Document ofThe World Bank

For Official Use Only

Report No: 19551

IMPLEMENTATION COMPLETION REPORT

BURUNDI

PRIVATE SECTOR DEVELOPMENT PROJECT(Credit No. 2359 - BI)

June 30, 1999

Private Sector Group (AFTP1)Africa Region

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit Burundi Franc (FBU)US$1.00 FBU 236.55 (average, CY1992)US$1.00 = FBU535.58 (average, March 1999)

WEIGHTS AND MEASURES

Metric System

ABBREVIATIONS AND ACRONYMS

BNDE Banque Nationale de Developpement EconomiqueNational Development Bank

BRB Banque de la Republique du Burundi (Central Bank)CCIB Chambre de Commerce et d'Industrie du Burundi

Chamber of Commerce of BurundiCCP Cellule de Coordination de Politiques

(Sector Policy Coordination Unit)CGP Cellule de Gestion du Projet (Project Management Unit)ESAF Enhanced Structural Adjustment FacilityICR Implementation Completion ReportIDA International Development AssociationIMF International Monetary FundMOF Ministry of FinancePMU Project Management UnitPFI Participating Financial InstitutionsPSD Private Sector DevelopmentSAC Structural Adjustment CreditSDR Special Drawing RightsTA Technical AssistanceUSAID United States Agency for International Development

FISCAL YEAR

January 1 - December 31

Vice-President: Callisto Madavo, AFRVPCountry Director: Emmanuel Mbi, AFC09Sector Manager: Demba Ba, AFTP1Task Team Leader: Fran,ois Nankobogo, AFTP 1

FOR OFFICIAL USE ONLY

IMPLEMENTATION COMPLETION REPORTREPUBLIC OF BURUNDI

PRIVATE SECTOR DEVELOPMENT PROJECT (CREDIT 2359-BI)

TABLE OF CONTENTS

PREFACEEVALUATION SUMMARY

Introduction ............................................... iStatement and L'valuation of Project Objectives ..................................... ............... - .Intplementation Experience ancl Results ................. ............................... . .Summary Findings, F uture Operations, and Kev Lessons l,earned .........r.....................................iv

PART I: PROJECT IMPLEMENTATION ASSESSMENT .................................................... I

A. BACKGROU)ND . . . .................................................... IB. STATENIENT AND EVALUATION OF PROJECTI OBJI1C'IIVES .......................... ......................... 2

C. ACHIEVEMENT OF PROJECT OBIJECTIVES ....... 4

D. MAJOR FACTORS AFFECTING THIE PROJEC .. 9E. PROJECT SUsTAINABILV.ITY .

F. BANK PERFORMANCE ................... 11

G. BORROWER'S PERFORNIWCE ................... 12

H. ASSESSMENTI OF OUTCOEII .................. : 131. FiTURE OPERATIONS .................. 15

J. KEY LESSONS LLARNED.................. 1 5

PART 11: STATISTICAL TABLES .17

T,U3LE 1: SUMMARY OF AsSESSMII.N I. 17

T.U31E 2: RELATED BA.ANK CRItS.l)l l S 19

TA3LE 3: PROJECT TImETABI .E. 20TA13LE4: LoA)N/CRIDU DirDisI3ilRSI\ENTINS: CUN\IMlUEll\XI EsIINI\An.I):\NI) ACT. Al 2()Table 5: Kev Indicators for Project Implementation. 21Table 6: Key, Indicators for Project Opcration 21Table 7: Studics Included in Project 22Table 8A: Project Costs 23Table 8B: Project Financinig 23Table 9: Economic Costs and Bcnefits ................ ...... .. . .. . . 24Table 10: Status of Legal C ovenants 4..................................................................... .....-......... .... 24TAI31.E 1I1: CO.NIIMPLIANCE WHUI 111 OIEI.RA I l()NAI .MANv AE S1 A I I.NII N-I S ................................. MA A....................................... ......... 24T,U31.E 12: B3.XNKRRESOURCES: Sil.-U INPUTS .................................. 25....... ...... .......- 25TA3LE 13: BANK RESOURCES: MISSIONS .......................... 26

APPENDICES:

APPENDIX A: MISSION's AIDE-MENMOIREAPPENDIX B: BORROWER'S CONTRIBUTION

Map

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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IMPLEMENTATION COMPLETION REPORTREPUBLIC OF BURUNDI

PRIVATE SECTOR DEVELOPMENT PROJECT (CREDIT 2359-BI)

PREFACE

This is the Implementation Completion Report (ICR) for the Private SectorDevelopment Project in Burundi, for which IDA Credit 2359-BI In the amoulnt ofSDR12.4 million (US$17 million equivalent) was approved on April 30, 1992, and madeeffective on February 28, 1993. Disbursements for the Credit were suspended on October10, 1996, pursuant to section 6.02 of the General Conditions, and they were reactivated inOctober 1997. An amount of SDR6.4 million (or US$8.78 million equivalent) wascancelled in October 1997.

The Credit was closed on March 3 1, 1999, after two extensions of the closingdate, originally scheduled for December 31, 1997. As of May 15, 1999, approximatelySDR5. 1 million (US$7.36 million equivalent) was disbursed. An undisbursed balance ofSDRO.9 million (or US$1.27 million equivalent) will be cancelled.

This ICR was prepared by Mr. Franc,ois Nankobogo, Private Sector Group of theAfrica Region, with the contribution of Mr. lrosper Nindorer-a trom the BurLndi ResidentMission. It was reviewed by Messrs. Demba Ba. SectoI Manager, and lain Christie, LeadSpecialist, Private Sector Group, anid LFnrmanuel Mbi, Country l)irector for B3urundi. 'rheBorrower's contribution to the ICR is included as Appendix B3.

Preparation of this ICR was beguL (illuring the 13aBnk's tinal supervision/completionmission, March 23-April 2, 1 999) It is based on both tield mlissioni tindings and material inthie project files. The Borrower con1tributedL to the preparation of thc IC'R by participatingin the final supervision mission as refllecte( in the ai(le-nlcinloolr, comlllenting on theBank's draft ICR, and providing thirci (oVwn iassCssmilenIt oftthe project's imilplenentation.

IMPLEMENTATION COMPLETION REPORTREPUBLIC OF BURUNDI

PRIVATE SECTOR DEVELOPMENT PROJECT (CREDIT 2359-BI)

EVALUATION SUMMARY

Introduction

I. The Private Sector Development project was designed in 1991 in order to helpaccelerate the supply response to the then ongoing Structural Adjustment Program byproviding long-term financing to private enterprises, facilities to investors through a sitesand services component, and technical assistance and training. The project was approvedin April 1992 and made effective in February 1993 Although the project was startedbefore the closing of another APEX project, it built on lessons learned during theimplementation stage of that project, and from experiences with previous operations.

2. The project was well suited to the Government's policy framework lor privatesector and financial sector development. Several other donors, ilcluding USAID, theEuropean Union and France were engaged in private sector promotion activities. Theproject was designed to help coordinate sector policies, modernize the legal andregulatory framework, and foster export diversification.

3. While the project was designed at a time when the country was making strides inits adjustment program, its implementationi was fraught with difficulties stemming from thepolitical instability which started in 1993, the economic embargo imposed by countries ofthe region from mid- 1 996 to early 1'999, andi internal coordiniation problems.

Statement and Evaltiation of Prroject Objectives

4. The project's overarchilnig obctive was to assist 13urulldi in promoting sustainedgrowth through the establishmnctt ol'ani ilcentitCvc framework for export-oriented privatesector investment. Thie project aimlled at rcmioving institutinal, legal and regulatoryobstacles which were nol tackled thrugh macrocconomic retormns supported byadjustment operations and tcchllical assistanccc ploiects. I'hc removal of micro-policy andinstitutional barriers, combine(d withi actioni at the enterp rise and finiancial levels, wouldstimulate the private inivestient responsc, iuicilh nceded f;or sustained economic growthand the diversification of'thc econolmiy

5. The project was to provide multi-faceted techniical assistance to Government, financialinstitutions and the private non-bankinig sector to implement and take advantage of thereform measures. This was to be achieved in a coordinated manner with other donors

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providing technical assistance and expertise in enterprise management and training, exportand private sector promotion.

6. The project consisted of a line of credit for productive investments, support toindustrial infrastructure, improvements in the business environment and in financialintermediation, and technical assistance in support of private sector development. Thecredit component aimed at providing foreign exchange, through eligible financialintermediaries, to finance economically viable, financially protitable and environmentallysound projects submitted by local and foreign private borrowers. The project also soughtto provide industrial plots, which would be developed under a sites and servicescomponent, so that project promoters could execute their investment plans withoutunnecessary delay. In addition, the project would support the modernization of the legaland regulatory framework and the improvement of institutional capacities to accelerate thegrowth of a private sector.

7. Given the momentum for reform and the higll level of commitment amomiŽ variousdevelopment partners that existed at the time of this project preparation, all thesecomponents were justified and well needed to address major issues which constr-ainied anaccelerated development of the private sector in Burundi.

Implementation Experience and Results

8. The project was approved at a time when Burundi's performance on the economiiicreform front was considered to be among the best in the sub-Saharan Africa. Iiowevel- itsimplementation coincided with a difficult period of political and social crisis. Severalaspects of the private sector and finanicial sector development policies were related to thecontinuation of the adjustment program supported by the third Structural AdjustmnenitCredit (SAC 111) and the Enhanced Structural Adjustment Facility (ESAF). Untortunately,the adjustment program, for reasons related to the country's political crisis, derailed withinmonths following the efTectiveness of the credit, and several measures that were to betaken between mid-1992 and end-1994 did not take place. For example, the tariffretborrland the revision of the investment incentive framework was not carried out. As the clrisisand the trade blockade caused the Government's foreign reserves to dwindle, the Cenltral[lank even proceeded to reverse some of the trade promotion measures previously taklenunder the ESAF and imposed restrictions on foreign exchange in November 1997.

9 Despite the difficult environment from the beginning of the project, the invest incntcomponent made a good start and managed to finance 34 projects in two years ot itsoperation for about 40 percent of the allocated amount. The sites and services componcnthowever experienced problems from the outset: the initial site was allocated for anotheruse by the Ministry of Public Works (see para. 18). Although the Governmentsubsequently deployed efforts to make another site available and spent up to US$1.5million equivalent, from its budget resources, on the needed basic infrastructure (e.g.access roads, connections to utility lines, etc.), it appeared in 1997 that demand for

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industrial plots had virtually dried up as a result of the lack of private investment. Thistriggered the cancellation of the component's undisbursed balance in the amount of aboutUS$3.3 million' representing 94 percent of the allocated resources. The civil unrestexperienced by Burundi and the ensuing economic deterioration led many donors to freezetheir support to the private sector development program.

10. Under the technical assistance and training component, the project contributed tocapacity strengthening in the administration, the industry and the private sector. TheSector Policy Coordination Unit relied on the services of consultants to prepare variouslegal and regulatory texts that the Government passed under the project. Some importantlaws were passed by the Government and enacted by the P'arliament: labor code (1993),general conditions of the commercial code ( 1993), private and public company code(1996), and law on the profession of notary-public (1996). However, since tlleimplementation regulations for these laws are still to be prepared, the laws hiave had noactual impact on the business environment.

11. As a consequence of the high turnover in the management of the TribuLlal of'Commerce, the project's contribution to the strengthening of tlis institution remainedlimited to a needs assessment, some training activities and the acquisition of computerequipment. Computerization of the registry system and archives was not implemented, andthe capacity of the Tribunal remains weak (para. 25). With respect to the support to theMinistry of Mining and Energy, the project provided technical assistance il the negotiationof mining concession contracts in 1993 and 1995, although no mining activity wassubsequently engaged. The reform the mining and petroleum regulations and code did nottake place either during the project implementation period, because of delays from boththe Government to initiate the work early enough and the Bank to provide timely feedbackon the terms of reference (para. 27). Despite the difficult environment however, theproject contributed to upgrading know-how and institutional capacities in the financialsector through short term consultant interventions and several training sessions organiizedby the PMU.

12 Overall, the project outcome is rated marginally unsatisfactory The goodpert'ormance of the project in its early years was eroded by the long-lasting political crisis.the trade embargo between mid- 1996 and early 1999, and the lack of timely restrLcturlingof the project. While the Bank tried to meet the Borrower's needs by leaving the teclhnicalassistance component open in 1997 in order to support the economic recovery strategy,the Government was unable to overcome its internal coordination problems. As a result,

little was achieved during the project extension period and its performance remllainedunsatisfactory until its closing. The sustainability of its results is unlikely.

About US$214,000 were disbursed under this component for consultant serviccs and cquipincnt.

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Summary Findings, Future Operations, and Key Lessons Learned

13. Owing to the momentum of the reform program and dynamism which of theprivate sector during the early years of the project, there were some achievements in theimplementation of the project's programs, particularly the line of credit and the legal andregulatory reform. However, the prolonged crisis took a heavy toll on the private sectorand the Government's focus was no longer on the implementation of sector policieswhich had been spelt out in 1992. In hindsight, the project implementation period wasintrinsically unfavorable to the achievement of satisfactory results, and the decision tocancel the line of credit and the sites and services component should have been taken atthe time of the mid-term review in 1996. In addition, the Bank should have been clear onthe institutional arrangement that was needed to carry out the restructured project in1997. This could have helped in the execution of the technical assistance componentwhich remained open.

14. There is a large unfinished agenda in the area of business environmentimprovement, particularly legal and regulatory reform, fiscal reform, and trade promotionmeasures. The Government expressed, during the ICR mission, a renewed commitment topursue the effort. Although there is no private sector development operation considered inthe near future, the Bank has started to prepare a private sector assessment and a post-conflict grant will be used to support the Government's etfort in the interim.

