Rapport de fin d'exécution et de résultats - Don de politique de développement pour la reconstruction économique et la croissance

Document of The World Bank Report No: ICR00003393 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H8680 TF-15662) ON A GRANT IN THE AMOUNT OF SDR13.3 MILLION (US$20 MILLION EQUIVALENT) TO THE REPUBLIC OF HAITI FOR AN ECONOMIC RECONSTRUCTION AND GROWTH DEVELOPMENT POLICY GRANT June 04, 2015 Haiti Country Management Unit MFM GP Latin America and Caribbean Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Fiscal Year October 1 to September 30 Currency Equivalents (Exchange Rate as of February 20, 2015) Currency Unit = Haitian Gourde US$1.00 = HT47.6 ABBREVIATIONS AND ACRONYMS BRH Central Bank of the Republic of Haiti ( Banque de la République d’Haïti) CIDA Canadian International Development Agency CNMP National Procurement Commission ( Commission Nationale des Marchés Publics ) CSCCA Court of Accounts ( Cour Supérieur des Comptes et du Contentieux Administratif ) DINEPA National Direction of Potable Water and Sanitation ( Direction Nationale de l’Eau Potable et de l’Assainissement ) DPG Development Policy Grant DPO Development Policy Operation DSNCRP National Strategy for Growth and Poverty Reduction ( Document de Stratégie Nationale Pour la Croissance et la Réduction de la Pauvreté ) EDH ECF National Electricity Company ( Electricité d’Haïti ) Extended Credit Facility EGRO Economic Governance Reform Operation EGTAG Economic Governance Technical Assistance Grant GCAB Joint Budget Support Group ( Groupe Conjoint d’Appui Budgétaire ) HELP Haiti Economic Lift Program HIPC Heavily Indebted Poor Countries HRF Haiti Reconstruction Fund IADB Inter-American Development Bank IDA IHRC International Development Association Interim Haiti Recovery Commission IEZ Integrated Economic Zone IFC International Finance Corporation IMF International Monetary Fund IPP Independent Power Producers ISN Interim Strategy Note MEF Ministry of Economy and Finance MDRI Multilateral Debt Relief Initiative MOU Memorandum of Understanding MARNDR Ministry of Agriculture, Natural Resources and Rural Development ( Ministère de l’Agriculture, des Ressources Naturelles et du Développement Rural) MPCE Ministry of Planning and External Cooperation ( Ministère de la Planification et Coopération Externe ) MTPTEC Ministry of Public Works, Transport, Energy and Communications ( Ministère des Travaux Public, Transport, Energie et de la Communication ) PARDH National Recovery and Development Action Plan for Haiti PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PPA Power Purchase Agreement PPP Public - Private Partnership PREPSEL Electricity Loss Reduction Project PRSP Poverty Reduction Strategy Paper PSIA Poverty and Social Impact Analysis PV Present Value SYSDEP SYSGEP Expenditure Information System ( Système d’Informatisation des Dépenses) Investment Project Management System ( Système de Gestion des Projets) UEP ULCC Programming and Analysis Units ( Unités d’Etudes et de Programmation ) Anti-corruption Unit ( Unité de Lutte contre la Corruption) UN United Nations USAID United States Agency for International Development US$ United States Dollar Vice President: Country Director: Sector Manager: Task Team Leader: ICR Team Leader: Jorge Familiar Mary Barton-Dock Miria Pigato Evans Jadotte Calvin Zebaze Djiofack HAITI Economic Reconstruction and Growth Development Policy Grant CONTENTS Data Sheet A. Basic Information........................................................................................................................ i B. Key Dates .................................................................................................................................... i C. Ratings Summary ........................................................................................................................ i D. Sector and Theme Codes............................................................................................................ ii E. Bank Staff ................................................................................................................................... ii F. Results Framework Analysis ...................................................................................................... ii G. Ratings of Program Performance in ISRs ................................................................................. ix H. Restructuring (if any) ................................................................................................................ ix 1. Program Context, Development Objectives and Design ............................................................ 1 2. Key Factors Affecting Implementation and Outcomes .............................................................. 7 3. Assessment of Outcomes .......................................................................................................... 14 4. Assessment of Risk to Development Outcome ......................................................................... 18 5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) ............................................................................................................................. 19 6. Lessons Learned (both operation-specific and of wide general application) ........................... 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners........................... 23 Annex 1. Bank Lending and Implementation Support/Supervision Processes............................. 24 Annex 2. Beneficiary Survey Results ........................................................................................... 24 Annex 3. Stakeholder Workshop Report and Results................................................................... 32 Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR ..................................... 32 Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders ....................................... 