Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00006427 IMPLEMENTATION COMPLETION AND RESULTS REPORT LOAN NUMBER 8871-CG ON A LOAN IN THE AMOUNT OF EUR 20.3 MILLION (US$25 MILLION EQUIVALENT) TO THE REPUBLIC OF CONGO FOR THE SUPPORT TO ENTERPRISE DEVELOPMENT AND COMPETITIVENESS PROJECT December 21, 2023 Finance, Competitiveness and Innovation Global Practice Western and Central Africa Region CURRENCY EQUIVALENTS (Exchange Rate Effective at project closure on May 30, 2023) Currency Unit = XAF (CFAF) 611 CFAF = US$1 US$ = SDR 1 FISCAL YEAR July 1 - June 30 Regional Vice President: Ousmane Diagana Country Director: Cheick Fantamady Kante Regional Director: Abebe Adugna Dadi Practice Manager: Mehnaz S. Safavian Task Team Leader(s): Benjamin Herzberg ICR Main Contributor: Karim Ouled Belayachi ABBREVIATIONS AND ACRONYMS ACPCE Agence Congolaise pour la creation des entreprises ADPME Agence pour le Développement des Petites et Moyennes Entreprises (Small and Medium Enterprises Development Agency) API Agence pour la Promotion des Investissements (Investment Promotion Agency) APPD-ZES Agence de Planification, de Promotion et Développement des Zones Economiques Spéciales (Agency for Planning, Promotion and Development of Special Economic Zones ) BPC Business Plan Competition CCEC Caisse Congolaise de Crédit et d'Épargne (Congolese Savings and Credit Fund) CPF Country Partnership Framework CNC Comité National de Consultation (National Consultative Committee) ERR Economic Rate of Return ESMF Environmental and Social Management Framework CPIA Country Policy and Institutional Assessment FADPME Fonds d’Appui au Développement des Petites et Moyennes Entreprises FCV Fragility, Conflict, and Violence FIGA Fonds d’Impulsion de Garantie et d'Accompagnement FM Financial Management GA Grant Administration GDP Gross Domestic Product GUOT Guichet Unique des Opérations Transfrontalières (One-Stop Shop for Cross-Border Trade) HCDPP Haut Conseil du Dialogue Public Privé (High Council for Public Private Dialogue) ICR Implementation Completion and Results Report IPF Investment Project Financing M&E Monitoring and Evaluation MSMEs Micro, Small, and Medium Enterprises MZESDE Ministry of Special Economic Zones and Economic Diversification NDP National Development Plan OHADA Organisation pour l’Harmonisation en Afrique du Droit des Affaires (Organization for the Harmonization of Corporate Law in Africa) PAD Project Appraisal Document PADE Projet d’Appui à la Diversification de l’Economie (Support to the Economic Diversification Project) PADEC Projet d’Appui au Développement des Entreprises et à la Compétitivité (Support to Enterprise Development and Competitiveness Project) PDO Project Development Objective PIU Project Implementation Unit PPD Public-Private Dialogue RPF Resettlement Policy Framework SCD Systematic Country Diagnostic SEZ Special Economic Zone SMEs Small and Medium Enterprises STEP Systematic Tracking of Exchanges in Procurement TA Technical Assistance TAA Technical Assistance Administration TABLE OF CONTENTS DATA SHEET .......................................................................................................................... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 5 A. CONTEXT AT APPRAISAL .........................................................................................................5 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) ..................................... 12 II. OUTCOME .................................................................................................................... 13 A. RELEVANCE OF PDOs ............................................................................................................ 13 B. ACHIEVEMENT OF PDOs (EFFICACY) ...................................................................................... 14 C. EFFICIENCY ........................................................................................................................... 24 D. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 27 E. OTHER OUTCOMES AND IMPACTS (IF ANY) ............................................................................ 28 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 30 A. KEY FACTORS DURING PREPARATION ................................................................................... 30 B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 30 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 31 A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................ 31 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 33 C. BANK PERFORMANCE ........................................................................................................... 36 D. RISK TO DEVELOPMENT OUTCOME ....................................................................................... 37 V. LESSONS AND RECOMMENDATIONS ............................................................................. 38 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 41 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 49 ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 52 ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 53 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 56 ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name Support to Enterprise Development and Competitiveness P161590 Project Country Financing Instrument Congo, Republic of Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency Republic of Congo Ministry of Plan, Statistics and Regional Integration Project Development Objective (PDO) Original PDO The objective of the Project is to foster MSME competitiveness in the targeted sectors and targeted geographic areas of the Republic of Congo's territory. Page 1 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 25,000,000 25,000,000 21,351,251 IBRD-88710 Total 25,000,000 25,000,000 21,351,251 Non-World Bank Financing 0 0 0 Total 0 0 0 Total Project Cost 25,000,000 25,000,000 21,351,251 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 30-May-2018 20-May-2019 10-Nov-2021 30-May-2023 30-May-2023 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Moderately Satisfactory Substantial RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 12-Sep-2018 Satisfactory Satisfactory .92 02 19-Mar-2019 Satisfactory Satisfactory 2.23 03 29-Jul-2019 Satisfactory Satisfactory 2.69 04 27-Jan-2020 Satisfactory Satisfactory 4.41 Page 2 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) 05 14-Jul-2020 Satisfactory Satisfactory 5.60 06 22-Dec-2020 Moderately Satisfactory Moderately Satisfactory 7.33 07 29-Jun-2021 Moderately Satisfactory Moderately Satisfactory 9.15 08 23-Dec-2021 Moderately Satisfactory Moderately Satisfactory 12.33 09 14-Jun-2022 Moderately Satisfactory Moderately Satisfactory 15.07 10 21-Dec-2022 Satisfactory Moderately Satisfactory 18.27 SECTORS AND THEMES Sectors Major Sector/Sector (%) Transportation 15 Other Transportation 15 Industry, Trade and Services 85 Agricultural markets, commercialization and agri- 5 business Public Administration - Industry, Trade and Services 12 Tourism 5 Other Industry, Trade and Services 63 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Economic Policy 32 Trade 32 Trade Logistics 32 Page 3 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Private Sector Development 72 Business Enabling Environment 26 Investment and Business Climate 26 Enterprise Development 72 Entrepreneurship 28 MSME Development 56 Finance 44 Financial Infrastructure and Access 44 MSME Finance 44 Human Development and Gender 60 Gender 60 ADM STAFF Role At Approval At ICR Regional Vice President: Makhtar Diop Ousmane Diagana Country Director: Jean-Christophe Carret Cheick Fantamady Kante Director: Ceyla Pazarbasioglu-Dutz Abebe Adugna Dadi Practice Manager: Rashmi Shankar Mehnaz S. Safavian Task Team Leader(s): Lorenzo Bertolini Benjamin Herzberg ICR Contributing Author: Karim Ouled Belayachi Page 4 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. Country context. At the outset of the project, the Republic of Congo was a fragility, conflict, and violence (FCV) country. Its economy was highly concentrated in extractive industries, with oil accounting for about one- third of the country’s gross domestic product (GDP), two-thirds of its fiscal revenues, and over 80 percent of exports. The domestic economy was highly vulnerable to shocks, reflecting oil prices volatility and unsteady oil production. At the project appraisal in 2018, the country was experiencing a prolonged economic contraction, following the persistent oil prices collapse since 2014, which resulted in a severe terms-of-trade loss, in turn affecting both the oil and non-oil sectors. For the first time in many decades, GDP growth remained negative for seven years consecutively, averaging 5.88 percent between 2015 and 2018. This led to a sharp decrease in economic activity, characterized by low public revenues, high expenditures, and debt external and internal imbalances. Economic recovery only started in 2021, with an average GDP growth of 1.5 percent. 2. Until 2014, the growth of oil activities boosted public revenues and household incomes within the sector, but the non-inclusive1 approach hindered the development of the non-oil sector, contributing to ongoing poverty and inequalities. Congo’s non-oil tradable goods sectors remained underperforming. Contribution of agriculture, services, and manufacturing to value added did not significantly progress. Poverty declined between 2001 and 2014, but incidence remains high with 50.7 percent of the population living below the poverty line in 2005, and 46.6 percent in 2022. Inequalities persisted at a substantial level, as indicated by a Gini index of 48.9 in 2011. Unemployment remained high as well, averaging 20.15 percent between 2000 and 2018 and estimated at 21.8 percent in 2022. Considering the growing number of graduates entering the workforce, youth unemployment had risen over the years from 39.4 percent in 2018 to 42.8 percent in 2021 and falling to 40.7 percent in 2022, according to the World Bank’s World Development Indicators. As of the project’s closure in 2023, the Republic of Congo remained on the World Bank’s list of nations characterized by institutional and social fragility. 3. Private sector context. The historical emphasis on the oil sector, coupled with a highly centralized state— largely shaped by the nation’s communist history from 1969 to 1992—hampered the growth of the non-oil private sector. The private sector remained underdeveloped, primarily comprising small and informal businesses operating in the services sector, geographically concentrated in Brazzaville and Pointe-Noire. Non-oil private investments represented 19.4 percent of total investments for 2011–2016. The private sector in Congo was characterized by a challenging environment, which impeded competitiveness and limited firms’ expansion at the extensive and intensive margins. The 2018 World Bank’s Systematic Country Diagnostic (SCD) identified the following among the major constraints to expansion and productivity of firms: (a) adverse business environment and weak micro, small, and medium enterprise (MSME) ecosystem; (b) lack of public-private consultation mechanism; (c) underdeveloped financial system and limited access to finance; (d) low skills and poor quality of education; and (e) insufficient public infrastructure. All these factors resulted in low firm productivity and the 1 The non-inclusive growth here refers to a model where economic growth is driven by one sector and more importantly, where the growth-driving sector disproportionately benefits certain segments of the population while leaving others excluded, leading to disparities in income, access to opportunities, and overall well-being. In the context of the Republic of Congo, the economic growth driven by the extractive sector did not benefit non-extractive sectors. Page 5 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) need for firms’ management to maximize assets and increase efficiency. As of 2023, at project closing, many of these issues remain, although the project helped increase the quality of the business environment, reinforced the MSME support ecosystem, and improved public-private dialogue (PPD). These improvements could be reflected in the next SCD. 4. Government strategy. With the fluctuating oil prices exposing macroeconomic vulnerability, the ongoing risk of depleting oil reserves by 2035, and increasing social demands alongside the persistent challenge of poverty, the Congolese development model started to be considered unsustainable around 1990. At that time, the Government started committing to a shift toward economic diversification and transformation, progressively designating the private sector as the driving force and leveraging sectors with an identified comparative advantage such as agriculture and agribusiness, forestry, transport, tourism, logistics, and information and communication technology sectors. By 2012, goals included promoting high value-added agricultural processing and export industry and increasing local content. Moreover, the Government emphasized strengthening governance, which, together with a stronger private sector, were highlighted as two of the strategic development axes in the country’s 2012–2016 National Development Plan (NDP). 5. Rationale for World Bank involvement. At the time of appraisal in 2018, there was a strong rationale for World Bank support, especially following the implementation of the World Bank’s Support to the Economic Diversification Project (Projet d’Appui à la Diversification de l’Economie, PADE) which closed in 2017. The PADE had enabled some small and medium enterprises (SMEs) to emerge in the country, but private firms, especially small and medium ones, still faced difficulties in accessing services and finance. Therefore, the Government of the Republic of Congo, led by the Ministry of Planning, requested renewed assistance from the World Bank to provide the technical expertise and resources essential for advancing the private sector as outlined in the NDP. Leveraging its experience and global knowledge, the World Bank responded to the Government by proposing a set of interventions to bolster private sector development, drawing on best practices in MSME development and collaborating with various development partners. Theory of Change (Results Chain) 6. The project’s Theory of Change was rooted in the idea of fostering private sector development through better business environment and enhanced MSME services and entrepreneurship promotion. The project was designed around two main clusters of activities: (a) policy, regulatory, and institutional support to strengthen the business environment for private sector development through reforms and strengthened PPD mechanism and (b) direct financial and non-financial (that is, coaching, trainings, and business development services) support to MSMEs for fostering entrepreneurship and enhancing the competitiveness of formal firms, through setting up business plan competitions (BPCs) for new micro and small enterprises and matching grant schemes for existing MSMEs. Throughout this document, competitiveness refers to the capacity of businesses to consistently achieve success in a particular market or economic setting. It determines the ability to enter new markets, outperform competitors, attract investments, and foster growth. This concept involves key factors such as efficiency, innovation, productivity, and the ability to adapt to dynamic circumstances.2 7. It was assumed that these two clusters of activities would be effective to address identified constraints to MSME growth. First, well-functioning institutions and an enabling business environment were essential to 2Falciola, J., M. Jansen, and V. Rollo. 2020. “Defining Firm Competitiveness: A Multidimensional Framework.” World Development 129: 104857. Page 6 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) tackle market failures, provide public goods, and diminish coordination costs within targeted value chains (agriculture and agribusiness, forestry, transport, tourism, logistics, information, and communications technology sectors). Supporting key regulatory reforms and enhancing the capacity of relevant business environment institutions would help attract investments, reduce the cost of doing business, and facilitate increased employment opportunities. This also included the support to institutions in charge of the development and management of transport and industrial infrastructure, as access to infrastructure is an important determinant of growth. Second, BPCs were envisioned as tools to promote entrepreneurship, providing platforms for existing and aspiring business owners to showcase innovative ideas, refine business models, enhance entrepreneurial skills, and expand investment capabilities. By providing the financial assistance where beneficiary MSMEs receive a grant from the project and the grant amount is matched by the MSME itself, matching grants would alleviate challenges related to poor access to finance. In addition, complementary business development services, customized coaching, and training would help improve productivity. In turn, these combined activities would strengthen the MSME environment in the Republic of Congo, consolidate and create jobs in targeted sectors, reduce poverty, and foster inclusive growth. The causal chain is illustrated in figure 1, and further details of the project components and activities are presented in subsection A.5. 8. The project was a launchpad to support non-oil private sector development in a country with a very embryonic and informal private sector. The project aimed to create a demonstration effect in two regions, Brazzaville and Pointe-Noire, where most economic activity is concentrated. This strategic focus aimed to lay the groundwork for potential future engagements within these and other regions. In parallel, the Support to Enterprise Development and Competitiveness Project (Projet d’Appui au Développement des Entreprises et à la Compétitivité, PADEC) served as a means to boost the entrepreneurship and MSME ecosystem, reinforcing national institutions such as the national public-private dialogue council and the national MSME development agencies, thus ensuring sustainability of the project’s activities through a more systematic approach to achieving long-term objectives in MSME development. 