Document of

The World Bank

FOR OFFCLAL USE ONLY

Report No. 11861

PROJECT COMPLETION REPORT

REPUBLIC OF NIGER

INDUSTRIAL DEVELOPMENT PROJECT(CREDIT 1225-NIR)

MAY 6, 1993

Industry and Energy DivisionCountry Department VAfrica Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank 2uthorization.

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CURRENCY EOUIVALENTS

At Appraisal US$ I = CFAF 270Intervening Years Average US$ 1 = CFAF 390Completion Year Average US$ 1 = CFAF 275

ABBREVIATIONS

BCEAO - Banque Centrale des Etats de l'OuestBDRN - Banque de Developpement de le Republique du NigerCFAF - Communaute Financiere Africaine FrancCMAN - Centre des Metiers d'Art du NigerGON - Government of NigerIDA - International Development AssociationOPEN - Office de Promotion de l'Enterprise NigeriennePAIPCE - Programme d'Appui aux Initiatives Privees et a la Creation d'EmploisPCR - Project Completion ReportSAR - Staff Appraisal ReportSME - Small- and Middle-Sized EnterpriseSTB - Societe Tunisienne de BanqueTA - Technical AssistanceUMOA - Union Monetaire Ouest AfricaineUNDP - United Nations Development ProgrammeUNIDO - United Nations Industrial Development Organization

FOR OFICIAL USE ONLYTHE WORLD BANK

W"hington, D.C. 20433U.SA

Offlice of Director-GeneralOperatlon Evaluaton

May 6, 1993

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Niger -Industrial Development Project (Credit 1225-N1R)

Attached is a copy of the report entitled 'Project Completion Report on Niger - IndustrialDevelopment Project (Credit 1225-NIR)" prepared by the Africa Regional Office. No contribution wasreceived from the Borrower.

The main objectives of the project were to provide a line of credit to the Banque deDeveloppement de la Republique du Niger (BRDN) in support of small-medium scale industry (SMI),and strengthen two agencies that promoted and extended technical assistance to SMI. These objectiveswere not attained.

Deficiencies in design, absence of an enabling environment, adverse macroeconomicdevelopments, BRDN's unsound lending practices and financial position, and lack of commitment bythe Government and BDRN's management resulted in the liquidation of all three intermediaries.

The PCR is of high quality, comprehensive in its coverage, and candid in its assessment ofproject outcomes.

Given the demise of the institutions involved, the project outcome is rated as veryunsatisfactory, and its impact on institutional development as negligible.

Attachment

This docmat ha a rerictd distribution and may be used by redpients ooly in the pwformance of thir ofeil ds. Itscontetu uay not otwerwise be disclosed without World Bank authorization.

FOR OFFICIAL USE ONLY

PROJECT COMPLETION REPORT

REPUBLIC OF NIGER

INDUSTRIAL DEVELOPMENT PROJECT(CREDIT 1225-NIR)

TABLE OF CONTENTS

PREFACE . .................................................EVALUATION SUMMARY ...................................... iii

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE ................ 1

1. Project Identity ............................................ 12. Background .............................................. 13. Project Objectives and Description ................................ 2

Project Objectives ....................................... 2Project Description ....................................... 2Changes in Project Scope ................................... 3

4. Design and Organization ...................................... 4Institutions ............................................ 4Changes in Design ....................................... 6Evaluation of Project Design ................................. 6

5. Project Implementation ....................................... 7Credit Effectiveness and Project Start-up ......................... 7Implementation ......................................... 7Procurement ........................................... 8Disbursement and Project Costs ............................... 8

6. Project Results ............................................ 8Attainment of Objectives ................................... 8

7. Project Sustainability ........................................ 108. Bank Performance .......................................... 109. Findings and Lessons Learned .................................. 1110. Borrower Performance ....................................... 1111. Performance of Consultants .................................... 1212. Project Documentation and Data ................................. 12

ANNEX 1: STATUS OF LINE OF CREDIT ........................... 13

PART II - PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE ....... 14

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS (cont'd.)