37 Annex 6. List of Supporting Documents ...................................................................................... 37 Annex 7. Map of Haiti .................................................................................................................. 39 Annex 8. Evolution of Reform Policy Supported By Bank (2005-2013) ..................................... 40 Annex 9. Evidence of Progress on the Number of accounts for each line ministry ..................... 41 List of Tables Table 1. Project development objectives ....................................................................................... iii Table 2. Intermediate outcome indicators ..................................................................................... vi Table A2-1. Beneficiaries adhesion to the objectives of the program .......................................... 24 Table A2-2. Beneficiaries perception of the quality of supervision ............................................ 26 Table A2-3. Beneficiaries’ perception of key constraints to achieve program objectives- reporting of the execution of public investments .......................................................................... 27 Table A2-4. Beneficiaries perception of key constraints to achieve program objectives- reporting of procurement plans..................................................................................................................... 29 Table A2-5. World Bank Evaluation by line Ministries ............................................................... 31 Table A4-1. Assessment of the Results of the Reforms to be Implemented for Public Procurement for Budget Support .................................................................................................. 36 DATA SHEET A. Basic Information Country: Haiti Program Name: Economic Reconstruction and Growth Development Policy Credit Program ID: P127208 L/C/TF Number(s): IDA-H8680,TF-15662 ICR Date: 01/20/2015 ICR Type: Core ICR Lending Instrument: DPL Borrower: REPUBLIC OF HAITI Original Total Commitment: USD 20.00M Disbursed Amount: USD 20.40M Revised Amount: USD 20.00M Implementing Agencies: Ministry of Economy and Finance Co-financiers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 03/07/2012 Effectiveness: 08/15/2013 08/29/2013 Appraisal: 05/07/2013 Restructuring(s): Approval: 06/18/2013 Mid - term Review: 01/13/2014 03/14/2014 Closing: 06/30/2014 06/30/2014 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Unsatisfactory Risk to Development Outcome: High Risk Bank Performance: Moderately Unsatisfactory Borrower Performance: Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Unsatisfactory Government: Unsatisfactory Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Unsatisfactory Overall Bank Performance: Moderately Unsatisfactory Overall Borrower Performance: Unsatisfactory i C.3 Quality at Entry and Implementation Performance Indicators Implementation Performance Indicators QAG Assessments (if any) Rating: Potential Problem Program at any time (Yes/No): No Quality at Entry (QEA): 1. None Problem Program at any time (Yes/No): Yes Quality of Supervision (QSA): 2. None DO rating before Closing/Inactive status: Unsatisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Banking 5 Central government administration 56 General public administration sector 11 Transmission and Distribution of Electricity 28 Theme Code (as % of total Bank financing) Administrative and civil service reform 11 Other public sector governance 33 Public expenditure, financial management and procurement 56 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Hasan Tuluy Country Director: Mary Barton-Dock Alexandre Abrantes Practice Manager/Manager: Miria Pigato Auguste Kouame Program Team Leader: Evans Jadotte Elizabeth Ruppert Bulmer ICR Team Leader: Calvin Djiofack Zebaze Calvin Djiofack Zebaze F. Results Framework Analysis Program Development Objectives (from Project Appraisal Document) The Development Policy Grant objective is to support the Government of Haiti’s program of sustainable reconstruction and growth. In particular, the Grant aims at supporting institution building, and the strengthening of economic governance through: (a) improvements to the commercial viability of the electricity sector, (b) improved transparency, accountability and efficiency of public resource use, and (c) continuation of the Government’s economic reform program and the transfer of resources to the Haitian budget in the event of a financing gap. ii Revised Program Development Objectives (if any, as approved by original approving authority) NA (a) PDO Indicator(s) Table 1. Project development objectives Indicator Baseline Value Original Target Values (from approval documents) Actual Value Achieved at Completion or Target Years Indicator 1: No information or publication on public investment using SYSGEP The Directorate of Public Investment publishes quarterly budget execution reports using SYSGEP that provide accurate information about domestically- financed public investment beyond the commitment stage with information covering line ministries and by project The Government of Haiti (GoH) has effectively substituted SYSGEP for SID- Haiti (Système d’Information sur le Développement d’Haïti). The Client argued that SYSGEP was no longer a viable option as it became cumbersome and difficult to obtain information from. However, the move was unilateral and did not receive Bank’ approval. The Bank’s project team assessment is that the new software, SID (Systèeme d’ Information sur le Développement d’Haïti), is an information system only and not a public investment management tool (see ISR). Furthermore, no quarterly publication of domestically-financed budget execution was provided by SID. Conclusion: This objective was not met. Indicator 2 : There are 569 public accounts at the Central Bank and commercial banks (as of May 2012), the majority of which are idle or dormant The number of accounts for each line ministry has been reduced to 3 accounts at the Central Bank: a current account for operations, an