9. Drawing insights from analogous initiatives worldwide, studies reveal that while empirical evidence on their transformative impact is modest, contemporary programs integrating targeting mechanisms yield greater success. MSMEs in low- and middle-income nations exhibit high marginal returns to investment yet face constraints in achieving substantial growth and generating significant profits or employment. Barriers include the need for advanced technologies, organizational structures, entrepreneurial skills, risk-taking behavior, and determination. Direct support programs, employing training, microcredit, cash grants, or business development services, are often used to address these constraints. While empirical evidence on their transformative impact is modest, contemporary programs integrating targeting mechanisms yield greater success. Better targeting, flexibility, and sufficient support scale are identified as critical elements.3 10. A recent study evaluating support to firms’ interventions in Burkina Faso provides valuable insights. Rigorous targeting through a BPC, coupled with substantial grants and complementary training, aimed to enhance private sector development and job creation in a resource-poor, rural setting. Short-term impacts revealed positive effects on investment for cash grant beneficiaries, with no discernible impacts on profits and job creation. However, robust improvements in innovation were identified for firms receiving either cash or matching grants. Cash grant beneficiaries also demonstrated increased likelihoods of owning a bank account and engaging in better business practices, such as formalization and bookkeeping. Assessing resilience during the COVID-19 pandemic 3 References to related literature are listed in annex 6. Page 7 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) indicated that cash grant beneficiaries were less likely to report declines in production, investment, and overall performance compared to counterparts in the control group. Figure 1. Project’s Theory of Change Note: This Theory of Change (TOC) relies on several critical assumptions on various dimensions: the stability of oil prices and recovery in the oil sector, sustained economic growth to facilitate reforms, government ownership and capacity for reform implementation, and the continued focus on developing the private sector in the overall economic context. In addition, it assumes the existence of qualified firms for BPCs and matching grants and the availability of skilled providers for Business Development Services and support services. Page 8 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Project Development Objectives (PDOs) 11. The PDO was to “foster MSME competitiveness in the targeted sectors and targeted geographic areas of the Republic of Congo’s territory.” Specifically, the project aimed to (a) enhance the business environment for attracting investments in non-oil sectors and (b) direct support (financial and non-financial) to MSMEs for improving their competitiveness. Recognizing their potential for growth within the context of the Republic of Congo and aligning with priorities outlined in the NDP, the project targeted the following sectors: agriculture and agribusiness, transport, logistics, information and communication technologies, and tourism. While efforts to enhance the business environment would yield nationwide benefits, direct support to firms was concentrated in Brazzaville, Pointe-Noire, and along the Pointe-Noire-Brazzaville-Ouesso growth corridor. The PDO statement in both the Project Appraisal Document (PAD) and the Legal Agreement were the same. 12. The project’s beneficiaries included MSMEs targeted by the interventions as well as government entities and institutions responsible for public policies related to private sector development. The direct recipients of technical and financial grants, as well as the reforms aimed at improving the investment climate, were the MSMEs in the urban and peri-urban centers of Pointe-Noire and Brazzaville and along the Pointe-Noire- Brazzaville-Ouesso growth corridor. The beneficiary institutions included the Ministry of Planning, Ministry of SMEs, Ministry of Economy and Industry, along with public agencies such as the Small and Medium Enterprises Development Agency (Agence pour le Développement des Petites et Moyennes Entreprises, ADPME), Agency for Planning, Promotion and Development of Special Economic Zones (APPD-ZES), and Investment Promotion Agency (Agence pour la Promotion des Investissements, API). The PAD did not provide a quantitative target of the beneficiaries under each category. Key Expected Outcomes and Outcome Indicators 13. The key PDO outcome indicators that were designed in the PAD to measure the achievement of the PDO were the following: (a) Number of investment climate reforms approved and implemented (Component 1) (b) Share of beneficiary firms under the support to enterprise development grants demonstrating a sustained increase in annual turnover (Subcomponent 2.1) (c) Share of new firms supported under the Business Plan Competition (BPC) that are still operating 24 months after receiving assistance (financial and non-financial) (Subcomponent 2.2). 14. Considering the evaluation time frame, the Implementation Completion and Results Report (ICR) will employ a proxy measure to assess the achievement of one of the PDO outcome indicators. Specifically, the outcome indicator “share of new firms supported under the BPC that are still operating 24 months after receiving assistance” will be proxied by “share of new firms supported under the BPC that are still operating at the Project closing.” Although the firms were selected in two batches across two different time periods, project assistance was delivered throughout the project duration until its closure at the end of May 2023. Consequently, observing the beneficiaries 24 months after receiving assistance is not feasible. The ICR was written six to seven months after project closure. 15. Intermediate results indicators for each project component were designed to track outputs across all dimensions of the project. These indicators included tracking progress in strengthening the enabling conditions Page 9 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) for private sector entry (such as the number of recommendations proposed by the PPD process or the number of procedures voted for business environment), promoting entrepreneurship (such as the number of business plans successfully launched), and providing financial and non-financial support to firms (such as the number of firms receiving technical support.). The full list of these indicators is provided in annex 1. Components 16. The project was structured around three components. The first component focused on regulatory and institutional support to strengthen the enabling environment for private sector development. The second component consisted of direct support to MSMEs to enhance the competitiveness of selected value chains. The third component encompassed all activities related to project coordination and implementation. Component 1: Strengthening the Business Environment (US$10 million) 17. The objective of this component was to enhance the business environment for promoting investments particularly in the priority sectors targeted by the project. Its focus was to support the regulatory and institutional framework for attracting investments, with particular emphasis on priority sectors (agriculture, agribusiness, tourism, transport, and information and communication technology). This component included three subcomponents. 18. Subcomponent 1.1: Investment Climate Reform and Public-Private Dialogue (US$3 million). This subcomponent aimed to formulate and implement incentive-based regulatory framework in priority sectors and to support the improvement of PPD. Specific activities for this subcomponent included the following: • Identifying critical policy, institutional, and other constraints to inform a reform action plan • Identifying and implementing simplified procedures • Supporting Government institutions working on doing business reforms • Operationalizing the Organization for the Harmonization of Corporate Law in Africa (Organisation pour l’Harmonisation en Afrique du Droit des Affaires, OHADA) legal framework • Implementing 12 reform measures across 6 dimensions of the business regulatory environment: (a) business creation, (b) construction permits, (c) access to electricity, (d) transfer of property ownership, (e) paying taxes, and (f) cross-border trade • Supporting the improvement of the PPD by providing technical assistance (TA) on the restructuring of the High Council for Public Private Dialogue (Haut Conseil du Dialogue Public-Privé in French, HCDPP). 19. The six dimensions of reforms complement each other with equal weights in contributing to the improvement of the business environment. The Country Policy and Institutional Assessment (CPIA), which evaluates the quality of policies and institutions in a given country, utilizes each dimension in assessing the business regulatory environment, with each component being equally weighted.4 The business regulatory environment rating focuses on the direct regulation of business activities and the regulation of goods and factor markets. Three subcomponents are measured: (a) regulations affecting entry, exit, and competition; (b) 4 World Bank Group. 2021. CPIA Criteria 2021, Operations Policy and Country Services. page 21/49. Page 10 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) regulations of ongoing business operations; and (c) regulations of factor markets. The proposed reforms in each segment contribute to the three main subcomponents mentioned above. For example, the tax payment system, construction permits, and cross-border trade contribute to the country’s rating for regulations of ongoing business operations. Property ownership, on the other hand, contributes to the country’s rating for regulations of factor markets. Lastly, business creation reforms contribute to the regulations of factor markets. 20. Subcomponent 1.2: Targeted Promotion of Domestic and Foreign Trade Investments (US$2 million). This subcomponent was designed to build the capacity of institutions engaged in facilitating investments and enterprise development, enabling them to deliver expected public services. Three institutions were identified: Investment Promotion Agency (Agence pour la Promotion des Investissements in French, API), the ADPME, and the Ministry of Tourism. Specific activities for this subcomponent included the following: • Capacity-building activities for the API • Capacity-building activities for the Ministry of Tourism • Capacity-building activities for the ADPME. 21. Subcomponent 1.3: Transport Sector and Industrial Infrastructure Management and Development (US$5 million). The primary objective of this subcomponent was to enhance the management and development of transport and industrial infrastructure sectors. This involved policy and regulatory reforms, institutional capacity building, investment planning, and mobilization. Specific activities for this subcomponent included the following: • Supporting the operationalization of the GUOT (One-Stop Shop for Trans-border Trade, Guichet Unique des Operations Transfontalières in French), by carrying out an institutional diagnostic of the One-Stop Shop, as well as capacity-building and coordination enhancing measures. • Conducting a feasibility study for the creation of a multimodal transport observatory as a means of promoting the production, diffusion, and advocacy of multimodal transport solutions. • Carrying out a policy and regulatory diagnostic of trade transit fluidity through the Pointe-Noire- Brazzaville-Ouesso corridor. • Providing TA to identify and implement policy and regulatory improvement recommendations identified in the diagnostic. • Carrying out studies to determine support services required for the Pointe-Noire–Brazzaville–Ouesso corridor. • Capacity building to strengthen industrial infrastructure investment planning along the Pointe- Noire–Brazzaville corridor. This would focus on providing support to the Ministry of Special Economic Zones (SEZs) and the Ministry of Grands Travaux to design and develop the institutional framework for SEZs, build capacity to develop an integrated investment planning/asset management strategy, and build capacity to conduct good practice pre-feasibility analysis (including site analysis, environmental and social safeguards, demand, and market testing, and so on) for industrial infrastructure and tourism development. Page 11 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Component 2: Direct Support to MSMEs to Enhance the Development and Competitiveness of Selected Value Chains (US$12 million) 22. The objective of this component was to empower MSMEs and enhance the competitiveness of value chains in priority sectors identified by the NDP. Component 2 was structured into subcomponents and windows to provide direct technical support and financial grants to MSMEs. 23. Subcomponent 2.1: Entrepreneurship Promotion and Development (US$4 million). This subcomponent focused on the rollout of a BPC. The BPC aimed to empower entrepreneurs, improve product/services, promote entrepreneurship culture, and build local capacity for business development services. Specific activities included offering financial and non-financial support services, promoting entrepreneurship among youth and female entrepreneurs, and delivering aftercare and TA to new firms. 24. Subcomponent 2.2: Support and Development Grants (US$8 million). This subcomponent aimed to provide business development services and TA support to 200 MSMEs and up to 10 associations/cooperative of firms with the goal of enhancing their operational and technical capacities. The subcomponent was planned to include three windows as follows: • Window A would provide business development services to MSMEs including training for management and personnel. • Window B would provide tangible assets such as equipment used in the production process as well as in the construction and lease of infrastructure. • Window C would provide TA to help organize and structure identified value chains and sector associations (Groupement d’interet economique, GIE) and commercial relations. Component 3: Project Implementation and Coordination (US$3 million) 25. Operational coordination. This component supported the operational aspects of the project, including technical coordination, financial management (FM), procurement, and environmental and social safeguards. The key activities encompassed facilitating the activities of the Project Steering Committee, setting up and managing a dedicated Project Implementation Unit (PIU), conducting stakeholder outreach and communication, and undertaking project evaluation and monitoring. 26. Governance arrangements. The governance arrangements included the Project Steering Committee with representatives from partner ministries, the private sector, and civil society. The PIU was administratively under the Ministry of Planning and managed various aspects of project implementation, including budget approval and coordination among stakeholders and World Bank support missions. B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets 27. While the PDO and outcome indicators remained unchanged throughout the project’s implementation, adjustments were made to the direct support to MSMEs (Component 2) in response to the COVID-19 pandemic. Page 12 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) To address new challenges brought forth by the COVID-19 crisis, a fourth financing window was opened (Guichet Express COVID-19) in favor of targeted MSMEs. This aimed to support working capital needs of businesses affected by COVID-19 following the slowdown of activities in targeted sectors. This included a maximum funding of CFAF 11,600,000 (approximately US$20,000 at the time). While the PDO did not change, the support to the firm’s procedure manual was revised to include these changes, and these changes were validated through task team leader (TTL) no-objection. 28. The COVID-19 window was implemented as an additional activity under Component 2, without significantly altering the Theory of Change or impeding the attainment of the PDO. Instead, it slightly broadened the project’s scope, with an anticipated positive impact on the PDO. The funding allocated for COVID support was managed within the initial budgets allocated for the BPC and matching grants. The PIU targeted approximately 100 firms. It is important to note that these were not supplementary to the 302 main beneficiaries but rather recipients of additional non-investment capital. However, the PIU did not furnish additional details as far as specifically tracking firms benefiting from the COVID funds. Revised PDO Indicators 29. Not applicable. Revised Components 30. As mentioned above, the COVID-19 window was implemented as an additional activity to Component 2. Other Changes 31. Not applicable. Rationale for Changes and Their Implication on the Original Theory of Change 32. The implementation of the COVID-19 window was meant to address new challenges brought forth by the COVID-19 crisis by supporting working capital needs of businesses affected by COVID-19 following the slowdown of activities in targeted sectors. The new activity did not significantly affect the Theory of Change or hinder the achievement of the PDO. Instead, they slightly expanded the project’s scope, with an anticipated positive impact on the PDO. II. OUTCOME A. