects of the Togolese investment climate. The component would focus on two Doing Business indicators (starting a business and registering property). The project would support:

19. Sub-component 1.1: Implementation and operation of the one-stop shop to register a company. The CFE had already been established and was receiving limited support from the World Bank’s Private Sector Revitalization State and Peace Building Trust Fund;

20. Sub-component 1.2: Establishment of the first - CGA in Togo which aimed at helping small enterprises with their accounting. “CGAs” were required in each West African Economic and Monetary Union (WAEMU) country per a WAEMU regulation; 21. Sub-component 1.3: Supporting the Land Registry (Direction des Affaires Domaniales et Cadastrales) to simplify and accelerate the issuance and transfer of land titles; and 22. Sub-component 1.4: Support for (a) public-private dialogue to help identify, prioritize and implement key reforms; and (b) the development and implementation of a communication strategy on investment climate reforms. 23. Component 2: Support to the development of entrepreneurial capacity (US$4.0 million). This Component targeted micro and small enterprises4 (MSEs), the primary source of job creation in Togo, and aimed to provide business training, matching grants and mentoring for informal (also referred as “traditional”)5 businesses. The project would support :

24. Sub-component 2.1: Informal micro-businesses. 2,000 traditional micro-businesses were to receive two types of support: training and mentoring. The training program focused on the following themes: (a) basic accounting and how to calculate costs; (b) marketing and customers relations; (c) managing and negotiating with suppliers; and (d) how to approach a financial institution for financing. 1,000 businesses among those trained were to be provided with mentoring to help them implement what they had learned. Additionally, during the training program, the participants were to have been encouraged to apply for a matching grant to finance additional technical assistance, training or consulting services.

25. Sub-Component 2.2: Formal micro- and small businesses. This sub-component focused on 1,000 formal MSEs and was to provide them with more sophisticated training. A rapid training needs assessment was to be undertaken first. During the training program, participants were to be encouraged to apply for a matching grant to finance a viable project within their enterprise.

26. Sub-Component 2.3: Matching grants. In addition to the training, any Togolese firm operating and paying taxes in Togo with less than 50 employees was to be eligible to apply for a matching grant. The matching grants were to be open to both formal companies (i.e. registered at the Chamber of Commerce and Industry) and ‘traditional’ companies, which had been in operation for at least 12

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months and provided evidence of taxes paid during the period. Business associations were also eligible to apply for matching grants. The matching grant was to finance the purchase of additional training, accounting, consulting services, participation in trade fairs, quality certification, or other Business Development Services (BDS). The matching grant could not be used to finance the purchase of land, buildings, nor equipment for the enterprise. The maximum subsidy amount would be 50 percent of the project cost, with a maximum life-time subsidy amount of US$10,000. An estimated 500 matching grants, of an average amount of US$3,500 each was to be provided. 27. Component 3: Support to the development of a new Free Zone (US$3.0 million). The project was to provide a range of goods and services to develop a new free zone. These were composed of developing a phased approach to defining the new zone’s vision and design, and performing feasibility studies. The Project also was to fund public-private sector dialogue (PPD) activities to develop support for and investor interest in the zone, fund environmental studies, and promote the new zone to investors. 1.6 Revised Components 28. In the Restructuring Paper which was approved in 2016, Component 1, 2 and 3 were scaled down as follows: 29. Component 1: Support to investment climate reforms (US$1.5 million). The project supported:

30. Sub-Component 1.1: Implementation and operation of the one stop shop to register a company with the Centre de Formalité des Entreprises (CFE): The activities included:

a) Development of an IT interface allowing interconnection between the CFE and various other agencies. b) Design of a web-site for the CFE, closely linked to the new IT interface. c) Ensuring the functionality of the CFE website d) Modernization of the Credit Registry by providing the infrastructure needed for the deployment of software to

computerize and harmonize the Commercial and Credit Registry across all 17 OHADA member countries.

31. Sub-Component 1.2: Establishment of the Centre de Gestion Agréé (CGA) specifically: a) Funding operating cost; b) Launching of a communication campaign to advertise the services of CGA.

32. Sub-Component 1.3: Revision of regulations on Construction Permits, (which replaced activity to support the Land Registry) aimed at:

a) Creating a single window for issuing construction permits; b) Revision of existing regulations for construction permits; c) A workshop to validate the recommendations resulting from the revision; d) TA to put the single window in place.

33. Sub-Component 1.4: public-private dialogue and communication related to investment climate reforms, specifically:

a) A validation workshop for a previous, project-funded study of PPD recommendations; b) A learning event to follow-up on a September 2015 study tour to neighboring countries by private sector (PS)

representatives c) Given that the initially planned communication campaign on investment climate reforms was to be paid for by the GoT,

the sub-component was reprogrammed to use available resources to launch a communication campaign for the promotion of the services of the CFE together and the Licensed Management Center (Centre de Gestion Agréé, CGA).

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34. Component 2: Support to the development of entrepreneurial skills (US$1.10 million). This component was dropped. 35. Component 3: Support to the development of a new Free Zone (US$.80 million). Activities under this component were confined to Phase 1 (preparatory phase) and Phase 2 (formulation and validation) for the new Free Zone foreseen under the original project design. This included:

a) The completion of the first part of the feasibility study for the new Free Zone; b) Completion of a quantitative survey on the application and validation of the sector for Adétikopé site; c) Presentation of recommendations for operationalization of the Free Zone (business model, institutional set-up, and action

plan). 36. 1.7 Other significant changes 37. The January 2014 mid-term review allowed the Bank and Government to assess the project’s lack of progress. As a result, the Government and the Bank agreed to restructure and re-design the project. In October 2014, the WBG commenced the restructuring process. The restructuring involved numerous internal consultations, and finally a decision was reached between the Government and the Bank to conduct a follow up restructuring mission in November 2015. During the mission an agreement was reached which resulted in the project being modified and closed six months prior to its revised closing date.

38. The restructuring instituted the following changes: (a) the project closing date was moved up from December 15, 2016 to June 30, 2016 (early closing); (b) cancellation of approximately US$7 million (the project had disbursed US$4.36 million at the time of restructuring); (c) cancellation of Component 2, and retention of a limited set of activities for Components 1 and 3. See Annex 1 Table (a) for changes in project cost after restructuring.

2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 39. Soundness of Background Analysis. Essentially sound, the background analysis conducted during project preparation was able to inform the project of market failures and areas future activities should address. The project’s design tried to be responsive to priorities identified in government strategies and aimed to address specific sector barriers to growth that had been identified in various sectoral studies and reports (Doing Business, Investment Climate Policy Note (ICPN), Country Economic Memorandum (CEM)) conducted by the Government and the World Bank. The project built upon past experiences of the Private Sector Revitalization State and Peace Building Trust Fund. 40. Incorporation of Lessons Learned. The project drew from past experience, such as (a) ensuring a strong analytical base through in-depth analyses undertaken in the context of the CEM and ICPN, and feedback from the Togolese authorities on the reports; (b) planning a comprehensive diagnosis of the existing Free Zone and building a consensus around how to structure it; (c) selectivity with respect to project scope in selecting, three components to avoid an over-ambitious project design; (d) concentrating on a limited number of investment climate reforms and identifying areas where political commitment and ownership were most evident; and (e) the design of the matching grant programs included an evaluation mechanism to assess performance, and planned to have an independently-recruited team to manage the grants. The design of the New Free Zone component was built on lessons from past and ongoing experiences which emphasized a sound and flexible legal and regulatory framework, integration into the country’s trade, investment and wider economic growth strategy, progressive reform of the national investment climate; and public-private coordination. Despite all the lessons, the resulting design was unrealistic with respect to a number of limitations: Togo’s low implementation capacity and the challenges the client would have carrying forward activities of the proposed complexity.

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41. Soundness of Rationale for the Bank’s Intervention. There was a strong justification for the World Bank Group to intervene, including the need for helping the Government to improve the investment climate, a key to private sector growth. The Project built on the efforts of the Private Sector Revitalization State and Peace Building Trust Fund activities, and analysis from the CEM and ICPN. Furthermore, the World Bank had significant experience supporting export processing zones and special economic zones (SEZs) around the world, particularly in Africa.

42. While the overall premise of the project was appropriate, as were the objectives, the design, implementation

arrangements and the sequencing these imposed had major shortcomings. In a general sense, it is understandable how the analysis informed the selection of the components. However, there were elements of the design that call into question the realism of the project’s approach. Component 3 was ill-defined in the project appraisal document and other project documents. It was unclear if efforts were to support expansion or improvement of the existing zone, or if the project was funding only preliminary studies for a new zone, or something else. If it called for studies, terms of reference were not drafted and approved prior to effectiveness. The component was designed as if the work to be funded would be defined after effectiveness. In addition, the implementation of Component 2 was circumscribed by a complex impact evaluation within the component using beneficiaries to measure the efficacy of the business training curriculum, and made more complex by the dual procurement process which delayed getting the training underway. The impact evaluation was a rigorous, complex and time-consuming aspect of the project, and not well understood by the client or beneficiaries. For the most part, the evaluation dictated what technical assistance was delivered, how, when and to whom. With Togo just recently reengaging with the World Bank for investment lending projects, it is debatable whether or not this approach was appropriate, and if the constraints it imposed, and the problems and delays it caused, could have been avoided with a less onerous, more demand-driven design.