Page

PART HI - STATISTICAL INFORMATION ........................... 14

1. Related Bank Loans and Credits ............... .................. 142. Project Timetable ...................... .................... 143. Credit Disbursements ....... ............ .. ................... 154. Project Costs and Financing ...... ........... ................... 165. Project Result ........................ ..................... 16

A. Direct Benefits ......................................... 16B. Technical Assistance (TA) and Studies ........................... 17

6. Status of Covenants ..................... .................... 187. Use of Bank Resources ....... ........... .. ................... 19

A. Staff Inputs ............................................ 19B. Supervision Missions ...................................... 20

PROJECT COMPLETION REPORT

REPUBLIC OF NIGER

INDUSTRIAL DEVELOPMENT PROJECT(CREDIT 1225-NIR)

PREFACE

This is the Project Completion Report (PCR) for the Industrial Development Project in Nigerfor which Credit 1225-NIR in the amount of US $16 million (SDR 14 million) was approved on April20, 1982. The Credit was due to close on December 31, 1987. After three extensions, requested bythe Government of Niger, the Credit was finally closed on December 31, 1990. The amount of thecredit utilized was US $14.6 million (SDR 12.2 million at prevailing exchange rates) with the finaldisbursement (of previously committed funds) being made in April 1991.

The PCR was prepared by the Industry and Energy Division of the Sahelian Department, AfricaRegion (Preface, Evaluation Summary, Parts I and m of the PCR) and is based on information fromthe Staff Appraisal Report, the President's Memorandum, Credit and Project Agreements, SupervisionReports, correspondence between the Bank and the Borrower and Beneficiaries, internal Bankcorrespondence and interviews with project task managers and Resident Mission staff. There was noProject Completion mission.

The Resident Mission in Niamey attempted to have Part II completed by the Borrower.However, since all three credit beneficiaries have been dissolved (between 1985 and 1990), and it hasbeen over 24 months since the Credit closing date, it is unlikely that useful information will beforthcoming.

I

I

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PROJECT COMPLETION REPORT

REPUBLIC OF NIGER

INDUSTRIAL DEVELOPMENT PROJECT(CREDIT 1225-NIR)

EVALUATION SUMMARY

Project Objectives

Conceived as a follow-up operation to the Industrial and Artisan Sector Employment CreationProject (Credit 809-NIR approved in May 1978), the goal of the Industrial Development Project (alsocalled the "Second IDF Project") was to continue to diversify the economic base of the Nigerieneconomy through further strengthening of the sectors outside agriculture and mining and the institutionalinfrastructure related to these sectors. To this end, the project was to (i) provide a line of credit toenable BDRN to continue its term financing operations, including lending to new small, medium-sizedand labor intensive enterprises, lending to other new enterprises, and easing access to investmentresources needed to strengthen existing enterprises; and (ii) finance technical assistance to BDRN,OPEN and CMAN, and modest capital assistance to OPEN, to help strengthen internal efficiency andimprove their services to Nigerien entrepreneurs. The project placed special emphasis on providingtechnical assistance to the growing indigenous construction subsector (through OPEN) and to the leatherartisanal subsector (through CMAN).

ImDlementation Experience

The appraisal was completed in February 1982 and the Credit and Project agreements signedin April 1982. After some delays in seizing necessary decisions on the part of the Government of Niger(GON), the Credit became effective in December 1982.

The worldwide economic downturn, which began in 1980-81, quickly exposed the fragilecondition of the institutions supported by the project. BDRN, a commercial and development bankappraised as a reasonably sound institution, had been selected as the key vehicle for projectimplementation. Its critical financial condition, largely the result of years of improper lending practicesand inadequate internal monitoring, was revealed in 1983. It became apparent in the early phases ofimplementation that a shift in project emphasis was necessary. The Project Agreement was amendedin December 1987, thereby officially shifting the project's focus from developing industry to basicallysalvaging BDRN (paras. 3.3, 4.21-4.25). This objective proved to be extremely costly and could notbe achieved (para. 6.13-6.14).