15. The major lessons to be drawn from this project experience (para. 5 1-54) are thefollowing:

* in the face of risk factors such us civil unrest, high political uncertainties, andmacroeconomic imbalances, private sector development activities need to beredesigned to take the environment into account or else the activities areunlikely to succeed;

* monitorable and measurable performance indicators and a well definedmonitoring and evaluation system are critical for successful projectsupervision and timely decision-making, particularly in a high riskenvironment;

* the public-private sector partnership cannot yield satisfactory results it'theprivate sector is not given a central role in the process so that its needs can beaddressed,

* finally, multiple implementation units for a project are an ingredient for itsfailure, particularly when there are coordination problems at the Governmentlevel.

IMPLEMENTATION COMPLETION REPORTREPUBLIC OF BURUNDI

PRIVATE SECTOR DEVELOPMENT PROJECT(CREDIT 2359-BI)

PART I: PROJECT IMPLEMENTATION ASSESSMENT

A. BACKGROUND

1. At the time of the Private Sector Development (PSD) project formulation, Burundihad been implementing its structural adjustment program for nearly five years. Substantialprogress were being made towards stabilizing the economy and laying the foundations forits structural transformation. But Burundi still had to seek for ways of stimulating a strongsupply response. Some progress in improving the business climate and the efficiency of thefinancial system had been achieved under the then ongoing Small-Scale Enterprise Project(SSE/APEX, Credit 1889-BU) and the two first structural adjustment credits. However,signals to the private sector remained mixed because of the slow progress made by theGovernment of Burundi (GOB) in disengaging from the large public enterprise sector.Therefore, a third structural adjustment credit (SAC 111) was approved with the aim ofprivatizing most of the commercial and manufacturing public enterprises. In addition, anAgribusiness project (Cr. 2429-BU) was put in place to accelerate the privatization ofpublic enterprises in the tea, cotton, and rice sectors, support diversification and marketingof agriculture produce and promote the involvement of the private sector in agribusiness.The PSD project would complement these operations and enable the private sector to playa key role in realizing Burundi's export diversification and private sector-led growth.

2. The project targeted the development of productive investments through a line ofcredit, the provision of industrial infrastructure with an industrial zone, improvements inbusiness environment and in financial intermediation, and technical assistance in support ofprivate sector development.

3. The project implementation period unfortunately coincided with a protractedsocio-political crisis with profound effects on the economy: the reform program derailed,macroeconomic imbalances increased, the business environment deteriorated and privateinvestment declined dramatically. Nevertheless, the private sector continued to muddlethrough and holds out the hope for a rapid recovery as the country begins to return tonormalcy.

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B. STATEMENT AND EVALUATION OF PROJECT OBJECTIVES

4. The private sector development project was designed to assist GOB inimplementing its adjustment and development program, characterized by a strongcommitment to put in place an enabling environment for private sector development. Theproject objective was to create a more propitious and open business environment likely tostreamline rules of entry and operation for new and existing enterprises. Priorities includedthe removal of institutional, legal and regulatory impediments to private enterprisecreation, the expansion of an industrial zone, and the provision of technical assistanceservices including support to the mining sector. In addition, the credit aimed at promotingzproductive investments through the implementation of focused financial intermediationand financial policy reforms.

5. The project was designed to enhance supply response to structural adjustmentreforms through increased local and foreign private investment that would contribute toattaining Burundi's export diversification and growth objectives. Rapid response byprivate sector investors, encouraged by improved business conditions, would generateemployment opportunities. A policy package of institutional, legal and regulatory reformswould be implemented. The Government strategy was reflected in two letters ofdevelopment policy, respectively for the private sector and the financial sector. Theproject covered three components: investment component (APEX line of credit), sites andservices, and technical assistance and training.

6. The line of credit component, in the amount of US$ Il million2 equivalent, aimedat providing long-term resources, in foreign exchange, through eligible financialintermediaries, to finance projects submitted by local and foreign private borrowers. Theseinvestment projects, which would have to be economically, financially and environmentallyviable, would be in all productive sectors, with a particular emphasis on export-orientedmanufacturing, small-scale mining, and agro-industrial projects. The line of credit wouldalso finance the modernization of equipment, rehabilitation and restructuring of productivefirms. The continued pursuit of flexible exchange rate policies and timely implementationof business environment policy policy reform measures would stimulate the demand forefficient import-substituting and export-oriented projects.

7. The Borrower was to onlend the line of credit to the Central Bank (BRB) at theprevailing market determined average yield of the auction market for three-monthtreasury certificates, minus an annual administrative fee of at least 1.0 percent of theoutstanding subloans refinanced under the credit. The fee would cover the administrationcost of the line of credit by the Project Implementation Unit within the Central Bank. Itwould be reviewed periodically to make sure it continues to cover the operating costs ofthe PMU. The loan to the Central Bank would be for 15 years, including a grace period of5 years. The Central Bank would onlend the funds to the qualified Participating Financial

2 This amount represented about 25 percent of the total estimated term credit demand of US$40-5(million for the project commitment period of September 1992 - June 30, 1997.

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Institutions (PFIs) at the Treasury Certificate average yield, with a flexible amortizationschedule reflecting the aggregate maturities of subloans extended by intermediaries.Onlending interest rates charged by PFIs to sub-borrowers would be variable and market-determined, while the exchange risk would be borne by the Government.

8. The sites and services component, for an amount of US$3.5 million, was meantto ease the constraints faced by most promoters in project implementation due to lack ofdeveloped industrial plots in Bujumbura, the capital city. The component would consist ofa pilot investment program in sites and services, i.e. industrial plots, primary andsecondary access roads, sewage, connections to existing utilitv lines andtelecommunications network. The new site was to be developed in a 45 hectares area.representing 1 1.3 percent of the total surface of the industrial zone. About 90 lots were tobe developed for industrial plants, commercial, artisanal, warehousing and other serviceindustries. This acti'vAty would help investors carry out their projects within a limitedamount of time and at an affordable cost. In order to ensure cost recovery, developedplots would be sold by a "Special Marketing Commission", including representatives ofthe private sector, on the basis of transparent criteria and fair rules. An auction system ofsales based on market principles would be considered in case of excess demand.

9. Technical assistance, training and studies. The objective of this component- inthe amount of US$2.5 million- was to provide the Government and various institutionsinvolved in the project with the technical expertise and institutional support to implement,and reap the benefits of policy reforms. This component covered the (i) entrepreneurshipdevelopment program, (ii) the legal assistance program, (iii) assistance for policy andtechnical assistance coordination, (iv) assistance to the Ministry of Energy and Mining,and (v) financial sector technical assistance program.

10. The entrepreneurship development program would focus on the delivery ofadvisory services at the enterprise level. The legal assistance program, covering areas oflegal environment, paralegal activities and operation of the Tribunal of Commerce, was tohelp modernize the legal and regulatory framework governing business activities foraccelerated private sector development. The project would support (i) the preparation ofmajors texts such as the commercial code, real estate regulations, environmentalprotection laws, etc.; (ii) the creation, and the establishment of a regulatory framework ofnew paralegal professions, such as private notaries-public, bailiffs, and other auxiliary legalactivities, and (iii) the equipment of the Tribunal of Commerce, the computerization of itscommercial registry system and archives, and the training of its staff

II. In order to ensure good coordination of the then several ongoing and plannedtechnical assistance programs targeting enterprise and export development in Burundi, theproject would support "a small Policy Advisory and Coordinating Unit" to help theGovernment implement a coherent and comprehensive private sector and exportpromotion strategy. The project would also provide assistance to the Ministry of Energyand Mining for advisory services in the negotiations of mining contracts, to reform itsmining regulations and code, and to improve the institutional capacity of the Directorate

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General of Geology and Mining. Finally, the project would also contribute to financialsector technical assistance aimed at upgrading know-how and institutional capacities ofthe Central Bank (particularly supervision functions, monetary and credit policies), and toimprove the management of banking institutions.

C. ACHIEVEMENT OF PROJECT OBJECTIVES

12. The project implementation arrangements consisted of the Cellule de Gestion duProjet (CGP), the Cellule de Coordination de Politiques (CCP), and various otheradministrative services (Ministries of Public Works, Mining, and Justice) -which wereinformally coordinated by the CCP--. This arrangement was held until the projectrestructuring in August 1998 which reduced the scope of the project, and thus the numberof entities involved in the implementation. With the cancellation of the line of credit andthe industrial zone -which represented a total amount of SDR6.4 million-, the project waslimited to technical assistance and capacity building, in support of Government'stransitional economic and social strategy. In light of the Government's strategy toemphasize on reconstruction, the oversight of the project was transferred from theMinistry of Finance to the Ministry of Planning and Reconstruction in early 1998. Thislocation of the project would allow its activities to address, inter alia, issues pertaining tomacroeconomic management so as to improve the business environment.

13. The Central Bank and the Ministry of Public Works disappeared from theretrofitted project's institutional setting. The CGP, which was transferred from the CentralBank to the Ministry of Planning and Reconstruction, was given the mandate ofcoordinating the implementation of the overall project, limited to training and capacitybuilding activities in support of the Government economic strategy. This broadened thescope of responsibility of the CGP, which provided capacity building services toenterprises and the financial sector between 1993-96. However, this role continued to beshared with the CCP, which considered that its mandate had not been aflected at all by theretrofitting

14. Line of credit. During its two year period of activity ( 1994-96), the line of credithelped to finance 34 projects, in all sectors of the economy, for a total amount of FBu1.26 billion or SDR3 million (about US$4.5 million equivalent, representing about 40percent of the resources). Given the prevailing circumstances in the country, thisperformance was outstanding as repetitively emphasized by supervision missions.

15. The table below shows that most of this long term financing, i.e. 75 percent of thetotal credit and 82 percent of the applications, was channeled through development banks,namely the "Banque Nationale de Developpement Economique" (BNDE) and the "SocietBurundaise de Financement" (SBF). Although commercial banks agreed to function asPFIs, they were more interested in financing strictly short term trade and less riskyactivities as compared to long-term investment. They consider that they are not wellequipped to handle venture capital financing. This distribution pattern was already noticed

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under the previous APEX project. The training and capacity building efforts deployedunder the PSD project did not affect the distribution. With respect to the repayment ofcredits, the five participating financial institutions (PFIs)3 repay automatically, on aquarterly basis, the amounts owed to the BRB. At their end however, they have to recoverarrears accumulated by the enterprises they financed. Amortization arrears representedabout I I percent of the total credit refinanced by the PSD project. As shown in the tablebelow, this aggregate ratio is affected by two bad loans made by the "Banque de Credit deBujumbura" (BCB) to two foreign investors who eventually left the country during thecrisis.

Table 1: Distribution of the uise of the line of credit by PFIs.

PFI Number Financing Percent Default on Percentof clients channeled amortization of

(FBU) (FBU) financingyBNDE 20 482,017,170 38.23 1,941,936 0.40SBF 8 464,556,464 36.84 3,045,741 0.65B.C.B. 3 164,823,417 13.07 139,350,250 84.54MBBB 2 127,000,000 10.07 - -

BANCOBU 1 22,500,000 1.79 -

Total 34 1,260,897,051 100.00 144,337,927 11.45

,Source: Troject MAanagenwut Unit tiI(Q'/)

16. In view of the depressed economic situation whichi resulted in a reduced demandfor investment financing, the weakening of the financial position of the participating banks,and the largely negative real interest rates (see table 2, para. 47), the uncommittedresources of the line of credit at the time of the suspension of disbursements in October1996, i.e. SDR4.5 million (US$6.2 million equivalent), was canceled a year later upon thelifting of the suspension. There was a significant risk that, negative interest rates,combined with distortions in the foreign exchange rate, would result in the financing ofnon-viable investments, thus weakening the financial sector even further and misallocatingscare resources in the economy.

17. Sites and services. The objective of making industrial plots available to privateinvestors was not achieved, as a result of cumulative delays and the adverse impact of thecrisis on investment demand. While this component was scheduled to be completed bymid-1994, major works had not started by the 1996 project mid-term review which waseventually followed by a one year suspension and subsequent cancellation of thecomponent.

3 The PFIs were: BNDE (25 projects), SBF (10 projects), BCB (2 projects), BANCOBU (2 projects). andMBB (liquidated since 1995, 4 projects). The line of credit was the main source of long term resources forthe BNDE and the SBF.

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18. Severe delays on the component execution schedule were experienced from thebeginning of the project. The first site was lost (45 hectares) because the GeneralDirectorate of Urban Planning in the Public Works Ministry allocated it to other usewithout informing the Bank. When a second site (40 hectares) became available, therewere delays in launching the technical study for the establishment of the estate. Between1994 and 1996, the Government financed preparatory studies and other civil works. AboutUS$1.5 million of budget resources were spent on building the basic infrastructure of theestate consisting of access roads, power lines, etc. With the Bank's approval, invitation tobid for the construction of the estate was issued, and bids were received and evaluated. Anupdated timetable was discussed at the time of the mid-term review, and it was expectedthat developed plots would be available by June 1997. Following the suspension ofdisbursements, the Bank did not give the no objection to the selection of the winnlingbidder; thus no notification was issued, and the civil works did not start,

19. Because of the bleak economic situation, the limited solvent demand for industrialplots, and the fact that priorities for public investment were, as a matter of urgency, to benow more targeted towards basic needs than developing an industrial zone, the Bankdecided to cancel the component after the lifting of the suspension of disbursements inOctober 1997. Unlike several decision-makers inside the Government and the Chamber ofCommerce and industry who would have liked to proceed with this project activity, theBank considered that a list of potential demand for plots established in 1993-94 wasoutdated in 1997 and did not reflect actual investment trends. In addition, establishing anindustrial zone while the country was still under trade embargo would result in veryexpensive plots that would no longer attract potential investors.