43. Without recent experience implementing investment lending projects of this size and scope in Togo, important pre-requisites for

successful implementation were not in place prior to effectiveness such as hiring the Project Coordination Unit (PCU) team, developing terms of reference and completing key procurements.

44. The project required involvement of several ministries: the Ministry of Commerce and Private Sector Promotion, the Ministry of Economy and Finance, the Ministry of Industry, Free Zone and Technological Innovation and the Ministry of Planning, Development and Land Administration. The Ministry of Commerce and Private Sector Promotion took the lead in the oversight of the project. The PCU was housed in the Ministry of Commerce and Private Sector Promotion, and a Project Steering Committee (PSC) was responsible for the strategic direction of the project.

45. In the lead up to and during appraisal, the Government was engaged. In 2012, the Prime Minister and several other ministers expressed their strong commitment to the Project at the official project launch. The Government signed the decrees relating to the CGA and CFE one year after the start of project implementation, adopted and published reforms related to starting a business, reducing the number of procedures for business creation from seven to three steps and reducing the amount of time for creating a business from 75 days to 2 days. Fees were also reduced. The Government also authorized the adoption of the single card (carte unique). In 2013, the Government’s commitment was also demonstrated through media interviews conducted with the Minister for Commerce on television where the country’s reform strategy and investment climate were discussed.

46. However, the Government’s commitment ebbed with respect to major Project activities and planned reforms, and was somewhat superficial in general. The land registry technical assistance did not move forward as planned, hampered by a parallel program to which the Project team was not privy. PPD activities did not progress as planned because the Government had difficulty resolving differences among stakeholder agencies. In 2012, changes in the national procurement regulations occurred with the introduction of the National Directorate for Procurement (Direction de Passation des Marches (DNPM) which resulted in glacial procurement, a major obstacle to project implementation. The challenges encountered in Component 3 implementation resulted from evolving government policies and laws, and never gained traction.

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47. Important risks were correctly identified by the Bank team, but these were underestimated. The PAD had noted risks such as: (a) likelihood of reduced commitment to reforms by the Government over time; (b) potential for implementation risks due to capacity constraints; (c) social and environmental risk related to possible land acquisition resettlement in the new Free Zone site directly or indirectly; and (d) potential for corruption and mismanagement with respect to the business plan competition. The project risks identified were appropriate, however the mitigation measures were insufficient considering the political economy of Togo, the decision-making process of the government and the weak ability of the private sector to influence the government’s actions. Finally, hiring and retaining skilled staff was a challenge. Greater flexibility and adapting activities to confront emerging disinterest from the client or new priorities may have helped. The experience of the project also argues for effectiveness conditions, or simply greater readiness prior to Board. 2.2 Implementation 48. Overall, project implementation experienced a number of challenges arising from the weak project design and unexpected exogenous problems.

49. Lack of Readiness for Implementation. The project took almost nine months to meet effectiveness conditions which were: (a) the adoption of the Project Implementation Manual; (b) the establishment of a Steering Committee; and (c) the recruitment of key staff: a Project Coordinator for the Project Coordination Unit (PCU) a specialist responsible for financial management and a specialist responsible for procurement, which were complied with only by December 31, 2011. Once it became effective, the Project unit was not fully operational because PCU staff still required training. 50. Lack of Collaboration and Coordination between IFC and the World Bank. In 2012, IFC introduced a new project focusing on the same objectives as the Bank which caused confusion among beneficiary agencies. At times, the PCU was unsure who was going to show up from the Bank, IFC or elsewhere to do what task. Nevertheless, the PCU cooperated with both the World Bank and the IFC in: (a) Doing Business reforms especially the creation of the one-stop-shop for business creation and investment at CFE; and (b) establishment of the first Licenses Management Centre (CGA.) which resulted implementation of the key reforms.

51. Lack of Coordination among key Institutions. In 2012, the Government signed the decrees relating to CGA and CFE, one year after project implementation had begun. Although the CGA was launched in December 2013, the Ministry of Commerce (MOC) did not provide necessary support to improve and strengthen this institution. There were major coordination and decision-making difficulties between the Ministry of Commerce and PCU, and CGA, causing delays in hiring the CGA director. The hiring problems arose from inconsistencies between the status of the Director and the charter of the certified accountancy firm.

52. Lack of Leadership. The Public Private dialogue was also hindered by the lack of coordination between the parties involved, particularly Government agencies. There was lack of buy-in, and engaged leadership within ministries (or agencies) responsible for executing project activities. A clear institutional mandate and a clarification of roles was missing. As a result there were difficulties in agreeing on the leadership of the public private dialogue. Only in 2012, was a workshop held to validate PPD strategy, and a study tour organized (see Annex 2). 53. Lack of Government Ownership. Although the project had identified support to the simplification of procedures to register property as a key priority, the project was only able to produce a provisional report of constraints which was discussed by stakeholders at a workshop held in May 2012. After the workshop, the PCU was informed that government was already receiving funding from other donors. As a result, the activity was placed on hold and dropped in the subsequent restructuring. 54. Complexity of the Impact Evaluation. Procurement delays and activity design elements made the implementation of Component 2 problematic. Chief among these were: (a) the Terms of References (TORs) for the training contractors not being prepared prior to effectiveness. As a result, the hiring process of the training firms for both informal and formal firms, and the formulation of the

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terms of reference for the training of formal enterprises, took more than a year; (b) laborious questionnaires, comprising almost 20 pages were required for the enrollment of the informal entrepreneurs; (c) follow up survey questionnaires conducted after the training took each entrepreneur 4-5 hours to complete and created expectations by the beneficiary firm of funding; and (d) the grants were never made available for 1,000 informal entrepreneurs who had received training as many firms expected. Despite these challenges the project trained and mentored 1,000 informal/traditional entrepreneurs in business edge and training tool developed by ILO (Germe). 55. Changes in Government policies, laws and lack of readiness. Component 3 implementation was impacted by evolving government policies and laws. In August 2011, the Government indicated that the Free Zone was threatened from UEMOA, ECOWAS and World Trade Organization (WTO), and the Convention Collective (Collective Agreement) agreements and regulations, and other factors, that threatened its survival. In 2012, the second year of the project, the Government introduced the Law on Investment code in Togo which included creating a national agency for Promotion of Investment and Free Zone (API-ZF). As a result of this change, SAZOF was replaced by API-ZF under the authority of the Office of the President. After delays the Government approved the decree to establish the Investment Promotion Agency in 2013, and a new Director General was to be hired. However, the process had not been completed at close of the project. These changes were disruptive to implementation. There were a number of project outputs which should have been prepared during the initial stage of the project including a detailed economic analyses to determine the viability of the intervention, however, these were still in progress by mid-term review. 56. The Mid-Term Review (MTR) recommendation to restructure the project was a missed opportunity to simplify and scale down the project. During the mid-term review mission of January 2014, the Government and Bank agreed to restructure the project. The MTR mission revealed the range of problems facing the Project and the poor performance against objectives. In redesigning Project components, the team assessed the possibility of cancelling some of the sub-components. Three factors were used as the rationale for continuing support to the selected sub-components: (a) the activities supported were essential to the country’s private sector development; (b) there were no alternative institutions that were delivering (or planned to deliver) the services provided by the selected sub-components (in cases where there was an alternative government-funded initiative, e.g., land registry, the subcomponent was dropped); and (c) the Bank was convinced of the existence of genuine, high-level government commitment and willingness to act to support the selected activities.

57. The initial Level 1 Restructuring Paper (RP) which would have required Board approval proposed to re-design the project. The RP addressed the needs of the beneficiaries. It was demand-driven and simplified the Project. The proposed changes included: (a) a revision of the PDO; (b) an adjustment of the project components; (c) a revision of the Results Framework; (d) a reallocation of proceeds; (e) a 13-month extension of the closing date that is expected to improve the project’s performance and help achieve its revised objectives; (f) introduction of new implementation arrangements for Component 2; and (g) a change in the Environmental Assessment (EA) category from B to A was initiated in January 2014.The restructuring package was prepared by the Bank team, and Management approval was sought in June 2015. The initial request to restructure the project from GoT was dated August 4, 2014. 58. Restructuring process was a lengthy exercise that negatively affected implementation. The initial proposed restructuring of the project following the MTR went through several internal deliberations and clearances within the World Bank. After long and extensive bureaucratic restructuring processes and consultations within the Bank, and between the Government and the Bank, the proposed restructuring did not occur. This restructuring process took almost two years. A detailed timeline of this lengthy process is laid out in Annex 11. It shows that, after the MTR in January 2012, and due to the complexity of the design, the project team conducted two restructuring missions (March 31 - April 11, 2014 and May 25 - June 2, 2014), and on August 4, 2014 the request official request from the Government was received by the Bank. Between September and December 2014, the Global Practice Director held discussions with the Project team and later with the Trade and Competitiveness Portfolio & Operational Solutions (PMSO) team. These exchanges resulted in a modification of the design of the project to include IFC activities. However, this modification was not feasible within the Project. In December 2014, the restructuring package was sent to the World Bank Legal Department (LEG) for review and clearance, and LEG, followed by ultimately Country Director provided clearances on May 26, 2015.

