The World Bank Niger Building Institutions and Human Capital DPO (P175256) Program Information Document (PID) Appraisal Stage | Date Prepared/Updated: 05-Nov-2021 | Report No: PIDA32490 Page 1 of 7 The World Bank Niger Building Institutions and Human Capital DPO (P175256) BASIC INFORMATION A. Basic Project Data OPS TABLE Country Project ID Project Name Parent Project ID (if any) Niger Building Institutions Niger P175256 and Human Capital DPO (P175256) Region Estimated Board Date Practice Area (Lead) Financing Instrument Macroeconomics, Trade Development Policy AFRICA WEST 15-Dec-2021 and Investment Financing Borrower(s) Implementing Agency Republic of Niger Ministry of Plan Proposed Development Objective(s) The Program Development Objective (PDO) is to (1) Strengthen economic governance ; (2) Develop human capital and reduce gender gaps. Financing (in US$, Millions) FIN_SUMM_PUB_TBL SUMMARY Total Financing 250.00 DETAILS -NewFin3 Total World Bank Group Financing 250.00 World Bank Lending 250.00 Decision The review did authorize the team to appraise and negotiate B. Introduction and Context Country Context 1. Recent GDP growth performance has been relatively robust, but it has not been underpinned by the structural changes/transformation in the economy necessary to achieve sustained income growth and poverty reduction. Real GDP growth averaged 5.2 percent in 2000-19 but per capita GDP only increased from US$121 in 2000 (current prices) stands at only US$565 in 2020, well below its peers. This modest change reflects marginal changes to labor productivity coupled with high population growth (Niger has the highest fertility rate in the world). Despite the steady decrease in the Page 2 of 7 The World Bank Niger Building Institutions and Human Capital DPO (P175256) percentage of the population living in extreme poverty, the number of people living with less than US$1.9 per day has surpassed 10 million. Moreover, stark differences across genders in accessing social and economic rights limit growth potential by about one quarter of GDP (World Bank 2018).1 2. Despite a successful political transition, the new government is still developing a reform program while institutions remain weak and the threats from regional volatility and insecurity have risen. For the first time since its independence, the country completed a constitutional political transition in 2021, with a new President and government formed in April 2021, backed by a strong parliamentary majority. Despite the progress, governance and institutions remain fragile. In 2020, Niger still ranked in the bottom thirty percent on the rule of law and government effectiveness indicators of the World Governance Indicators (WGI). The increasing challenge from a sharp surge in regional and domestic terrorist violence could also threaten hard won political and institutional reforms. The new government is developing its reform agenda and starting to put together a strategic action plan to address some of the key bottlenecks pertaining to fragility, including those tackled by this DPO. Acknowledging the limited capacity and fragile environment, this DPO re-engages with new authorities by supporting measures that address some pressing bottlenecks for inclusive growth; while continuing the dialogue to develop a more comprehensive reform program, particularly in critical infrastructure, public revenue and financial management, and social sectors. 3. The DPO is supporting reforms for a sustained and resilient economic recovery while cementing the gains made in recent years. Achieving sustained economic growth and poverty reduction requires strong institutions and economic governance to invest in the physical and human capital needed to increase productivity and incomes. Raising human capital is also crucial for reinforcing citizenship and the social contract. For example, children living in remote areas need increased access to education and better teachers to gain the skills needed to fully participate in social, political and economic life. Improving the management of essential services like water and sanitation will support economic activity, human capital accumulation, greater integration of marginal groups and basic improvements in living conditions. The operation also aims to cement the gains made in recent years on iwomen’s empowerment and inclusion by supporting reforms tackling early childbearing and its consequences on health. 4. Niger’s macroeconomic policy framework is adequate for the proposed operation. The medium-term outlook appears broadly positive with the economy expected to gradually recover. In 2021 growth is expected to recover to above 5 percent, and gain further traction in 2023 (9.4 percent) when crude oil production comes on stream in the medium term, providing further boost to growth and exports. The authorities are committed to maintaining a prudent macroeconomic and borrowing policy, and to reverting to the 3 percent fiscal deficit of the West African Economic and Monetary Union (WAEMU) convergence criterion by 2024. Public debt is sustainable, and the risk of overall and external debt distress is moderate. After a successful implementation in FY2021 the authorities continue to strengthen debt management and transparency through the proposed Performance and Policy Actions (PPAs) under the Sustainable Development Finance Policy (SDFP). The policies supporting debt sustainability and macroeconomic stability are expected to be anchored in the next Extended Credit Facility (ECF) program under negotiations with