20. During the ICR mission in March 1999, the Directorate of Urban Development inthe Ministry of Public Works and Equipment indicated that, while the size of the demandfor industrial plots may have declined compared to the 1992 estimates, there are privateinvestors who are handicapped by the lack of developed industrial plots and are muddlingthrough with unsustainable solutions such using areas where good access roads oradequate connections to utilities cannot be developed eventually.

21. Technical assistance and training. Activities under this component focused on:(a) modernization of the legal and regulatory framework in order to improve the businessenvironment; (b) institutional capacity building for the CCP and advisory services for theMinistry of Energy and Mining, (c) provision of support to the Tribunal of Commerce;and (d) training for the financial sector and technical support to private enterprises.

22. In the area of business law modernization, substantial progress was made in thepreparation of laws, particularly between 1993-96. The Labor Code, the generalconditions of the commercial code and the law on public and private enterprises werefinalized, adopted by the Government, and enacted by the Parliament4. However, the

4These laws were adopted or enacted by the Parliament as follows: the labor code (adopted by thcGovernment before the 1993 elections), the General Conditions of the Commerce Law (enacted by the

7

effort was not deployed all the way through to ensure that these enacted laws beimplemented and disseminated. The dissemination effort was not started until late 1997when a draft business guide ("Guide d'entreprise") was finalized. A newtelecommunication law, based on the principle of competition in the sector, was enactedin 1997. As a result, a telecommunication regulation agency, "Agence de reglementationet de contr6le du secteur des telecommunications" (ARCT) was established by decree inSeptember 1997, and became operational in May 1998. In addition, revised legislation onthe free trade zone regime was prepared in 1995 but was not enacted. A law on theprivatization of the profession of notary-public was passed in July 1996 but is not yetimplemented. Other draft laws on paralegal professions exist but have not yet beenapproved by the Government. Additional work on the insurance sector and on abankruptcy law was underway or considered at the end of the project.

23. Other noteworthy actions towards the improvement of the business environmentwere: (a) the reform the "drawback" system (a compensation mechanism between fiscalobligations and Government debt was introduced, and the treatment time was reduced),(b) the reduction of the tax rate on corporate profits from 45 percent to 40 percent5 ; and(c) the study on the improvement of the free trade zone regime legislation. During theperiod of the project, Burundi initiated and completed the process of joining MIGA", thusbecoming eligible for guarantees against non-commercial investment risks. The projectalso encouraged Burundi to participate in the Cross-border initiative (CBI)7 which aims toremoving obstacles to free cross-border trade, investments, payments, and productionfactors mobility among Eastern and Southern African countries.

24. There was no progress in the areas of fiscal reform and foreign trade promotion.Although a technical committee was appointed in 1993 to work on the fiscal reform,including a simplification of the fiscal code which would integrate the incentives of theinvestment code, it failed to function and to deliver any proposal. The reform should haveeliminated existing distortions in direct and indirect business taxes, while ensuring atransition from the transaction tax to a value-added tax system. Direct tax rates oncompanies' profits would be gradually reduced from 45 percent to 35 percent. Asmentioned above, only the corporate tax was brought down to 40 percent. With respect toforeign trade promotion, the liberalization of the current account initially achieved under

Parliament in 1995). and the Companies Law, including privatization modalities (enacted by theparliament in 1996).5The incentive provided by a 5 percent profit tax reduction as of 1995 was de facto climinated by theintroduction of a five percent solidarity tax on the same base (corporate profits) in 1996. The Banksuggested that the latter tax, which is meant to be temporary to reduce the hardslhip caused by thcembargo. should be eliminated as soon as the sanctions are removed. The Government nceds also toclarify deductible expenditures from the taxable profits (amortization, provisions, miscellancous costs).deductibility of the transaction tax on financial costs, immobilization and spare parts, legislation ondividend tax, as well as the air transport liberalization.6 Burundi became the 136t member of MIGA in 1998.' The CBI is co-sponsored by the World Bank, the IMF, the African Development Bank, and theEuropean Union.

8

the ESAF was reversed in November 1997 when the BRB instituted restrictions onforeign exchange.

25. Very little was achieved at the level of the Tribunal of Commerce. Due to a highturnover in the management of the Tribunal and failure from the Ministry of Justice toprovide the Tribunal with adequate office facilities, envisaged support to this institutionwas delayed. The Tribunal has not been able to gain the experience needed to speed upeffectively the settlement of conflicts. The training provided under the project was neitherstrategically well focussed nor systematic to ensure meaningful capacity building asinitially expected. The computerization of the commerce registry and archives was notcompleted. Only limited number of computer equipment was acquired in early 1999.Reference books on legal issues could not be delivered before the credit closing date.

26. In the milling sector, the project supported the negotiations of the nickelexploration contracts with Rhino Tinto Zinc (RTZ) in 1993. Negotiations with BHP werealso carried out in 1995 but remained inconclusive. In 1998, a gentlemen's agreement ledto the cancellation of the RTZ contract. Negotiations of a new concession contract weresubsequently concluded in early 1999 between the Government and Andover ResourcesInternational, without any Bank support. No action to promote small mining enterpriseswas carried out during the project implementation period.

27. With respect to the Mining and Petroleum Code, there were delays in engaging theactivity. During the first two years of the project, the Government delayed the preparationof the terms of reference for the revision of the Code. On the Bank side, there was a lackof continuity in the follow-up of this particular activity during the same period. Since1996, the Bank delayed the extension of its no objection to the terms of reference and thestudy was not even initiated before the closing of the credit. The project did not providefurther support to improve the institutional capacity of the Directorate General of Geologyand Mining as originally planned.

28. The project promoted and supported continued dialogue with the Central Bank onthe issues of credit and monetary policies. As the liberalization process went on, newbanks were created. There was a risk of increased vulnerability of the sector if itsregulation had not been strengthened. The project helped put in place prudentialregulations'. This situation also required that the BRB enhance its supervision capacities.The Bank of France provided assistance to the Central Bank in the supervision andmonitoring of banking institutions.

29. The CGP provided to some enterprises consultant services that emphasizedtrouble-shooting and problem solving, including advice on technical matters such as plantlay out, selection of equipment, cost accounting and marketing. In addition, the PMUorganized several training sessions for the financial sector so as to improve and staffcapacity. As one of the PFIs went bankrupt and was eventually liquidated (the Meridien

s A law on bank and financial institutions regulation was passed in 1993. For further details, see the 1995World Bank Note on the Burundi Financial Sector.

9

Bank BIAO Burundi), the Government requested an audit of the financial sector usingproject resources. The audit was carried out by Coopers-Lybrand Maurice. However, itsfinalization was delayed and the conclusions were not implemented. The second phase ofthe audit, intended to cover the remainder of sector institutions, did not take place.

30. A consultative committee of the public and private sectors was established in1996 but failed to deliver on its promises because the mechanism: (i) remained heavilydominated by the public sector, i.e. civil servants without familiarity with private sectorconcerns; and (ii) became rather a routine set of meetings where the Governmentattempted to sell its own decisions, instead of addressing the real issues of the privatesector. In addition, the crisis environment was not conducive to mature dialogue as thefocus was on short term and political issues.

D. MAJOR FACTORS AFFECTING THE PROJECT

31. At the time of project preparation, a risk assessment was carried out. It wasalready anticipated that the political transition could slow down the pace of revamping theregulatory framework and the implementation of fiscal and labor policy reforms, whichwould ultimately translate into lower private investment levels. However, it was believedthat the consensus built around the need for effective reform of the business environmentand the strong voice of a rapidly growing private sector would minimize this risk andensure the effective implementation of the project.

Factors within Covernment Control

32. Sound economic policies: The economic environment started to deteriorate in theearly stage of project implementation. Since the outbreak in October 1993 of the socio-political crisis, the focus on good economic management started to decline. Fiscal deficitsincreased, Government arrears vis-a-vis the private sector accumulated, inflation soared,and real interest rates became negative. Private investment declined and even somebusinesses eventually closed down. The private sector was hard hit by the crisis from theoutset, but, due to political infighting particularly during the period covered by the "Government Convention" (October 1994-July 1996), public policies were not designed insuch a way as to help the recovery. The situation was worsened by the economic sanctionsimposed by the country's neighbors on July 31, 1996 following the military-backed coupwhich brought President Buyoya back to power. There was no attempt at fiscaladjustment to try to keep the fiscal deficits under control and to bring inflation down. Asreal interest rates remained negative, it became clear that the use of the line of creditresources could not be continued because it would constitute an additional vulnerabilityfactor for the PFIs. In addition, the impact of the crisis on PFIs had made the eligibility ofsome of them questionable; and the banking sector audit was to help update the list ofeligible PFIs if the line of credit had not been cancelled in the meantime.

10

33. Swift implementation of project action plans: Although project implementationhad been quite timely at the beginning for some components, delays were experiencedwith a few project components such as the regulatory framework modernization, theimprovement of the commerce tribunal's operations, sites and services, and technicalassistance. After the lifting of the disbursement suspension, it took about two months forthe Government to sign off on the project amendment package. Further, and the updatedaction plan covering all the areas of retained activities was never completed.

34. Adequate institutional arrangements for project implementation: Projectimplementation was further handicapped by poor coordination at both the ministerial andthe technical levels. The CGP, which was defined from the outset as the ProjectManagement Unit, was not given the overall coordination responsibility. The CCP instead,owing to the fact that it controlled the special account for all activities except thosecarried out by the CGP, positioned itself as their de facto coordinator. After the 1998restructuring, the CGP was challenged in its coordination role. Tension among variousentities involved in carrying out various activities impeded the project performance. T hissituation worsened at the time of project restructuring and delayed any action that wouldhave allowed timely execution of the project. In hindsight, it appears that one ministry andone management unit should have been given clear coordination role throughout theproject life so as to pull together all contributions to project implementation.

Factors outside Government Control

35. The socio-political and economic crisis since October 1993: As the inflationrose from 5 percent in 1992 to 26 percent in 1997 and the real interest rates becamenegative, it became increasingly difficult to commit the resources of the line of credit inprofitable projects. Exports declined by 54 percent, falling from about US$108 million toUS$61 million in 1998. The free trade zone regime could no longer attract newinvestments. The justification for an industrial zone ceased to exist as private investmentdried up.

36. Project complexity: By covering a wide range of components such as regulatoryand financial sector reforms as well as a line of credit to support private sectorinvestments, including a pilot investment in sites and services, and technical assistance, theproject was meant to represent a comprehensive approach to private sector developmentwhich was judged necessary for a successful promotion of the sector activities. Projectcomplexity was flagged at the time of the project design, but it was believed that such anapproach was needed to provide adequate support to a growing private sector. Given theBurundi context in 1992 and the skills endowment at the time, this project was not reallycomplex. However, the situation changed with the crisis; and complexity started becomingobvious as key interlocutors rotated and caused the implementation of the project to drag.

37. The overlap between the APEX line of credit and the PSD project: The projectwas approved at a time when the previous APEX line of credit, which was still active, was

11

being committed at a faster pace than before, and was expected to be exhausted byeffectiveness of the new project. The credit line component was designed in light of theexisting APEX operation. It therefore benefited from design improvements andsignificantly better business environment -which was also supported by the proposedoperation--. The line of credit was to be made available at effectiveness. However, the lineof credit did not start being committed until about 18 months after effectiveness: the firstcommitments started in 1994, when the previous APEX line of credit was completelydisbursed. All in all, the line of credit was active for only two years because the Credit wassuspended in October 1996 and the line of credit was subsequently cancelled at the time ofthe lifting of the suspension in February 1998 as real interest rates remained negative.

E. PROJECT SUSTAINABILITY

38. Sustainability of project results is unlikely. The projects financed under the line ofcredit had a good start but could not develop as anticipated because of the impact of thecrisis. Following the lifting of the embargo in January 1999, the country's prospects haveimproved. However, Burundi needs resumption of external assistance in order todismantle the restrictions on foreign exchange, a step which would contribute to theimprovement of the business environment.

39. With respect to technical assistance and institutional strengthening, projectachievements are unlikely to be sustained because most of the work was carried out byimplementation units and consultants without much involvement of Ministries staff Interms of business environment, the reduction in the corporate tax rate (from 45 percent to40 percent) was a good signal to the private sector. But, it could not suffice to spur thedevelopment of the sector in an environment where the demand contracted continuously.In addition, the Government instituted a 5 percent solidarity tax in 1996, thus restoring theoriginal tax burden level. The Government has claimed that this is a temporary measure,but has not set the date by which it would be eliminated.

F. BANK PERFORMANCE

40. The Bank's overall performance is marginally satisfactory. While the identification,preparation, and appraisal were globally effective, supervision was unsatisfactory,particularly starting at the time of the mid-term review. Although all the project activitiesretained for implementation were needed under the prevailing circumstances and thatlessons drawn from the implementation of previous projects were taken into account, theBank failed to spell out clear monitorable and measurable performance indicators for theproject. The project was supervised 8 times between approval in April 1992 and itsclosing in March 1998, which was not enough to facilitate imp!ementation progress forthis kind of project and the environment under which it operated. Given the countrycircumstances at the time of the mid-term review in March 1996, the Bank should havetaken the opportunity to restructure the project.

12

41. Within months after the mid-term review however, the Bank decided to suspenddisbursements to Burundi on the grounds of country conditions. The lifting of thesuspension in October 1997 was simultaneous with restructuring of the project, duringwhich two of the three components were canceled and the oversight of the projecttransferred to the Ministry of Planning and Reconstruction. The project, from there on,only consisted of training and technical assistance for implementing reforms and actionswhich were necessary to improve policies in support of private sector activity. Theseactions would also help the Government implement an economic recovery strategy, whichwas unveiled to the Bank and the IMF during the June 1997 Article IV Consultations. Thelimited project scope was nevertheless left with two implementation agencies, and therewas a high resistance to the new responsibility given to the MOPR. This caused delays inthe execution of the work program, and yet the Bank still extended the closilg date of theproject.