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating Relevance rating: High 33. The PDO’s relevance is rated High. The PDO is centered around MSME development, which is a stated goal both in the World Bank Country Partnership Framework (CPF) 20–24 and in the Government’s NDP (2012–2016 and 2018–2022). The relevance of the PDO lies in the premise that MSMEs’ competitiveness can foster sustained growth and employment opportunities, consequently leading to poverty reduction. The PDO was considered relevant by the authorities as it contributed to put the private sector agenda at the forefront of the Government’s Page 13 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) development priorities. MSME beneficiaries of the project and private sector-related institutions could also find themselves clearly represented through the PDO focus on competitiveness with clear expectations in terms of targeted areas and sectors. The beneficiaries of the project add to the relevance of the PDO, encompassing (a) institutions relevant to the business environment and (b) entrepreneurs, and among them, a large share of young entrepreneurs and female entrepreneurs. 34. The PADEC aligns with the CPF. The first focus area of the CPF emphasizes strengthening economic management to create an improved climate for private sector-led growth. This strategic area responds to the World Bank’s SCD focus on economic diversification outside of oil intensive sectors. Within this focus area, the project supported the Objective 1.4 ‘Improved Business Regulatory Environment and MSME Development’ through Components 1 and 2. The project is also aligned with the second strategic area of the CPF which emphasizes reducing fragility and building human capital for improved social inclusion. This strategic area aligns with the SCD’s emphasis on building human capital and enhancing resilience for social inclusion and sustainable growth. While the project does not directly focus on formal education, it actively engages in training and coaching of entrepreneurs, thereby contributing significantly to the enhancement of their human capital. 35. The PDO is aligned with the NDP of 2012–2016 and 2018–2022. The third Strategic Axis of the NDP 2018– 2022 prioritized diversification, transformation of the economy, and growth, in the sectors of agriculture, tourism, and industry. The PDO was designed in alignment with this objective. Beyond the Strategic Axis, the NDP was structured around specific sectors, with its concerns and objectives reflected in both the PDO and the subsequent project. The initial sector outlined in the NDP focused on Reinforcing the Private Sector and Business Climate. This aspect was foundational to the PADEC, which addressed the question on a sectoral basis, as indicated by the PDO, through PPD and support to reforms. 36. The project focused on specific regions that represent high concentration of population and host significant economic activity. The strategic focus aimed to concentrate the project on regions with most potential for MSMEs development and business links in specific value chains. This approach yielded advancements in competitiveness in targeted sectors. B. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 37. The PDO statement was “foster MSME competitiveness in the targeted sectors and targeted geographic areas of the Republic of Congo's territory.” The project targeted the following sectors: agriculture and agribusiness, transport, logistics, information and communication technologies, and tourism. The following regions were targeted: Brazzaville, Pointe-Noire, and the Pointe-Noire-Brazzaville-Ouesso growth corridor. 38. The efficacy assessment is organized around the two core PDO elements, which can be broken down in two objectives: (a) enhance the business environment for attracting investments in non-oil sectors and (b) direct support (financial and non-financial) to MSMEs to enhance the development and competitiveness of selected value chains. 39. Considering the importance of activities implemented under Subcomponents 1.2 and 1.3, the assessment of efficacy will consider an additional PDO of building institutional resilience and capacity. The PAD considered three PDO-level indicators. The first relates to improving business environment and focuses on Page 14 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) measuring the number of investment climate reforms implemented. The second and third related to improving the competitiveness of firms and focused on measuring the status and annual turnover growth of the BPC and the matching grants’ beneficiary firms. However, several project activities focused on building institutional capacity as demonstrated below. Hence, the team is considering this retrospectively as a PDO area which is worth exploring. 40. The project achieved or surpassed all three PDO-level indicators. The section below assesses the results of activities under each component of the project for PDO-level and PDO intermediate results indicators. Table 1. PDO-level Indicators Indicator Target Achieved I Number of Investment Climate reforms implemented (cumulative) 12 12 Share of new firms supported under the Business Plan Competition (BPC) that are still 50% 57.4% II operating at Project closure. Share of beneficiary firms under the Support to Enterprise Development grants 20% 36.6% III demonstrating a sustained increase in annual turnover. Source: Results Framework, Closure Mission Aide Memoire. 41. As indicated, the ICR team is adding one PDO area of discussion and thus the section below is organized as • Outcome 1: Enabling environment for private sector development in targeted sectors (PDO Indicator 1); • Outcome 2: Building institutional resilience and capacity (new PDO area considered in this ICR); and • Outcome 3: Direct support to MSMEs to enhance the development and competitiveness of selected value chains (PDO Indicators 2 and 3). Outcome 1: Enabling environment for private sector development in targeted sectors 42. The PDO indicator to assess this objective, as indicated in the PAD, is the number of investment climate reforms implemented. Although the PDO targeted specific regions, the project’s achievements in this objective have nationwide benefits. The project allowed the implementation of 12 reform measures across 6 dimensions of the business regulatory environment. The 12 reforms considered in the Results Framework of the investment climate reforms are as follows: • In 2019, the project supported the adoption of two reforms on logistics and construction permits: o Decree No. 2019-49 of March 11, 2019, establishing a single control point for goods at the autonomous port of Pointe-Noire. o Law No. 6-2019 of March 5, 2019, on the Urban Planning and Construction Code. • In 2020, the project supported the adoption of three reforms on property transfer and the payment of taxes: o Law No. 52-2020 of September 29, 2020, on the establishment of the national cadaster. Page 15 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) o Text No. 0 247 of April 15, 2020 (Circular Note and Finance Law 2020) relating to the reduction of corporate income tax from 30 percent to 28 percent. o Text No. 0 247 of April 15, 2020 (Circular Note and 2020 Finance Law) relating to the reduction of the global flat-rate tax from 7 percent to 5 percent. • In 2021, the project supported the adoption of two reforms on cross-border trade, business creation, and payment of taxes: o Decree No 21000/PM-CAB of May 3, 2021, on cross-border trade, business creation, and payment of taxes and duties. o Decree No. 0081/MFB-CAB of February 17, 2021, specifying the obligation and terms of payment of taxes, fees, duties, taxes, and customs duties to the single window for payment. • In 2021, the project supported the adoption of three reforms on leasing and factoring: o Decree No. 54-2021 of December 31, 2021, on Leasing. o Decree No. 55-2021 of December 31, 2021, on Factoring. o Memorandum on April 13, 2021, Pre-clearance Fee Schedule. • In 2022, the project supported the adoption of one reform on real estate registration: o Law No. 26-2022 of 25 May 2022, laying down the rules for the registration of real estate ownership and transfer of ownership. • In 2023, the project supported the adoption of one reform on business formalities: o Circular Note No. 0011/MPMEA/ACPC/DG/2023 of 12 January 2023 on the pricing of business formalities for business creation. 43. These impactful reforms aimed at enhancing the business environment contributed to support the Republic of Congo in its transformative journey to economic growth through private sector development and competitiveness. • The positive impact on factor markets is evident, with property ownership reforms and business creation reforms further contributing to the regulatory framework. In 2020, the adoption of Law No. 52-2020 facilitated property transfer through the establishment of the national cadaster. The rules for real estate registration, as outlined in Law No. 26-2022, have bolstered the transparency and efficiency of property transactions. Previously, Law No. 6-2019 on the Urban Planning and Construction Code simplified the acquisition of construction permits, enabling businesses to efficiently build infrastructure and use it as collateral for financial transactions. Moreover, the Leasing and Factoring reforms in the same year, implemented through Decree No. 54-2021 and Decree No. 55-2021, have provided additional tools for businesses to access financing and manage their finances effectively. • Reforms in ongoing business operations have played a pivotal role. Tax-related reforms, such as the reduction of corporate income tax from 30 percent to 28 percent and the setting of a flat-rate tax from 7 percent to 5 percent, have eased the burden on businesses, making it more conducive for them to operate and thrive. The recent reform in 2023, as stipulated in Circular Note No. 0011/MPMEA/ACPC/DG/2023, focuses on business formalities for business creation, further Page 16 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) streamlining processes and contributing to the overall ease of doing business in the Republic of Congo. • One noteworthy area of improvement is in the regulations affecting cross-border trade. Notably, in 2019, the implementation of Decree No. 2019-49 established a single control point for goods at the autonomous port of Pointe-Noire, streamlining logistics and trade processes. This was reinforced in 2021, with the focus on cross-border tax and duties through Decree n°21000/PM-CAB and Decree No. 0081/MFB-CAB, emphasizing the commitment to fostering a business-friendly trade and logistics environment. 44. In summary, these comprehensive reforms have not only improved the ease of doing business in the Republic of Congo but have also positioned the country as an attractive destination for investment, fostering economic development and sustainability. However, since no standardized survey or assessment such as the World Bank Investment Climate Assessment was conducted at the end of the project, one can only infer the positive effect of firms rather than measure it with precision at this point and thus consider how the project contributed the changes in ratings or survey responses. Note that the Doing Business survey was discontinued during the course of the project and a new methodology was not yet rolled out for the Republic of Congo. 45. The intermediate results indicators were also achieved or surpassed except for one. The implementation of Subcomponent 1.1 also contributed to the improvement of the business environment by enabling a PPD process to formulate 175 recommendations, on a target of 18, which were accepted by the Government for implementation (961 percent completion rate). The National Consultative Committee (Comité National de Consultation, CNC) created under the project, by Decree 2018—346 dated August 27, 2018, put forward 153 business environment reform proposals from the technical committees and 20 from the provincial Chambers of Commerce and Industry. The Government ratified the recommendations for implementation (during the CNC workshop of June 7, 2023). 46. The project facilitated significant enhancements in the business initiation process. Notably, the overall time required to complete all procedures for company formation saw a remarkable reduction, from 49 days to 4 days. This achievement surpassed the initial target set by the project, which aimed for completion within 17 days. Furthermore, the cost associated with starting a business, measured as a percentage of GDP per capita, witnessed a substantial decrease from 77.8 percent to 20 percent. This reduction not only exceeded expectations but also surpassed the target set at the inception of the project, originally established at 57 percent. Table 2. Intermediate Indicators for Business Climate Level of Achievement Indicators Unit Baseline Target Realization (%) Number of procedures under 6 investment Number 0 30 12 40 climate (DB) indicators streamlined Number of measures/recommendations proposed by PPD process endorsed for Number 0 18 175 961 implementation Out of which number of measures/recommendations that led to Number 0 12 12 100 reforms API Investment Promotion Strategy & Text 0 Yes Yes 100 Business Plan Development Page 17 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Level of Achievement Indicators Unit Baseline Target Realization (%) GUOT strengthened operationally Text 0 Yes Yes 100 Amount Direct Compliance Cost Savings 0 1,9155 2,7726 145 in US$ Reduction of procedures for setting up a new Number 10 7 1 300 business (Starting a Business - Procedures) Total time for the completion of all Day 49 17 4 141 procedures for the creation of a company Cost of starting a business (% of national % 77,7 57 20 287 income per capita) Outcome 2: Building institutional resilience and capacity. 47. Subcomponent 1.2 provided capacity building for the investment promotion agency (Agence pour la Promotion des Investissements, API) and connected sectoral agencies (such as the Ministry of Tourism) in developing and executing an investment promotion strategy. This subcomponent specifically targeted three beneficiaries across nine activities, including four for the API,6 four for the ADPME and one for tourism (pertaining to E-VISAs). • Regarding the API, the project successfully carried out various activities: (a) an institutional film promoting the brand image of Congo as an investment destination was successfully produced, (b) the website was revised and maintained and English versions of the IPA Facebook and Twitter pages were created, (c) a consultant (firm) has been recruited to provide TA and training to the staff of the API and partner structures, and (d) IT equipment and video conferencing kit have been provided and installed. • Regarding the ADPME, four activities were carried out: (a) establishment of the ADPME's website; (b) provision of logistics, transport, and office and IT equipment for the ADPME, including for the sites of the ADPME in the regions of Niari, Sangha, Cuvette and Kouilou/Pointe-Noire; (c) capacity building for ADPME staff on BPC and Fonds d’Appui au Développement des Petites et Moyennes Entreprises (FADPME), including transfers of MSMEs database; (d) advocacy efforts were undertaken for the implementation of the provisions relating to the promotion of entrepreneurship contained in the 2021 and 2022 finance laws. • Regarding the Ministry of Tourism, an activity was planned but did not take place and was cancelled due to delays. The initial plan was to provide support for the implementation of the classification system for Tourist Accommodation Establishments (phase 3: (a) training of auditors; (b) organization of a training seminar; and (c) acquisition of computer equipment and other technical equipment, establishment of the national classification commission, and popularization of classification standards. However, due to delays in the revision of the terms of reference by the Ministry of Tourism, this activity was cancelled. 5 CFAF 1,169,974 at 611 exchange rate to US dollars, which was the exchange rate at the project closure on May 30, 2023. 6 CFAF 1,693,908.00 at 611 exchange rate to US dollars, which was the exchange rate at the project closure on May 30, 2023. Page 18 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) • To support the Ministry of Information and Communication Technologies, a study aimed at improving the business environment for startups and digital companies was completed. 48. Subcomponent 1.3 focused on the management and development of the transport and industrial infrastructure sector, aiming to address business environment challenges at the sectoral level. The activities successfully implemented under the subcomponent are • The diagnostic study of the GUOT and its repositioning in relation to the port ecosystem; • The GUOT strategic plan with a road map on actions likely to be financed by the PADEC. However, implementation of the activities in the road map relating to the acquisition of equipment and software were not initiated due to limited remaining time before project closure; • The process of setting up the corridor regulation and management body; • The support for SEZs and operationalization of the APPD-ZES; and • The TA to the Ministry of Special Economic Zones and Economic Diversification (MZESDE); updating of the feasibility study of the Pointe-Noire SEZ; support for the MZESDE working group (review of SEZ development conventions; preparation of administrative, financial, and operating documents of the APPD-ZES); provision of a special adviser (cabinet) responsible for assisting the ministry in charge of SEZs for operationalization of the APPD-ZES; and strengthening the operational capacities of the APPD-ZES (computer equipment, office furniture, vehicle). 49. Due to lack of recent data, it is not possible to observe the macroeconomic indicators related to business environment. For example, most of the World Bank’s ease of doing business and regulatory environment measures are not available for the years following the project’s launch. Despites issues of attribution, such data could have informed on the overall trends at the country level. According to the UNCTAD7 World Investment Report 2022, foreign direct investment inflows to Congo fell by 13 percent between 2018 and 2022 despite the increase between 2019 and 2020. The slowdown of foreign direct investment is not unique to the Republic of Congo due to the global context of COVID-19 and the Russia’s invasion of Ukraine that raised food and energy prices, financial turmoil, and debt pressures. Outcome 3: Direct support to MSMEs to enhance the development and competitiveness of selected value chains 50. At the project closure, 57.4 percent of new MSMEs supported through the BPC were still in operation, surpassing the agreed-upon target performance indicator of 50 percent. Likewise, 36.6 percent of beneficiary firms under the support to enterprise development grants demonstrated a sustained increase in annual turnover, exceeding the 20.0 percent target. Additionally, intermediate indicators were successfully achieved. 