investment account, and a revenue account, representing a key step allowing the establishment of the Single Treasury Account (STA) At the closure of the program in June 2014, this objective was not met. Between October 2013 and March 7th, 2014 88 accounts were closed; the outstanding balance of 84 additional accounts was brought down to zero and the proceeds transferred to the corresponding STA at the Central Bank. iii At the closure of the program, t here remained 126 accounts to be closed to reach the objective of 3 accounts per line ministry and other entities. However, the objective was met on September 2014.The Bank team received a copy of the decree of September 2014 from the Prime Minister and the Ministry of Economy and Finance; closing the remaining 126 account and creating accounting units required for the operationalization of the Single Treasury Account (STA). The ICR interviews conducted in January 2015 with the 19 line ministries confirmed the achievement of this objective (see annex 2). Conclusion : The objective was met with 3 months delay. Indicator 3 : The 2009 Procurement Law is not fully effective; the share of contracts using competitive or limited bidding in FY12 was less than one -third Not less than two-thirds of public procurement contracts above the prior-review threshold and signed after March 31, 2013, and outside of periods of Emergency Law, are the result of competitive or limited bidding, using standard bidding documents The CNMP did not collect adequate information to monitor this indicator, largely because of the delay in the approval of the government budget for FY 2014.The ISR report mentioned that the Bank Team has agreed with the MEF that a joint task force be formed including the Treasury, the National Procurement Agency (CNMP), the Supreme Court of Auditors (CSCCA), and the Directorate of Public Investment (DIP-MPCE) to track down and collect the necessary information to come up with a reliable measure of the contracts passed from March 2013 to date. However, the joint force has never been never operational. Conclusion : Objective was not met iv Indicator 4 : No procurement plans were prepared for FY11 or FY12 within the required timeframe All procuring ministries have submitted procurement plans for FY14 to CNMP by October 31, 2013; ministerial procurement units submit quarterly reports to CNMP on all procurement activity in their ministries Only 58 percent of the ministries (11 out of 19) had submitted their procurement plans for FY14 to the National Procurement Agency (CNMP) by October 31. Two additional line ministries submitted their procurement plans with delays ( in November). Moreover, the ICR survey revealed that .4 out of the 6 line ministries that did not submit a plan have no procurement activities Furthermore, only two ministries (Finance and Education) submitted any quarterly plans. Conclusion : Objective was partially met. Indicator 5 : The US$11M allocated to the 5 terminated contracts are not reallocated to other investments The US$11M originally allocated to the 5 terminated contracts was freed up for reallocation to other investments The Department of Legal Affairs of the Ministry of Finance, the MPCE and the Supreme Court of Auditors ( CSCCA) have provided supporting evidence on the legal basis of the termination of these contracts. The US$11M originally allocated to the 5 terminated contracts was freed up and reallocated to other investments by end June 2014. The Bank team is satisfied with the documentation submitted. Conclusion : Objective met Indicator 6: Modern remote meters at IPP entry points are lacking, so that IPPs’ production claims cannot be verified Payment of IPP bills is based on production levels measured by remote meters and verified by EDH At the closure of the program, only 2 (E-Power et Sogener à Varreux T-69) out of the 6 meters for the billing of IPP were functional. This represents 51% of total production of IPP. The other four meters were damaged and sent for repairs abroad. As of April 2015, a World Bank Energy team conducted an on-site assessment of all 3 IPPs. All v (b) Intermediate Outcome Indicator(s) Table 2. Intermediate outcome indicators Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1: No information or publication on public 1. The Ministry of Planning and External Cooperation has Met January 2012 meters were installed and functioning. However, they were still not functioning remotely and no evidence of their use to cross -check bills was provided by EDH. Hence, although substantial progress was made, this objective is still not met 9 months after the closing of the program. Conclusion : Objective not met. Indicator 7: Meters of many large customers indicate zero electricity consumed EDH billing of priority customers is based on meter readings At appraisal, the objective was largely met. EDH conducted inquiries and regularized more than 200 customers’ accounts, resulting in a 9 percent increase in revenues. . Conclusion : Objective met Indicator 8: Central administration arrears to EDH amounted to US$6.9 million in September 2012 No new arrears by the Central Government to EDH for electricity consumption are accumulated The objective was not met at the closure of the program. At the end of June 2014, the total Central Administration arrears to EDH was evaluated at US$5.4M. However, EDH provided evidence to the ICR team that the government debt has been fully paid early January 2015. The Bank is satisfied with the documentation presented. Conclusion : Objective met with 6 month delay. vi investment using SYSGEP established and staffed a Directorate of Public Investment within the said ministry 2. The Programming and Analysis Units (UEPs) in line ministries have been staffed, and a UEP action plan to restructure and strengthen the said UEPs was adopted in January 2013 by the Prime Minister’s Office Met January 2013 Indicator 2 : There are 569 public accounts at the Central Bank and commercial banks (as of May 2012), the majority of which are