42. In view of the dismal results achieved during the first year extension of the closing,date, the Bank resisted Government's request for a second extension of the closing datein October 1998 and decided to close the credit on December 31, 1998 leaving a smallamount needed for the final audit to be completed by the end March 1999, and thepreparation of the Government's contribution to the ICR.

G. BORROWER'S PERFORMANCE

43. The Borrower's overall performance is unsatisfactory. At the time ofidentification, preparation and appraisal, the Government carried out satisfactory workwhich was not sustained during the implementation phase. The commitment of the earlyyears were exemplified by the Government's preparation of comprehensive letters ofsector policy for both the private and the financial sectors. However, implementation wasfaced with difficulties very early on in some areas such as the industrial zone component,and fiscal reform and trade promotion policies which dragged.

44. The Borrower complied with legal covenants that were set for Credit effectivenesswithout delay. The covenant related to the adoption by the Government of a decreeauthorizing private paralegal professions, which was due as early as October 1993, wasnot complied with. The Government ensured, however, timely completion of projectaudits in spite of the difficult environment.

45. In the areas of legal and regulatory reform and export promotion, the etfortsupported by the project and USAID could not have an impact on the private sector sincelaws enacted by the Parliament were not followed through with preparation byGovernment of implementing instruments. Despite the existence of a proposal made forthe improvement of the free trade zone regime, no action has taken place yet to finalizethe revised law. In addition, coordination problems among ministries involved in theproject and turf battles among implementation units inhibited project implementationprogress.

13

H. ASSESSMENT OF OUTCOME

46. Since most of the project objectives were not met, the overall outcome ismarginally unsatisfactory. However, some benefit came out of this project on severalaccounts: (i) the line of credit allowed the financing of 32 enterprises; (ii) progress wasmade in the area of legal and regulatory framework through the preparation and thepassing of major legal texts, including the commercial code; and (iii) several institutionsinvolved in private sector development, particularly banks and financial institutions,benefited from training and capacity building activities financed through the project.

47. The amount of work initiated under the various project components wassubstantial. However, most of it was not implemented such as to foster the developmentof the private sector as expected. The crisis that started in the early stage of projectimplementation did not allow the business environment to improve, nor the private sectorto develop. As shown in the table below, macro-economic imbalances, includingaccumulation of arrears vis-a-vis the private sector increased during the projectimplementation period, and private investment did not take place as expected because ofthe high risk and uncertainties.

14

Table 2: Key macroeconomic indicators(in US$ millions, unless otherwise specified)

1992 1993 1994 1995 1996 1997 1998GDP 1,085.9 1,072.5 891.3 860.1 900.4 957.1 975.4(nominal) _Real GDP 2.7 -5.8 -3.7 -7.3 -8.4 0.4 4.5growth rate I_ IExports 77.4 72.9 80.7 112.5 40.1 87.3 49.3(f.o.b) .Imports 181.8 172.0 172.6 175.6 M0(. 97.9 102.6(f.o.b) _

Overall -11.5 -12.8 -6.7 -8.5 -12.4 -8.5 -6.9fiscal deficit(% GDP)Dircct 0.6 0.3 -0.1 1.4 (.0 0.0 0.investmentGross 178.5 171.6 213.9 215.3 144.7 117.3 108.2officialreserves .Inflation 4.5 9.7 14.9 19.4 26.2 31.1 17.0Rediscount 11.0 10.0 10.0 10.0 10.0 10.0( l0.rate (longterm loans)

Exchange 208.3 242.8 252.7 249.8 302.8 352.4 435.2rate(FBu/US$) .

48. As reflected in the above table, the supply response to structural adjustment andother policy measures which was expected to be fostered by the project could notmaterialize during the project implementation period. Nevertheless, the project's line ofcredit financed 32 enterprises, for a total amount of FBu 1.4 billion, or 40 percent of thecredit resources between 1994 and 1996. These enterprises created about 3 10 new jobs.These jobs cannot be sustained unless there is a settlement to the crisis and a resumptionof external assistance to provide much needed foreign exchange and to revitalize thecontracted demand. The very limited export diversification in the early stage of theproject, with fruits and horticultural products coming on stream, did not last long as theinsecurity disrupted productive activity. As the socio-economic situation deteriorated,these new activities declined or were simply abandoned.

15

I. FUTURE OPERATIONS

49. The 1995 CAS had planned for a Financial Sector Adjustment Credit as a followup to the project. However, the country situation has changed dramatically in themeantime, and the lending program could not be implemented as originally planned for.Pending the preparation of a new CAS, an Interim Strategy to guide Bank actions over thenext 24 months is being finalized. A PSD project is only contemplated during the outerInterim Strategy period (i.e. FY02). In the meantime therefore, resources are being soughtfrom the Japanese Post-Conflict Fund to help the Government implement activities thatcould not be carried out before the closing of the project. However, in order to restorenormalcy under which a new private sector development project could be implemented,the Government would need to reduce macroeconomic imbalances and to think about aninnovative strategy for private sector revitalization as an engine for economic recoveryand sustainable growth.

50. As for the new operation being considered in the future, it would be preferable thatit be focused on addressing the constraints that have emerged in the current businessenvironment. The macroeconomic fundamentals would need to be better so as to allowactions at the private sector level to yield any meaningful result. A fresh look at thesituation of the financial sector would be required before engaging in any new line ofcredit.

J. KEY LESSONS LEARNED

51. In an environment where political uncertainties persist over a long period of timeleading to instability of the macroeconomic framework, private sector developmentoperations should be undertaken with extended caution if they are to succeed. A line ofcredit should not be maintained in an environment with negative real interest rates andwhere fiscal discipline is unlikely to be enforced in order to combat inflation. In addition,the disconnect between the bureaucratic process of producing draft texts for the legal andregulatory reform and the actual implementation of the reform tend to increase.

52. In order for project supervision to yield good results and to serve as a basis fortimely decision-making, particularly in a situation fraught with high risk factors, clear andmonitorable indicators, as well as a monitoring and evaluation system, are critical. A clearexit strategy would need to be developed. This would have allowed the mid-term reviewto make decisions on project restructuring, and for subsequent supervision missions todecide on the usefulness of maintaining the operation open beyond its original closingdate.

16

53. The development of public-private sector partnership mechanism is not likely toyield satisfactory results if it is dominated by civil servants who have little familiarity withthe real needs of the private sector. In addition, it cannot work properly if its agenda is notsubstantive enough to address the real problems of the private sector.

54. In order to avoid risks of coordination problems, a project should have only oneunit in charge of the overall management, and there should be a clear definition of roles forevery institution involved in the implementation process. The quality of institutionalarrangements for project implementation is indeed essential for its success. In the case ofthis project, the lack of clarity in roles and even project priorities caused the project to gettrapped in institutional problems, which affected its performance in an already difficultenvironment.

17

PART II: STATISTICAL TABLES

TABLE 1: SUMMARY OF ASSESSMENTS

A. Achievement of Substantial Partial Negligible Not appDlicableObiectives (77 )1)

Macro Policies .

Sector Policies ;

Financial Objectives .

Institutional Development :

Physical Objectives .

Poverty Reduction O El

Gender Issues O

Other Social Objectives O0

Environmental Objectives F] 0

Public Sector Management I 0

Private Sector LI 0Development

Other (specify) i

B. Proiect Sustainability Likely Unlikely Uncertain

.________________ (/) (/) (/)

O] 0.

18

HighlyC. Bank Performance satisfactoy Satisfacto Deficient

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _(/) (vi) (v')

Identification :E

Preparation Assistance :

Appraisal :

Supervision :

HighlyD. Borrower Performance satisfactory Satisfactory Deficient

(/) (/) (/)

Preparation E

Implementation 0

Covenant Compliance 0

Highly Marginally HighlyE. Assessment of Outcome satisfactory Satisfactory Unsatisfactory unsatisfactory

________OK(1) (1) (/) (/).. .. ; z

19

TABLE 2: RELATED BANK CREDITS

Loan/credit title Purpose Year of Statusapproval

Preceding operations

1. Industrial Development of industrial 1977 Closed onInvestment: US$3.7 investment through the National 12/3 1/1983 )million equivalent Development Bank (BNDE) (Marginally

(Cr. 73 1 -BU) satisfactory)

2. Local Construction Brick-making promotion through 1982 Closed onIndustry Pilot the financing of two limekilns, 3/3 1/1987Project: US$5.2 technical and managerial assistance .s.almillion equivalent to construction enterprises, and the (Unsatisfactory)

(Cr. 120 - BU) Ministry of Public Works, Energy,(Cr. 1230 - BU) and Mining _ _

2. Small Enterprise Support the development of small 1988 Closed onAPEX Project: scale enterprises by providing term 12/3 1/1994US$8.0 million financial resources and TA, help (Marginallyequivalent improve efficiency of the financial Unsatisfactory)

(Cr. 1889-BU) sector and the SSE policy(Cr. 1 889-BU) framework, generate new

employment opportunities.

3. Agribusiness Improvement of viability of agro- 1992 Closed (threePromotion Project: industries, diversification of years ahead ofUS$3.1 million production and marketing of schedule) onequivalent agriculture produce (including 6/30/1996

(Cr. 2429 - BU) exports), and promotion of (Highlyinvolvement of private sector in unsatisfactory)agribusiness.

4. Third Structural Support the reform of state-owned 1992 Closed on JuneAdjustment Credit: enterprises and the reform of the 30, 1995. SecondUS$30.0 million budget (expenditure composition, tranche wasequivalent. public investment programming, cancelled.

(Cr. 2376 - BU) and sectoral medium term (Unsatisfactory)expenditure programs).

Following operations

None.

20

TABLE 3: PROJECT TIMETABLE

Steps in Project Cycle Date Planned Date Actual/Latest Estimate

Identification October 24, 1990 October 24, 1990

Preparation March I"s, 1991 March 1", 1991

Appraisal June 18, 1991 June 18, 1991

Negotiations March 16, 1992 March 16, 1992

Letter of Development Policy March 16, 1992 April 15, 1992

Board Presentation April 30, 1992 April 30, 1992

Signing June 22, 1992 June22, 1992

Effectiveness August 31, 1992 February 26, 1993

Project Completion June 30, 1997 March 31, 1999

Credit Closing December 31, March 31, 19991997

Soure : Project files.

TABLE 4: LOAN/CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL

(UJSS thotusanidv)

FY93 FY94 FY95 FY96 FY97 FY98 FY99Appraisal 1,000.0 6,800.0 10,500.0 13,000.0 15,500.0 17,000.0 -

EstimateActual 129.6 1,084.3 2,693.6 5,214.7 6,760 6,930.2 7,362.0Actual as% 13.0 16.0 25.0 40.1 43.6 40.7 43.3of Estimate

Date of Final MayDisbursement 28,

1999

Source: Bank project reporting system.

21

Table 5: Key Indicators for Project Implementation

[The project did not include specific performance indicators for implementation.

Table 6: Key Indicators for Project Operation

| The project did not include specific indicators for project operation.

22

Table 7: Studies Included in Project

Purpose as DefinedStudy at Appraisal/Redefined Status Impact of Study

1. "Impact de la crise Not foreseen at appraisal. The Completed Most of the studyet strategie de relance study aimed at devising (1995) recommendationsdu secteur prive" strategies for private sector were implemented

revitalization in the aftermathof the 1993 political crisis.

2. Free trade zone Not foreseen at appraisal. Completed Revised law not yet(FTZ) regime lImprovement of the law (1995) enacted.legislation governing the free trade zoneimprovement regime and its application

instruments. This wouldparticularly clarify theeligibility of minerals, andprovide an improved FTZ law.

3. Diagnostic study Not foreseen at appraisal. Take Completed Reinforced bank(audit) of banks and stock of the Banking sector (1998) supervision.financial institutions vulnerability to the crisis after(Bancobu, BCB, one of the commercial banksBBCI, SBF) (and a PFI), Meridien Bank,

underwent a bankruptcy and asubsequent liquidation.

4. Sites and services Development of lands for Completed Not used as the sites(Industrial zone) industrial purposes, with (1996) and servicesfeasibility study connector roads, sewers, and component was

industrial zone management canceled in 1997.arrangements.

5. Computerization of Eliminate regulatory Not done. N/A.the commercial requirements while ensuringregistry that various institutions key

data required for their day today use.

Source: Project files and ICR mission.

23

Table 8A: Project Costs

Appraisal Estimate (US$ thousands) Actual/Latest Estimate(US$thousands)

Local Foreign Total Local Foreign TotalItem Costs Costs Costs Costs

1. Subprojects 8,100 14,000 22,100 300 4,195.5 4,495.5

2. Sites & 900 3,000 3,900 1,500 293.2 1,7931.2Services

3. Technical 825 3,465 4,290 700 3,353. 3 4,05 3.3Assistanceand Training

TOTAL 9,625 20,465 30,290 2,500 7842,0 10,342.0Source: Bank project reporting svstem and staiT estimates.

Table 8B: Project Financing

Appraisal Estimate (US$M) Actual/Latest Estimate(US$M)

Local Foreign Total Local Foreign TotalSource Costs Costs Costs Costs

IDA 17,000 17,000 - 7,362.0 7,362.0

Other External - 1,190 1,190 - 480.0 480.0Sources9

Domestic 12,100 - 12,100 2,500"' - 2,500.0Contribution

TOTAL 12,100 18,190 30,290 2,500 7,842.0 10,342.0Source: Bank project reporting system anid staff estimates.