the IMF. Monetary and exchange rate policies are anchored in Niger’s membership of the WAEMU. Relationship to CPF 5. The proposed DPO operation is well aligned with the World Bank Group (WBG) identified priorities in Niger. The operation selectively addresses two binding constraints to economic and productivity growth identified in the 2017 Systematic Country Diagnostic, notably inadequate human capital and gender disparities; and poor governance 1 Economic Impacts of Gender Inequality in Niger (World Bank, 2018). Page 3 of 7 The World Bank Niger Building Institutions and Human Capital DPO (P175256) constraining service delivery.2 The operation support two of the three Focus Areas identified the FY18-FY22 Country Partnership Framework:3 (i) improving human capital and social protection; and (ii) better Governance for Jobs, Service Delivery and Growth. It is also aligned with the Prevention and Resilience Action (PRA) Plan’s4 strategic objectives: (i) improving the integration of youth and women into the country’s economic and social dynamics; (ii) scaling -up essential basic services and connectivity in conflict-affected and fragile areas to promote a positive state presence; and (iii) scaling up investments to strengthen natural resources management and slow rapid population growth. C. Proposed Development Objective(s) The Program Development Objective (PDO) is to (1) Strengthen economic governance ; (2) Develop human capital and reduce gender gaps. Key Results 6. By the end of the operation, it is expected that the oversight of SOEs and the efficacity of public investment management will improve, reducing fiscal risks. Access to sanitation infrastructures is expected to expand. Human capital should improve as well through more consistent deployment of primary school teachers, Usage of adolescent contraceptive should increase which will help reduce the fertility rate, the highest in the world, and by doing so support women’s agency and productive capacity. D. Project Description 7. The operation is structured around two pillars as follows: - Pillar 1. Strengthen economic governance through the following measures: (i) improving public investment efficiency and effectiveness through Public Investment Management (PIM); (ii) strengthening the oversight and management of state-owned enterprises (SOEs); and (iii) establishing the regulatory framework to manage the water and sanitation sector. Selection of public investment projects is opaque, despite the large amount of domestic and external resources devoted to infrastructures. SOEs play a central role for the economy and service delivery in Niger but they are inefficient and represent significant fiscal risks. The adoption of a specific regulation of the sanitation sector and the adoption of the rules for the taxation of use of clean water in industrial activities are essential to expand access to water and sanitation, where Niger is lagging compared to its peers in sub-Saharan Africa (SSA), particularly in Niger’s rural areas. - Pillar 2. Develop human capital and reduce gender gaps. The second pillar aims to build human capital by improving the efficiency of the education system and outcomes, and reduce gender gaps by expanding knowledge on sexual and reproductive health for adolescent girls and boys. Building human capital remains the main challenge for a country where the productivity of the next generation will only be 30 percent as productive as they could have been if they had access to full quality education and health (Human Capital Index 2020). E. Implementation Institutional and Implementation Arrangements 2 Report No. 115661-NE 3 Report No. 123736-NE 4 Niger Prevention and Resilience Allocation Analytical and Advisory Support (P175947) Page 4 of 7 The World Bank Niger Building Institutions and Human Capital DPO (P175256) 8. The proposed operation will utilize an institutional framework for the coordination of economic and financial programs established by the Government. This framework includes an inter-ministerial committee in charge of the coordination of external projects and budget supports, chaired by the Minister of Planning, while day-to-day oversight and supervision of implementation of these projects is delegated to a technical committee. The technical committee regroups all entities involved in the implementation of all existing budget support programs, which will improve the coordination of reforms and the flow of information within the Government. Primary technical responsibility for the implementation reforms will rest with line ministries involved, with overall coordination provided by the technical inter- ministerial committee. A Results Matrix included in Annex 1 sets out the two operations of the proposed DPF operation, defines relevant indicators and empirical benchmarks to monitor progress during implementation. It also enables a thorough ex post evaluation following the end of the program in 2021. Niger’s development partners will track progress on the reform agenda through a harmonized review process. F. Poverty and Social Impacts, and Environmental, Forests, and Other Natural Resource Aspects Poverty and Social Impacts 9. Several actions supported by the proposed operation are expected to have significant positive poverty reduction and welfare enhancement impacts. While the COVID-19 response plan is expected to alleviate the immediate burden on targeted population, the DPO measures lay the foundation for more solid progress on poverty reduction. Measures under Pillar 1 and 2 are specifically