Deficiencies in project design (para. 4.3) and general economic malaise in the country, madeeffective project supervision difficult but all the more necessary. A combination of high qualitytechnical assistance, close and responsive Bank supervision, and firm political commitment on the partof the Government and BDRN management was essential if the project was to be prevented fromcompletely unravelling. Technical assistance was inadequate and of doubtful quality (para. 11.02), Banksupervision was generally lacking in depth and was not sufficiently timely in response (paras. 8.02-

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8.03), and the Government and BDRN management lacked the ability and political will to take difficultdecisions (paras. 10.01-10.02).

The original Closing Date of December 31, 1987 was extended three times in order to adjustthe scope and conditions of the project. The first extension was mainly aimed at continuing to supportBDRN's rehabilitation and OPEN's privatization (para. 3.3). The second and third extension wereallowed to facilitate BDRN's restructuring and privatization. The Credit was finally closed onDecember 31, 1990.

Project Results

The attainment of project objectives ranged from marginal to dismal. The line of creditcomponent to support industrial development was reduced from SDR 10.46 million to SDR 7.05 millionof which only SDR 4 million was actually disbursed (para. 3.33 and Annex 1). According to ResidentMission staff, the small and medium sized enterprises (SMEs) financed are doing reasonably well butmost of the larger enterprises have either failed or in arrears (para. 6.1 and Annex 1).

The credit appraisal capabilities of BDRN's development department were strengthened anddata-processing of the bank's lending operations was partially computerized. However theseimprovements, and additional technical assistance financed by the project, were not sufficient to savethis institution (para. 6.12). Attempts begun in 1989 to privatize BDRN concluded with its eventualliquidation in mid-1990 and the creation of SONIBANK, with Societe Tunisienne de Banque (STB) asthe major single shareholder and manager. SONIBANK is currently owned by STB (25%), BCEAO(25%) and GON (20%); to date, the 30% equity capital expected from the private sector is still tocome. In all, about SDR 3.85 million was spent on training and consulting services provided to BDRN.

The two other institutions supported by the project, CMAN and OPEN were dissolved in 1985and 1989 respectively. Supervision reports do not elaborate on the evolution of the sub-sectors (leather,construction, industry, etc.) supported by these institutions (para. 6.15).

Studies financed under the project in the areas of banking, industrial incentives and petroleumdistribution have not led to any significant sectoral reforms (para. 6.16). The project provided somefinancing to civil servants who had voluntarily retired from the government to establish their ownenterprises. According to supervision reports there was modest success in the creation of suchbusinesses, however, no information is provided about their performance.

Project Sustainability

On balance, apart from the SMEs and possibly financing the inventories of the Grande Marchefire victims, there are almost no testaments to the project's success. Technical assistance and capitalprovided for institution strengthening have not resulted in a single institution supported by the projectoutliving the Credit closing date; recommendations of the studies financed have not been implementednor resulted in improved sectoral policies.

Lessons Learned

Key lessons learned include the need to integrate the financing of investment projects andtechnical assistance for institutional support with the reform of critical sectoral policies. If funds aregiven to the wrong institution, working under skewed incentives, without proper accountability

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mechanisms, the result will be disastrous, even if the activity financed (either trade or industrialdevelopment) is by itself profitable. The objective of sectoral development can only be adequatelyfulfilled in the presence of an enabling environment (paras. 4.334.34). In addition, project designshould attempt to identify, and adequately prepare for, the downside risks to a project. Since allcontingencies cannot be predicted during preparation, the responsibility of supervision staff to effect on-going course corrections becomes essential for achieving project goals.

Investment and technical assistance projects should incorporate some key performance measuresin the project design by which supervision teams can evaluate project progress and the quality oftechnical assistance. In the case of the subject project, about 50 percent of total project costs weredisbursed for technical assistance and consultancy services, yet there was virtually no critical assessmentof whether, and to what extent, the objectives of this assistance were being met. A corollary to thisis the need for Task Managers to devote careful and critical attention to the preparationlapproval ofTerms of Reference for technical assistance and consultant services.