9 Parallel financing by USAID through its "Burundi Enterprise Support and Training (BEST) Projcct".'0 The largest share of this amount is the US$1.5 million cost incurrcd by thc Government for the sitesand services component.

24

Table 9: Economic Costs and Benefits

No economic analysis was carried out for the credit component during projectpreparation. For the sites and services component, cost recovery would have been appliedif the activity had been implemented.

Table 10: Status of Legal Covenants

Agreement Section Covenant Present Original Description of Commentstypc status fulfillment covenant

date

DCA 3.01 03 C FltVectiveriess (iovernmenit ot lruntndi Comiplied with betbre

is to sign i subsidiary credit effectiveness.

aigreemiienit with the

Centtr a3aBnk (13R13) to

retrocede the lftiancilngavailable uLider thle line

of credit componienit

]CA 3.01 03 C FlIectiveniess 13R13 is to sign Cotiiplied wvith on time.

participatorv ugreemniielts

with participating

Iinancial intermediaries

to refiniance loains

3 .04 13 NC October 1993 (Governiment ofLlurLtmdi D)ecree has becni

is to adopt a nrew decree prepared but not vet

authorizing private adopted bv the

paralegal protcssionis Government

DCA 4 01 (I C IEver\ year Teli proJcct is to be All aidits were

atidited everv v'ear bv completed.

accotuntants satislactory

to ll)A

Covenant types: 01 =Accounts/audits; 03 Flow and utilizatioIn of project fiands: 13 Otther.Present status: C = Complied with; NC = Not complied with.

Source: Project files and Bank project reporting system.

TABLE11: COMPLIANCEWITH OPERATIONAL MANUALSTATEMENTS

Not applicable to this project

25

TABLE 12: BANK RESOURCES: STAFF INPUTS"

Stage of Planned ActualProject Cycle

Week US$ Weeks US$

Preparation to Appraisal N/A N/A 36.0 106. 1

Appraisal-Board N/A N/A 60. 1 172.8

Negotiations through Board Approval N/A N/A 4. 1 11.5

Supervision 125.0 120.4 113.5 271 1

Completion 10.5 30.4 14.5 35 1

TOTAL 1355 1308 228.2 596.6

Source: Bank project reporting svstem and staff estiinates.

"The system shows planned staff weeks and amounts only since FY96.

26

TABLE 13: BANK RESOURCES: MISSIONS

Performance Ratinmg

Number Skills Implem De elopmStage of Month/ of Days Reprcs entation cnt TFpes of

Project Cycle Ycar Persons in ented Status Objectives Probl)emsField

Througli March 4 21 SO; BS; N/A N/A NoneAppraisal 1991 IE: 00

Appraisal June 7 21 SOO; N/A N/A Nonethroughi Board 1991- BS: IE:Approval April 00

1992

Supervision'2 I January 1 7 SOO 2 2 Delay in mceting1993 cffcctivcncss

conditions: Delav inlaunching the sludvon sites andservices.

Supervision 2 October 4 11 POO. 2 2 Free trade zone1993 IE, L. regime faced with

FA imiplenentationdiffictitties.

.Supervision 3 April I 8 FA S S Declininig private1994 investmenits because

of the crisis. anidcomiitiiients stillongoinig under theAPEX credit.

Supervision 4 Septembe 1 9 FA S S Need to set up ar 1994 iioniitorinig systein

of cnterprisesfinanced under thecredit.

Supervision 5 February 1 8 FA U U Delav in the fiscal1995 reformil: lack of

progress for theTribunail ofCommercc.

12 Until end 1994, this PSD project was supervised together with the APEX project, which was still active.The number of days allocated to the supervision of this project is therefore prorated (estimates).

27

Supervision 6 April I 12 FA U U Negative real1996 initerest rates: littile

.Mid- progress in the(Mid- iiodernii.ationi oftern the legal andReview) regulatory

frainework: 11oprogress unider theTribunal ofComiiiercc.

Supervision 7 August 2 7 SOO. E U U Need to cancel the1997 linie of credit and

the sites anidservicescolmlpoIICllts.

Supervision 8 April 313 3 SOO. U U The transfer of1998 E. 00 project oversight to

thc Ministn of'Planning followingthle liflinig of thesuspension and thcrcstructurinig hasnot been wcilreceived by manyactors and hascaused tensionisam111onig tile toprojcctimplementatlionuniits. No progressmiadc since 6imontlis.

Completion March/ 2 9 E: 00 U U Overall poor project

April performnalce.1999

POO: Principal Operations Officer; SOO: Senior Operations Oflicer: 00: Operations Olliccr: 13S: 13anking Sector Specialist: IE:Industrial Economist; E: Economist; L: asyer. FA: Financial Analyst

Source: Bank project reporting system and staff estimates.

13 Because of the lack of commercial flights to Burundi, the mission met wvith the national projectmanager in Nairobi.

I

APPENDICES

APPENDIX A: MISSION'S AIDE-MEMOIRE

Aide-memoire de la Mission de supervision et de preparation du rapportd'achevement du Proiet de Developpement du Secteur Prive - PSD

(Cr. 2359 BU)

1. Une mission de la Banque mondiale a visite le Burundi du 23 mars au 2 avril 1998pour proceder A la derniere supervision du projet PSD et preparer son rapportd'achevement. La mission etait composee par MM. Fran,ois Nankobogo, Economiste,Chef de mission et Prosper Nindorera, charge des operations a la Mission residente de laBanque mondiale. La mission a travaille conjointement avec une autre mission de laBanque Mondiale conduite par M. Jean Michel Happi et comprenant aussi MM. EugeneNyambal et Roy Pepper qui procede a une evaluation de la situation actuelle du secteurprive au Burundi.

2. La mission tient A remercier Monsieur le Ministre des Finances, Monsieur leMinistre de la Planification du Developpement et de la Reconstruction, les differentsresponsables des composantes du projet PSD, les divers cadres de l'administration ainsique les representants du secteur prive pour leur grande disponibilite et leur precieusecollaboration.

I. Dernieres operations du Proiet

3. La mission a revu 1'etat d'execution des dernieres activites du projet PSD quiavaient fait l'objet de report de la date de cl6ture pour le premier trimestre 1999. Cesactivites incluent l'audit des comptes A fin 1998, la finalisation de l'audit des banques,I'acquisition de materiel informatique et documentaire, ainsi que la preparation de lacontribution gouvernementale au rapport d'achevement du projet.

4. L'audit des comptes 1998 a ete realise dans les deais. Le rapport provisoired'audit est attendu au cours des premiers jours du mois d'avril et les unites de projet ontpris l'engagement de faire ce qui est en leur pouvoir pour que le rapport final soit pret etpartage avec la Banque mondiale avant la fin du mois d'avril 1999. Pour ce qui est desdernieres operations comptables realisees par les unites de projet, les comptes devront etreetablis par les unites de projet pour etre soumis A une revue des d6penses qui sera realis6epar la Mission residente au cours de la premiere semaine du mois de mai 1999. II a etrappele que la fin de la periode de grace pour la soumission A l'IDA des dernieresdemandes de paiement a ete fixee au 30 avril 1999. Le rapport final d'audit des banques aete remise A la mission. Le materiel informatique pour le tribunal de commerce et la cellule

2

de coordination des politiques a pu etre acquis dans les delais. Par contre, un retard a eteenregistre dans la livraison du materiel documentaire (ouvrages juridiques) pour leTribunal de commerce et ne pourra donc pas etre acquis sur les ressources du projet.

5. S'agissant de la pr6paration de la contribution gouvernementale au rapportd'achevement, les unites de projet, respectivement la Cellule de Gestion du Projet (CGP)et la Cellule de Coordination de Politiques (CCP), ont indique avoir travaille sur lesaspects du projet sous leur responsabilite. Toutefois, les modalites pratiques pour mettreensemble ces contributions pour rediger une synthese doivent encore etre prises. LeMinistre de la Planification du developpement et de la Reconstruction, qui a la tutelle duprojet, a indique a la mission qu'il suivrait de pret cette question pour s'assurer que lacontribution du gouvernement au rapport d'achevement parvienne a l'IDA dans les delais.

II. Evaluation des Realisations du Proiet

ILI. Composante CGP: Ligne de credit et assistance technique aux entreprises.

6. Cette composante avait pour activite la gestion de la ligne de credit (reliquatAPEX et ressources PSD) et I'administration de services d'assistance technique a traversla formation et l'assistance aux entreprises financees.

7. Les ressources de la ligne de credit du projet PSD s'e1evaient a $1 1 millions.Celles-ci etaient des ressources longues ( 1 5 ans dont 5 ans de grace) pretees auxentreprises par les institutions financieres participantes a un taux inferieur a celui dumarche du fait de b6neficier elles-memes d'un refinancement de la Banque centrale au tauxdes certificats du tresor a 3 mois.

8. L'activite de la ligne de credit a consiste d'abord a engager, en 1993 et 1994, lesressources qui restaient sur le projet APEX; et un montant de FBu 1.39 milliards a etrefinance. La ligne de credit PSD a ete engagee entre 1994 et 1995 pour un montant totalde FBu 1.26 milliards --representant 40% des ressources de la ligne de credit-- qui ontfinance 32 entreprises reparties dans divers secteurs de l'economie, avec environ 3 10emplois nouveaux associes. Cinq Institutions Financieres Participantes (IFP) -- deuxbanques de developpement (la BNDE, la SBF) et trois banques commerciales (la BCB, laBANCOBU, et la MBB)-- ont et partie prenante dans l'utilisation des ressources de laligne de credit du projet PSD. La participation des deux banques de developpementrepresente 82.3% de 1'ensemble des ressources engagees, tandis que la BCB, la MBB et laBancobu n'ont respectivement vehicule que 8.8%, 5.9% et 3.% des ressources engagees.En raison des taux d'interet reels negatifs en 1996 et en 1997, la d6cision d'annuler lereliquat de la ligne de credit a prise a fin 1997, au moment de la reactivation du creditapres une annee de suspension des decaissements.

9. Bien que la crise ait limite l'utilisation de la ligne de credit du fait de la reductionde la demande d'investissement, les IFP ont confirme l'importance primordiale dedisposer de ressources longues pour financer 1'economie dans un environnement out les

3

ressources des banques sont A court terme. Elles ont mis en suggere que les aspectsmeriteraient ci-dessous solent cependant d'etre ameliores a l'avenir:

* les procedures de l'IDA sont difficiles a maitriser et prennent trop de temps,* le risque ne repose que sur l'IFP qui finance un investissement dans la mesure ou la

Banque centrale leur d6bite automatiquement les echeances arrivant A terme sans tenircompte des difficultes que l'entreprise financee eprouve. Les IFP propose qu'A l'avenirleurs obligations de remboursement soient mises en relation avec leurs possibilites derecouvrement des creances aupres des entreprises,

* la necessite de trouver une autre base de determination du taux de refinancement, quiest juge 6leve et non neutre;I la promotion de la ligne de credit aurait pu etre plus active.

10. Au niveau des actions de formation et d'assistance technique, les beneficiaires desactions de formation organisees par la CGP, A l'interieur comme A l'exterieur du pays, ontapprecie l'utilite de l'action menee dans le cadre du projet. Les banques en particuliersouhaitent une action de formation suivie et systematique de leurs employes afin de mieuxevaluer les projets d'investissement et en assurer le suivi. Quelques entreprises ontbeneficie d'une assistance technique (tel qu'indique par les entreprises visitees lors de lamission) qui a fourni une formation en entreprise des employes.

11.2. Composante Coordination des Politiques (CCP).

11. La cellule de coordination des politiques avait pour mission de suivre les activitesrelatives au cadre juridique et reglementaire, a la promotion des echanges, a la politiquetarifaire et fiscale et au climat d'investissement. Les realisations en matiere d'ameliorationdu cadre juridique et reglementaire ont consiste en preparation de diff6rentes textes de loidont les principaux sont: le code du travail (promulgue en juillet 1993), les dispositionsgenerales du code de commerce (promulgue en juillet 1993), le code de soci6tes publiqueset privees (promulgue en mars 1996) ainsi que la loi portant organisation etfonctionnement du notariat ainsi que statut des notaires (juillet 1996). Des projets de loiexistent aussi sur l'organisation de la profession de geometre et sur la privatisation de laprofession d'huissier. Les differentes lois promulguees n'ont pas encore de texted'application. La mission a reitere la necessite de mettre en application les lois qui ont etedejA promulguees.

12. En mati&re de promotion des echanges, les differentes mesures de liberalisation desoperations du compte courant et d'acces aux devises qui avaient ete prises en 1992 dans lecadre du programme d'ajustement structurel ont ete annulees par le gouvernement ennovembre 1997. Les differents representants du secteur priv6 ont mis en exergue l'impactnegatif que cela produit sur leur activite. Toutefois, en 1996, le gouvernement a adopteune reforme du mecanisme de remboursement du draw-back (loi de decembre 1995 etordonnance ministerielle de fevrier 1996).

4

13. Dans le cadre du projet une refonte et integration du code des investissements dansle code general des imp6ts avaient et envisagees mais n'ont pas eu lieu. Seul le delai dereponse a une demande des avantages du code des investissements, limite A 45 jours, a faitl'objet d'une disposition legale amendant le code de 1987. Le regime de zone franche afait l'objet de travaux d'amendement au niveau technique mais n'a pas encore ete valide.En matiere de politiques tarifaire et fiscale, les reformes qui avaient et proposees audebut du projet n'ont pas ete realis6es. Le secteur prive estime que le regime fiscal resteune des principales entraves A son developpement.