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59. The proposed Level I restructuring package was then submitted to the Africa Operations Unit and the team received several comments which were incorporated, and clearance was obtained on June 16, 2015. In addition, the package had received recommendations from the Safeguards team providing their clearance on June 16, 2015. The restructuring package was sent to the Vice Presidency (VP) for approval on June 16, 2015. A Letter from Prime Minister re-committing endorsement of the Project as restructured was received by the World Bank on August 24, 2015. The CD held discussions on the restructuring directly with VP at Annual Meetings of 2015. As a result, the Level I restructuring package was sent back to the project team on December 18, 2015, for revisions taking into account the guidance to proceed with level 2 restructuring which only required Country Director approval.

60. The project team conducted a restructuring implementation support mission in November 9-12, 2015 to pursue modification of the project and extension of the closing date which was to close the project 6 months earlier than planned with a limited set of activities still to be completed, and cancel US$7 million of the funds.

61. The revised and final restructuring was simplified to include: (a) changing the closing date from December 30, 2016 to June 30, 2016; (b) cancellation of US$7 million; (c) changes to components and costs, specifically, cancellation of Component 2, and only a set of limited activities continued for Components 1 and 3, in which in Component 3 focused on a feasibility study and strategy development in the existing Free Zone. The restructured project did not address development of a new zone, nor cover the operating costs of the Investment Promotion Agency that would govern the Zone; (d) changes in the Results Framework, specifically: deletion of indicators for dropped activities and introduction of one, new Intermediate Indicator for a new activity; which resulted in one PDO indicator and 5 intermediate indicators being achieved or partially achieved; (e) changes to disbursement estimate; (f) changes to the implementation schedule, (g) changes to the economic and financial analysis; and (h) changes in the technical analysis. This resulted in a simplified project.

62. The revisions of restructuring commenced on April 26, 2016 and the Level 2 RP was approved by the CD on May 11, 2016. Thus, the WB internal procedures and decision-making process made for a very long, delayed restructuring which contributed to the inefficiency of implementation. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 63. M&E Design. The indicators that were identified to measure the investment climate improvements and reforms were not easy to implement and achieve. The project suffered from lack of effective implementation of activities in order to reach the targets. Targets were not met for Component 2 and many investment climate indicators had to be dropped due to lack of progress, or changes in the client’s priorities.

64. Some of the indicators that were dropped were not realistic and ill-conceived. These included: (i) Measuring performance of

MSMEs through increased turnover which has little meaning as a turnover increase may simply have reflected an exogenous change in price due to imperfect competition. Addressing value added would have been more suited to measuring impact on beneficiaries; (ii) Reducing Investment Climate improvement to the reduction in number of days required to create a firm was a very limited measure of PDO achievement; and (iii) A PPP framework was more an input, than an outcome.

65. The Results Framework had indicators that were not consistently monitored, such as, “3, 000 micro and small entrepreneurs have benefited from training”, which was listed in the PAD and measured by the Impact Evaluation, however this indicator was not monitored in ISRs and not included in the Restructuring Paper. This is likely due to the perennial lack of progress on Component 2.

66. The non-appropriateness of the initial results framework is further demonstrated by the fact that 2 out of 3 PDO indicators were

dropped during the restructuring as well as 5 intermediate result indicators.

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67. M&E Implementation and Utilization. The Project M&E system was designed to enable each component to be managed by a dedicated staff member. The data was to be derived from Doing Business reports and specific surveys including data from the impact evaluation. There were difficulties in M&E implementation. The PCU’s M&E Specialist was not hired until June 2012. There were instances of lack of coordination with key ministries which resulted in a number of indictors not being monitored. The M&E system was weak throughout the project.

2.4 Safeguard and Fiduciary Compliance 68. At Appraisal, the project’s environmental status was rated as Category B. Environmental issues raised by the Safeguards Specialist concerned Component 3: Support to the Development of the new Free Zone component. The environmental audit was carried out and this concluded that the existing legal, regulatory and institutional framework was satisfactory. During project preparation, potential involuntary resettlement issues within the existing Togolese Free Zone arose. These issues were outside the scope of the contemplated project, however the Regional Safeguards Advisor raised the issue of reputational risk. The internal discussion caused delays in project development, and was a factor in the nebulous presentation of Component 3 activities. Most of the activities for this component were cancelled during the restructuring, with the exception of the three-phased feasibility study of the Free Zone and the elaboration of recommendations on the operationalization of the Free Zone (business model, institutional set up, and action plan). Fiduciary Compliance. 69. Financial Management: Government capacity in financial management was initially weak. However mitigation measures were undertaken to strengthen the capacity to ensure adequate budget planning and establishment of efficient internal controls. Reassignments were made within the PCU and new staff hired. Project internal controls improved due to hiring of an additional FM Specialist and Accountant. There were no overdue audit reports indicated. 70. Procurement: Changes to the national procurement regulations instituted in 2012 became a major obstacle to project implementation. The Project experienced delays due to the need to comply with both Bank and national procurement approval processes. The Government started a parallel program financed by the National Publics Procurement’s Control Direction (Direction Nationale de Contrôle des Marchés Publics, DNCMP). Documentation had to be approved by the DNCMP before submission to Bank for approval. Even when there were very minor changes to the terms of the tender, the PCU was required to re-submit and start the process again. As a result, it took over one year for a simple procurement for the training firm required to implement Component 2. 71. Furthermore, there were conflicts between the project coordinator and the Bank team’s procurement specialist over transactions where the coordinator indicated pressure to accept higher prices for certain goods and services. These issues were never resolved to the coordinator’s satisfaction. For example, the PCU purchased a vehicle for 50 percent more than the actual price, yet the Bank provided no objection for the purchase as should have been expected. The second case related to contracting the training firm for Component 2 for training the first 1,000 entrepreneurs. The initial proposal from the firm contained unnecessary and double-counted line items that increased the proposed contact cost by 40 percent, tens of thousands of dollars. There was considerable debate among the PCU and Bank team whether or not the potential savings justified the time and effort required to negotiate the contract down to a reasonable level. Thanks to the actions of the PCU Coordinator, the contract amount was negotiated down. 2.5 Post-completion Operation/Next Phase 72. Despite the challenges experienced during the life of the Project, the Government is still committed to improving the investment climate, and there remain opportunities for constructive engagement between the World Bank and Togo. A new operation is under development focusing on improving transport logistics. Furthermore, many stakeholders provided the team with suggestions on how to better design projects and activities, taking stock of the limitations of the environment and lessons learned implementing this project.

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73. The Government will continue to develop the operations of the CGA and a Director has been appointed. The CFE has become autonomous, and the Private Public Dialogue will continue implementation of an action plan which includes support to GODEF, Vision 2030, and ACCM (linked to OHADA).

74. In terms of sustainability, the IE included a training of trainers course which was achieved, and these trainers have the capacity to train more entrepreneurs. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Modest 75. Relevance of Objective - High. The World Bank approved an Interim Strategy Note for Togo in December 2011 for the period FY12-FY13 in which Objective I focused on Deepening the Economic Recovery Process and Promoting Sustainable Development. In particular, Outcome 1.1 stated “Improved Business and Investment Climate.” The Poverty Reduction Strategy Paper, January 2013 focused on Strategy for Boosting Growth and Promoting Employment (2013-2017) and stated that ‘measures needed for consistently improving competitiveness increasingly required strong commitment from all Government sectors, the private sector, and social partners. To support this, it was important to strengthen (a) dialogue between the State and the private sector; (b) public-private partnerships (PPPs); and (c) communication on the extent of reform and its impact on the engines and levers of growth, reducing inequality and promoting employment’. Therefore, the project’s development objective, namely: ‘to contribute to an improved investment climate in Togo, including in a New Free Zone, and to an improved performance of targeted micro and small business remains highly relevant. 76. Relevance of Design and Implementation. Negligible. As discussed in Section 2, the design of the Togo Private Sector Development project was complex, not fully prepared at signing and effectiveness, with Component 3 too nebulous to be particularly relevant. The project included reforms which had a clear link with the improvement of the investment climate. Although there were improvements in one or two indicators under project responsibility, the project was not truly responsible for the country’s improvement in the DB for 2015. Therefore, the achievement was not “sensu stricto” attributable to the project.

77. The client and beneficiaries did not have had an optimal understanding of how the enterprise training component, matching grants and associated impact evaluation were going to work, the cost of the impact evaluation in terms of time and effort, and how it was going to impose conditions on many aspects of implementation. Furthermore, beneficiaries thought they would receive matching grants, but failed to understand that there were many conditions in order to receive them, and that the expenses eligible to be paid via the matching grants were of little interest to them. These issues caused delays and strong, negative feelings among beneficiaries.

78. The hiring of the training firms was delayed as the Terms of Reference required specific and somewhat comprehensive knowledge of enterprise training programs to align with the demands of the impact evaluation, and the procurement required dual processing procedures using country systems and Bank systems. As a result, the training of informal firms was delayed for years, and the training of formal firms was cancelled. Due to the challenges experienced in the hiring of the firms, the matching grant preparation was not able to take off, although it was unclear whether the matching grant was directly linked to the training of the firms. The follow up surveys conducted after the training of the informal entrepreneurs were laborious, and it was not clear on whether these were to inform the training program, or for the sake of the research.

79. The design of Component 3 was imprecise, lacked sufficient analysis and lacked commitment from the Government. The component was contentious internally as well, due to the reputational risk arising from potential safeguards issues. Ultimately, the Bank did not take a clear position either to redesign the component into activities that were manageable, or to drop it prior to appraisal.