I

PROJECT COMPLETION REPORT

REPUBLIC OF NIGER

INDUSTRIAL DEVELOPMENT PROJECT(CREDIT 1225-NIR)

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE

1. Project Identity

Name Industrial Development ProjectCredit Number 1225-NIRRVP Unit Africa RegionCountry Republic of NigerSector Industry and services supporting, but not based on, uranium or

agriculture; other industry outside the uranium and agriculture sectors;finance and banking; artisanal and construction.

2. Bacgund

2.01 Niger belongs to the West African Monetary Union (UMOA) which shares a common CentralBank (BCEAO) and a common currency (the CFA Franc). Full convertibility of the CFA Franc intoFrench Francs and liberal trade policies followed by UMOA members have strengthened trade linksbetween Niger and its UMOA neighbors. An agreement among UMOA members allows BCEAO toimpose some discipline over the monetary and fiscal policies of member countries in order to maintainconvertibility. Until 1989 BCEAO's monetary management was characterized by the use ofeconomically inefficient instruments which included regulated and preferential interest rates and creditallocation for selected "priority" sectors such as the Government, small-scale enterprises, short-termcrop financing and housing.

2.02 Awareness of shortcomings in BCEAO's financial policies resulted in an IDA supported reformprogram initiated in 1989 aimed at bringing BCEAO's policies more in line with 'international'standards. The program has resulted in some reform such as the abandonment of preferential discountrates, tightened control of credit to the public sector, and streamlined supervision of banks in theBCEAO zone by a supranational supervision commission. BCEAO rules remain less stringent thaninternational rules, especially in the area of external independent audits, which are still not required.

2.03 Niger's economy has developed along dual lines, with slow, but steady, growth in the traditionalrural sector based on agriculture and more substantial, but fragile (because of its dependence on worlduranium markets), growth in uranium production and earnings. On balance, the economy's performanceduring the 1970s was good, particularly by Sahelian standards. This was largely due to increasedrevenues from uranium exports and the Government's relatively prudent economic policies. The 1980sstarted with signs of a longer term economic crisis. Between 1979 and 1982 uranium prices fell bymore than 50%, exports stagnated and revenues declined sharply from CFAF 25 billion to CFAF 13billion. Agricultural production also declined and continued unfavorable climate forced Niger toincrease grain imports.

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2.04 The uncertainties associated with uranium mining and agriculture resulted in emphasis beingplaced on the development of "secteurs d'accompagnements" and local handicrafts as a means ofaugmenting employment and income for the population (estimated at 5.5 million at the time ofappraisal) and diversifying the country's economic base. The "secteurs d'accompagnements" were thosesectors which supported, and benefitted from, the growth in agriculture and uranium mining. TheGovernment's diversification strategy was reflected in the objectives of IDA's Industrial DevelopmentProject (subject project - Credit 1225-NIR) and its precursor, the Industrial and Artisan SectorEmployment Creation Project 1/.

2.05 In addition to employment creation, the purpose of the Industrial and Artisan Developmentproject was to strengthen sectoral institutions through the provision of technical and financial assistance.The institutions receiving technical assistance, and identified as vehicles for the implementation of thisproject, were the Banque de Developpement de le Republique du Niger (BDRN), which was to serveas the focal point of project coordination, the Office de Promotion de l'Enterprise Nigerienne (OPEN)and the Centre des Metiers d'Art du Niger (CMAN). Project objectives were only partly achieved:(i) six enterprises were financed, instead of the forty estimated during appraisal, and about 40% of thejob creation target was met; (ii) the technical assistance included in the project was able to develop theidentified institutions to a considerable extent but substantial gaps remained.