14. Enfin, la CCP a recemment finalise le guide d'entreprise et fait adopte la loi sur ladeductibilite des charges. Par contre, il n'existe pas d'indications allant dans le sens d'uLlereforme fiscale d'ensemble ni de reprise du programme de reformes economiquesnecessaires A la revitalisation du secteur prive et A la relance de l'investissement prive.

11.3. Tribunal de Commerce

15. Les realisations du projet au niveau du tribunal de commerce sont rest6es treslimitees. L'instabilite de l'administration centrale du Ministere de la Justice ainsi que dupersonnel du tribunal de commerce n'a pas permis de mettre en oeuvre le programmed'amelioration des operations du tribunal de commerce. Seules quelques actions deformation des magistrats ainsi que l'acquisition recente du materiel informatique ont puetre realisees. La mission a exprime son regret que les actions qui auraient pu etreconduites des le debut du projet meme sans le demenagement du tribunal de commercedans de nouveaux locaux n'aient pas et engagees A temps. Ceci pose un probleme decredibilite de l'engagement A ameliorer les performances du tribunal de commerce dont lerBle est important dans le fonctionnement du monde des affaires.

11.4. Zone Industrielle

16. Le retard dans le demarrage des activites d'amenagement de la zone industrielle aete cause, au debut du projet, par l'affectation du terrain qui avait ete identifie A une autreutilisation. Par la suite, le gouvernement a choisi un autre site sur lequel des voiesd'amenee ont ete amenagees. Le coat de la depense encourue est estimee A environ 1.5 dedollars. Des etudes de viabilisation ont ete conduites, mais la composante a 6te annulee en1997 avant que les travaux ne commencent. Cette decision a decoule du constat selonlequel la demande d'investissement avait considerablement decline et de la necessited'affecter les ressources publiques a d'autres priorites nees de la crise. Toutefois, laDirection generale de l'urbanisme a indique qu'il y a une reprise de demande de terrainsindustriels et que les entrepreneurs se contentent provisoirement de viabilisation sommaireA leurs frais.

11.5. Mines

17. Le projet devait appuyer le gouvernement dans les negociations de conventionsminieres et la revision du code minier et petrolier de 1976. Un appui a ete donne sur les

5

ressources du projet pour les negociations avec RTZ et BHP. Par contre, le concours del'IDA n'a pas ete sollicite dans les recentes negociations avec Andover ResourcesInternational qui vient de signer avec le gouvemement une convention miniere pour1'exploration et 1'exploitation du nickel de Musongati. En ce qui concerne le code minieret petrolier, le travail n'a jamais depasse le stade de termes de reference, mais legouvernement a deplore le manque de reponse de la Banque pour cette activite depuis1995.

Conclusion

18. La mission a constate que, dans l'ensemble, les performances du projet ne sontpas satisfaisantes. L'enthousiasme du debut du projet n'a pas resiste aux effets de la crisequi a commence en octobre 1993. En effet, 1'environnement socio-politique n'a pas etefavorable a une poursuite continue des efforts d'amelioration de l'environnement desaffaires et de promotion des exportations ; et les desequilibres macro-economiques quis'en sont suivi ont meme provoque des retours en arriere-sur des reformes passees tel quecelles de liberalisation du compte courant. Malgre ces facteurs exogenes, aussi bien1'emprunteur que la Banque mondiale n'ont pas reussi bien mener la mise en oeuvre duprojet, surtout a partir de la revue a mi-parcours de 1996. En somme, 1'essentiel de ce quia ete realise par le projet l'a ete au cours de ses premieres annees, jusqu'au debut de 1996.Par contre, la periode consecutive a la reactivation du projet en octobre 1997, apres uneannee de suspension des deboursements, jusqu'a la date de cl6ture en mars 1999 n'a qu'unbilan tres maigre, en raison d'inefficacites des structures chargees de mettre en oeuvre leprogramme de relance du secteur prive.

APPENDIX B: BORROWER'S CONTRIBUTION

RAPPORT D'ACHEVEMENT DUPROJET D'APPUI

AU DEVELOPPEMENT DU SECTEUR PRIVE(CR 2359-BU).

l~~~~~~

INTRODUCTION

Le Gouvermement du Burundi et I'Association Intcmationale de Dvcvloppcment (IDA) ontconclu en Juin 1992 un accord do credit de developpemcnt portant sur l'appui au ddvcloppcmcnt dusecteur priv6.

Tel quo defini par l'accord de projct du credit 2359 BU J. projct a d&fini Ics objoctifsprincipaux a atteindre a savoir:

(( 1. Contribuer au dcveloppement cconomiquc du Bunidi Cei fournissant unc aidefinanci&re aux entreprises d'investissements. particulicremcnt celles qui utilisClnt plus dc ressourceslocales et qui contribuent a la crcation d'cmplois A la dcccntralisation de l'activitc cconomique. ala realisation des rccettes en deviscs ou a la substitution des importations.

2. Faciliter la crcation, 1'cxpansion ct la modcrnisation des entrepriscs»

Le projet, d'un montant dc 12.400.000 DTS comprenait plusicurs composantcs placcessous diverses tutelles techniques:

(a) Unc ligne de crcdit. d'un montant dc 7.572.000 DTS soit 6lpour-cent du crcdit.etait geree par la C.G.P. sous la tutelle do la Banque do ia Rcpublique du Burmndi.

(b) Un montant de 2.1 10.000 DTS, soit 17pour-cent du cr6dit. ctait destinc a financerune operation de viabilisation d'une zone industricllc.

(c) Une composante assistance technique et formation devait permettre la rcalisationdes actions suivantes:

(i) Renforcement des capacitcs ct equipement du tribunal do commerce.(ii) Rcformrc t modernisation du droit des affaircs(iii) Un appui au Minist6rc des Mines.

La date de cl6ture prcvuc initialemcnt ctait fixce au 31 dccembre 1997. L'cxccution duprojet a commence au mois do janvier 1993.

Pour ce qui est de la partic A du Projet, le Gouvemement du Burundi et l'IDA so sontconvenus quo les fonds du projet APEX (5.700.000 DTS). dont los d&caissements avaicnt ctcbloqu&sjusqu'en 1992. soicit cgalemnent gcres par la C.G.P. pour Ic financenient desinvcstisscments a travers Ic svstcmc bancaire. Ainsi cc montant s'ajoutait a celui do la ligne dccredit du projet 2359 BU.

I.DEROULEMENT DE L'EXECUTION DU PROJETPOUR LA C.G.P. ET LA LIGNE DE CREDIT

A) AVANT LA SUSPENSION DES DECAISSEMENTS EN OCTOBRE 1996.

Le projet s'est deroule normalement du I er janvier 1993 au 10 octobrc 1996. Suite al'embargo decide par les pays voisins du Burundi au mois d'aoat 1996, 1'IDA a decide lasuspension des decaissements pour tous les projets au Burundi a partir du 10 octobre 1996.

2

Au mois d'aout 1997, une mission de supervision de l'IDA s'est rcndu au Burundi afind'analyser l'opportunite de la levee de la suspension des dccaissements sur Ic credit d'appui audeveloppement du secteur priv. Etant donnc la detcrioration de 1'environncment macro-economique pour les investissemcnts dont notammcnt une forte inflation rendant les taux d'intcrctsreels negatifs et un taux de change surcvaluc. I'IDA a dcidc ['annulation dc la composante lhgncde credit du projet en Octobre 1997.

i) ENGAGEMENTS ETDECAISSEMENTS.

Durant la pcriode d'cxccution dc la composantc lignc dc credit plusIcurs opcrations ont puctre financces comrnmc suit:

Etant donne un reliquat important du projet APEX. Ia C.G.P a d'abord comilmllcnc aengager les fonds du projct APEX CR 1889 BU. dont la date dc cl6turc etait fixcc au 3 1 / 1 2/ 9Q4Ces fonds ont pu ctrc totalcment engagcs au 31 Octobre 1 994. Lc taux de decaissemnent definitif futde 96,3 pour-cent a la fin du projct.

Les fonds de la ligne de crcdit du projct d'appui au d6voloppcenent dui scctcur privc (CR2359 BU) furcnt engagds sculement a partir d'octobre 1994 a la fin du projet APEX. Etant donnequ'il s'agissait de la composante principalc du nouvcau projet. le taux de dccaisscmcnt du crcdit2359 BU au 30/9/1994 etait seulement de 4 pour-cent. Au momenit de la suspension desddcaissements, le taux de dcbourscmcnt de la ligne do crcdit 2359 BU fuit de 40.45pour-cont et surle projet entier de 37 pour-cent. Cc rcsultat ftit rcalisc uniqucment sur la pcriodc d'octobre 1994 aoctobre 1996.

Nonobstant donc l'embargo imposc au Burundi cn ao;it 1996 et la suspension desd6caissements qui s'en est suivi en octobre 1996. Ia ligne de cr6dit aurait ctc utilisce totalement a ladate dc cl6ture pr6vue dans l'accord de crcdit do devcloppement 2359 BU soit au 31/12/1997. 43op6rations ont ctc cngagccs sur la ligne do crcdit du projet d'appui au dcvc1oppcrncnt du scctcurprivc et dont 34 crcdits dccaisscs pour un montant total do 1 260 897 051 FBU soit 3 062 338.64DTS.

ii) INSTITUTIONS FINAN(JERES PARTIC1PANTES.

Cinq banqucs ct institutions financicrcs (InstituLtions financicrcs participantcs IFP) ontparticipc a la ligne do credit: La Banquc Commercialc du Burundi (BANCOBU); La Banquc doCr6dit de Bujumbura (BCB); La Banque Nationalc do Dcveloppement Econonlique (BNDE): LaMeridien BIAO Bank Burundi (MBBB). La Socictc Burundaisc de Financement (SBF).

Au mois de mai 1995,1a MBBB fut misc en liquidation suite a la faillite dc 1'6tablissemcnt.Deux dossiers de la MBBB avait beneficic du refinancement do la nouvelle ligne do crcdit. Pour lesautres IFP, le taux de repartition de l'utilisation de la ligne do crcdit est la suivantc: BNDE: 58.8pour-cent: SBF: 23,5 pour-cent, BCB: 8,8 pour-cent; BANCOBU : 3.0 pour-ccnt

La BNDE avait maiitris6 les procedures d'utilisation dos lignes dc credit IDA dcpuis laligne de credit APEX. Par contre le faible taux d'utilisation des ressourccs de la ligne de cr6dit parla BANCOBU s'explique par les difficultes qu'avaient les services techniques do cette institutiondans l'evaluation des dossiers des prets a long terme et l'idee qu'avaient les instances dirigeantes

3

d'une competition entre les ressources de la ligne de crcdit et celles proprcs a la banque bicn queces demieres etaient a court terme.

iii) EMPLOS C'REES ET SECTEURS D 'A C'TI VITES.

La ligne de crcdit a contribu6 a la crcation d'environ 310 nouvcaux cmplois

Tous Ies sectcurs d'activit6 economique ont c finances Ic primnairc Ic seconidaire et ictcrtiaire. On trouve des domaines aussi divers quc Ics suivants L'1evage. les ccolcs. ls cliniques.les tclecommunications, la transformation du bois. les h6tcls rcstaurants. la fabrication de cahicrs.une minoterie confiscrie. la construction dc batimcnt commcrcial et administratif la construction dcbatcau de transport, les usincs dc the et do fabrication de tubes en PVC etc. (Voir tableau oClannexe dcs secteurs financcs sur Ic projet).

iv) SI TUA TION DES RECOUVREMENTS

Le projct a cte cxccutc durant UIIC pcriode de crisc profonde depuis Ic mois d'octobre I '93et qui a cte aggrave par un cmbargo impose par les pays voisins cn aotit 1996. Cette conjolIcture aeu impact ncgatif sur la r6gularit6 des remboursomcints do sous projcts cnvors Ics IFP.

Alors quo le ratio creances impaye&s/total des prcts varic entre dc 17.4 pour-coii et 52.4pour-cent pour les banques auditccs cn 1997 ( Cfr. rapport gcncral du diagnostic du sectcurfinancier burundais 1992-1997).cc ratio est de 11.45 pour-cenit et do 9,'13 pour-cent par rapportrespectivement au total des d6caissements sur la ligne do crcdit et des prcts totaux dccaisscs par IcsIFP pour les dossiers refinanccs sur Ic projet d'appui au dcveloppement du secteur privc Ccconstat dcnote la justcsse des ctudes do rcntabilitc cffectu6cs avant Ic financcmont des dossiersrnfinanccs et unc certaine rnsistancc des investissements financcs par rapport a ['cnscmble duportcfouille des banques.

Lei montant recouvrn auprcs des IFP cnvers la lignc do crcdit ctait do 615 747 727 FBU au31/ 12/1998 soit 48,8 pour-ccnt des dccaissements totaux. Lc svstric do rocouvrnmcit cntre lcsIFP et la ligne do crcdit no ticnt pas compte du remboursement offectif du sous pro et auprcs doI'IFP. Aussi les irrcgularitcs dc romboursemont auprcs do la ligne do credit n'iont tOUIch6 quo lesdossiers do l'ex MBBB Le cornitc do liquidation de la MBBB est on train cependanit do rcgularisorcettc situation

B) ANNULATION DE LA LIGNE DE CREDIT ETRESTRUCTURATION DU PROJET EN OCTOBRE 1997.

L'IDA a ddcidd en octobre 1997 I'annulation des fonds destincs a la partic A ct a la particB du projet. Elle a leve la suspension des ddcaisscmcnts sur la partic C du prolct.

Cette decision a eu comme consequence une reduction do plus do 82 pour-ccnt du montaintdisponible sur le crddit (passant de 7.804.790,58 DTS a 1.398.720.39 DTS).