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80. After one year of project implementation, the decree which reduced the procedures for business creation was signed, adopted and published which resulted in reducing associated fees and is recognized in the Doing Business Reports. However, the project suffered serious setbacks that affected several subcomponents throughout the project due to factors discussed earlier. These factors included: inadequate government ownership and changes to the institutional arrangements, lack of mechanisms for coordination, weak capacity, and parallel procurement processes which resulted in unreasonable delays. These factors indicate that the project was not ready to go to Board. 3.2 Achievement of Project Development Objectives Rating: Modest 81. The proposed project development objective (PDO) was to contribute to an improved investment climate in Togo, including in a New Free Zone, and to an improved performance of targeted micro and small businesses. Progress against the elements of the development objective of the project – improving (a) the investment climate; and (b) performance of micro and small businesses – is assessed below based on achievement before and after restructuring of the project.

Before Restructuring 82. The PDO outcome associated with the improvement of the business environment was the reduction in the number of days required to create an enterprise from 75 to 2. Togo made starting a business easier and less costly by reducing incorporation fees (registration costs), improving the work flow at the one-stop shop for company registration and replacing the requirement for a copy of the founders’ criminal records with one for a sworn declaration at the time of the company’s registration. The Doing Business ranking (see Annex 10) for Togo significantly improved (see impact for both dealing with construction permits and starting a business). In 2015 Doing Business Report states that among the 21 economies with the most reforms making it easier to do business in 2013/14, 10 stood out as having improved the most in performance on the Doing Business indicators: Tajikistan, Benin, Togo, Côte d’Ivoire, Senegal, Trinidad and Tobago, the Democratic Republic of Congo, Azerbaijan, Ireland and the United Arab Emirates. These economies were selected on the basis of the number of reforms and ranked on how much their distance in frontier score improved. 83. The PDO outcome indicator: A Public Private Partnership (PPP) legal, regulatory and institutional framework applicable to the Free Zone and to the Special Economic Zone was established in 2013. Although the indicator was dropped during the restructuring in 2016, the outcome was achieved. 84. In terms of the PDO outcome indicator: ‘The performance of MSEs supported by the project has improved compared to the firms in control group (as measured by increased turnover)’, no information on progress was available at restructuring. However, the impact evaluation later revealed that the performance of MSEs that participated in training had improved, but the project trained considerably fewer MSEs than planned. In addition, the firms did not receive any matching grants as planned under the project. Thus, improved performance of these MSEs is partially attributed to project support, and this indicator was dropped during restructuring. 85. Before restructuring, some of the very relevant investment climate indicators were improved in a timely manner, others were not. Despite the project’s challenges and attribution issues, the business environment was improved through the adoption of the reduction in number of days to create an enterprise; a single window for the issuance of construction permits which was put in place; and reduction in the number of procedures to start a business. The Project did not reach targets for training MSEs, and there was little progress on the SEZ that can be attributed to the project’s efforts.

In terms of the intermediate outcome indicators before restructuring, (i) the indicator to measure ‘number of procedures to start a business’ was partially achieved by 67 percent;(ii) the indicator to measure ‘the first CGA is providing services to an increasing number of micro and small businesses’ was 8 percent achieved before restructuring (iii) ‘3,000 micro and small entrepreneurs were expected to

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have benefited from training (including at least 15 percent being female); however the result was that only 991 informal entrepreneurs were trained of which 54 percent were women; (iv) direct project beneficiaries was achieved by 33 percent. The following intermediate outcome indicators had not achieved any result before the restructuring: (i) number of land titles; (ii) the procedures to register a property have been significantly simplified; (iii) improvement in the organization of production (i.e. control of stocks, keeping organized accounts) of the MSEs compared to the firms control group; (iv) improvement in the organization of production (i.e. control of stocks, keeping organized accounts) of the MSEs compared to the firms in control group; (v) The performance of MSEs that received a matching grant has significantly improved (by 10%) compared to the firms in control group (as measured by profitability); (vi) SAZOF has been restructured and Free zone Management is separated from Free Zone regulation;

Post -Restructuring 86. After the restructuring, the only PDO indicator that remained to be monitored was the reduction in the number of days required to create an enterprise. PDO indicator number 2, ‘The performance of MSEs supported by the project has improved compared to the firms in control group (as measured by increased turnover),’ was dropped and PDO indicator number 3, ‘A Public Private Partnership (PPP) legal, regulatory and institutional framework applicable to the Free Zone and to Special Economic Zones is established,’ was achieved before restructuring, and dropped at Restructuring. The PDO outcomes associated with the improvement of the business environment, among intermediate indicators, the target for ‘the number of procedures to start a business’ was revised during restructuring. However, the target was achieved as procedures were reduced from 7 to 3. This target was revised and achievement surpassed the original target. The indicator, ‘the first CGA was providing services to an increasing number of MSE,’ underperformed with only 53 out of 250 MSEs receiving services. This indicator was partially achieved at 8 percent before the restructuring, and 21 percent after restructuring. 87. The other intermediate indicator that was monitored during implementation but not included in the PAD was direct beneficiaries and the percentage of which were women. The Project target of 2000 direct beneficiaries was surpassed with 2991 direct project beneficiaries of which 530 were female.

88. Seven intermediate indicators were dropped: (a) Number of land titles issued; (b) The procedures to register a property have been significantly simplified (days); (c) Improved performance of targeted MSEs (percentage increase in turnover compared to control group; (d) Improvement in the organization of production (i.e. control of stocks, keeping organized accounts) of the MSEs compared to the firms in control group); (e) The performance of MSEs that received a matching grant has significantly improved (by 10 percent compared to the firms in control group (as measured by profitability); (f) SAZOF has been restructured and Free Zone Management is separated from Fee Zone regulation; and (g) The establishment of a Public Private Partnership (PPP) legal, regulatory and institutional framework applicable to the Free Zone and to Special Economic Zones. 3.3 Efficiency Rating: Negligible 89. There was no quantitative economic analysis provided in the Project Appraisal Document. Extensive inquiries with the project team, and research into project documents did not produce one either, so the ICR writers have no ex-ante ERR estimate to compare with an ex-post calculation for any of the components. On the whole, the project efficiency was hampered by long delays which resulted in the project underachieving significantly in the number of businesses trained, no matching grants being disbursed, and few results in SEZ development or enhancement. A large percentage of project funds was cancelled. Given the performance of other projects that endeavor to train businesses and disburse matching grants, the project does not compare favorably. Taking over a year to hire a training service provider, little activity on Component 3 over the life of the project and the disruptive, long delay in getting approval for project restructuring, indicate unsatisfactory efficiency.

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90. The project original amount was US$13 million of which US$7 million was cancelled. The revised project amount became US$6 million. The total disbursed amount for the project was US$4.7 million of which US$1.5 million was for the PCU. The remaining amount of US$3.2 million was used for project activities. The financial rate of return is poor as for every dollar spent on activities, it costed 50 cents on administration. (Ratio 1.5:3.2). Therefore this was not the most efficient use of resources.

3.4 Justification of Overall Outcome Rating Rating: Unsatisfactory 91. Given that the objectives, design and implementation are modest, achievement of project development objectives is Modest and efficiency is Negligible, the overall outcome rating is assessed to be Unsatisfactory. Overall Unsatisfactory rating is confirmed based on a weighted average of disbursement before and after restructuring as shown in table 1 below.

92. Overall outcome rating is Unsatisfactory as shown in table 1 below.

Table 1: Project Overall Outcome Rating Description Original Activities Restructured

Activities Overall

Objective1 Unsatisfactory Unsatisfactory Unsatisfactory Rating value2 2 2 Weight (% disbursed before after restructuring)3

93% 7%

Weighted value4 1.85 0.15 2.00 Overall rating Unsatisfactory

Notes: 1: Rated against the project development objectives assigned ICR assessment before and after restructuring 2: Unsatisfactory has a rating value of 2. 3: Derived from SDR IDA disbursements before and after the restructuring 4: Weighted value is the weight of the two ratings by the proportion of actual total disbursement in each period. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 93. At its conception, the project did not have specific gender targets. However, some of the project activities did have a gender impact. For instance approximately 54 percent of the small business owners which were trained were women. Furthermore, the impact evaluation results did obtain evidence that the personal initiative training was particularly effective for women entrepreneurs. (b) Institutional Change/Strengthening 94. Poverty Impact. Tracking the project’s impact on poverty was not part of the M&E design. (c) Other Unintended Outcomes and Impacts (positive or negative) N/A 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

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4. Assessment of Risk to Development Outcome Rating: Moderate 95. During the ICR mission, the Government emphasized that improving the investment climate is a priority to the Government. The Government intends to hold a stakeholder workshop to discuss the findings of the project. In light of Togo’s recent improvement in its DB indicators, it appears that the appetite for economic reforms persists.

. 96. Institutions such as the CGA and CFE are likely to continue their operation. The CFE is autonomous and self-funded, however the CGA is dependent upon on Ministry of Commerce for financing.

97. Although SAZOF is winding down its operations, API-ZF will inherit the activities of the SAZOF once the API-ZF Director is appointed. At the time of the ICR mission, the Director had not been appointed. There appears to be positive developments with respect to Togo’s zones. Perhaps, the Project’s attention came too early.