51. The project accomplished significant results under Subcomponent 2.1 designed to implement BPCs aimed at supporting MSMEs by providing financial backing and training to enhance their competitiveness. The BPC witnessed the participation of 178 companies in the final stages of implementing business plans, achieving an overall subsidy consumption rate of 85 percent. Among these, 55 percent were existing companies (which already existed before the BPC) and 45 percent were new companies. 7 United Nations Conference on Trade and Development, 2022, World Investment Report. Page 19 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Box 1. Business Plan Competition Time Frame September 2019–February 2020: Potential partners to support the BPC program were identified and assessed, through awareness campaigns, engagement with entrepreneurs, and the mobilization of service providers. March 2020–January 2021: The support phase for candidates was launched, and the activities on mobilization and technical support were carried out. February 2021–September 2021: Winners have been selected, awarded, and grant agreements signed. November 2021–February 2022: Business plans and allocation of grants to the winners have been updated. January 2022–March 2023: Operational and financial support has been extended for the implementation of the winning subprojects. August 2022–April 2023: The intermediate results achieved by the winning companies have been collected, monitored, and verified. 52. Beneficiaries received on average CFAF 2,919,019 (around US$5,000 at the outset of the Project).8 Among these 178 beneficiaries, the sectoral distribution is skewed toward agriculture, with around 80 percent of the beneficiaries being active in the sector. About 13 percent are in the transport and logistics sector, with only 9 percent in the tourism sector.9 Most beneficiaries were in the Brazzaville department (27 percent) followed by the Pool 16 percent, Pointe-Noire 13 percent, and the Cuvette 12 percent. Other departments such as Cuvette Ouest, Lekoumou, and Plateaux or Kouilou accounted for as low as 1 percent of beneficiaries to 4 percent. 8 Database "230528 BDD post concours des 179 Lauréats du CPA-Cy1-V5.46", see variable "Total décaissés compte de subvention". Page 20 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Table 3. PDO Indicators by Sector and Region (support to firms) Disaggregation Indicator Sector Share by Indicator Variable • Agriculture: 80% • COVID related: 2%9 • Information and Communications Technology: 3% By sector • Transport and logistics:7% Share of new firms • Tourism: 5% supported under the • Other: 3% II Business Plan Competition • 27% in Brazzaville (BPC) that are still • 13% in Pointe-Noire operating at Project closure • 12% in Cuvette By region • 11% in Niari • 6% in Bouenza • Less than 5% in each of these regions: Cuvette Ouest, Kouilou, Lekoumou, Plateaux, Sangha • Agriculture: 69% Share of beneficiary firms • Transport and logistics: 6% under the Support to • Information and Communications Technology: 3% Enterprise Development By sector III • Tourism: 19% grants demonstrating a (Data include only beneficiaries that were still sustained increase in operational at project closure) annual turnover By region No data on regional localization Source: Satisfaction surveys conducted by the PIU at project closure. 53. Subcomponent 2.2 significantly contributed to the PDO and its corresponding level indicators by offering financial aid and TA to approximately 464 MSMEs over the 200 targeted (232 completion rate) and to 11 associations/cooperatives of firms over the 10 targeted (110 percent completion rate). The core objective was to enhance their operational and technical capacities through support and development grants while supporting the firms in increasing their relationship with financial institutions, which in turn educates financial institutions about MSME lending. Implementing start-up competitions alongside coaching aligns with best practices, significantly improving the survival rate of start-ups. Concerning technical support, a total of 15 specific training sessions covering all themes concerning enterprise management were organized. The project also identified and trained 83 MSME service providers (coaching, accounting, marketing, inventory management, and so on). In addition, 143 suppliers of goods and services were linked with MSME recipients which were recipients of the project. Table 4. Intermediate Indicators Level of Indicators Unit Baseline Target Realization Achievement (%) Successful launch of business plans Number 0 100 179 181 9This pertains to businesses that capitalized on the increased demand due to the COVID pandemic, such as those producing hydroalcoholic gels, liquid soaps, and Artemisia, a plant believed to have health benefits related to COVID. Page 21 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Level of Indicators Unit Baseline Target Realization Achievement (%) % of Business Plans with actual funding. % 0 20 34,26 171 Number of MSME receiving technical support Number 0 200 46410 232 of which female owned Number 0 80 109 136 Firms benefiting from private sector initiatives Number 0 500 63211 126 of which female owned Number 0 200 264 132 Number of private sector co-operative (GIE) Number 0 10 11 110 established (cumulative) of which secured a market access with a buyer Number 0 5 2 40 Overall Satisfaction Rating of Recipients of Direct % 0 75 89,7012 90% Support from the project 54. Grants were channeled through the FADPME, established at project inception to support MSMEs. The FADPME activities had a portfolio of 123 companies and 11 value chains (clusters),13 divided into two cohorts: generation 1 and generation 2. Following the approval of 83 projects in 2022, in addition to the initial 40 in 2021, all 123 beneficiaries have established sub-accounts (sous-comptes) to receive the matching grant. A total of 115 of them fulfilled the conditions required for disbursement (including depositing their matched funds into the subaccount and agreeing to all safeguards for planned activities). Eight recipients did not fulfill these conditions and as a result, did not receive the matching grant. 55. Strengthened intermediaries. The activities of Component 2 contributed to the PDO not only by the direct support to enterprises through the BPC and the FADPME but also by strengthening the MSME support ecosystem. Specifically, this includes the enrollment of six microfinance institutions and eight banks which served as 10 464 = 179 BPC + 123 FADPME + 83 business development services providers + 79 from the 11 Groupement d’Entreprises. 11 This number includes the 464 firms + 143 firms involved in new business links with the 464 beneficiaries having received technical support by the project + 25 firms having received FADPME TA without grants, toward the end of the project, when the PIU was hoping to get an additional financing and had started to provide TA to selected firms in case of obtaining it. 12 This percentage is the average of three subindicators on overall satisfaction rating from direct support to MSME, desegregated by youth and women. Another indicator is not included here: the one on overall satisfaction rating of beneficiaries from business climate activities. This ended up not being measured by the PIU and thus is reported as zero in the Results Framework, which brings the official overall rating down to 34 percent, which is misleading. The survey was not conducted for the business climate since the political economy warranted this survey to be run by the National Consultative Committee, which suffered delays due to a late change of management during the project time frame. 13 The clusters represent 120 individual companies: 26 companies from the Brazzaville Poultry Industry cluster, 9 companies from the Local Consumption cluster, 6 from the information and communication technology cluster, 18 companies from the Igné Agricultural Logistics cluster, 11 companies from the Oyo River Transport cluster, 4 companies from the Green Brazza cluster, 11 companies from the Evasion Bouenza cluster, 7 companies from the Union of Banda land fishermen cluster, 10 companies from the Moringa cluster, 11 companies from the Boko Zangouka cluster, and 7 companies from the Brazzaville market gardening products value chain. Page 22 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) intermediaries to handle the disbursements of grants to recipient firms. As the project completed, these financial intermediaries reported that the PADEC constituted a learning opportunity for them, as they had not dealt with MSMEs beforehand. Since then, several of these banks and microfinance institutions have started to lend money to the recipients. This is compounded by the active involvement of the newly established Fonds d’Impulsion de Garantie et d'Accompagnement (FIGA), which can enable financial intermediaries buffer their risks in venturing into the new MSME sector. Additionally, MSME ecosystem actors such as the chamber of commerce, Agence Congolaise pour la creation des entreprises (ACPCE), and the ADPME have been reinforced and re-energized concerning MSME support. The PADEC PIU operated a skill transfer to these agencies which, together with the financial support provided to them, will allow them to sustain ongoing MSME activities in the future. Box 2. FADPME Selection Details • 909 applications were received. • Out of which, the first 547 complied with filing requirements. • Out of which, 303 were admissible and sent for eligibility analysis. • Out of which, 167 were recommended for a business assessment. • Out of which, 142 were recommended for social and environmental assessments. • Out of which, 40 benefited from PADEC grants after review and approval by the Selection Committee at its 2021 sessions and 83 during the 2022 sessions, for a total of 123 FADPME awardees. 56. Out of the six financial intermediaries used by the project, one suffered a case of fraud which ended up negatively affecting 23 beneficiaries of the CPA. The implementation of the BPC was based on local microfinance institutions, which were responsible for disbursing the funds to the beneficiaries. In one of these institutions, the Congolese Savings and Credit Fund (Caisse Congolaise de Crédit et d'Épargne, CCEC), a major occurrence of fraud resulted in substantial losses and delays in grant disbursements. As part of Component 2 implementation, the PADEC entered into a partnership agreement with the CCEC, a private microfinance institution, on October 28, 2021, to allocate grants for executing selected companies’ business plans. However, starting from July 2022, companies slated to receive grants reported delays and non-disbursements by the CCEC despite regular provision of necessary funds to the institution. The total sum blocked amounted to approximately CFAF 217,606,662 (approximately US$356,00014). The CCEC never paid those amounts, and its administrator supposedly fraudulently took the funds for personal use. He was subsequently arrested and prosecuted. At the time of this ICR, he is in jail, as judicial investigation is currently under way. The funds which were not disbursed to the beneficiaries were declared ineligible expenditures. 57. The sectoral angle of the FADPME revealed a significant limitation. In the first phase, only 10 out of 40 beneficiaries operated outside the agricultural sector, while in the second phase, the ratio stands at 12 out of 79 beneficiaries. While the project did not have targets per sector but a list of priority sectors, the over- representation of the agricultural sector among beneficiaries has been identified as a concern, notably highlighted during the ICR mission by the client themselves, especially as one of the stated goals of the project in the PAD was to contribute to economic diversification. However, the client also pointed out the success of the PADEC in the agricultural sector, highlighting the great potential of such MSME support and financial services to foster agricultural transformation, especially in sectors prone to exports. 58. The satisfaction levels among beneficiaries of the BPC and FADPME subcomponents stand as compelling evidence of their effectiveness. A telephone-based survey conducted by the PADEC PIU toward 174 BPC 14 The exchange rate used is 611, which was the rate at the closure of the project on May 30, 2023 Page 23 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) beneficiaries and 119 FADPME beneficiaries aimed to gather insights about their business activities during the five months following the project’s closure, from June to October 2023. Among the 174 BPC beneficiaries surveyed, 152 were still operating and only 22 had ceased operations, largely attributing their closure to the failure of CCEC in providing anticipated funds due to the aforementioned case of fraud. Regarding FADPME phase 1, 5 out of 40 beneficiaries reported bankruptcy or cessation of operations, and for FADPME phase 2, the corresponding number was 3 out of 79. 59. Anecdotal evidence and case study videos. Throughout beneficiary interviews, surveys, and 26 case study videos available on the PADEC Project YouTube channel,15 a palpable sense of overall satisfaction among the beneficiaries is evident. • For example, RODMING Groupe Piment Seche, specializing in pepper harvesting and transformation since 2015, utilized PADEC support to rejuvenate its business in 2019 after facing bankruptcy in 2015. The injection of CFAF 2 million enabled the enterprise to acquire new machinery, augment productivity and revenues, and expand its clientele base. Furthermore, the enterprise formalized its status during this process. • LEOFIR PRESTATION, a modest-size IT shop offering printing services and internet access, received CFAF 3.2 million. Leveraging the PADEC’s support, it invested in machinery, thereby broadening its service spectrum within the IT sector. • KALAS SOCIETE, a larger enterprise engaged in cleaning product manufacturing since 2017, received PADEC support in 2020, primarily focusing on capacity building and acquiring additional machinery. This assistance led to heightened market shares and increased revenue for the enterprise. These individual narratives of entrepreneurs, highlighting their accomplishments and successes, serve as compelling evidence of the project’s relevance and impact. • LD TECH, and IT and solar energy firm, increased its employment from 7 to 15 after the PADEC support, which enabled it to relocate its offices and open an exhibition room to increase its marketing effectiveness. • CONGO tourism company, managed to acquire equipment and develop new tourism offering, including training 10 certified tourism guides. Justification of Overall Efficacy Rating 60. Based on the information above, the state of implementation is deemed Substantial, as the development objectives of the project have been broadly met by the project for each of the components. There was a strong progress in the project’s Results Framework, which is therefore rated as Substantial. C. EFFICIENCY 61. The economic rate of return (ERR) was recalculated post project closing at 45 percent, which compares favorably with the discount rate and the ERR at outset calculated at 55 percent (see annex 4 for details). The PAD proposed an ERR analysis for each subcomponent, excluding Subcomponents 1.2 and 1.3 as their activities did not allow for the direct calculation of monetary benefits. For Component 1, the anticipated economywide 15 See https://www.youtube.com/@Padec2019/videos. Page 24 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) benefits were to come from increased capacity of local institutions, better-informed policies, PPD platform, and improved transport and logistics infrastructure. Concerning Subcomponent 2.1, which involves the BPC, the anticipated benefits were expected to arise from augmented revenue growth, increased Government tax revenues, and employment expansion. For Subcomponent 2.3, the benefits would stem from returns to MSMEs. The ERRs for Subcomponents 1.1, 2.1, and 2.3 were calculated post-closing (see table 5 for details) and suggest substantial value for money. Further details about the computation of the ERR post project closing along with underlying assumptions are discussed in annex 4. Table 5. ERR at Appraisal versus at Project Closing (%) Appraisal ERR Closing ERR Total Project 55 45 Subcomponent 1.1 56 54 Subcomponent 2.1 36 35 Subcomponent 2.2 62 48 62. While it is difficult to assess the efficiency of Component 1, given the focus on institutional capacity building, results under the business climate subcomponent indicate substantial efficiency. On average, the nine intermediate results indicators relating to the business climate exceeded their anticipated end targets by more than 240 percent, indicating a substantial efficiency in the use of resources. The other two subcomponents also delivered positive results for the beneficiary institutions and implementation of Component 1 overall did not experience major issues. 