Concernant les objectifs du projet, le Gouvemement et l'IDA se sont convenus d'unereorientation du projet afin de faire face a la deterioration de 1'environnement dconomique peufavorable aux investissements. 11 fut ddcidd de renforcer l'appui institutionnel en finan,ant lesactions d'appui a la mise en oeuvre de la strategie economique et sociale du Gouvernement sur la

4

periode 1997-1999. La matrice des actions a soutenir prevues par cette stratcgic comprcnaitnotaniment.

Dans la logique de la r6orientation dcs objectifs du projct. Ics dcux parties sc sontconvenues de modifier les dispositions de gestion du projet en confiant au Ministcre de laPlanification du Developpement et de la Reconstruction la coordination ct la misc ell ocuvrc desobjectifs du projet. A cet cffct. les amendements a ['accord dc crcdit de dcvcloppcmcnt CR 23559furent sign6s par l'IDA en janvier 1998 et par le Gouvenienmcit du Burmndi cn fcvricr 1998

Au vu des delais neccssaires a la realisation des objectifs souhaitcs et dc la pcrioded'execution dc la strat6gio &conomique et sociale. Ic Gouvernemncrit a\ait demandc. par lettre duMinistre des Finances a l'IDA du 27/11/97, unc prorogation de la datc de cl6ture du projct au3 1(12/1999.

Par correspondance du 24/12/1997. I'IDA a acceptc de proroger la date de cl6ture duineannee en laissant la possibilitc a une nouvellc extension aprcs examnci de la misc en ocuvre du pland'action. Des la signature des amendements fin fcvricr 1998. unc concertation ftit initicc par lcMinistere des Finances afin d'arrcter un plan d'action global du projet.

Sur base dos propositions de chaque composante. une rcunion s'cst tenuc a Nairobi dcbutavril 1998 pour analyser la pertinence des actions proposes Cei egard aux nouvclles oricntationis duprojet et a la periode d'exdcution prcvue.

Bion que sur lc plan techniquc les diff6rentes propositions d'un plan d'action aient ctcdisponible des la fin mars 1998, la procedure do misc Cln place d'un plan d'action global lie putccpendant aboutir avant lc niois do Juin 1998.

MDs la nomination du nouveau Gouvernement le 13 juin 1998, Ic Ministrc dc laPlanification du D6veloppement ct de la Reconstruction enclencha des discussions avec toutcs lescomiiposantcs du projet: Un plan d'action a ex6cuter cntre aoit ct dcccmbre 1998 fuit finalcmncit6laborc ct envoy6 a l'IDA pour approbation.

L'IDA a donnc son accord lc 4 septcmbre 1998 pour la grande partic des actionspropos6cs et Icur rcalisation suivi au cours du demier trimestre do l'annce 1998.

Entre le mois de mars 1998 et aout 1998. plusicurs activitcs ont cependant ctc rcalisces parles differentes composantes notammcnt:* Le demarrage de I'tude sur Ic scctcur dcs assurances.* La preparation du guide pour la crcation des entreprises.

II. LA COMPOSANTE VIABILISATION DE LA ZONE INDUSTRIELLE.

Cette composante etait placee sous le tutelle du Ministere dcs travaux publics et de1'&quipement (MTPE).

La composante a pu realiser deux des trois phases prevues a savoir:* L'identification du site et la realisation des infrastructures d'acces au site: Ces travaux ont ctc

finance par le Gouvernement du Burundi.

5

La realisation des etudes de viabilisation du site.

A la fin de cette seconde phase, la composante a lance un appel d'offres pour 1'executiondes travaux. La Banque Mondiale a cependant decide la suspcnsion des decaissements pour leBurundi a cc moment. Lors de la restructuration du projet en Octobre 1997. Ia Banquc Mondiale aannule cette composante.

111. LA COMPOSANTE ASSISTANCE TECHNIQUE.

A- LA CELLULE DE GESTION DU PROJET.

La CGP a r6alisc plusicurs actions d'assistance tcchlniquc durant la priode d'ex6cution duprojet. Dc fa,con pernanente, la CGP a assistc les promoteurs ct Ies entreprises i bicn montcr Icsdossiers d'ctudes de rentabilitc des investissements avant une demande de finanicemnclt auprcs dcsIFP. Dc m-mc. Ia CGP a organise ou financc plusicurs seminaircs de formation cen faveur dcscadres des banqucs sur place.

Les actions suivantes ont etc rcalisccs par la CGP dans Ic cadre du projet:( Organisation du 13/2 au 3/3/95 du scminairc de fonration bancaire sur (< ['valuation desprojets d'invcstissements )> Toutes Ics banques ct institutions financicres ont participc a ccseminairc.

* Rcalisation en Fcvrier/Mars 1995 d'une Etude sur lcs bcsoins cn formation pour Ics cadrcs desbanques et institutions financicrcs >>. Cette dtude a permis d'identificr ct de formuler Ics termesde reference de dix s6minaires prioritaires pour les banques.

* Financement de la participation de 3 exportateurs dc fruits et Icgumes a la SemaineIntcmationale Verte a Berlin en Janvier 1996.

* Financcment ct supervision de ['audit du scctcur financier (jUiin ct juillct 1996) par Ic cabinetCOOPERS § LYBRAND. L'audit a portc sur la BCB. Ia BANCOBU. Ia SBF. ia BBCI et laCAMOFI.

* Rcalisation d'un scminaire de formation dcs comptablcs des proicts finances par l'IDA enjuillet 1996.

A partir du mois d'aout 1996. ls pays voisins ont dccidc d'ui enmbargo commercial contreIc Burundi. Conformcmcnt aux recommiianldationls du rapport de revuc zi mi parcours du projet. IaCGP venait dc lancer un appcl d'offre pour la realisation d'un manucl dc proccdure pour la misccn place d'un << Fonds de promotion de l'entreprcunariat. >> Ce fonds devait .outrc l'appui a lacrdation d'entreprises aux promotcurs . pcrmncttrc dc counduirc la prcscrvation Ct la consolidation duportcfeuille financc notamment par dcs actions d'assistance tcclhniquc ct de formation.

Lors de la lcv&c de la suspension des dccaisscmnits cn octobrc 1 997.11 fut dccidc unercstructuration du projet ct une mission d'appui la lamisc en ocLurre dc la strat6gic cconomiquc etsociale du Gouvernement fut confic a la C'I.

Dans le cadre dc cette rcstructuration et aprcs I'approbation par l'IDA du plan d'action,les actions suivantes furent rcaliscs sur Ics trois dermiers mois de l'ann6e 1998:

* Scminaire de formation sur Ic contr6lc internc en favcur du sccteur bancaire aumois de novembrc 1998.

6

* Financement de la formation de trois cadres a l'etranger sur la gestion desprivatisations et sur la creation des PME.

* Financement de la formation de deux cadres a l'ctranger sur la confection desmanuels des proc6dures.

* Financement d'une mission d'ctudes dans trots pays d'une delegation del'Agence de Regulation et de Contr6le des tclecommunications ( ARCT).

La mission d'etudes prevue a I'lle Maurice pour les hauts cadrcs du Ministcre dc laPlanification du D6veloppement et de la Rcconstruction et du Service chargc des entreprisespubliques (SCEP) n'a pas pu ctrc rcalisce.

Du fait d'une prcsentation ct d'unc approbation tardive du plan d'action. les activatcssuivantes n'ont pas pu ctre menccs et avaient ctc programnimcs par la CGP Cln cas de nouvcllcprorogation de la date du cl6turc du projet:

B) REFORME ET MODERNISATION DU DROIT DES AFFAIRES.

Cctte composante existait avant Ic projct d'appul au dcvcloppement du scctcur privc dansIc cadre du Service charge des Entreprises Publiques (SCEP). Ellc a cnsuItc ctc transfircc sous Iatutelle du Ministere du Commerce et de l'Industrie dans le cadrc du PDSP. Cettc composante a putravailler jusqu'en 1996 apres la recvue a mi parcours du proet. Les r6alisations de cettecomposante sont:

i)Avant l 'int6gration c/u 1?lMODR4 clans le 1'1%S7l:

* Suppression des barricres sur les routes (Taxation commilunale): Lc dossicr a 6t6 gclc suite a lacrise socio-politique depuis 1993 Allcgcmcnt dcs proccdures d'agrmcnnt comme importatcur ctexportateur

* Extension des activit6s du Fonds National de Garantics au secteur des services: Le texte decette extension a ctc promulguc.

* La revision de l'article 149 du code foncicr.* La rcvision du codc des investisselmcnts: Cc travail n'a pas pu aboutir a son

ii) AprPs l integration chi RFl.MOI)R?A cLtins lc II)NJl.

* Etude sur le secteur bancaire: Lcs rccommandations issues de cc travail n'ont pas Co0lnlU dcsuite.

* Un projet de loi sur les magasins gcncraux et la tierce dctentLon a cependanit ctc proposc.* Le livre premier du code du commercc: 11 a ctc promulguc par le dccrct loi n° 1/045 du 9/7/93

portant disposition g6n6ralc du code de commcrce. Ncuf mcsures d'application a caractcrereglementaire n'ont pas pu ctrc claborcs.

* Le projet de loi portant code des socictcs priv6es ct publiques: Lc code des soci6tCs a ctcpromulgue.

* Projet de loi portant privatisation de la profession dc notaire.* Projet de loi portant organisation de la profcssion de g6omrtre.* Projet de loi portant privatisation de la profcssion d'huissicr de justice* Projet de loi portant rdforme de la Icgislation sur la faillite et le redressement des entreprises en

difficultes.

7

Lorsque la composante le REMODRA a ete arretee, ii tait envisage de commencer lestravaux suivants:

* L'claboration des textes d'application du livre Icr du code de commerce* La mise en application du code des socictcs promulguc* La rcforme de la procedure civile* La reglementation de l'arbitrage commercial* La poursuite de simplification des proccdurcs notamnent la rclance du dossier de la

suppression des barrieres sur les routes, Falldgenment dcs conditions d'acccs au transport despcrsonnes, etc.

La composante REMODRA a cependant ctc supprimce au cours dc I'antide 1996 . Lesactivit&s realisees et les projets prevus ont de facto ctc repris par la composante Cellule dcCoordination des politiqucs (CCP).

C) LA CELLULE DE COORDINATION DES POLITIQUES (CCP).

La CCP a ctc crede au scin du Ministcrc du Commerce et dc lI'nidustric afin d'appuver IcCabinet du Ministcrc pour les activitcs suivantes:* Coordination ct suivi dcs actions de promotion et dc d-c:loppcmnent du sccteur privc et des

exportations.* Coordonner et optimiscr les divers programmcs d'assistancc offerts dans ccs domaines par lcs

baillcurs de fonds.

Les objectifs de travail assign6s a cette Cellulc ont cependant ctc compromis par la crisesocio-politique qui a frappc Ic BLiunrdi dcs Octobre 1993: En effet les actions d'appui au secteurprivc ont ctc gelces ou simplcmncit annuldes par les divers baillcurs de fonds progressivement. Dcmcme .Y'environncrnent pour la divcrsification ct Ic d6ivcloppemncnt des exportations s'cst dctcriorctiant pour la disponibilitc dcs produits quic p)ouL IcuLr ziclhicilineicmiclt dcs licux dc production aBujumbura Et depuis Aout 1996. Ic transport international tnit bloquc par I' embargo.

Dans cette conjonicturc. la CC'P a nkarnloirns rcalisc quclqucs activitcs dont une ctude surl' impact de la crise et Ics perspcctives dc relanicc cn 1995 ainsi ql'ulnlC consultation pour ladcfinition des actions d'appui au d6vcloppcliernt du secteuir privc.

Les autres rdalisations de la CCP sollt notamlelnclt:* Une etudc d'amclioration du statut de zone franclic.* L'adhcsion du Bunindi a I'Agence multilat6ralc de garanmic dcs invcstissements (MIGA)* La rdalisation des travaux relatifs a l'initiative transtrontalierc.* La mise en place et l'aniimiatioin d'une strLcturc dc conccrtation Etat/secteur prive.* Mise en place d'un svstmem de ('Chque du Trcsor pour Ics opcrtions de remboursement des

droits exonerees mais payes par Ics exportateurs.* Constitution d'un fonds documentaire pour Ic secteur prnvc au Burundi.* La realisation d'unc ctude sur Ic secteur des assurances au Burundi.* La realisation d'une ctudc sur Ic secteur des assurances au Burundi.

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Depuis I'annee 1996 a la suppression de la composante REMODRA. Ia CCP a pris cncharge les travaux realises par cette composante. La suspcnsion des dccaissements qui a suivi cetteperiode et I'absence d'un plan d'action durant une partic importante de l'ann&e 1998 n'a ccpcndantpas perrnis d'avancer les travaux laisses par Ie REMODRA.

D) COMPOSANTE MINES.

Cette composante avait comnme objcctif Ic renforccmcnt des comp6tenccs du Ministcrc Cllcharge des Mines en matiere de negociation des Conventions d'cxploration minicrc et la rcvision duCode Minier et Petrolier du Burundi.

Le PDSP a notammnent financ6 la participation de la dc&kgation du Burunidi i landgociation d'une convention minicre avec Uine soci6t6 mininre (BHP) a Paris Cln Francc. LeMinistcre a 6galemcnt claborc Ics tcrmes de rcfdrencc d'unc missioni dc consultation pour lardvision du codc minier. L'IDA n'a cependant pas pu faire suitc a cette requctc ct Ic proIct s'estcl6turd sans qu'il ait dte possible de rcaliscr cette importante rcforme.

E) COMPOSANTE TRIBUNAL DU COMMERCE.

Cette composante avait pour objectif l'amclioration des moy cns d'instruction ctd'administration du Tribunal de Commerce. Pour cette composante. if etalt prcvu:* Ia mise en place d'un fonds documentaire du Tribunal servant cntrc autre a ['acquisitioll du

mnatdriel de bureau (photocopicusc, apparcil fax) et du matcricl roulantt:* Ia formation des magistrats ct l'informatisation du Tribunal.