idle or dormant 3.The Ministry of Economy and Finance has adopted the May 2012 strategy to establish the Single Treasury Account, and closed 301 idle and dormant public accounts at the Central Bank and commercial banks Met September 2012 Indicator 3 : The 2009 Procurement Law is not fully effective; the share of contracts using competitive or limited bidding in FY12 was less than one -third 1 4. Pursuant to the Procurement Law dated June10, 2009, the Government has issued and published on December 21, 2012 through its executive branch, the following two implementing regulations (“ arrêtés d’application ”) covering respectively: (i) the code of ethics for officials involved in procurement activities; and (ii) the standard Met December 2012 1 The share is calculated in terms of the number of contracts passed by ministries excluding those passed under an Emergency Law. vii documents for evaluating bids 2 Indicator 4 : No procurement plans were prepared for FY11 or FY12 within the required timeframe 5. All line ministries have established and staffed ministerial procurement units ( commissions ministérielles de passation des marchés ), and the Commission Nationale des Marchés Publics (CNMP) has provided training to the staffs of such units Met September 2012 Indicator 5 : 6. In order to improve public procurement practices, the Government has, in accordance with the Arrêté dated February 16, 2005, and the Emergency Law dated April 19, 2010, rescinded 5 contracts awarded under the said Emergency Law Met July 2012 2 The Charte d’Ethique Applicable aux Acteurs des Marchés Publics et des Conventions de Concession d’Ouvrage de Service Public and the Documents Standards Relatifs à l’Evaluation des Offres et au Suivi de l’Exécution des Marchés Publics (Documents Normalisés) were adopted in Arrêtés présidentiels dated December 21, 2012. viii Indicator 6: Modern remote meters at IPP entry points are lacking, so that IPPs’ production claims cannot be verified 7. EDH has initiated the use of meter readings from functional remote meters newly installed at IPP entry points to verify IPP production levels and inform billing Met March 2013 Indicator 7: Meters of many large customers indicate zero electricity consumed 8. EDH has performed on-site meter testing and verified meter readings for at least 200 priority customers, re-issued bills, and implemented arrears recovery plans when applicable Met January 2013 Indicator 8: Central administration arrears to EDH amo unted to US$6.9 million in September 2012 9. The Central Government, through the Ministry of Economy and Finance, has settled all its FY12 payment delays to EDH Met November 2012 G. Ratings of Program Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 10/01/2013 Satisfactory Satisfactory 20.40 2 05/31/2014 Unsatisfactory Unsatisfactory 20.40 H. Restructuring (if any) Not Applicable ix Implementation Completion and Results Report for an Economic Reconstruction and Growth Development Policy Grant to the Republic Of Haiti 1. Program Context, Development Objectives and Design 1.1 Context at Appraisal 1. At the time of appraisal, some progress had been made in coping with the devastating earthquake of January 2010, which killed 230,000 and displaced over a million Haitians. The election of Michel Joseph Martelly as President in May 2011 marked the first peaceful handover of power from one democratically elected president to another from a different political party. However, the political climate remains contentious, with strong tensions between the Executive and Parliament, which de facto lapsed on January 12, 2013. While the appointment of a business- friendly prime minister in May 2012 was received positively by the donor community and the private sector, the clear break with some practices of management of public resources that many had hoped for was not obvious.. 2. The security situation remains uncertain, due to growing frustration over the increase in the price of basic foodstuffs, dissatisfaction with the slow pace of reconstruction, and allegations of corruption. Moreover, two severe hurricanes in 2012 (Isaac and Sandy) had further disrupted the economy and Government operations, greatly complicating the Government’s task in managing the reform program while increasing the urgency of Bank support. Thus, the appraisal mission faced a difficult environment. 3. Haiti made some progress in establishing macroeconomic stability. After the devastating earthquake of January 2010 and the subsequent severe recession, the economy recovered by 5.6 percent in FY11. GDP growth fell to 2.9 percent FY12 due to some slowdown in government investment expenditures, and a hurricane and intense drought that impaired agricultural production. Inflation declined to 6.5 percent in FY12 from 10.4 percent in the previous year. The exchange rate, a managed float, remained stable over the two previous years. Despite sharp fluctuations in trade flows, the current account deficit remained relatively stable (4.6 percent of GDP in FY11 and 5.7 percent in FY12), and reserves were equivalent to over 6 months of imports. The fiscal deficit (including grants) was 4.1 percent of GDP in FY11 and 4.8 percent in FY12. Revenues increased through intensified efforts at tax collection (supported by technical assistance from the IMF), while current expenditures has been relatively stable. 4. Shifts in deficits is driven by large external inflows (very large grant inflows after the earthquake, followed by increased inflows from the oil import financing arrangement with Venezuela, referred to as PetroCaribe) that financed some capital expenditures and government social programs. The Government has also been able to access internal financing from the Central Bank and, by issuing T-bills. Haiti’s pre-earthquake debt levels were significant, but a series of debt forgiveness arrangements – the Heavily Indebted Poor Countries (HIPC) relief and Multilateral Debt Relief Initiative (MDRI) – sharply reduced external debt obligations from 29 percent of GDP in FY08 to only 8.9 percent of GDP by FY11. Public debt accumulation then resumed, however, pushing the external debt-to-GDP ratio to 13.3 percent of GDP in FY12, driven 1 by PetroCaribe sources. The IMF has satisfactorily concluded the fifth review of its ECF program in March 2013. 