63. Efficiency of Component 2 can be quantified in terms of cost per job created, which is favorable compared to international benchmarks, indicating high efficiency. According to a study conducted by the PADEC PIU after the end of the project, BPC beneficiaries created 62616 new permanent jobs by the project's end and collectively generated 766 occasional jobs, for a total permanent jobs equivalent of 881. The FADPME phase 1 and FADPME phase 2 beneficiaries created 103 and 573 new permanent jobs, respectively, for a total of 676 new permanent jobs.17 The substantial job creation significantly affected various project outcomes, meeting PDO-level indicators with high success rates. The cost for one job created is US$6,789, which constitutes an efficient figure compared to international good practices for SME development projects. For example, the ‘Youth Enterprise with Innovation in Nigeria’ (YouWiN!) BPC’s cost per job created was estimated at US$8,538.18 The program funded 1,200 entrepreneurs who each received an average of US$50,000. Table 6. Cost per Job BPC FADPME BPC + FADPME Jobs created 88119 67620 1,557 16 For the BPC, 881 jobs = 626 permanent jobs + 766 temporary jobs (which is assumed to be equivalent to 255 jobs; 3 temporary jobs = 1 permanent job). 17 For the FADPME, there was no data collection on temporary jobs. 18 David McKenzie. 2017. “How Effective Are Active Labor Market Policies in Developing Countries? A Critical Review of Recent Evidence .” The World Bank Research Observer 32 (2): 127–154. https://doi.org/10.1093/wbro/lkx001. 19 New formal permanent and temporary jobs—from “Tableau suivi des lauréats/bénéficiaires post financement BPC/FADPME, cf. Infos post financement lauréats BPC V.1.2”. 20 New formal permanent jobs only—as the PIU did not track the number of temporary jobs for the FADPME-related jobs—from “Infos post financement bénéficiaires FADPME GEN 1 & GEN 2 V.1.1”. Page 25 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) BPC FADPME BPC + FADPME Cost of grants and TA to 2,272,244,928 3,864,929,910 6,137,174,838 firms21 (CFAF) Amount spent per job 2,579,165 (4,221 US$, 5,717,352 4,148,258 (6,789 US$ (CFAF) equivalent22) (9,357 US$, equivalent23) equivalent) 64. In terms of operational costs of administering grants and TA to firms, the project exhibits substantial efficiency overall, despite the misuse of CFAF 217,606,662 (approximately US$356,00024) in grant funding. The administration ratio for the total number of grants (302 grants) is 38 percent, which is not far from the average cost of grants administration (GA) for other similar projects.25 The administration ratio for the BPCs grants is much higher (67 percent) than that of the FADPME (9 percent) because it involved smaller start-up firms that needed to get formalized and open bank accounts for the first time, to deposit their own matching funds and receive the award. Hence disbursement of the grant required extensive preparation and follow-up from the PIU. The FADPME was aimed at already formal firms, who already had bank accounts, so the grant administration was more straightforward and required less hand-holding. However, the administration ratio for the advisory activities is similar between the BPC (26 percent) and FADPME (27 percent) because the nature of the advisory services was similar, in terms of providing collective workshops, individual technical training sessions, and coaching. Thus, it is most cost efficient to provide grants to larger formal firms than smaller informal ones, and the administration cost of technical advisory delivery being the same for smaller and larger firms, one might also infer that it is also more efficient to provide such advisory for larger firms, as it would have a larger impact in number of jobs than for smaller firms. Overall, the grant and technical administration costs were administered efficiently and very efficiently for larger firms (see table 7). In addition, the project provided additional support in response to COVID- related challenges without additional costs. This demonstrated flexibility was executed within the described efficient cost structure. Table 7. Cost of Grants to Firms BPC FADPME Total Grants Number of recipients 179 123 302 Grants to recipients (G) (CFAF) 597,000,000 2,809,445,303 3,406,445,303 TA to recipients (TA) (CFAF) 1,005,146,956 633,290,764 1,638,437,720 GA cost (CFAF) 402,058,782 253,316,305 655,375,087 TAA cost (CFAF) 268,039,188 168,877,537 436,916,725 Total cost (C) 2,272,244,928 3,864,929,910 6,137,174,838 Ratio of GA cost to grants cost (%) 67 9 38 Ratio of TAA to TA cost (%) 26 27 26.5 21 This includes (a) the cost of grants, (b) the cost of TA, (c) the cost of GA, and 4) the cost of TA administration (TAA). 22 The exchange rate used is 611, which was the rate at the closure of the project on May 30, 2023. 23 Idem. 24 Idem. 25 A study by the World Bank (2016) conducted a systematic review of matching grant projects implemented by the World Bank. It suggests that operating costs for matching grants average 23.8 percent when projects involve a private manager and 19.8 percent when managed by the PIU. Page 26 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) 65. Table 7 considers the following assumptions: • The total cost (C) is the entire cost for Component 2 (BPC and FADPME) as reported by the PIU including a portion of the costs pertaining to Component 3 on project supervision. • The administration and TA costs are derived from the difference between the cost of grants (G) and the total cost for the component (C). This amount is split between 60 percent of (C−G) assumed to be on TA while 40 percent assumed to be on administration cost for grants (GA) and TA (TAA). • The administration cost is assumed to be split between 60 percent GA and 40 percent TAA. • [( − ) × 0.4] × 0.6 The ratio of grant administration cost to grant costs is thus × 100. • [( − ) × 0.6] × 0.4 The ratio of TAA cost to TA costs is: × 100. 66. Component 3 exhibits Modest efficiency given issues with FM that led to a small portion of ineligible expenditures. Despite this and the onset of COVID-19, which caused implementation delays, the project was managed adequately and was able to achieve important results within the original time frame. Given that Component 3 represents 12 percent of the overall project cost, it does not affect the overall project efficiency significantly. Assessment of Efficiency and Rating 67. Based on the information above, the efficiency is deemed Substantial, considering the project cost in relation to the achievement and outcomes of the components. D. JUSTIFICATION OF OVERALL OUTCOME RATING 68. The overall outcome rating for the project is Satisfactory. This rating is based on an assessment of the overall relevance of the project (PDO), the efficacy rating of the objectives, and its efficiency. Considering the Substantial relevance of the PDO, and the Substantial efficacy and efficiency, the overall outcome rating is Satisfactory. Page 27 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) E. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 69. The project, particularly through Subcomponent 2.2, made a positive impact on reducing gender inequality and empowering women entrepreneurs. As indicated by the Closure Report, under Subcomponent 2.1, among the 230 MSMEs supported in the first phase of the BPC, 34 percent were owned by women. Additionally, among the 123 projects selected and structured under the FADPME, 24 percent were owned by women. Altogether 264 women business owners benefited from the project. Although the proportion of male business owners is higher, the PIU highlighted that salaries were equivalent between genders. This aspect of pay equity was a crucial highlight of the project, aligning with the gender focus area outlined in the latest CPF. However, the report emphasized the need for further advancements in targeting vulnerable groups and women. To achieve this, future engagements should clearly define vulnerable groups and consistently incorporate this variable in beneficiary data collection through targeted surveys. Institutional Strengthening 70. The project significantly contributed to institutional strengthening through various channels but did not fill all capacity gaps by project closing. The initial component concentrated on fostering an enabling environment for private sector development, which involved establishing the CNC (PPD platform) and formulating 12 critical reforms. Remarkably, the project not only met but exceeded its target indicators, with 12 business climate reforms implemented against a target of 12 and another 175 recommendations which were endorsed for implementation by the Government. Additionally, in the realm of public structures, various entities such as GUOT; ADPME; API; ACPCE; SEZ; Port of Pointe-Noire (Port Autonome de Pointe-Noire, PAPN); Congolese Shippers’ Council; Ministry of Tourism; Ministry of Planning, Statistics, and Regional Integration; Ministry of Transport; and Ministry of the Digital Economy received support to enhance their capabilities. Despite these achievements, several planned activities outlined in these road maps encountered delays and could not be executed before the project’s closing date. Other issues related to the minimal capacity of some of these administrations to start with. One prevalent issue remains that allocated budget for some institutions is not always provided to such on a timely basis, which creates issues of ability of said institutions to implement programs efficiently and with full continuity. 71. Formalization of firms. Among BPC beneficiaries, the project noted a high formalization rate of 95 percent. This high formalization rate is the result of awareness-raising actions concerning good management practices for MSMEs and the eligibility criteria of the BPC, which required firms to formalize and open bank accounts to qualify for grant access. The lessons learned section of this ICR elaborates more on the factors which led to this significant achievement of the project. Page 28 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Mobilizing Private Sector Financing 72. The project facilitated financing for MSMEs, enabling them to leverage their own capital to implement projects. In doing so, the project aided in mobilizing the private capital of MSMEs, scaling up their business plans through new investments. However, it is important to note that the project lacked a comprehensive collection of financial data from firms, which would have provided insights into the original value and exact realized matching share of the investments made by beneficiaries. However, while it would be good to collect more comprehensive financial data from firms, one should note that this is difficult even in countries with a less nascent private sector and more mature firms. It is challenging to do this in a consistent, efficient manner and convey this skill to beneficiaries. This can be particularly salient in an FCV context. Poverty Reduction and Shared Prosperity 73. The project is expected to lead to a positive impact on poverty reduction and shared prosperity. The project allowed the enactment of reforms whose implementation will lead to improvements in the business environment in the long term. In addition, the support to firms eased competitiveness of beneficiary firms with expected spillovers on non-beneficiary firms. In the longer term, the project is on track to contribute to poverty reduction and shared prosperity through a favorable business environment and better MSMEs ecosystem by having reinforced the business intermediaries noted above in paragraph 525. 74. The project also supported resilient MSMEs that managed to increase their revenues and expand their operations in the medium term. At the time, businesses were surveyed to measure the level of their turnover (6 months before project closure) and based on the 15-month period, the PIU reported an average 284 percent increase in turnover for BPC recipient firms by then. However, this survey did not document the turnover for all BPC recipients, and thus the result cannot be used. Instead, the ICR used the last documented figure of 36 percent of the businesses that received subsidies reported a revenue increase of at least 5 percent, as this measure considers all firms. Additionally, 57.4 percent of corporations supported by the BPC remained operational two years after receiving financial or non-financial support (this number only considers the first phase recipients, as later ones have not yet completed two years between the time they were awarded a grant and the time of this ICR which is six months after project closing). 75. By engaging women, young entrepreneurs, and individuals from targeted regions (the Pointe-Noire– Ouesso–Brazzaville corridor), the project significantly contributed to the World Bank's twin goals of poverty reduction and shared prosperity. Specifically, the project’s support for women entrepreneurs, outlined in the Gender section, aided in enhancing shared prosperity by enabling women to pursue entrepreneurial endeavors. However, the project could have placed greater emphasis on supporting vulnerable populations and women. Vulnerable individuals represented only 12 percent of all project beneficiaries.26 Therefore, it would be beneficial, such as in the selection of BPC beneficiaries, to incorporate targets focusing on vulnerable recipients. 26 See the Rapport de Cloture (September 2023) Page 29 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 76. The World Bank project team acknowledged the challenging political and economic landscape in Congo, marked by political instability and macroeconomic challenges. The prevailing political instability posed challenges in maintaining sustained political consensus. Concurrently, the nation grappled with a debt crisis that diverted attention and resources away from external projects. These circumstances significantly influenced the project’s structuring during the Project Concept Note stage. To mitigate these risks and enhance the project’s implementation prospects, the team opted for a sectoral, regional, and programmatic approach. This decision represented a pragmatic and realistic choice, drawing upon the World Bank’s experience in the country. B. KEY FACTORS DURING IMPLEMENTATION 77. The implementation of the project was influenced by several key factors highlighted in the PAD during the appraisal phase. (a) A high country risk from the fiduciary perspective. The country has weaknesses at all levels in terms of governance and public funds management. There was a high rate of turnover within project implementation agencies, line ministries, and public agencies The project did not have specific mitigation measures but mentioned that another World Bank project (P160801) would address some public financial management concerns. The Republic of Congo is characterized by intricate challenges in institutional coordination and attaining consensus on reforms. Implementing programs that challenge vested interests often encounters significant resistance within this context. This affected mostly Component 1. (b) Substantial entity-level risks. Fraud and corruption practices were a substantial risk. The assessment of some ministries revealed internal control weaknesses and weak fiduciary environment, which were partly mitigated during the project by the adoption of an FM procedures manual and by training of FM professionals. Toward the project’s conclusion, the regular weekly meetings between the World Bank team and the PADEC PIU demonstrated a positive impact on project implementation and closure, highlighting the pivotal role of interaction in achieving results within complex contexts. However, the risk associated with financial institutions was underevaluated at the outset, especially that the project, in its endeavor to involve many financial institutions to increase their familiarity with MSMEs, increased this risk by spreading itself over no less than 14 banks and microfinance outlets. 78. Despite the project closing on schedule, delays in parliamentary ratification and the onset of COVID-19 significantly affected the project, causing a two-year delay before the implementation actually started. The project’s effectiveness was conditional on parliamentary ratification and the preparation of the project manuals. This process resulted in delays, causing the project to become effective one year after its approval in 2018. Compounding the issue, the COVID-19 pandemic further contributed to additional delays. This proved to be critical, especially in a country characterized by institutional and social fragility, where direct missions and interaction with the client counterpart are pivotal for project success. The PADEC, due to its major capacity- building component, required more direct interaction with the client. The COVID-19 pandemic, by reducing the ability to organize missions, had a specifically strong and negative impact. Slow adaptation to COVID-19 measures Page 30 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) and excessive politicization further hindered the smooth execution of both Components 1 and 2. These challenges underscore the importance of considering and navigating the local context for effective project implementation. 79. The onset of COVID-19 as well as institutional constraints also particularly affected the implementation of the PPD work led by the CNC (formerly HCDPP). The project planned on restructuring of CNC involving the establishment of an interdepartmental committee headed by the Prime Minister, with a permanent secretariat based on thematic groups and departmental committees. During the ICR consultations, it was noted that this process faced challenges. Despite restructuring attempts through the project, issues persisted, including a delayed team arrival, and hindered fieldwork due to the COVID-19 pandemic. Non-sustained technical committees, ministerial reluctance, and the absence of an inaugural session further posed limitations. Despites these challenges, the CNC, once established with an energized team, set up an effective PPD platform and contributed to the work leading to the prioritization, selection, endorsement, and implementation of the reforms. 80. The project’s reliance on grant disbursements from a vast network of local financial institutions exposed significant challenges. The failure of one of the microfinance outlets selected to be an intermediary for the project, CCEC, to deliver, accompanied by the arrest of the Chief Executive Officer for fraud, ineligible spendings, and delayed fund distribution, underscores the risks associated with this strategy. This situation emphasizes the need for strategic planning during the appraisal phase, such as incorporating a subcomponent focused on capacity building in local financial institutions, with a dedicated budget allocation. This incident underscores the necessity for rigorous and repeated due diligence processes when selecting financial institutions for project involvement and at regular interval during the process. 