Parmi toutcs ces actions qui avaicit ctc cibldes aui debut dii proict. pCLi de choses ont ctcrcalisees. Avant 1994, trois magistrats du Tribunlal dc Coommiicrce out cffcctu6 dcs stages dans lesTribunaux de Commerce en Francec pour prcindre connaissancc dIi fonctioininement dcs autrestribunaux de commerce. Le Tribunial a b6n&ficid aussi de quiclquies fourniltures de bureau ainsqu-un micro-ordinatcur avcc accessoircs.

Eu cgard a ccs faibics pcrfbrinaiiccs. il cst souliaitabIc (quc Ics actions dcia identificcsrestent dans les prioritcs dui Gouvcrnicmcrit si inic quciconquic solitioll cst cnvisageablc

IV. FACTEURS AYANT LIMI'I'E LES PIERFORMANCES Dl) PROJET.

i) La d6tdrioration dle l environneenlc'nt soci-io/itique et ses consequelces surP'&onomie du pa v.

A partir dui mois d'octobrc 1993. Ic 13tiruinidi est cntrd darls tinC crisc socio-politiqueprofonde qui a perdur- tout au loig dc la pduiodc cx&cutioi dii projet.

La situationi d'insccurit6 clji a pr-valiu a dacouragd Ics niitiiatwcs d'invcstissemcnts,particulidrcment durant la premiirc moitid dc J'ainc 1994 F I.n cffct lcs infrastructures physiqucsde l'interieur du pays ont subi beaucoup de d6gits. Dans la C'apitalc. bien quc ces infrastructuresn'aient pas ete detruitcs dans un prenier tcmps. la villc et scs cnvirons ont ctd I'objet d'unesituation d'insecuritd durant toutc l'anncc 1994 et durant l'annde 1995.

9

Les entreprises a Bujumbura qui avaient pu continuer a travailler ont eu trois typcs dcdifficultds majeures:

* A plusicurs reprises, Ic personnel avait dcs difficultes a se rendre sur les licux detravail du fait dc l'insecuritc pcrsistante dans plusieurs localitds.

* A partir de 1995. dos sabotages des ligncs d'alimcntation du courant ciectriquc a layile de Bujumbura ont provoquc un ralcntissemcnt trcs important sur la productionindustrielle.

* Des aout 1996c1'embargo imposc au Burundi a stoppc l'approvisionnocnient en intrantainsi que les exportations.

Ccs differents elements ct toutos lcs conscquences d'une guerrc civile persistantc ont finipar rendre pratiquement impossible tout invostisscmcnt. L'infilationi n 'a pas cess& do croitrc jusqu aattcindrc des taux de croissancc avoisinants lcs 40 pour-cent par la rarctc dcs produitscssonticelement agricolcs avant Aout 1996 puis manufacturiers aprcs cctte date. Le cout desinvcstissemcnts ctait devenu prohibitif. Les taux d'inttrcts dos cmppnilts sonit devenus ncgatil's cnterme r6ols. Lc taux dc changc officicl ctait infcricur dc prcs do 60 % au taux du march6 parallMe.Los institutions ddcisionncllcs du pays n'ont pu procddcr i ['approbation do certaines rlormics ou dtcur misc cn oouvrc. L'cxportiso ctrang,rc hcsitait a se rcndre au Burundi on gcncral et zi l'intcricurdu pays en particulicr.

ii) Imperfection dans le montage institutionnel du projet.

Au momcnt du dcmarrage du projct. ccrtaines dispositions pratiqucs ii'avaicnt pas ctcpr6vucs dans l'accord dc credit notamment:

* Le changement dc tuitlle do la composanite Rctormc et modernisation du droit dos affairos(REMORDA ) qui passait du Service C'harg& des Eintroprises l'ubliques (SCEP) au Ministcrcdu Commerce ct de l'lndustric.

* L'impr6cision sur les comlptes spcciaux pour le l;onctionnenlent des composaiites REMODRATribunal do commorce et la (i&ologic ct Mincs.

* Lo projct ctant a plusictirs composanles. I'accorid ni los aidc-minmoirc des diffcrcntcs missionsde supervision n'ont pzis dmili Iai itillc hcniiui gn;Ii e dvi projot. Ccllc-ci cst rcvonueimplicitemrnt aL Ministrc dcs Finances Owlw dotinu qciil al;t sigiiataire du cr6dit ct qu'il estGouvernour du BuruinLdi pour Ia Banque Mondiale.

* L'accord ii'a pas pr6vta los licns cntrc le proijca APIE'X ctle projct d'appui au dcvcloppcmcnt dusecteur privc.

Cos omissions onl enl palclu i;l tcv&cs par les amendements i l'accord do cr6dit cn 1994 eten janvier 1998. Touttefois (tc dlfficidlkts lout aul lonig (Ic cxcutIion du proict i'ont pas manqu6 dosurgir du fait do cc mon1tage incollplet Oin peut flot lltlilalint citer

* Les conflits cntrc los composantbs ('clitle de (oordination des Politiquos (CCP) ct toREMODRA qui ont tinialcmint abouti a la supprcssion de la composante REMODRA en 1996ct l'integration do facto dos rcalisations et dcs actions du REMODRA a la composante CCP.

* Des interfdrcnces cntrc composantes so sont produites tout au long de cxccution du projet .

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* La confusion qui a prevalu lors de la restructuration du projet au debut de l'annre 1998 et sesconsequences sur l'execution en g6n6rale du projet tire egalement ses racines dans les lacuncsdu montage institutionnel du pro'et a l'origine.

Cette experience devrait etre misc a profit dans la conception de nouveaux crcdits etprojets. 11 serait cependant souhaitable quc dans la mcsure du possiblc. Ie montagc institutionneldes projets soit assez simple, clair, en tenant surtout compte du caractere multisectoricl chaquc foisque de besoin.

iii) Suivi des decisions des missions de supervision.

Du fait de la crise socio-politique . les missions dc supernision W'onit pas CtC rcguIicres. 11 aete constate par suite qu'il v avait quclques difficultcs au suivi des recomilialidatiolis et d&ciSiolsdc ces missions: Des dossiers de demandes de non objection n'ont pas cii de suite notamnmcnt. desfois les problemes lids a l'organisation institutioinelle n'ont pas cu de solutioIns i toimps cntrainantun blocage dans l'execution du projct; il a c ressenti parfois un cloisonnmccnt cntre lcs ser icesde ddcaissements et lcs services dc supervision du projet. etc.

V. PERSPECTIVES D'AVENIR.

Certains des Mvnemonts principaux avant rcnduL difficile la r6alisation dii prOict comimiiecl'insccurit6 g6ncralis&c. Ics interruptions prolong6cs de '6inergie 6iectriquc et l'cmbargo ont ctcmaitriscs.

Le processus de paix cngage cntrc toutcs los sensibilitCs politiqucs du pays est sir Lille

bonne lanccc et pourrait aboutir vers Ia fin dc l'anin6c cn cours. Ces difftrcnts Licmciits pcrmettentla creation progrcssive d'unc confianice danis tinC rclaiice econonilque a termc.

It s'av&rc n6ccssairc d'initicr ;i brcvc ckiance des ncstires dc rcconstruction et deredressement do l'6conomic. (cs micsircs dcvrait pcrnicttrc d'engager Ulle rcstructtiration dcF6conomic afin d'aboutir zi tcrinic a tin sySInie caractt.rise par la comnpctitivitc et la prcdominanccdiu secteur privc dans les activitSs dc production cl do services.

La rolance de 1'economic devralit s'articuler sui les actions suivantes:

* Rctablisscmcnt des principaux jidicatcirs socio-cconiomiqtics dont notamment un tauxd'inflation A un chiffre. los taux d'ilnt6rts r6els positifs. tinc maitrise du dcficit public. unretablissement do certains indicaitetirs sociaux dc base commie lc taux de scolarisation Ic tauxde couvcrturc sanitaire, Ic pourcentagc do I'liabiat d&ceilt. ctc.

* Reconstruction des ouvrages d6triiits ct cndoninigas.* Accroissemcnt et diversification do la production agricole do manicrc A rcievcr

substanticllement les rcvonus dii moide rural ct d'augmenter lcs produits exportablcs: fleurs,fruits, Idgumcs pour la granido exportation et les produiits vivriers pour Ia sous r6gion.

* Promotion de la micro entreprise ct do la transformiationi dans l'agro-Lievagc.

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Dans un avenir immrdiat, la realisation de ces objectifs et la poursuite des actions initiccsdans le cadre du PDSP pourraient etre concentrees sur Ics activites suivantes:

1) La consolidation du portefeuille des entreprises et la disponibilisation d'un serviced'assistance technique.

Outre le diagnostic des banqucs. Ia mission dc rcvuc a mi parcours du PDSP en Mars 1')'6avait recomnmande la mise en place d'un fonds de promotion dc 1'entrepreunariat dont Ic r6le ctaitla mise A disposition d'une assistancc technique multiforme aux entreprises ct aux promoteurs aveclc principe du cout partage. Dans le contexte de la relance .cc fonds pourrait 6galement constitucrl'instrument d'elaboration et do conception des rcformnns economniqucs a soumiicttrc aux decideursafin d'cnclencher la restructuration de 1'cconomic. Avec ces dernircs rcforncs sculement. I'actioninitice par la rdforme l6gale lancee avant ct poursuivic dans Ic cadre de cx&cution du PDSPpourrait avoir une efficacite concrcte dans la promotion du secteur privc.

2) Appui au secteurfinancier.

Les rdsultats dc I'audit du secteur financier rnalisc en 1996 et Cll 1997 permettraicntd'ctablir une base d'un programme de l'ajustcmcnt financier attendu depuis 1995. C( programmeest d'autant plus urgent quo tous los travaux et rdunions sur les modalitcs concr6tes do la rclancedconomique posent Ic problcme dc la disponibilitc des rcssources financicrcs pour apurer la dottede l'Etat cnvers le secteur privc et Ic secteur bancaire. ct ensuite disponibilitc des ressourcesnotanunent en devises pour renfloucr la trcsorcric des cntreprises afin dc reconstitucr lcurs stockset permettrc la reprise des investissements

L'appui au sectcur financier devrait aussi poursuivre I'action de formation initicc dans Iccadre du PDSP en l'intensifiant. Lc problcmc dc la disponibilitc ct do la capacitc d'accds auxressources financicres ct aux devises poUr Ie sectcur pri\d cen gdndral ct pour les activitcs dcproduction dans Ic milicu rural cn particulicr constituic Ic point tboal de la dcfinition du tvpc derclance a adoptcr:

Le mccanismc ai Dettrc Cen oeuvre derailt idieiilC par cifl't d'entraiDeCment ladisponibilisation de revenus susccptiblcs dc finlanlccr la reconstructioni et Ia redynamisation do laproduction et des cchangcs coninicrciaux par Ics privcs ct les mniagcs.

Un financcmcnt dircct dcs bcsoins dc rcconistrulctioni ct dc rcdnarnisation do l'offrcconduirait autrement a dcs bcsomiis Col Icssomnccs diiICIICIICInt acccssiblcs par Ic pays.

3) Assistance technique' auxv vtr curm /chwrA'cks dinitier les aCtiOnN (/c liberalisationde privatisation et cle de;reglementiation vixant Ic domnwine ,n,blic

La rationalisation et la rostructuration do I'cononile ailSi qms ' u io r6ello promotion dusecteur prive passcront n6cossaircment par cos typcs Lio rcilornics. Cellos-ci ncccssitcnt cependantune expertise nationale et 6trangdrc ai mobillsor ct ai encadrer.

Les structures tcllcs quo lo SCE'P . Ic PAS. Ics services do promotion do diff6rentsministeres en charges do l'invcstisscmicnt ont un bcsoin importanit d'appui tcchnique et financierpour conduire ces diff6rentes rdformis.

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4) Internalisation etformation.

La restructuration indispensable de l'cconomic passera par dcs reformes cconomiqucs quipour certaines bousculeront certainos habitudes ,Ics intcrets dc groupes ou des lobbv existants .Undebat et un dialogue constituent des conditions dc r6ussitc de tcllos politiqucs afin de tenir comptedans les decisions et rassurer les uns ct Ics autres de la sauvegardc a tcrme dcs intcrets dc tous lIsacteurs.

Lc projet d'appui au developpement du sectcur privc aura c executc dans un contextccnvironnemental et institutionncl difficile. 11 aura ccpcndant pcrmis d'entamcr des actions d'appuiimportantes pour le secteur privc tant cn maticrc dc financcment dc l'invcstisscmcnt qu'cl maticrcd'amelioration de la legislation et d'encadrement du sectcur des entrcprises.

11 rcste cepcndant utilc d'cngager dans I'avcnir des r6formes cconoiniiqLics vcritablcs: acette condition, les efforts initiecs dans la rcformfc Igalc pourraicirt cnfini condtire i Utine cfficacitcdans la restructuration de l'economic.

Des reussites et des echccs dans I' cxccution du PDSP permettont . au ternic do cc pro'Ictd'avoir une vision plus realiste des mccanismcs qui sur Ic plan pratique . sont a mcmc d'cntrainerun reel ddveloppement du scctcur privc.

A cc titre ct de bon moment vcnu. Ia primautc qui reviendra au sectcur dans la rclancc del'cconomic et do la rcconstruction au Burundi exigera un cadrc coh6rcnt. bicn coordonnc et micuxsuivi par l'Administration pour une promotion rccllcmcnt intcgrativc dc 1'ensciiiblc dcs secteursprioritaircs.

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