designed to speed the pace of poverty reduction by broadening economic and social inclusion, offering community-based development opportunities and improving women and girls living conditions and promoting access to educational and sanitation services. Prior action 3 focuses on expanding sanitation coverage and protect water quality, which will have positive impacts on poverty reduction and human capital. Prior actions 4 will enhance the recruitment, the training and the deployment of teachers, increase education supply and reduce regional disparities in access to education. Niger has the second lowest expenditure on education as a percentage of GDP (3.5%), and this negatively impact the ability of the Government to deploy sufficient human resources, physical infrastructures, learning materials, scholarship to provide quality education, and therefore improve children education outcomes. Prior action 5 will strengthen the quality, management and efficiency of the vocational training system by establishing clear financing mechanisms. This measure is also expected to have positive social and poverty reducing impacts. TVET opportunities play a fundamental role in the process of supporting the young labor force to gain market relevant skills. Investment in a high-quality workforce can create a virtuous cycle, where relevant and quality skills enable productivity growth and foreign direct investment, which result in more and better jobs for the current workforce and more public and private investment in the education and training system. Prior action 6 will help accelerate the decline of the fertility rate and reduce early pregnancy by promoting access to reproductive health education and services for adolescents. Environmental, Forests, and Other Natural Resource Aspects 10. Niger has a comprehensive legal and regulatory framework to ensure management of environmental and social risks and negative impacts of any form of investment on land, water, natural resources (including forests, pasturelands, and fisheries) and ecosystem services. The framework sets a clear step-by-step procedure aimed at identifying, for different categories of project, specific mitigating measures. The protection of the environment is a priority expressed in several texts, including the 2010 Constitution which stipulates that "the State ensures the assessment and control of the impacts of any development project and program on the environment". 11. The water sector reforms entail some environmental risks but instruments are in place to mitigate against the Page 5 of 7 The World Bank Niger Building Institutions and Human Capital DPO (P175256) risks. Environmental adverse impacts that could arise from an increased exploitation of water resources might increase risks related to destruction of some protected tree species and Niger River’s riparian countries conflict linked to international water intake and pollution. Screening of subprojects has taken place and will continue to ensure proper identification and mitigation of any adverse impacts. A mandatory Environmental and Social Impact Assessment (ESIA) is conducted. Niger can notify the riparian countries of the Niger River through the Niger River Basin Authority (NBA). The proposed measures for both water and sanitation also seek to better protect water quality which the lack of adequate infrastructure threatens under high demographic pressure and climate change. Niger has institutions dealing with adverse environmental impacts in the water sector. The Ministry of Water also oversees the management of water resources per the recently approved National Project for Integrated Water Management (Projet d'Action National de Gestion Intégrée des Ressources en Eau, PANGIRE) adopted at the end of 2017. This plan defines the appropriate national framework for water resources management which is inspired by the principles of water management internationally recognized, while adapting them to national conditions (art. 31 to 33, Water Code). The key documents have envisioned a reciprocal articulation for Knowledge, Monitoring and Protection of Water Resources. G. Risks and Mitigation 12. Once appropriate mitigation policies are taken into consideration, the overall risk level associated with this operation is “Substantial�. The improvement in growth and the macroeconomic situation over the past years has been achieved through a combination of reform efforts, support from partners and favorable factors including weather conditions. However, there is the risk that the structural fragility in Niger and the COVID-19 crisis lead to a more negative trajectory. Sources of programmatic risk and their respective risk ratings are presented in Table 6. The categories deemed to pose a substantial threat to the proposed operation are the macroeconomic, the technical design of project or programs, the government’s institutional capacity for implementation and sustainability, the fiduciary, the stakeholder risks, the Climate and Security risks. All other risks are deemed moderate. . CONTACT POINT World Bank Paolo Di Lorenzo, Nathalie Picarelli Senior Economist Borrower/Client/Recipient Republic of Niger Implementing Agencies Page 6 of 7 The World Bank Niger Building Institutions and Human Capital DPO (P175256) Ministry of Plan Dogari Bassirou Directeur General dbassirou2002@yahoo.fr FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Task Team Leader(s): Paolo Di Lorenzo, Nathalie Picarelli Approved By APPROVALTBL Country Director: Joelle Beatrice Dehasse 28-Oct-2021 Page 7 of 7