81. The fiduciary competencies of the ADPME were identified as a limiting factor in fully managing the BPC. This indicated a need for capacity-building initiatives within the ADPME to enhance its ability to effectively handle the financial aspects of the project. Addressing these competency gaps was crucial for ensuring the overall success of project management and financial oversight. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 82. The implementation of the project was managed by an implementing unit, the PADEC PIU, which operated directly under the authority of the Ministry of Planning, Statistics, and Regional Integration. The PADEC PIU essentially evolved from a prior World Bank Group-financed project’s PIU, specifically the (P118561) PADE Support to Economic Diversification Project, also overseen by the Ministry of Planning. 83. The M&E system allowed tracking of key indicators; however, there were some shortcomings. Key PDO indicators provided some insight into the achievement of stated PDOs and the main outcomes not explicitly mentioned in the PDO. Nonetheless, the PDO statement focused on Component 2 on the support to firms but did not include a stated objective for Component 1. Moreover, the ‘key PDO indicators’ provided some insight into the achievement of the stated PDOs and the main outcome not stated in the PDO, but they did not provide a complete account of competitiveness outcomes. This limitation did not facilitate clear tracking of the four outcomes, which included job creation in the non-oil sector, increased economic contribution of private non-oil Page 31 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) focal sectors, poverty reduction, and fostering of inclusive growth. The relationship between the PDOs, the PDOs’ key indicators, and the four outcomes was not clearly presented. 84. The PADEC established an M&E system aimed at contributing to the effective and efficient management of project resources. The system achieved milestones such as staffing at the PIU, the development of an M&E manual, a computerized database for BPC and FADPME beneficiaries, support for creating annual workplan and budgets, and the regular production of implementation reports. Implementing agencies were tasked with monitoring and evaluating project activities and generating reports. Both the BPC and FADPME implementing agencies collected data on project implementation using templates provided by the PIU, which were then transmitted to M&E officers for consolidation. Although progress reports were shared between the implementing agencies and the PIU, some of these exchanges did not result in specific adjustments. Furthermore, the data generation process did not sufficiently finely capture the characteristics of the beneficiaries or adequately track their progress throughout the project implementation (such as financial and accounting data associated with each firm). 85. Future similar engagements could incorporate two important M&E tools: a satisfaction survey of beneficiaries and a structured data gathering process of the financial status of beneficiaries. The project, as executed, lacked some precision in monitoring companies and business owners. Collecting data on funding sources, investments, challenges faced by enterprises, profitability, sales, and other relevant metrics at different intervals would have enhanced project evaluation. These surveys should encompass the difficulties encountered by business owners and evaluate the project’s influence on their business models, strategies, and overall experiences. Performing these surveys, particularly focusing on financial and capacity aspects, regularly would facilitate tracking changes over time. Such surveys, if performed at the outset of the project, would have enabled to establish precise baselines. This approach would enable a comprehensive analysis of the project’s impact at the firm level, moving beyond anecdotal evidence. 86. The M&E system encountered challenges in monitoring specific indicators that extended beyond six months post-project completion. For instance, assessing the indicator related to the ‘Percentage of new firms supported through the Business Plan Competition (BPC) still operational 24 months after receiving assistance (financial and non-financial)’ proved difficult, mostly because of the lack of ownership and resources of a public entity that would undertake this monitoring. M&E Implementation 87. Data were systematically collected and analyzed. The documented achievements were verified and compiled in Aide Memoires and the Government project completion report. However, certain shortcomings affected the consistency of data collection implementation. The field service providers engaged by the BPC and FADPME operators, responsible for data collection, often lacked adequately trained M&E personnel. Additionally, some of these providers lacked operational logistical resources and were burdened with multiple project involvements, causing challenges for regular field visits by the M&E manager to verify the collected data. This situation resulted at times in a mismatch between physical data collection and M&E databases. Additionally, Furthermore, results were calculated on a quarterly basis; however, there were instances where they failed to accumulate with prior periods. This inconsistency led to computing errors, necessitating regular course corrections. Page 32 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) M&E Utilization 88. Information derived from program implementation data was effectively utilized to guide program management and decision-making, especially concerning the achievement of the PDOs. For instance, the identified delays in disbursing funds to beneficiaries prompted the termination of the partnership agreement with CCEC. Moreover, the evaluation of COVID-19 risks contributed to informing and implementing necessary adjustments during the project’s execution (see section I.B.). A better M&E system would have enabled the PIU to better measure the results of the TA to firms and thus adjust the curriculum overtime. On investment climate reforms, the M&E system was not sufficiently used to put pressure on counterparts to help advance the reform agenda. This was only done during the latter part of the project, which proved effective in motivating Government entities in accelerating some of the reforms pertaining to their institution. Justification of Overall Rating of Quality of M&E 89. The M&E system, as both designed and implemented, was generally sufficient for assessing the full achievement of project objectives. Although some shortcomings existed, these were catered for over time. This effort from the PIU to improve the M&E system and data collection over time was significant, especially given the FCV context, combined with the COVID-19 context, in which it took place, with the associated low institutional capacity of partner institutions, low capacity of firm to collect information, and difficulties related to travel in hard-to-reach areas. Consequently, and given this context, the overall rating of M&E quality is deemed Substantial. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ENVIRONMENTAL SAFEGUARDS 90. The PADEC was implemented in accordance with the requirements of the World Bank ’s operational policies (under OP/BP 4.01 and OP 4.09). Two environmental operational policies have been triggered: (a) OP/BP 4.01 - Environmental Assessment and (b) OP 4.09 - Pest Management. Thus, to address the respective requirements of these policies, the project developed an Environmental and Social Management Framework (ESMF) which was used by operational tools in particular: an Environmental and Social Impact Assessment (ESIA/ESMP), a Pest Management Plan, or Integrated Pest Management Plan (IPMP or PGP). In its quest to improve its environmental and social performance, the project has also produced an environmental and social audit guide. 91. At the conclusion of discussions with the project teams, it was disclosed that as part of the environmental and social monitoring for supported MSMEs, out of the beneficiary firms, 160 MSMEs had appointed an environmental focal point. This marked significant progress since the November 2023 mission. However, during the closure mission in May 2023, it was recommended that the PIU ensure the designation of an environmental focal point in the remaining 30 MSMEs. To address this, the PIU effectively developed an environmental and social fact sheet and conducted a capacity-building session on its use for 33 coaches. 92. The project disbursed grants to 168 MSMEs requiring operational safety procedures, based on the nature of their operations and the stipulations outlined in accompanying plans. These grants aimed to ensure adherence to operational security measures by facilitating the acquisition of personal protective equipment (PPE). Additionally, support was provided for the installation of facilities such as latrines and garbage cans, aligning with hygiene standards to enhance the well-being of MSME workers. The initiative also encompassed the establishment of living quarters and the formulation of staff contracts, coupled with the initiation of insurance Page 33 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) policies to fortify the safety net for MSME personnel. Regrettably, among the 168 MSMEs involved, only 88 (approximately 52 percent) successfully implemented the prescribed operational security measures. 93. The PIU encountered challenges in collecting environmental data such as air quality, noise levels, and soil analysis within the beneficiaries’ operational zones, hindering effective environmental monitoring of their activities in the intervention area. Additionally, the mission was informed that departmental structures meant to assist the PIU lacked adequate capacity, including insufficient material/equipment, qualified personnel, and financial and logistical resources. 94. Based on this proceeding, the environmental safeguard score of the project is Moderately Satisfactory. Social Safeguards 95. The project’s performance in terms of social safeguards has been estimated to be Moderately Satisfactory. The project triggered the Involuntary Resettlement policy (OP/BP 4.12) and a Resettlement Policy Framework was prepared and disclosed in-country and by the World Bank in April 2018. To ensure the implementation of the social safeguards measures, the project recruited a social safeguards specialist to its team. However, throughout the implementation phase, environmental and safeguards reports were at times not consistently shared with the World Bank. Similarly, a comprehensive report on the project’s environmental and social performance was not submitted at the project’s closure. 96. Concerning the implementation of social safeguard measures, the project did not encounter challenges related to displacement or ensuring secure and documented land tenure status at beneficiary sites. Ten supervision missions and field visits were conducted by the task team and resulted in recommendations to address identified weaknesses and enhance project performance. However, social safeguards were inadequately considered and monitored overall. Although the design of subprojects financed by FADPME and BPC funds did not initially include safeguards, the World Bank and project safeguards teams reviewed activities and proposed corrective actions. These measures, implemented before project closure, contributed to a Moderately Satisfactory project performance by integrating the M&E of social safeguard measures between February 12 and April 13, 2023. 97. The grievance redress mechanism was set up and functional during the project’s final year of implementation. By completion, the project had set up 112 complaints management committees. The project also strengthened the capacity of 398 members of the complaints management committees. Complaints management committees were equipped with necessary tools such as logs, inbox, and means of communication to document the management of complaints. A total of 10 complaints were registered, addressed, and closed, encompassing issues such as disagreements related to business plan selection, conflicts among associated beneficiaries, delays in funding due to site changes conflicting with project safeguarding requirements, and disputes over the amount of financing for the business plan. Fiduciary Compliance 98. The FM risk was initially assessed as Moderate (M) at project inception, but later upgraded to Substantial (S) and remained as such until the end of the project. The FM function was the responsibility of an implementing agency, the PADEC PIU, directly under the tutelage of the Ministry of Plan, Statistics and Regional Integration. In November 2021, the FM performance was downgraded to Moderately Unsatisfactory from an Page 34 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) initial Moderately Satisfactory and remained at this rating until project closing. The downgrade occurred primarily because of inadequate budget monitoring. Incidences of line ministry operating expenses that were not included in the Financing Agreement being financed on Investment Project Financing (IPF) funds were a direct result of an inadequate internal control environment and the concurrent management of the PADEC by the PIU with at least two other African Development Bank-financed projects. This multitasking diluted the monitoring and oversight efforts for the project. 99. It was in this context that a World Bank in-depth review of the fiduciary management of the project was performed in May 2022, covering a 90 percent sample of recorded expenses incurred by the project from May 2018 to December 31, 2021. This review identified questionable expenditure amounting to CFAF 159,497,316 (approximately US$261,00027) arising from the following: (a) Use of the PADEC (P161590) funds to pay for operating expenses of the PADE (P118561), effectively resulting in a comingling of funds. (b) Lack of prior concurrence (non-objection) from the TTL before the execution of activities/expenses leading to ineligible expenses. (c) Use of project funds to finance line ministry operating expenses effectively using earmarked IPF funds as form of budget support. (d) Use of project preparation funds for full active implementation activities instead of exclusively ‘preparatory and limited initial implementation activities’ in noncompliance with World Bank Guidance: Project Preparation Facility (PPF); the absence of adequate supporting documentation for certain expenses, and the inadequate justification of expenditure by appropriate supporting documentation. 100. In addition to the above, the project incurred additional questionable expenditure of CFAF 217,606,662 (approximately US$356,00028). As part of the implementation of the two direct business support instruments, in particular the BPC (BPC) and the FADPME, the PADEC signed on October 28, 2021, a partnership agreement with the CCEC with the aim of paying subsidies for the execution of the business plans of the selected companies. Since July 2022, companies receiving grants informed the project of delays observed in the disbursements and non- disbursements of grants by the CCEC, which nevertheless regularly received the necessary funds for this. It is clear that the CCEC is to all intents and purposes in default and that not only will these funds not have been used for the purposes for which they were intended, but they were never returned to IDA before project closure. This not being an eligible use of project resources, these funds automatically became ineligible and will be notified to the Government for reimbursement. The amount in question is CFAF 217,606,662 (approximately US$356,000). In the last meeting with the client, before the closing date, the project asserted that the Government was implementing measures to fund the project activities by its own means. Such an initiative, if successful, could have been assimilated to substitute documentation as defined by the World Bank Group and be substituted to the ineligible expenditure already identified, thus cancelling it. However, the project closed without the client providing any evidence of this substitute documentation. 27 CFAF 159,497,316 at 611 exchange rate to US dollars, which was the exchange rate at the project closure on May 30, 2023. 28 CFAF 217,606,662 at 611 exchange rate to US dollars, which was the exchange rate at the project closure on May 30, 2023. Page 35 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) 101. In conclusion, the project incurred total questionable expenditure of CFA 377,103,978 (approximately US$617,00029). The notification package has been notified by the TTL to the Country Director for notification to the client, based on the advice of FM, procurement, and legal teams. 102. The project closing, and application deadline dates were May 30, 2023, and September 30, 2023, respectively. Project closing due diligence procedures were partially initiated and the issue of grace period financing was never definitively clarified and/or communicated to the World Bank. The documentation on the use of all funds advanced to the Designated Account is complete, and the final audit report, as well as associated financial statements are still to be issued. Procurement Management 103. In general, the contracting risk and the performance of the procurement remain moderate and satisfactory, respectively. This considers (a) the progress made in the implementation of the procurement activities, (b) the proper management of the procurement processes of the various activities recorded in the Procurement Plan, (c) the proper monitoring of the execution of the contracts concluded, and (d) the proper use of Systematic Tracking of Exchanges in Procurement (STEP) as a tool for the day-to-day management of procurement. 