5. The main challenges going forward is how to maximize the aid momentum and prepare for reduced external assistance in the medium term. External financing of 21 percent of GDP in FY11 and 15 percent in FY12 (from both grants and the oil import financing program) has been responsible for the bulk of recent social and economic achievements. In preparing for the likely decline in external assistance, the Government emphasized measures to (i) improve public resource efficiency – including through public financial management, procurement and electricity sector reforms; (ii) target grant funding to infrastructure and human capital investment that supports growth; (iii) foster private sector development through regulatory reform and export promotion in integrated economic zones; and (iv) mobilize additional resources through fiscal reforms and public-private partnerships. 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved): 6. The policy areas covered by this program (including public finance management, electricity sector reforms, and governance) were selected in coordination with other donors, and represent a subset of policies delineated in the joint donor matrix. A joint-mission of donors involved in budget support took place in February 2012 to coordinate the policy actions underpinning the Government’s reform program and budget support operations. This mission followed on a series of joint supervision missions and consultations among the members of the Joint Budget Support Group ( Groupe Conjoint d’Appui Budgétaire , GCAB), including in particular the World Bank, IADB, EU, France, Spain, CIDA, USAID, and in collaboration with the IMF. 7. The operation’s development objective is to support the Government of Haiti’s program of sustainable reconstruction and growth. Towards this end, the Grant supports institution building and the strengthening of economic governance in sectors critical to reconstruction and growth in the short and medium term: (a) improving the commercial viability of the electricity sector; (b) improving transparency, accountability and efficiency of public resource use, leading to increased spending effectiveness across ministries, and (c) supporting the Government’s economic reform program and the Haitian budget through the transfer of resources. 8. The operation is built on nine specific, prior actions designed to strengthen transparency and financial sector management, including : o establishment and staffing by the Ministry of Planning and External Cooperation of a Directorate of Public Investment; o staffing of the Programming and Analysis Units (UEPs) in line ministries, and adoption of a UEP action plan to restructure and strengthen the UEPs; o adoption of a strategy by the Ministry of Economy and Finance to establish the Single Treasury Account, and closure of 301 idle and dormant public accounts at the Central Bank and commercial banks; o issuance and publication of implementing regulations for the 2009 Procurement Law, covering the code of ethics for officials involved in procurement activities and the standard documents for evaluating bids; 2 o establishment and staffing of procurement units in all line ministries, and provision of training by the Commission Nationale des Marchés Publics (CNMP) to the staffs of these units; o rescinding of 5 contracts awarded under the Emergency Law of April 19, 2010; o initiation by EDH of the use of meter readings from functional remote meters newly installed at IPP entry points to verify IPP production levels and inform billing; o initiation by EDH of on-site meter testing and verified meter readings for at least 200 priority customers, reissuance of bills, and implementation of arrears recovery plans, when applicable; and o settling by the Central Government of all FY12 payment delays to EDH. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification: 9. The objectives of the operation were not revised. 1.4 Original Policy Areas Supported by the Program (as approved): The Grant is intended to support key actions to improve economic governance in public financial management, public procurement, and electricity sector performance. Public financial management 10. While Haiti has made progress in budget preparation and transparency, key areas of public financial management remain weak. The operation focuses on two critical items for improved transparency and accountability of public resources management: public expenditure tracking and monitoring, and the establishment of a Single Treasury Account. A system to track effectively where public funds are spent and what outcomes result is necessary to make government functioning more transparent and accountable, which in turn could inform spending priorities and planning for the future. Better expenditure tracking and monitoring is to be facilitated by streamlining the accounts through which public funds are processed into a Single Treasury Account, reducing opportunities for funds to be diverted and enabling more efficient cash management. 11. The system for tracking public expenditures is fragmented and did not provide comprehensive information. It captures only current expenditures and allocations to line ministries for domestically-financed investment at the commitment stage. For capital spending, once funds are transferred by the Ministry of Economy and Finance to the Ministry of Planning and then onward to projects and/or line ministries, the transaction is accounted as budget execution. Thus, there is no proper tracking of the status of expenditure processing or project implementation. 