5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Unsatisfactory 98. On the positive side, the Bank carried out significant preparatory work, and held extensive consultations with various stakeholders, which informed the architecture of the project, and strengthened the buy-in from stakeholders. The Bank tapped into lessons from past experience. However, these were not enough to ensure a feasible design, effective institutional arrangements and risk mitigation measures.

99. Quality at entry and realism. The project preparation team was given guidance to simplify the project at Concept Note and Quality Enhancement Reviews (QER). However, the design at appraisal does not appear to have engendered this guidance. At appraisal, Component 3 was not ready, key studies and assessments on the sites had not been conducted, the PCU was not in place, and the procurement bottleneck for Component 2 was impending (no TOR). Furthermore, the impact evaluation appears to have been poorly understood by the client and beneficiaries, particularly the extent to which it would circumscribe implementation. Risks were not adequately considered at appraisal to the extent that the team put in place effective mitigation measures. (b) Quality of Supervision Rating: Unsatisfactory

100. The team’s unsatisfactory performance derives from: (a) demonstrating flexibility and resilience in a very fragile environment by searching for opportunities where success was possible; (b) undertaking regular implementation support missions with a broad range of expertise with clear action plans in the aide-memoires; and Task Team leaders taking up residence in Lome to offer day-to-day implementation support. Ultimately, the Task Team was unable to fix the project, or restructure in a timely manner. This resulted in cancellation of 54 percent of the grant.

101. Changes in Bank project team leaders: The project experienced three Task Team Leaders which was mildly disruptive. The third

TTL, the only TTL based in the field, generated renewed interest from the client and some forward momentum. However, bureaucratic processes and institutional changes, delayed consultations and decision-making specifically to restructure the project resulted in negligible outcomes.

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102. Realism and candor. The ratings in the World Bank’s Implementation Status Report were too positive and lacking sufficient candor in the first three years of the project. After the first year, the project was rated Satisfactory and remained so for three years despite the effectiveness delays and disruptive institutional changes.

103. Restructuring. Restructuring took place in May 2016 despite being proposed and thoroughly elaborated during the January

2014 Mid-Term Review. This impacted implementation and created uncertainty because the client and the task team were unclear whether activities would proceed. As a result, the client began implementing some of the activities agreed upon following the MTR mission in January 2014, some of which that were later cancelled during the November 2015 restructuring mission.

104. Procurement and Financial Management. As explained previously, the project experienced delays due to multiple procurement

approval processes, and a failure to kick-off key procurements prior to effectiveness. However, there were no mis-procurements, no qualified financial statements or audits implying inadequate fiduciary oversight by the team. (c) Justification of Rating for Overall Bank Performance Rating: Unsatisfactory The range of problems for which the Bank was partially or completely responsible led to poor outcomes, and justify an unsatisfactory rating. 5.2 Borrower Performance (a) Government Performance Rating: Unsatisfactory

105. Government performance is rated Unsatisfactory. The implementation of reforms to improve the business environment, especially in starting a business, underscored Government commitment to some of the Project’s activities. However, there were many changes to responsible ministries and agencies over the life of the project that disrupted implementation. The project experienced three changes of minister in the Ministry of Commerce and Private Sector which caused recurrent delays due to a need to sensitize new counterparts. The Project Steering Committee, chaired by the Permanent Secretary in of the Ministry of Commerce and Private Sector Development, met only a few times. Delays in key appointments contributed to delays in execution of the project. Changes in institutional arrangements, such as the introduction of the investment code which created a new investment agency required the project to re-align activities after the procedures for signing of the Decree were finalized. With respect to procurement, the project experienced delays due to cumbersome processes which the Government made no apparent effort to remedy. (b) Implementing Agency or Agencies Performance Rating: Unsatisfactory

106. The project was challenging to coordinate despite having only three components. The PPP Dialogue was one example where the PCU failed to motivate, organize and encourage constructive action, and instill enthusiasm among stakeholders. The coordination between CGA, Ministry of Commerce and PCU was a challenge in that it took a long time to appoint the CGA Director which contributed to delays in implementation. The preparation process for implementation of the training of the micro and small entrepreneurs was cumbersome, and the sequencing of activities not clearly defined, mainly due to the obligations of the impact evaluation process. This resulted in delays. The project was unable to proceed with key activities in the Free Zone due to the institutional changes from SAZOF to API-ZF. At the close of the project, the Director has still not been appointed.

107. Financial Management and Procurement. Audits identified that the Financial Management (FM) reporting needed to be strengthened which resulted in the hiring of an experienced FM specialist. Procurement processes suffered from the parallel processes which required approvals from the National Publics Procurement’s Control Direction (Direction Nationale de Contrôle des Marchés

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Publics, DNCMP) and subsequent delays receiving WBG clearances. Overall, this resulted in lengthy delays. High-level intervention from the client was not forthcoming to resolve this problem indicating a level of indifference to the Project’s success. (c) Justification of Rating for Overall Borrower Performance Rating: Unsatisfactory

108. The PCU was fighting an uphill battle while struggling with its own difficulties. Overall, the range of serious shortcomings for which the client was responsible justify an unsatisfactory rating. 6. Lessons Learned

109. In a fragile environment, it is important to have simplicity and flexibility with respect to project design. Post-conflict environments are characterized by weak implementation capacity, political inertia, and powerful vested interests, hence the need to moderate expectations and aim for simplicity, with possibilities for scaling up as opportunities arise. Some examples from the Project that endorse this lesson: the impact evaluation questionnaires were too long and complex for project beneficiaries as complaints were received. Terms of Reference for important activities should have been ready during preparation. Engaging key training contractors should be done during preparation. Above all, the project should have been explicit regarding technical services that it was is going to provide and what assets it was going to purchase prior to effectiveness. Furthermore, concrete potential sources and estimated costs should have been known and discussed early and often between the project team and client throughout the project development process. If these pre-requisites are not in order, it is unlikely that implementation will keep to schedule. Ill-defined, nebulous components and sub-components are indicative of a project not ready for effectiveness. If the team finds it too difficult to articulate what they want to do for whatever reason: government’s mind not made up, political pre-requisites not in place, inter-Bank departmental decisions unclear, teams should reformulate elements to reflect what can be explicitly defined, or drop the component/activity from the design.

110. Implementation units should be in place before effectiveness. Inability to recruit and hire key staff in a timely manner is a recurring deficiency of T&C projects, and it happens that several months, or even over a year, can pass after effectiveness before key staff is in place. Also, there can be disputes with the client on selections funded by the Bank. It should be assessed if effectiveness conditions tied to hiring implementation unit staff resolves these problems.

111. Proactivity: Early restructuring and efficient restructuring processes are keys to success. Restructuring, if done early, gives

a poorly-performing project a better chance of success. In this case, two components were not progressing as planned. While the mid-term review and efforts of the Project team identified and redesigned appropriately, the prolonged, cumbersome restructuring process was an obstacle to salvaging the project.

112. Anticipating outcomes and a robust communications strategy are needed to address the complexity of lending operations.

Managing client or beneficiary expectations is crucial as activities can have unexpected, negative consequences when they are not fully understood by the client or beneficiaries, like raising expectations or failure to understand what the project is really going to do and not do. With the PADSP, the client and beneficiaries may not have had an optimal understanding of how the enterprise training component, matching grants and associated impact evaluation were going to work, the cost of the evaluation in terms of time and effort, and how the evaluation was going to impose conditions on many aspects of implementation. Furthermore, beneficiaries thought they would receive matching grants, but failed to understand that there were many conditions for receiving them, and that the expenses eligible to be paid via the matching grants were of little interest to them. These issues caused delays and strong, negative feelings among beneficiaries. The Bank team, Country and Country Management Unit (CMU) teams, the implementation units and beneficiary agencies convey messages about what a project is going to do, when, for whom, and how. Stakeholder analysis, mapping, careful planning of communications and a robust communications strategy can help avoid problems like this. Teams need to anticipate what expectations they may be creating, and potential reactions from stakeholders, and adapt accordingly. They must also pay close attention to the degree of understanding of stakeholders, and not take it for granted. This is not an easy thing to do. It requires effort (which requires budget), and experience, both technical and cultural.

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113. Lengthy procurement delays can be anticipated with preparation. Projects should perform major procurements prior to effectiveness with contracts with suppliers contingent upon the effectiveness of the project, or other approaches to line up disbursement. There is also the possibility of derogations of national procurement policy, but it would be better to coerce clients, those using national procurement processes, to take care of these matters prior to effectiveness. Using redundant procurement systems slows down implementation, and should be raised as early as possible as a potential risk.

114. The choice of the right instrument is crucial to ensure project success. . An Investment Project Financing (IPF) may not

have been the best tool for some of the proposed activities in Component I, shown de facto when it required the involvement of IFC support/instruments. It would have been more appropriate to undertake these activities as part of an advisory services activity (DB improvements and one-stop-shops) rather than an IPF.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies

115. The issues raised by the Borrower ICR are summarized in Annex 7. (b) Cofinanciers (c) Other partners and stakeholders

116. During ICR preparation, representatives from the private sector indicated that they had not been sufficiently consulted during project planning, restructuring and implementation. The private sector had expected direct, financial support from the project through matching grants and business plan competition. The private sector pointed out that while reforms and training are important, these were not necessary their priorities.