104. Statistics on procurement activities in STEP as of May 23, 2023, show 19 contracts signed. All other activities had a closed status at the time of the closure. With the exception of the following 2 contracts relating, respectively, to (a) the mission to write the project completion report and (b) the development of the FADPME website, the other contracts do not present a particular challenge to their closure in the rules of the STEP, because all the expected deliverables would have been validated by the beneficiaries and the project team is waiting for the transmission of the minutes to proceed with the payment of the balances, where applicable, and at the closing of contracts in STEP. C. BANK PERFORMANCE Quality at Entry 105. Regarding the quality at entry, the World Bank formulated a strategically aligned intervention approach for the private sector in the Republic of Congo. The project’s preparation team ensured its alignment with the Government’s NDP (2018–2022), emphasizing economic enhancement via good governance, business environment improvement, private sector expansion, and environmental protection. Moreover, the project’s design harmonized with the programmatic approach initiated by PADE (PADEC’s predecessor project). Consultations with both the Government and private sector were pivotal in preparing the project, facilitated by a multi-ministerial task force led by the Ministry of Planning. Quality of Supervision 106. Regarding the quality of supervision, the project team displayed a strong commitment to supporting the Government in project execution. The project team conducted 10 supervision missions and virtual conferences between 2019 and 2023. This ensured diligent project management and oversight, despite the FCV 29 CFAF 377,103,978 at 611 exchange rate to US dollars, which was the exchange rate at the project closure on May 30, 2023. Page 36 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) context at entry. Recommendations from these sessions, deliberated with the PADEC management team, effectively tackled bottlenecks and refined the project’s operational strategy and methodological approach. These supervisory activities enabled comprehensive reviews of the institutional framework, project objectives, and technical components. 107. Throughout the project, several implementation challenges emerged, including delays, capacity limitations, and the unforeseen disruptions caused by the COVID-19 pandemic. Despite these challenges, the World Bank team demonstrated dedication to achieving the PDO by actively collaborating with the Government to identify and implement suitable solutions. For example, in response to the COVID-19 crisis, adjustments were made to Component 2, expanding funding to cover firms’ working capital needs rather than solely focusing on investment capital. However, the PIU’s final report highlighted that the recurrent alterations in component activities, changes in the World Bank’s team members, and the complex procedures involved in executing project activities collectively had an overall adverse impact, slowing down the project’s pace. Moreover, the World Bank’s procurement procedures needed adaptation for implementation among a subset of beneficiaries due to the small scale and nature of their activities. A suitable Procurement Plan for the procurement of goods, equipment, and services for beneficiary SMEs was therefore developed by the PMU Trust with the assistance of the World Bank’s procurement service. Despite this, some expenses which took place early on during the project were reviewed later as ineligible. These expenses were flagged early on by the team and official processes were followed accordingly. 108. Supervision teams provided regular reports on safeguards, procurement, and FM. These reports were compiled during supervision missions, where teams closely worked with the PIU and other implementation entities to enhance their capacity in critical areas. Project progress was documented in Aide Memoires and Implementation Status and Results Reports (ISRs) during these missions. These reports served as crucial tools, keeping World Bank management well informed about the project’s advancements. Through consistent documentation and sharing of updates, the missions ensured that project stakeholders remained informed about the project’s trajectory and achieved milestones. This comprehensive reporting approach played a vital role in facilitating the thorough evaluation and analysis of the project's outcomes and impacts. Justification of Overall Rating of Bank Performance 109. The World Bank’s overall performance is deemed Moderately Satisfactory, a judgment derived from both the Satisfactory rating at entry and the Moderately Satisfactory rating during supervision, which were affected by the FCV context and the COVID-19 context. D. RISK TO DEVELOPMENT OUTCOME 110. While the PADEC achieved its PDO-level indicators and outcomes, the sustainability of these improvements remains a significant risk. One critical aspect pertains to the sustainability of the achievements of the PADEC through the ADPME. Despite substantial capacity-building efforts directed toward the ADPME within the project’s framework, the institution has yet to access the planned government-allocated funds for its operation. This situation raises concerns as it may potentially impede the progress of MSMEs. Although these enterprises have witnessed significant growth through the project, continuous support and guidance are essential for their sustained development. Immediate and appropriate action from the Government is crucial to ensure the survival of these businesses and of the entrepreneurial spirit that they engendered, and thus the Government needs to ensure the effective functioning of the ADPME. Resolving the challenges related to state budget fund Page 37 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) disbursement and facilitating the ADPME’s access to allocated funds are imperative for the project’s long-term success and objectives. 111. Additionally, a critical risk lies in the effective implementation over time of the business environment reforms adopted under the PADEC. Many of the reforms promoted by the PADEC are regulatory in nature (that is, decree or law). Historical trends in the Republic of Congo indicate that implementation of such reforms can be mixed over time, often leading to implementation gaps. In addition, PPD has produced 175 recommendations which were endorsed by the Government for implementation, but as this implementation is being planned for after the PADEC closing, there is a risk of a lack of momentum to transform these recommendations into their own specific decrees and legal amendments. 112. Lastly, the project faces a reputational risk associated with one of its six financial service providers for the BPC, the microfinance structure CCEC. The institution failed to fulfill its commitment to disburse the allocated funds of CFAF 220 million to the intended beneficiaries. This failure to fulfill financial commitments poses reputation risks, especially affecting the beneficiaries who expected but did not receive the funds. The inability of CCEC to honor its agreement due to misuse of funds by the CCEC manager, who was subsequently arrested, and although it was at no fault of the PIU, undermined trust of project partners. The Government was asked to promptly address and rectify this issue to safeguard the project’s reputation and maintain the integrity of its intended objectives. V. LESSONS AND RECOMMENDATIONS 113. The project demonstrated that formalization of firms, often perceived as a challenge, can be achieved through provision of adequate support and incentives. The fact that 95 percent of the BPC recipient firms formalized has demonstrated that formalization of firms is not an impossible task when the incentives are right. The demonstration effect of such formalization will have to be measured over time. The project showed the crucial role played by educating entrepreneurs on formalization. Moreover, the firms which formalized served as examples for other informal firms, as many of the formalized firms could access financing in parallel to the grants they received. In fact, about half of the BPC recipients borrowed money from the financial institutions in which they opened a bank account to help come up with their matching share of the grant. Hence, one could consider the BPC results not only in its direct achievement in terms of business activity which it enabled with the recipient firms but also as a forcing device for formalization (the need to formalize to receive the grants and the subsequent financial literacy that occurred show that grants can be an adequate formalization incentive, setting the example for other informal firms). This is one of the reasons which pushed the PIU to invest heavily in communication and to obtain many videos of the winners, for others to see the benefits of formalization. This lesson should be used for further projects which aim at formalizing informal firms. 114. MSME development and entrepreneurship promotion can support a paradigm shift toward a market economy, but efforts need to be sustained. The push toward highlighting and supporting start-ups and MSMEs has had a profound impact on how entrepreneurs are perceived in a society that has only recently adopted a market system. Mechanisms set up to provide direct support to companies through the BPCs (BPC) and the FADPME has demonstrated its effectiveness in favor of beneficiary companies. The positive feedback from beneficiaries and stakeholders documented during the ICR mission clearly attested to the significant contribution of PADEC to the promotion of entrepreneurship in a country where entrepreneurship is still in its infancy. In particular, technical support, training, and coaching proved to be of crucial importance for these companies, so Page 38 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) much so that many continued to use these services at their own expense after the closure of the PADEC. In addition, progress has been made in the SME financing ecosystem, notably with financial institutions, which for the first time have considered the possibility of financing SME-related projects, whereas they had not granted credit to this sector in the past. However, the technical and coaching services for firms needs to be provided on a sustained basis by the ADPME and other actors of the entrepreneurship and MSME support ecosystem. Either the Government will need to increase its funding for such activities, or new projects from development partners should consider building on the PADEC to scale up the MSME support. On the financial sector, FIGA should be accompanied by more support, and financial institutions should benefit from MSME lending training—something that should be considered by the International Finance Corporation—to build on the initial successes of the PADEC, which gave the occasion for these institutions to lend to MSMEs often for the first time. That said, the project emphasized the significance of securing the sustainability of operational achievements through counterpart institutions in the Government. In addition to capacity-building resources allocated to specific government institutions (ADPME, API, and so on) timely measures should be implemented to ensure that the institution receives necessary support from the Government to pursue the activities. Immediate and appropriate consolidation actions from the Government are necessary to ensure the survival of the project’s activities and the effective functioning of the Government institution. Another critical lesson revolves around the imperative need to incorporate measures ensuring the effective implementation of business climate reforms adopted under the project. Apart from adopting reforms, it is crucial to prioritize careful design, close supervision, and meticulous monitoring of the reform implementation process to ensure success. Neglecting these aspects could potentially undermine the intended impact of the project and compromise the attainment of its overall objectives. 115. The role of the private service provider emerged as notably effective regarding the implementation of the direct support to firms. This highlights a positive lesson from the project, given the mixed effectiveness of service providers in the literature on program delivery of matching grants. A comprehensive review study on the implementation modalities of matching grants30 indicates that while the private sector demonstrates perceived higher efficiency, particularly in scenarios where public sector capacity is lacking, approximately one-quarter of contracted schemes received Moderately Unsatisfactory or lower ratings. This further highlights that the choice between public, private, and alternative forms of implementation are contingent on local circumstances and opportunities, and this project was a success example of cost-effective delivery in a fragile context. Furthermore, it underscores the importance of ensuring that the implementing agency possesses the requisite capacity, incentives, and governance arrangements for efficient program management. 116. Selection of recipient firms and timing of TA delivery needs to closely match the project objective and consider market trends. The PDOs underscored fostering competitiveness of MSMEs in targeted sectors and regions to promote economic diversification. However, the mechanism for the selection of beneficiaries was not conducive to an equal participation of targeted sectors. Instead, all firms were selected from a single pool, leading to an overrepresentation of firms in the agricultural sector. Future interventions could benefit from a stratified selection of beneficiaries by targeted sectors. Furthermore, the project has shed light on the significance of strategic timing for the delivery of TA. For instance, the limited three-month training period for the API underscores the need for allocating adequate time for comprehensive training and knowledge absorption. Moving forward, careful consideration of the timing for TA is vital to ensure optimal impact and effectiveness, especially that the assistance needs to constantly adapt to market demand. 30 See annex 6. Page 39 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) 117. The importance of PPD has been underscored, with a specific recommendation for a sectoral approach. Building upon the consensus that emerged during discussions, there is a strong demand to continue conducting PPD workshops under the purview of the CNC and with the union of industrialists of Congo. These workshops, possibly supported in collaboration with the World Bank and International Finance Corporation, should be meticulously planned and structured. They represent a proactive measure to encourage improved collaboration between the public and private sectors, thus fostering sustainable development and mutual accountability and trust. PPD remains important for fostering an enabling business environment for the private sector development. Lessons learned emphasize the key role of consistent political commitment, sustained capability strengthening, and funding in support for continuous PPD to fuel the needed reforms. In addition, an inclusive approach calling for increased private sector involvement will ensure a comprehensive implementation of reforms. The project demonstrated the transformative role of PPD to shift advocacy from lobbying of a few large firms to a structured and transparent dialogue process for the benefit of many, with beneficial returns for the business environment and competitiveness of firms of all sizes. 118. The emphasis on a sectoral focus and a value chain approach would need to complement an economywide approach in the future. While the PADEC has effectively stimulated the entrepreneurial spirit, discussions with various stakeholders have revealed the potential benefits of a more targeted approach to value chains. Advocating for a sector-based strategy, particularly concentrating on value chains, is highly recommended. The exploration of an SEZ, with a comprehensive feasibility study in the timber, agricultural, or mining sector is identified as a potential avenue to optimize results and generate added value. The creation of business-to- business links between firms in the same sector, through purchasing and supplying of good and services, and with the provision of tailored infrastructures, could create more impact in terms of the competitiveness of selected value chains than selecting firms which have no relationships with each other or operate in different subindustries. A sustained horizontal, economywide approach to supporting reforms and MSME-support ecosystem and institutions needs thus to be complemented in the future with a vertical, sector-specific approach to increase impact. . Page 40 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: To foster MSME competitiveness in targeted sectors and geographic areas of the Republic of Congo Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of Investment Number 0.00 12.00 12.00 Climate reforms implemented (cumulative) 30-May-2018 30-May-2018 31-May-2023 Comments (achievements against targets): The Project achieved the implementation of the 12 targeted reform measures across 6 dimensions of the business regulatory environment. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Share of beneficiary firms Percentage 0.00 20.00 36.60 under the Support to Enterprise Development 30-May-2018 30-May-2018 30-May-2023 grants demonstrating a Page 41 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) sustained increase in annual turnover. Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Share of new firms supported Percentage 0.00 50.00 57.40 under the Business Plan Competition (BPC) that are 30-May-2018 30-May-2018 30-May-2023 still operating 24 months after receiving assistance (financial and non-financial) Comments (achievements against targets): Considering the evaluation timeframe, the ICR employed a proxy measure to assess the achievement of one of the PDO outcome indicators. Specifically, the outcome indicator “share of new firms supported under the BPC that are still operating 24 months after receiving assistance” will be proxied by “share of new firms supported under the BPC that are still operating at the Project closing”. Although the firms were selected in two batches across two different time periods, project assistance was delivered throughout the project. The reported number (57.4%) refers to the proxy indicator (share of new firms supported under the BPC that are still operating at the Project closing) A.2 Intermediate Results Indicators Component: Regulatory and institutional support to strengthen the enabling environment for PSD Page 42 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of procedures under Number 0.00 30.00 12.00 6 investment climate (DB) indicators streamlined 30-May-2018 30-May-2023 30-May-2023 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of Number 0.00 18.00 175.00 measures/recommendations proposed by PPD process 30-May-2018 30-May-2018 30-May-2023 endorsed for implementation Out of which number of Number 0.00 12.00 12.00 measures/recommendation s that led to reforms Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion API Investment Promotion Text Not Approved by API Yes Yes Strategy and Business Plan Board Page 43 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) development 30-May-2018 30-May-2023 30-May-2023 Including promotion, Text No Yes Yes facilitation and aftercare activities Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion GUOT (The One Stop Shop Yes/No No No Yes for trans-border trade) strengthened operationally 23-Jun-2020 30-May-2018 30-May-2023 Institutional quality of the Number 0.00 12.00 0.00 GUOT (index) Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Direct Compliance Cost Amount(USD) 0.00 1,169,974.00 1,693,908.00 Savings 30-May-2018 30-May-2018 30-May-2023 Starting a Business - Number 10.00 7.00 1.00 Page 44 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Procedures Starting business - Time Days 49.00 17.00 4.00 Starting a Business - Cost (% Percentage 77.70 57.00 20.00 of income per capita) Comments (achievements against targets): Component: Direct support to MSMEs to enhance the development and competitiveness of selected value chains Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Business plans successfully Number 0.00 100.00 179.00 launched 30-May-2018 30-May-2023 30-May-2023 % of Business plans with Percentage 0.00 20.00 34.26 actual funding Comments (achievements against targets): Page 45 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of MSME receiving Number 0.00 200.00 464.00 technical support 30-May-2018 30-May-2018 30-May-2023 of which female owned Number 0.00 80.00 109.00 30-May-2018 30-May-2018 30-May-2023 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Firms benefiting from private Number 0.00 500.00 632.00 sector initiatives 30-May-2018 30-May-2018 30-May-2023 of which female owned Number 0.00 80.00 264.00 30-May-2018 30-May-2018 30-May-2023 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Page 46 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Number of private sector Number 0.00 10.00 11.00 cooperative (GIE) established (cumulative) 30-May-2018 30-May-2018 30-May-2023 of which secured a market Number 0.00 5.00 2.00 access with a buyer 30-May-2018 30-May-2018 30-May-2023 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Satisfaction rating by project Percentage 0.00 75.00 34.00 beneficiaries administered through a survey 30-May-2018 30-May-2018 30-May-2023 questionnaire (%) (Citizen Engagement) Out of which female Percentage 0.00 75.00 89.45 beneficiaries Out of which youth Percentage 0.00 75.00 90.00 beneficiaries Out of which MSMEs Percentage 0.00 75.00 89.66 Page 47 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) beneficiaries Out of which Investment Percentage 0.00 75.00 0.00 Climate activities Comments (achievements against targets): Page 48 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Lorenzo Bertolini Task Team Leader(s) Clement Tukeba Lessa Kimpuni Procurement Specialist(s) Bella Diallo Financial Management Specialist Joelle Nkombela Mukungu Environmental Specialist Aurelie Marie Simone Monique Rossignol Environmental Specialist Steve Denis Jean Utterwulghe Team Member Issa Thiam Team Member Jean Edouard Albert Saint-Geours Team Member Federico Antoniazzi Team Member Kilara Constance Suit Team Member Grace Muhimpundu Social Specialist Peter Ngwa Taniform Team Member Alain Tienmfoltien Traore Team Member Jacqueline Beatriz Veloz Lockward Counsel Josyane Engracia Carmen Framery-Costa Team Member Mehdi Benyagoub Team Member Gokhan Akinci Team Member Ganna Musakova Team Member Herve Assah Team Member Page 49 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Lucienne M. M'Baipor Social Specialist Tanangachi Ngwira Team Member Supervision/ICR Benjamin Herzberg Task Team Leader(s) Lanssina Traore, Rose Caline Desruisseaux-Cadet Procurement Specialist(s) Francis Tasha Venayen Financial Management Specialist Lydie Madjou Financial Management Specialist FNU Owono Owono Social Specialist Marina Ngoma Mavungu Team Member Anclem Urielle Moukoubouka Nee Biniakounou Team Member Christophe Ngongo Muzyumba Team Member Fredy Cyprien Farel Mouyangou Team Member Issa Bitang A Tiati Social Specialist Fabena Divine Babindamana Nee Niemet Gampika Team Member Irma Seraphine Pella Team Member Ruggero Carlo Aldo Hubert Gambacurta Scopello Team Member Jesse Dieuveil Milandou Team Member Darren Danielle Minu Samba Team Member Marilyne Florence Mafoboue Youbi Team Member Albert Francis Atangana Ze Environmental Specialist Federico Antoniazzi Team Member Josiane Maloueki Louzolo Procurement Team Mistre Hailemariam Mekuria Team Member Karim Ouled Belayachi Team Member Alain Tienmfoltien Traore Team Member Mehdi Benyagoub Team Member Gokhan Akinci Team Member Si-Ambhaivan Sisombat Team Member Lorenzo Bertolini Team Member Page 50 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Tanangachi Ngwira Team Member B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY17 7.547 48,391.10 FY18 49.882 368,920.84 FY19 14.060 94,112.73 FY20 3.425 19,610.92 Total 74.91 531,035.59 Supervision/ICR FY18 .450 3,106.62 FY19 12.625 96,319.35 FY20 22.677 137,141.97 FY21 31.398 166,630.77 FY22 26.561 164,593.81 FY23 21.069 177,111.02 FY24 15.453 120,294.26 Total 130.23 865,197.80 Page 51 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) ANNEX 3. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Closing Percentage of Components (CFAF, millions) (CFAF, millions) Approval Regulatory and institutional support to strengthen the enabling 4,021,771,530 2,083,839,063 51.81 environment for private sector development Direct support to MSMEs to enhance the development and 6,362,782,900 6,137,174,838 96.45 competitiveness of selected value chains Project implementation and 897,911,252 3,193,448,258 355.65 coordination PPF execution 2,033,461,418 1,128,155,411 Total 13,315,927,100 12,542,617,570 94.19 Page 52 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) ANNEX 4. EFFICIENCY ANALYSIS Assumptions for the ERR Analysis 1. Some assumptions were made to be able to perform the ERR calculations at the close of project.31 • The average sales (turnover) for 2022 was compared to the average sales (turnover) for the first three months of 2023. This enabled to calculate a rate of sales growth of about 10.4 percent which was used for sales projections for 10 years. This is lower than the 12.6 percent sales growth estimated at project inception. This is also considerably lower than the sales revenue jump of about 257 percent between December 2021 and average sales for 2022. This is considered a reasonable assumption. • Average grants issued are as reported by project and indicated in the table in this Annex. • The reported figures for salary per employee were extremely low at about CFAF 30,000 per month or about US$650 per year for a country where minimum wage is estimated at US$2,000 or CFAF 100,000 per month. It is suspected that these figures were not appropriately reported. However, US$650 was used as the annual wage per employee consistent with the numbers reported. • Between the end of 2021 and 2022, the project created 350 new jobs. This was used for the calculations of the first year’s increase in salary income. However, the assumption is that only about 100 new jobs will be created after every 4 years or about 25 additional jobs per year. • Annual turnover for MSMEs selected through the BPC was about US$13,500 per firm compared to US$45,000 estimated at the inception of the project. However, firms that received matching grants outperformed the estimates, that is, turnover of US$45,881 against US$45,000. Total reported sales were divided by the number of firms that received grants. However, associated costs were high as running costs for the project management unit were added to costs for implementing specific activities. • The assumption at inception of the project was that there is a benefits multiplier of 4.375 percent for investment in business environment reforms (this yields US$15 million over 10 years). Based on the total cost that was finally attributed to the business environment reforms, the 4.375 multiplier produced a benefit of about US$25 million which was spread out over 10 years or a US$2.5 million per year benefit. • The discount rate for capitalization is maintained at 12 percent just as during project inception which corresponds to average rates given to SMEs by the banking sector in the 31 The new ERR was calculated using figures from the detailed project spreadsheet reporting results at the end of Q1 2023 (March and April 2023), a few months before closing. Hence, the numbers used in the following tables are slightly under the final project results in terms of number of firms, jobs, and so on. The Exchange Rate used as part of the ERR calculation is 554 which was used for ERR calculations at the outset of the Project. Page 53 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Central Africa Economic and Monetary Community (Communauté économique et monétaire d’Afrique centrale) area. Table 4.1. Assumptions in the Data Sheet at Inception of Project in 2018 Used to Estimate Project ERR 2.1 Business Plan 2.2 Matching Subcomponent Competition Grant 1.1 Annual turnover (US$) 45,000 45,000 Sales growth rate WITHOUT project (%) 6.6 6.6 Sales growth rate WITH project (%) 12.6 12.6 Business tax rate (%) 0.65 0.65 Annual headcount of firms 1 9 Employment growth rate WITHOUT project (%) 9.4 9.4 Employment growth rate WITH project (%) 25 25 Minimum wage (US$) 2,000 2,000 Number of firms 100 200 Average grant (US$) 50,000 40,000 Average matching subsidy coverage by firm 6,000 Benefit (US$) 15,000,000 Implementation cost (US$) 4,573,300 9,146,600 3,428,400 Table 4.2. ERR at Inception of the Project Total Project 55 Subcomponent 1.1 56 Subcomponent 2.1 36 Subcomponent 2.2 62 Table 4.3. Data Sheet at Close of the Project Used for ERR Projections Subcomponent 2.1: Subcomponent Subcomponent Business Plan 2.2: Matching 1.1 Competition Grant Annual turnover (US$) 13,582.00 45,881.00 Sales growth rate WITHOUT project (%) 6.6 6.6 Sales growth rate WITH project (%) 10.4 10.4 Business tax rate (%) 0.6 0.6 Annual headcount of firms 1 9 Employment growth rate WITHOUT project 9.4 9.4 Page 54 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) Subcomponent 2.1: Subcomponent Subcomponent Business Plan 2.2: Matching 1.1 Competition Grant (%) Employment growth rate WITH project (%) 15 15 Minimum wage (US$) 650.00 650.00 Number of firms 171 119 Average grant (US$) 5,000.00 38,000.00 Average matching subsidy coverage by firm Benefit (multiplier) (US$) 25,000,000.00 Implementation cost (US$) 6,187,965.81 8,842,440.78 5,873,956.03 Table 4.4. Expected Rate of Return at Project Close ERR Pre-implementation (%) Total Project 45 Subcomponent 1.1 54 Subcomponent 2.1 35 Subcomponent 2.2 48 Table 4.5. Comparison of ERR Pre- and Post-Implementation of Project (%) Pre-Project Post-Project Total Project 55 45 Subcomponent 1.1 56 54 Subcomponent 2.1 36 35 Subcomponent 2.2 62 48 Discussion 2. The ERR calculations tend to suggest that the target ERR of 55 percent was not fully achieved as the project obtained a total ERR of 45 percent. In any case, an ERR of 35 percent for the BPC component and an ERR of 48 percent for the matching grant component are quite high from a business standpoint and suggest that the project provided quite substantial value for money. It also appears that the project was too optimistic during design on what could be achieved in a tough business environment such as in Congo. Page 55 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS (Translated from French. Comments received on December 8, 2023.) 1. After examination of the report, we confirm that the conclusions of the ICR team reflect the state of implementation of the activities of the various components of the PADEC as well as the results obtained during its implementation. 2. However, it is incumbent upon us to point out that the note on the evaluation of the project during the World Bank's technical mission during the period of May 23–24, 2023, was not taken into account and was therefore not included in the table on page 3 of the report. The mission assessed the level of achievement of the development objective of the PADEC as ‘Satisfactory’ and the progress on the implementation of the activities was also ‘Satisfactory’. 3. It is important to emphasize that the PADEC achievements were met with a complete enthusiasm at the national level, both from actual beneficiaries and potential ones (as more than 500 additional business plans were considered as part of a potential PADEC Phase II before the idea of a new project was abandoned). It is obvious to us that this response and behavior from the beneficiaries deserves to be strongly supported by the financing of a new project supporting the private sector in the Republic of Congo. 4. Lastly, a lesson learned with regard to funds made available to financial institutions or microcredit institutions is that they should benefit from an insurance policy to safeguard the security of the funds. Original text received: 1. Au terme de l’exploitation du Rapport, nous confirmons que les conclusions de l’équipe ICR traduisent bien l’état de mise en œuvre des activités des différentes composantes du PADE ainsi que les résultats obtenus pendant son exécution. 2. Cependant, il nous revient de souligner que la note sur l’évaluation du projet pendant la mission technique de la Banque mondiale courant la période du 23 au 24 mai 2023, n’a pas été pris en compte et n’a donc pas été insérée dans le tableau de la page 3 du Rapport. Cette mission avait jugé «satisfaisant» le niveau d’atteinte de l’objectif de développement du PADEC et le progrès sur la mise en œuvre des activités été aussi «satisfaisant». 3. Il est important de souligner que les réalisations du PADEC ont suscité au plan national, un engouement total auprès des bénéficiaires tant réels que potentiels (plus de 500 plans d’affaire disponibles n’ont pu être financés car, l’espoir focalisé sur la prorogation du PADEC ou la seconde phase du Projet n’a pas vu le jour. Il est clair que cette attitude des bénéficiaires mérite d’être fortement soutenue par le financement d’un nouveau projet dans le domaine du secteur privé en République du Congo. 4. Enfin, au sujet des fonds mis à la disposition des établissements financiers ou de microcrédits, ils devront désormais bénéficier d’une police d’assurance pour la sécurité. Page 56 of 57 The World Bank Support to Enterprise Development and Competitiveness Project (P161590) ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) References 1. Banerjee, A., and E. Duflo. 2004. “Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending Program.” CEPR Discussion Paper 4681. 2. Blattman, C., E. P. Green, J. Jamison, M. C. Lehmann, and J. Annan. 2016. “The Returns to Microenterprise Support among the Ultrapoor: A Field Experiment in Postwar Uganda.” American Economic Journal: Applied Economics 8 (2): 35–64. 3. Cho, Y., and M. Honorati. 2014. “Entrepreneurship Programs in Developing Countries: A Meta Regression Analysis.” Labour Economics 28 (C): 110–130. 4. de Mel, S., D. McKenzie, and C. Woodruff. 2008. “Returns to Capital in Microenterprises: Evidence from a Field Experiment.” Quarterly Journal of Economics 123 (4): 1329–1372. 5. Fafchamps, M., D. McKenzie, S. Quinn, and C. Woodruff. 2014. “Microenterprise Growth and the Flypaper Effect: Evidence from a Randomized Experiment in Ghana.” Journal of Development Economics 106 (C): 211–226. 6. Grimm, M., J. Krüger, and J. Lay. 2011. “Barriers to Entry and Returns to Capital in Informal Activit ies: Evidence from Sub-Saharan Africa.” Review of Income and Wealth 57: S27–S53. 7. Grimm, M., S. Soubeiga, and M. Weber. 2020. Matching or Cash Grants for Entrepreneurs: What Is More Effective? Experimental Evidence from the Bagré Growth Pole Project in Burkina Faso. World Bank, Washington, DC. 8. Grimm, M., S. Soubeiga, and M. Weber. 2021. “Short-Term Impacts of Targeted Cash Grants and Business Development Services: Experimental Evidence from Entrepreneurs in Burkina Faso (No. 14892).” IZA Discussion Papers. 9. Kremer, M., J. N. Lee, J. M. Robinson, and O. Rostapshova. 2011. “The Return to Capital for Small Retailers in Kenya: Evidence from Inventories.” Harvard University. 10. McKenzie, D., and C. Woodruff. 2008. “Experimental Evidence on Returns to Capital and Access to Finance in Mexico.” World Bank Economic Review 22 (3): 457–482. 11. McKenzie, D. J., and C. Woodruff. 2006. “Do Entry Costs Provide an Empirical Basis for Poverty Traps? Evidence from Mexican Microenterprises.” Economic Development and Cultural Change 55 (1): 3–42. 12. Schündeln, M. 2005. “Modeling Firm Dynamics to Identify the Cost of Financing Constraints in Ghanaian Manufacturing.” Proceedings of the German Development Economics Conference, Kiel 2005 29, Verein für Social politik, Research Committee Development Economics. 13. Udry, C., and S. Anagol. 2006. “The Return to Capital in Ghana.” American Economic Review 96 (2): 388– 393. 14. World Bank. 2016. How to Make Grants a Better Match for Private Sector Development. World Bank. 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