12. The operation supports ongoing measures to improve the integrity of the budget and the credibility of the public expenditure management system. The Ministry of Planning has developed and started rolling out in 2009 an information system (SYSGEP) linking line ministries with the Ministry of Planning, which allows for consolidating data on investment budget execution and monitoring the related physical execution and outcomes. The Directorate of Public Investment, 3 under the Ministry of Planning, is in charge of operationalizing the system, relying on the Programming and Analysis Units ( Unités d’Etudes et de Programmation – UEPs ) in line ministries, which are tasked with entering into the system data on investment at various stages of execution for further centralization and treatment at the level of the Ministry of Planning. By the closing date of the Grant in June 2014, it is expected that the Directorate of Public Investment will have published quarterly budget execution reports using SYSGEP, containing information on public investment financed through the government budget – including the proceeds of PetroCaribe – beyond the commitment stage, with information covering line ministries and by project. 13. In a complementary effort to improve control over public resources, and more broadly to improve the efficiency of their use, the Government also has started implementing the measures needed to establish a Single Treasury Account. The Ministry of Economy and Finance has completed an inventory of public accounts held by line ministries at the Central Bank and commercial banks, identifying a total of 569 accounts. By the closing date of the operation, the number of bank accounts is to be reduced to three per ministry, which would contribute to more transparent and efficient public resource use for reconstruction and other priority spending by avoiding unnecessary borrowing costs and enhancing the Treasury’s control over public resources. Procurement 14. The operation supports the establishment of a credible institutional framework for procurement and upgrading of procurement management capacity . The progress achieved in procurement before 2010 has stalled after the earthquake. In order to accelerate reconstruction activities in the immediate aftermath of the earthquake, the Government adopted an Emergency Law that included specific dispositions allowing for limited competitive bidding for public contracts. While the Government swiftly restored the procurement regulatory body, the CNMP, policy reform implementation had been slow. As of early December 2011, 14 of the 17 implementing decrees have been adopted, but only four have been published, which delayed the effectiveness of the Procurement Law. In addition, effective procurement and transparency is dependent on line ministries submitting annual procurement plans to the CNMP, but procurement units in most ministries are barely functional, and there is no code of ethics guiding officials involved in procurement activities (as is the norm in other countries). 15. A specific issue of concern is the new Emergency Law enacted after Hurricane Sandy in October 2012, which provides for the issuance of a large number of contracts using non- competitive procurement procedures. The goal is to redress as quickly as possible the severe damage caused by the storm, which according to Government sources amounts to an estimated US$120 million. 16. By the closing date of this Grant, it is expected that two-thirds of public procurement contracts above the prior-review threshold signed after March 31, 2013, and outside of periods of Emergency Law, will be the result of competitive or limited bidding, using standard bidding documents . This would represent a significant improvement compared to the baseline indicator of less than one-third. Continuing technical assistance to the CNMP and the ministerial procurement units is to be provided to strengthen the application and culture of good 4 procurement practices. The continuing TA are expected to contribute to address some of the capacity issues highlighted in this ICR. The Bank is providing technical assistance through the Infrastructure and Institutions Emergency Recovery Project (US$65 million approved after the earthquake focused on restoring key economic and financial functions) and recent Additional Financing (of US$35 million approved on September 2012) to enhance CNMP’s capacity. In mid- 2012, the program support the CNMP to organize a series of training workshops so that agents working in existing procurement units and relevant officials could effectively use the various documents underpinning the new legal framework. The Technical assistance under the Infrastructure and Institutions Emergency Recovery Project has also supported the development of the CNMP website, and will help develop an information system to enhance record keeping and reporting of procurement practices. All procuring ministries are expected to submit their FY14 procurement plans to CNMP before October 31, 2013, as required by the Law. Furthermore, ministerial procurement units are to submit quarterly reports to CNMP on all procurement activity in their ministries in conformity with the Law, including activity undertaken under the Emergency Law. This data can then be cross-referenced with public investment execution information being tracked by the UEPs. Electricity Sector 17. Finally, the operation supports electricity sector reforms to improve governance and enhance EDH’s financial performance . Due to a poor management system, the performance of the national, vertically integrated electricity utility Electricité d’Haïti (EDH) has deteriorated over time. EDH has been characterized by weak customer services and lack of infrastructure maintenance, which has affected its revenue performance as well as the quality of electricity service and supply, including frequent service interruptions and large voltage fluctuations. The sector’s institutional framework is obsolete, sector policies are out of date, planning and monitoring of sector activities is inadequate, and vested interests have impeded reform efforts, in particular by creating bottlenecks for installing meters at IPPs. The compound effect of the earthquake on power generation, transmission, and distribution further aggravated EDH’s weak performance. In 2011, bill collection rates were as low as 65 percent, while EDH’s losses stood at 65 percent of the electricity generated (of which commercial losses represented nearly 40 percent). Only one-fourth of Haiti’s population has access to electricity, and in rural areas, access is around 5 percent. 