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Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent)

Appraisal Estimate (USD) (1)

Restructuring Estimate (USD) (2)

Actual/Latest Estimate (USD) (3)

Percentage of Appraisal (4)

Component 1: Support to investment climate reforms

3.0 1.50 1.0 33

Component 2: Support to the development of entrepreneurial capacities

4.0 1.10 0.9 23

Component 3: Support to the development of the new Free Zone

3.0 0.80 0.7 23

Implementation (Project Coordination Unit)

1.50 1.30 1.4 93

Physical Contingencies 0.50 0.03 6

Total Project Cost 13.0 4.73 4.0 31

Note: (4) = (3)/(1) (b) Financing

Source of Funds Type of Cofinancing

Appraisal Estimate (USD millions)

Actual/Latest Estimate (USD millions)

Percentage of Appraisal

Borrower 0.00 0.00 .00 IDA Grant 13.00 4.00 31

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Annex 2. Outputs by Component

Project Achievements by Components:

Component/Sub-component Main Outputs Before Restructuring Main Outputs After Restructuring Implementing Entity

Component 1: Support to investment climate reforms (US$3.0 million) - Support to one stop shop

to start a business (Centre de Formalité des Entreprises, CFE) (US$0.7 million)

(i) Office equipment and CFE (ICT) software delivered

(ii) TA for CFE procedures and processes provided

(iii) Capacity Building through Training of Director and development of staff plan

(iv) Communication Plan and Strategy implemented

(v) Audit of constraints to establishment of a company and development of a blueprint new software for the Center

(vi) Business Plan for five years implemented

(vii) Capacity building mission to Cape Verde which included CFE, Ministry of Trade, Industry, Private Sector Promotion and Tourism, Presidency Unit supporting reforms on business climate

(viii) TA for the integration of the unique cards printing mode and configuration

(i) Design of the “cfetogo.tg” domain and online website and publication of established companies

(ii) Designed and implemented website for CFE

PIU/CFE

- Support to the establishment of the first Licenses Management Center (Centre de Gestion Agréé, CGA) (US$0.5 million)

(i) Manual of procedures prepared (ii) Office equipment purchased (iii) Awareness campaign on the CGA

structure conducted (iv) .Capacity building mission to Cote

d’Ivoire and Burkina Faso for CGA, CCIT, RTO, MEF and MCIPSPT

(v) Recruited Executive Director and two economic operators

(i) Business Plan developed and market study on feasibility of CGA conducted

(ii) Communication campaign to advertise services of CGA

PIU/CGA

- Support to the simplification of procedures to register property (US$0.9 million)

Study on process of property transferred completed

PIU/Direction des Affaires Domaniales et Cadastrale

- Support to public-private dialogue and communication (US$0.9 million)

(i) Study mission to Senegal and Burkina Faso for representatives of major private sector organizations was conducted

(ii) Diagnosis and Recommendations for revival of DPP completed

(iii) Support to coordination of secretariat and draft report for Togo Vision 2013

(i) Workshops on new OHADA procedures on ‘how to group companies conducted in Lome

(ii) Purchase of equipment for RCCM (iii) Capacity building of stakeholders

in the construction permit Implementation of computer equipment for building permit process

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(iv) Component 2: Support to the development of entrepreneurial capacities (US$4 million) - Support to formal firms

(US$0.75 million) (i) Training needs analysis conducted (ii) Telephone survey conducted and

diagnosis of validation of results (iii) Recruited legal agent to supervise

drawing selection of formal micro entrepreneurs

(iv) Produces the operating manual for Competition of Business Plans

- Support to informal (traditional) firms (US$1.21 million)

(i) Developed memorandum of understanding with 3 IMF networks Cooperative Savings And Credit Of Artisans (Cooperative D'epargne Et De Credit Des Artisans, CECA), Co-operative Savings and Credit Units (Faîtière des Unités Coopératives d'Epargne et de Crédit, FUCEC) et Women and Associations for Gain both Economic and ) WAGES) 14 cyber cafes, 5 other media and national television

(ii) Recruited, managed and deployed 30 student to support awareness campaign

(iii) Designed and implemented ‘Plan B in terms of the number of registrations

(iv) 3445 candidates applications

accepted after monitoring and evaluation and 1600 potential beneficiaries selected

(v) 1500 micro entrepreneurs identified for an impact evaluation

(vi) Recruitment of legal agent to draw of 1000 firms and a call center to inform 100 firms of selection; and consortium of firms to develop and organize training and follow up program

(vii) 500 control group identified (viii) 1,000 traditional micro business

owners trained and mentored (500 in management and 500 in business skills)

(ix) 3 evaluation surveys conducted supervised by the Bank

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Matching Grants No achievements. Support to the development of a pool of business consultants for micro-enterprises

No Achievements.

Component 3: Support to the Development of a new Free Zone (US$3 million).

(i) Audit for SAZOF completed (ii) TA for creation of free zones (iii) Recruitment of Director General

and staff of API-ZF through a consultant

(iv) Business plan for API-ZF (v) Drafted Manual of procedures for

API-ZF (vi) Updated framework for the

Resettlement Policy (CPRP)

(i) Feasibility study and Master Plan for SAZOF completed

(ii) Quantitative survey on the application and validation of the sector for Adétikopé site

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Annex 3. Economic and Financial Analysis

1. The project’s development objective was to contribute to an improved investment climate in Togo, including in a New Free Zone, and to an improved performance of targeted micro and small businesses. The project was to achieve these objectives by supporting investment climate reforms, supporting the development of entrepreneurship skills and support to the development of a new Free Zone. 2. It was noted that the PAD provided an economic analysis summary, however additional quantitative or qualitative analysis for each component was not provided. No qualitative economic analysis was found for the project in any of the project documents or via consultation with a range of people involved in preparation with which the ICR team could compare the assumptions at appraisal. The project did not fully disburse allocated funds, was restructured with a large amount of funds cancelled, and then the operation experienced early closing.

3. On the whole, the project efficiency was hampered by the complex implementation mechanism which were put in place; the commitment to objectives of government, its agencies and other participants. The inadequacy of the participatory processes contributed to inefficiency. Other factors such as incomplete preparation of the project; the unrealistic implementation schedules and failure to schedule sufficient time for startup activities and mobilization, for example, the hiring of the firms for the formal firms in Component 2; delays in selecting staff and consultants and the parallel procurement processes. As a result, the project focused mainly on capacity building and provision of technical assistance. 4. However, the following assessments of the components were made: 5. Improving the Investment Climate. Component 1 was designed mainly to provide institutional strengthening and technical assistance to improve the investment climate in Togo. As illustrated in the Doing Business reports from 2012 – 2016 Togo was listed as one of the countries that has made ‘starting a business’ easier and there has been a reduction in registration costs. Although the Land Registry (Direction des Affaires Domaniales et Cadastrales) was dropped, this was implemented by the Government. Component 1 made significant impact on the investment climate and contributed to efficiency of the project. 6. Supporting the Development of Entrepreneurship skills. An illustrative analysis was conducted for Component 2 and was based on the 1000 entrepreneurs that were trained to demonstrate the increase in business impact. The ICR compared an average firm with trained employees and average firm with non-trained employees. Assumptions were an increase in revenue for the firm with trained staff and that costs decreased due to efficiency. The result was as follows:

Component NPV (US$ million) ERR Supporting the Development of Entrepreneurship Skills

(US$21,904.46)

59.97%

7. Although ERR was estimated at 60 percent, with corresponding NPV at US$-21,904.46 (for a 12 percent discount rate), the project component also included Trust funds used for the impact evaluation which were not factored in during the assumptions and this would have driven the impact to negative.

8. Therefore, some elements are presented to assess and justify the rating of the efficiency as follows: The project management costs were 25 percent of the total revised amount of the project, the project management team had skilled members, however, the design and implementation of the project stalled progress. On the World Bank side, task team leader was later country based which resulted in project performance being reported more candidly and this helped underscore the complexity of the project.

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9. Support to the Development of a New Free Zone. Component 3 activities were scaled down to technical assistance and therefore does not lend itself to an economic and financial analysis. 10. The project original amount was US$13 million of which US$7 million was cancelled. The revised project amount became US$6 million. The total disbursed amount for the project was US$4.7 million of which US$1.5 million was for the PCU. The remaining amount of US$3.2 million was used for project activities. The financial rate of return is poor as for every dollar spent on activities, it cost 50 cents on administration. (Ratio 1.5:3.2). Therefore this was not the most efficient use of resources.

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Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members

Names Title Unit Hugues Agossou Sr Financial Management Specialist GGO31 Itchi Gnon Ayindo Consultant GSP07 Claude Baissac Consultant ECSP1 - HIS Elena Bardasi Senior Economist IEGEC Francisco Moraes Leitao Campos Senior Economist GTC13 Wolfgang M. T. Chadab Senior Finance Officer WFALA Thomas Farole Lead Economist GPSJB Garth Frazer HQ Consultant ST DECOS Alain Hinkati Sr Financial Management Specialist GGO26 Esinam Hlomador-Lawson Program Assistant AFMTG Leonardo Iacovone Senior Economist GTC04 Anthony Molle Senior Counsel LEGSG Africa Eshogba Olojoba Lead Environmental Specialist GEN05 Alice R. Ouedraogo Senior Private Sector Specialist GTCIC Haroune Ould Sidatt Consultant GTC07 Thomas Jeffrey Ramin Senior Operations Officer DFGPE Abdoul Wahabi Seini Senior Social Development Specialist GSU01 Chantal Leontine Tiko Program Assistant AFMTG Andrea Vasquez-Sanchez Senior Program Assistant GFM01 Lucienne M. M’Baipor Senior Social Development Specialist GSU01 Kouassi Kouakou Consultant Asya Akhlaque Lead Economist GTC02 Guillemette Sidonie Jaffrin Lead Private Sector Specialist GTC07 Maiko Miyake Head GTCA1 Aminata Ndiaye Young Professional Jose Guilherme Reis Practice Manager GTCTC Gilberto de Barros Senior Private Sector Specialist GTC07 Elke U. Kreuzwieser Consultant Ousmane Sangare Consultant Dileep M. Wagle Consultant Jean Robert Kamgaing Simplice Ntyame Belinga Driver AFCC1 Ndeye Anna Ba Senior Program Assistant GTI01 Joseph Daulat Marsangap Information Assistant SECPO

Supervision/ICR Itchi Gnon Ayindo Consultant GSP07 Zacharie Agbossaga Driver AFMBJ Lorenzo Bertolini Senior Private Sector Specialist GTC13 Francisco Moraes Leitao Campos Senior Economist GTC13 Adja Mansora Dahourou Private Sector Specialist GTC07 Numa F.De Magalhaes Senior Private Sector Specialist GTCIC Magueye Dia Senior Private Sector Specialist GTC07 Sylvie Charlotte Ida do Rego Program Assistant AFMBJ

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Abdoulaye Gadiere Senior Environmental Specialist GEN07 Axel Gastambide Consultant Puja Guha Consultant Leonardo Iacovone Senior Economist GTC04 Hillary C.Johnson Economist EAPCE Hamoud Abdel Wedoud Kamil Senior Education Specialist GED07 Judith Lewetchou Efouefack Consultant IEGSD Kossi Logossou Driver AFMTG Tatiana S. Mensah Armande Executive Assistant AFMTG Aminata Ndiaye Young Professional GFM06 Tanangachi Ngwira Analyst GTC07 Irene Marguerite Nnomo Ayinda-Mah Program Assistant GTC07 Martin Maxwell Norman Senior Private Sector Specialist GTC07 Mahaman Sani Consultant Lina Sawaqed Private Sector Specialist GTC07 Abdoul Wahabi Seini Senior Social Development Specialist GSU01 Hamidou Sorgo Senior Private Sector Specialist GTCA1 Jeremy Robert Strauss Senior Private Sector Specialist GTC07 Dolele Sylla IT Analyst ITSCR Samuel Taffesse Senior Economist GFA01 Papa Demba Thiam Senior Private Sector Specialist GTCOS Alain Tienmfoltien Traore Senior Private Sector Specialist GTCA2 Barbara Weber Senior Operations Officer GTC07 Nadine Marianne Weber Financial Officer DFIRM Karamath Djivede Sybille Adamon Young Professional GTC03 Desire Dieudonne Bankole Birima Fall Nicholas Robert Gabin HountoHotegbe Consultant Jeannette Kah Le Guil Senior Program Assistant GTC07 Ferdinand Ngobounan Operations Officer CASSB Matinath Anicette Deen Private Sector Specialist GTCA1 (b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending

2010 0.00 5631.90 2011 24.81 190712.94

Total: 24.81 196344.84 Supervision/ICR

2011 2.42 4473.73 2012 38.63 155558.20 2013 35.02 106227.40 2014 34.56 147659.36 2015 53.00 152121.30 2016 36.11 101553.36

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2017 14.59 44403.83

Total: 214.33 711997.13

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Annex 5. Beneficiary Survey Results

None.

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Annex 6. Stakeholder Workshop Report and Results

None.

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

Summary of Closing Report Togo Private Sector Development Project

Credit No.: 6580 – TG

Ministry of Trade, Industry, Promoting Private Sector and Tourism

October 2016

1.1 Context 1. The Government of the Republic of Togo, in the perspective of sustainable and inclusive economic development, committed, through the strategic framework for Poverty Reduction - interim (CSRP - I) in 2008 and finalized (CSRP - F) in May 2009, a vast project of reforms to improve the business climate, the development of initiatives of strengthening of the private sector for accelerated growth inclusive, and generating jobs. 2. In this context, the Government of Togo requested the support of the Group of the World Bank for the implementation of the project of Private Sector Development Project (PADSP) in the amount of US$ 13 million (6.5 billion FCFA). The agreement was signed on 19 July 2011 with implementation date December 19, 2011 for an initial term of five (05) years. 3. The PADSP aimed to give impetus to the Togolese economy and attract foreign investors through the improvement of the business climate, modernization of the benefits of the single desk of establishment of enterprises (CFE), the strengthening of the entrepreneurial skills of micro and small businesses and the implementation of a new free trade zone. To achieve these objectives, the project was divided into four (04) components.

• Component I : "support to the reforms of the investment climate" (US$ 3.0 million) • Component II:" support for the development of entrepreneurial capacities" (US$ 4.0 million). • Component III: "support the development of a new free Zone (NZF)" (US$ 3.0 millions) • Component IV: concerns the costs of implementation of the project. (US$ 1.5 million)

4. The PADSP experienced a restructuring triggered on March 31, 2014 and ending May 24, 2016, by an amendment to the original grant agreement, reducing the funding of 6.5 billion FCFA to 2.8 billion FCFA and the closing of December 15, 2016 to June 30, 2016. 1.2 Implementation Period 5. Three (03) periods mark the implementation of the project: (i) the period of December 2011 and December 2013; (ii) the period of January 2014 to November 2015 and (iii) the period of December 2015 to 30 June 2016. The 1st period (December 2011 - December 2013); Start-up phase 6. Component I, the actions of the sub component: Support for the modernization of the CFE ', A document of communication strategy for improving the climate of business in Togo has been achieved.

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7. In March 07, 2012, The decree establishing the Centre of formalities for enterprises, in the form of a single window which included: (i) The Office of Togolese of Revenue (OTR), (ii) the National Social Security (CNSS) Fund, and (iii) the Trade and Personal Property Registry (RCCM). 8. A communications plan to inform the public of the changes was developed, which highlighted the reduction of the period of creation of companies from 60 days to 22 days, after the implementation of the Decree. Similarly, expenses of creation went 69,000 F CFA to 34,000 F CFA for individuals and 150,000 CFA F 61.250 FCFA for legal persons. 9. Sub-Component I: Support for the implementation of the first authorized Management Center (CGA) , working meetings were held with the CCIT, set up a work plan for the establishment of the AMC pilot and its operationalization. In addition, awareness was made in respect of the structures involved in the creation of the CGA for its ownership. Thus, on 30 October 2012, the CGA pilot statutes were adopted. 10. Sub Component 1: Support for the modernization of the management of State Affairs and cadastral was marked by sessions with the DADC were held to implement the recommendations of the organizational diagnosis made by the (IFC) International Finance Corporation, World Bank Group. 11. Sub-Component 1: Support for the implementation of a public - private dialogue has been the subject of working sessions with the Ministry for the recovery of the information and records relating to the framework for dialogue between the private sector and the public, with a view to the recovery of the Public-private Dialogue. 12. Component II, the first actions have consisted in the work preparation and start-up of phase pilot of the " 1000 MPE of the informal sector training program ', including the creation of a website for the registration of applications; the campaign appeal and awareness in collaboration with seven (7) institutions identified[4] and registration of 3445 applications retained after a joint assessment with the team monitoring and evaluation of the World Bank Group. A first staff of 1600 potential beneficiaries has been preserved. However, the final selection of the 1,000 beneficiaries MPE was repulsed on 2014, given that the process of recruiting trainer was unsuccessful. 13. At the same time, the impact evaluation of the training program started by a baseline of the 1600 MPE, potential beneficiaries of which will be extracted by draw 1000 final beneficiaries and 500 witnesses. 14. The implementation of the " MPE from the formal training program ', started by a telephone survey definition of training needs, in terms of development of management skills, with 400 companies registered in the CCIT, followed by a diagnosis of validation of the results of the survey on a sample of 10 percent of MPE respondents. The conclusions of these two missions were used to refine the TOR and to launch the recruitment of consultant trainer (firm) for the training of a first wave of 500 MPE. 15. Relatively to the III component: ' Support the development of a new free Zone (NZF) ", activities were mainly on the follow-up of the first part of the organizational audit of the SAZOF contract, the recruitment of an individual consultant to carry out a mission for technical assistance in the creation of free zones in emerging countries, and a law firm to conduct a feasibility study and development of a master plan for an industrial free zone on behalf of the SAZOF. The 2nd period (January 2014 - November 2015): Phase of Re-orientation 16. It results from the conclusions of the different supervision of the World Bank missions that took place on 31 March to 11 April and 25 May to 02 June 2014.