18. EDH’s weak grid infrastructure, poor commercial performance, and inadequate controls over sub-contracted electricity generation by independent power producers (IPPs) have led to a financial drain on Government resources. Due to its inability to meet electricity demand and in an attempt to expand electricity availability, EDH has subcontracted part of the production of electricity to IPPs. 3 Unable to cover its operating expenses, including fuel costs and power purchases, in part because of low bill collection rates, EDH has relied on fiscal transfers from the Treasury averaging US$200 million annually in recent years (equivalent to 10 percent of the national budget and 1-2 percent of GDP). 4 IPPs are expected to continue to play a major role in power generation in Haiti. In particular, as the Government plans to expand electricity coverage 3 IPPs provided 60 percent of total electricity generation in 2011. 4 Electricity transfers are unbounded due to their dependence on international oil prices, electricity supply, unsanctioned theft and bill non-payment, inter alia. 5 to support development of industry, trade and tourism zones, the demand for reliable electricity is likely to increase. 19. Past governance reforms to preserve the integrity of public resource management in the electricity sector have produced modest results. The control system to check the accuracy of IPPs’ bills is weak, both at the level of EDH and the Government. Ill-equipped, EDH can not systematically check the power and energy produced by IPPs, and there is no adequate institutional set-up at the level of MEF and MTPTEC. The Government has made progress through transferring accountability and responsibility for IPPs to the state power company, initiating a dialogue on the level of state support needed and the modalities of their transfer to EDH (an essential component of budget planning for all parties), and the publication of a monitoring table including key data, despite some irregularity and interruptions. 5 Nevertheless, the risk of overpaying IPPs remains high, given that EDH cannot accurately measure the amount of power and energy delivered by IPPs. The Government also has initiated a range of corrective measures to address challenges related to sector performance, institutional capacity and financial viability, with Bank support under the Electricity Loss Reduction Project. 20. Nevertheless, these measures have not generated marked improvements in electricity service delivery or EDH’s financial performance. With respect to the management of IPP bills, the capacity for EDH to ensure billing accuracy is inadequate, and the incentives for EDH to ensure billing accuracy and operational efficiency are weak, because EDH ultimately relies on the sovereign guarantee in the power purchase agreements (PPAs) and passes on all costs to the central government rather than directly compensating IPPs. IPP invoices submitted to EDH can not be verified. Improving the management of public transfers and the accountability system in the sector requires a gradual transfer of payment responsibility away from the Ministry of Finance directly to EDH through a well-defined financial framework, accompanied by investment in equipment for EDH to enhance control over power and energy distributed by IPPs; this is being supported through the purchase and installation of remote meters, an action financed by the Bank’s Electricity Loss Reduction Project. By the closing date of this Grant, it is expected that the payment of IPPs’ bills would be based on production levels measured by remote meters and verified by EDH, which should eliminate any unexplained discrepancies between IPP claims of energy generation and IPP payments. It is also expected that billing of priority customers would be based on meter readings, and that no new arrears by the Central Government to EDH for electricity consumption will emerge. 1.5 Revised Policy Areas (if applicable): The policy areas were not revised. 1.6 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations): Not applicable 5 The table, published on the MEF website, includes portions of updated data on: (i) payments by the State to each IPP, as well as transfers to cover EDH fuel costs, (ii) payments by EDH to each IPP, (iii) energy produced by each IPP, and (iv) amounts billed by each IPP during the period. 6 2. Key Factors Affecting Implementation and Outcomes 2.1 Program Performance 21. The Economic Reconstruction and Growth Development Policy Grant was a stand- alone operation. It was approved on June 18, 2013, became effective on August 29, 2013, and was closed on June 30, 2014. All 9 prior actions, listed above, were met by the time of Board approval. 22. With regard to the Policy Grant indicators’ targets: a total of eight expected outcomes in the areas of public financial management, procurement, and the electricity sector (see (a) on PDO Indicators), were to be achieved by closure of the operation in June 2014. However only two were met, two more were completed with some delay, and 5 were not met at the time of the ICR mission (Table 1) in January 2015. Two key issues impeded achievement of several targets. The first was the extremely difficult political and economic environment. Tensions between the government and the legislative branch resulted in extended delays in approving a budget, which greatly complicated efforts to strengthen administration. Moreover, the continued impact of the 2010 earthquake and Hurricane Sandy in 2012 on the functioning of government compounded longstanding weaknesses in public sector administration, including difficulties in retaining technical staff. The second, however, was the clear resistance to reform objectives by some responsible authorities, including a lack of commitment to the agreed investment programming system and the likely obstruction of efforts to improve monitoring of electricity bills. Public Financial Management Indicator 1: The Directorate of Public Investment is to publish quarterly budgetary execution reports using SYSGEP. These reports are to provide accurate information on domestically- financed investment beyond the commitment state, broken down by line ministries and by project. 