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17. The component "Support to the investment climate reforms" becomes " establishing an environment conducive to the development of the sector private” and is divided into (i) support for the operationalization of the CFE. (ii) support to the creation of the authorized Management Center; (iii) support to the revitalization of the Public-private Dialogue; (iv) support to the automation of the register of trade and of furniture Credit (RCCM); (v) support to the operationalization of the Central balance sheet; and (vi) support to the operationalization of the API - ZF. The 3rd period (December 2015 - June 2016); Phase of the addendum to the document of the project" 18. The follow-up mission of the 09 to November 12, 2015 PADSP suspended some activities of Component I, including (i) the support of the salary of the Director of the CGA. (ii) support the rent of the CGA and (iii) support for the implementation of the Central balance sheet. Only the following activities should be pursued: (a) modernization of the CFE. (b) the grant of the CGA; (c) the RCCM in hardware equipment; (d) the proofreading of the texts of the permits (DPP). 19. In its operationalization, the financial statements of the PADSP have been regularly audited by external auditors. The conclusions are satisfactory . 20. At June 30, 2016, the rate of disbursement of the project is 88.19 percent the value of the credit (DTS 3 386 930,21). 3 Evaluation of the Performance of the Project 3.1 Overall Evaluation of the Project 21. The PADSP performed strongly linked to the guidance provided to the project's lifetime, the complexity and interdependence of certain activities, relating to impact evaluation of the Component II and also decrees, including the Components I and III which supported the Government implementation. These influenced the assessment of the performance of the project according to the different phases experienced by the latter. 22. The complexity of the component activities/operations and their strong correlation demonstrated in the different training agendas. Processing of the recruitment of training firm, prior to the final selection baseline survey, by raffle, 1000 beneficiaries first MPE, which was rescheduled from 2013 to 2014 and on several occasions, the date of formation of the MPE. The project had to be innovative in communicating in order to retain applications, given the risk of withdrawal and disinterest, due to the relatively long period, which separated, applications, (November 2012) to the training sessions (April 2014). 23. This series of actions, driven by the restructuring project was about to start when in November 2015, the PSDPS activities were suspended. 24. The " phase of the endorsement ' to the project document resulted in implementation of certain activities namely: support for the CFE, certain activities of the CGA, the modernization of the issuance of the building permit process and assistance to the modernization of the RCCM. These recent activities were completed entirely within the period of June 30, 2016, to the satisfaction of the beneficiaries. 4 Lessons Learned and Recommendations 25. The following table shows the synthesis of lessons learned and recommendations.

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Lessons learned Recommendations

Project Management / Coordination / product development / risk management / time management / cost management / quality management

Institutional anchorage; Staff of the PCU; Complexity and interdependence of certain

activities; Immaturity of some of the project activities; Application of a standard and unique setting

(disbursement rate) of assessment for all projects.

The PCU management Instability of the position of the SGF

Multisectoral projects must be attached to an instance which covers the departments involved in their implementation;

To ensure that the recruitment of all personnel before the start of the project;

Categorize projects based on objectives; Identify activities and associate them with specific

objectives (configuration); Take into account the areas of each project the rate

of disbursement; Take measures to avoid a one-man project

management; Make sure that all the remedies (capacity, seems,...)

have been explored before any dismissal.

Integration management / human resources management

The degree of ownership of stakeholders is a guarantee for the implementation of the activities

Ensure that the ownership of projects by partners who agree to make available a powerful staff benefiting from incentive premiums;

Make the assessment of the staff of the partners as focal points in the projects at the time of their design;

Capacity building of implementing partners.

Communications management / information management

Wide dissemination of the achievements and future of the project;

Value gains.

Establish a communication plan; Set up a database that centralizes information and

achievements of projects.

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

None.

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Annex 9. Changes in Results Framework following Restructuring

Status Results Indicator Core Unit of Measure Baseline Original End Target

Revised End Target

PDO Results Indicators 1 No Change The number of days required to create an enterprise has been

reduced Number 75.00 5.00 5

2 Dropped Improved performance of targeted MSEs (percentage increase in turnover compared to control group)

Percentage 0.00 10.00

3 Dropped A PPP legal, regulatory and institutional framework applicable to the Free Zone and to Special Economic Zones is established.

Yes/NO No Yes Yes

Intermediate Results Indicators Component 1: Support to investment climate reforms 4 Revised

target Number of procedures to start a business Number 7 4 6

5 No Change The first CGA is providing services to an increasing number of micro and small businesses

Number 0.00 250.00 250.00

6 Dropped Number of land titles issued Number 1041.00 4000.00

7 Dropped The procedures to register a property have been significantly simplified (days)

Number 295.00 100.00

8 New Single window for the issuance of construction permits in place

Yes/No No Yes

Component 2: Support to the Development of Entrepreneurial capacities 10 Measured

by IE 3,000 micro and small entrepreneurs have benefited from training (including at least 15% of female)

Number 3000.00(15%)

11 Dropped Improvement in the organization of production (i.e. control of stocks, keeping organized accounts) of the MSEs compared to the firms in control group

Percentage 0.00 10% by MTR

12 Dropped The performance of MSEs that received a matching grant has significantly improved (by 10%) compared to the firms in control group (as measured by profitability)

Percentage 0.00 10% by MTR

Component 3: Support to the development of a new Free Zone 13 Dropped SAZOF has been restructured and Free Zone Management is

separated from Fee Zone regulation 0.00 No Yes

Other Indicators* 14 Revised

target** Female beneficiaries Number 0.00 450.00 20.00

15 Revised target*

Direct Project Beneficiaries Percentage Sub-Type Supplemental

.00 30000.0 2000.00

* Indicators were not in the PAD Results Framework, however, monitored during implementation of the Project to comply with new Bank requirements **Indicator not in ISR, however included in PAD and supported by Impact Evaluation results

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Annex 10.Togo Doing Business Indicator Rankings (2011 and 2016)

Ease of 2010 2011 2012 2013 2014 2015 2016 Doing Business

162 160 162 156 157 149 150

Starting a Business

170 169 174 164 168 134 133

Dealing with Construction Permits

150 152 146 137 114 170 179

Registering Property

155 158 162 160 159 182 182

Protecting Investors

146 147 147 150 147 122 155

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Annex 11: Togo Private Sector Development Level I and Level 2

Restructuring Process January 2014 – May 2016

Togo PSD - P122326 Level I and Level II Restructuring Process Description Date (s) Mid-Term Review mission January 16-24, 2014 Restructuring Mission March 31 - April 11, 2014 Restructuring Mission May 25 - June 2, 2014 Government Restructuring Request Received August 4, 2014 GP Discussions with Director and PMSO September 2014-December

2014 Submission to LEGAF December 2014 LEGAF acknowledged receipt January 2015 Team submitted Restructuring package to WFALA and LEGAF for clearance March 13, 2015 Submission to Safeguard March 20, 2015 WFALA Clearance Obtained April 28, 2015 Legal Clearance Obtained May 12, 2015 RP Package t submitted to CD May 13, 2015 PM Concurrence Obtained May 15, 2015 CD Comments Received May 17, 2015 Submitted to Africa Operations May 20, 2015 CD Concurred Obtained May 26, 2015 Africa Operations comments Received May 28, 2015 Africa Operations comments Received - Second Revisions June 1, 2015 Africa Operations comments Received - Third Revisions June 4, 2015 Safeguard Clearance requested June 5, 2015 Safeguard Comments received June 5, 2015 Safeguard Request to change Category June 10, 2015 Re-Submission to Africa Operations June 11, 2015 Safeguard Clearance obtained June 16, 2015 Africa Operations clearance obtained June 16, 2015 Level I Restructuring Package submitted to AFRVP June 16, 2015 Level 1 Restructuring_Comments from RVP Front office June 17, 2015 VP Front Office requesting a meeting with PM and TTL June 19, 2015 Ongoing discussion on Level 1 disbursement per categories June 19 - 29, 2015 Change of Safeguards category to "A" June 29, 2015 Amended FA by LEGAM July 1, 2015 Clearance by WFALA July 2, 2015 ISR upgrading IP to MU July 7, 2015 ISR archived with Comments: awaiting clearance from AFRVP, with options for partial or total cancellation of undisbursed funds

July 8, 2015

Meeting with LEGAM, WFALA + team July 9, 2015 Revised Amended FA (category allocations) July 9, 2015 Clearance by WFALA July 10, 2015

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Clearance by LEGAM July 10, 2015 Letter from Prime Minister of Togo emphasizing importance of the Private Sector and the Project

August 24, 2015

TTL background for Restructuring Level 1 August 31, 2015 Meeting with T&C Director, RVP Front Office, PM and TTL September 1, 2015 CD discusses the restructuring directly with VP at Annual Meeting October 2015 Level II Restructuring Process Commences Level II Restructuring Mission November 9-12, 2015 Level 1 Restructuring Submission to RVP for Decision December 18, 2015 Return for revision December 18, 2015 ISR instructing for a Level 2 Restructuring December 22, 2015 Approved ISR confirming Level 2 Restructuring and project closing date within six months

December 28, 2015

Revised Letter from Government requesting Partial Cancellation and Early Closing Received

February 17, 2016

Team submitted Restructuring package to WFALA and LEGAF for clearance April 11, 2016 Safeguard Clearance April, 20, 2016 Legal Clearance Obtained April 26, 2016 WFALA Clearance Obtained April 30, 2016 CD Decision May 11, 2016

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Annex 12. List of Supporting Documents

1. Project Appraisal Document (Report No: 57046-TG) – Republic Togo Private Sector Development Support Project, March 2, 2011 2. Financing Agreement (Grant Number H658-TG) – Republic Togo Private Sector Development Support Project, July 19, 2011 3. Restructuring Paper (Report N. RES16457) – Republic of Togo Private Sector Development Support Project, March 2, 2016 4. Implementation Support Mission Aide- Memoires 5. Implementation Status and Results Reports

6. Extensive consultations with Bank team, PCU and beneficiaries.

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MAP