23. This objective was not achieved. The Government abandoned SYSGEP as a means of tracking investment projects, and substituted a different system (SID-Haiti). The Government apparently preferred this system because the SYSGEP system was cumbersome to use, and SID-Haiti can be accessed through the Internet, while SYSGEP can only be accessed through the Government’s systems. The last supervision mission for the operation (in May 2014) concluded that SID-Haiti was not an optimal system for investment programming. Nevertheless, the system could be used for this purpose, and the major constraint on investment programming was seen as the failure to adequately staff the units responsible for investment in the line ministries. 24. Formally speaking, it might have been preferable to modify the target, in light of the Government’s decision to proceed with a different system than originally envisioned. However, the goal of providing a regular report on domestically-financed investment as a tool to improve management of the public investment program would not have been met in any event. 25. The failure to meet the program goal of improving the transparency of public investment goes beyond the adoption of another software program. The reporting system was to rely on the establishment of Unités d’Etudes et de Programmation (UEPs ) in each line ministry . However, many of these units were not functioning or were not adequately staffed and 7 equipped (see Table A2-3 and A2-4). The ICR interviews of the 19 line ministries revealed that only 5 have a level of satisfaction of more than 3 (5 is the highest score and 1 the lowest) regarding the number of staff they need to achieve their objective. Only 4 out of 19 line ministries have a satisfaction rating of more than 3 regarding the quality of their equipment (computer, offices, and appropriate software). The case of the Ministry of Public Works, a key ministry for public procurement, illustrates the problems involved: the UEP was still not effectively functioning at the time of the ICR mission in January 2015. The counterpart in the Ministry indicated to the ICR team that the budget request to fund the UEP was not fully funded. the previous year. 26. Moreover, improving investment planning was complicated by the failure to approve the Government’s budget during the past two years, and the apparent failure of the DIP to mobilize line ministries to cooperate. The Directorate for Investment Planning is in the Ministry of Planning, which reported to the Prime Minister during the execution of the program. it is possible that the lack of their own Minister made it more difficult for the DIP to mobilize other ministries to cooperate in the reform. One indication of the problems involved was that the UEP in the Ministry of Planning, the Ministry responsible for carrying out this reform, cannot obtain adequate information on investments in that Ministry. Indicator 2: Each line ministry is to hold only three bank accounts (a current account for operations, an investment account, and a revenue account), and these are to be at the Central Bank, not at commercial banks. 27. This outcome was not fully achieved by June 2014 (when few ministries were in compliance), but was completed by September 2014. There appears to have been considerable initial resistance to this reform at the highest level of government and in some line ministries. An accompanying requirement was that a public accountant from the Treasury would have to sign off on each expenditure out of these accounts by each Ministry, and this may have been viewed as interference in the responsibilities of the line ministries. Because of the resistance from line ministries, the Prime Minister had to suspend the implementation of this measure, and requested a reevaluation of its relevance. After the reevaluation, his strong support of the measure facilitated the cooperation of line ministries. Both of these measures had to be met for approval of Haiti’s IMF program. Procurement Indicator 3: Not less than two-thirds of the public procurement contracts above the prior-review threshold and signed after March 31, 2013, and outside of periods of Emergency Law, are to be the result of competitive or limited bidding, using standard bidding documents. 28. This objective was not achieved . The bidding process was to be monitored by a national procurement committee, but it does not appear that this committee pursued this responsibility very aggressively, due to lacking capacity, political will, and the power to enforce the Procurement Law. 8 Indicator 4: All procuring ministries are to submit procurement plans for FY14 to CNMP by October 31, 2013, and ministerial procurement units are to submit quarterly reports to CNMP on all procurement activity in their ministries. 29. This objective was not achieved. Only 11 of the 19 Ministries presented their procurement plans to CNMP by end-October 2013 and only two ministries (Finance and Education) submitted any quarterly plans. Although, no all line ministries submitted procurement plans by End-October, 2013 there have been substantial progress on this measure, as two additional line ministries submitted their procurement plans with delays. Moreover, the ICR survey revealed that .4 out of the 6 line ministries that did not submit a plan have no procurement