2.06 The appraisal of the Industrial Development Project judged the Industrial and ArtisanDevelopment project to have had a positive impact on institution building, vis-a-vis BDRN and OPEN,while being less successful in employment creation. It was also felt that it was premature to assess thefull impact of the project, especially in developing the leather artisanal sub-sector.

3. Project Objectives and Description

3.1 Proiect ObWectives: Conceived as a follow-up operation to the first project, the goal of theIndustrial Development Project was to continue to diversify the economic base of the Nigerienneeconomy through further strengthening of the sectors outside agriculture and mining and the institutionalinfrastructure related to these sectors. To this end, the project would (i) provide a line of credit toenable BDRN to continue its term financing operations, including lending to new small, medium-sizedand labor intensive enterprises, lending to other new enterprises, and easing access to investmentresources needed to strengthen existing enterprises; and (ii) finance technical assistance to BDRN,OPEN and CMAN, and modest capital assistance to OPEN, to help strengthen internal efficiency andimprove their services to Nigerienne entrepreneurs. The project placed special emphasis on providingtechnical assistance to the growing indigenous construction subsector (through OPEN) and to the leatherartisanal subsector (through CMAN).

3.2 Project Description: The Project, involving a total credit of SDR 14 million (equivalent to US$ 16 million at the time of appraisal) included a line of credit, to be administered by BDRN, and threetechnical assistance programs to support and strengthen BDRN, OPEN and CMAN. The IDA creditof US$ 16 million was made available to finance 75% of the total project cost estimated at US $ 21.3million.

1/ IDA Credit 809-NIR - Credit for US$ 5 million for the Industrial and Artisan Sector EmploymentCreation Project was approved in May 1978, became effective in February 1979 and was fullydisbursed in June 1983.

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3.21 Part A: Bangue de Developpement de le Republigue du Niger (BDRN)

(a) Line of Credit: US$ 12 million (SDR 10.5 million) for investment in sub-projects with20% being earmarked for small-scale and labor-intensive enterprises. Resources on-lentto BDRN (by the Government) to provide medium, long-term or equity financing forviable development projects in support sectors including small and medium-sizedenterprises (SMEs), industrial rehabilitation, agro-processing, manufacturing, repairfacilities, etc. On-lending annual interest rates between the Borrower and BDRN wereset at 7.5% for loans to small-scale or labor-intensive enterprises and 10% for all otherinvestment enterprises. BDRN's margins on these sub-loans were to be at least threepercentage points.

(b) Technical Assistance: Grant of US$ 0.8 million (SDR 0.7 million) to BDRN for:

i) Strengthening the Development Department by financing advisors and providingstaff training.

ii) Establishing an in-house training unit by financing specialists, consultants,materials and equipment.

iii) Improving the computerized data processing and management informationsystem.

3.22 Part B: Office de Promotion de l'Enterprise Nigerienne (OPEN)

(a) US$ 1.88 million (SDR 1.66 million) as a grant to address operating constraints, helpestablish a Technical Assistance Unit for indigenous construction contractors andcontribute (SDR 0.47 million) to the construction of OPEN's premises.

(b) General Support

(i) Improve OPEN's organization and strategy in assisting SMEs and artisans.

(ii) Conduct strategy related studies to identify import substitution and exportopportunities, and forms of assistance most appropriate to the artisan sector.

(iii) Finance the development of OPEN-sponsored training of workers in technicalsubjects such as bookkeeping, woodworking, electricity and plumbing.

3.23 Part C: Centre des Metiers d'Art du Niger (CMAN)

A grant of US$ 1.2 million (SDR 1.05 million) to be passed on to CMAN to provide technicalservice to improve the organization's management, production and marketing activities, and finance theestablishment/development of separate training facilities and support services for all leather artisans.

3.3 Changes in Project Scope: Slow disbursements in the line of credit, BDRN's growing financialdifficulties and CMAN's dissolution in 1985 made changes in project scope necessary during the courseof project implementation. Agreement between the Government and IDA to place greater emphasis onBDRN's rehabilitation was reflected in the Amendment to the Development Credit and Project

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Agreements formalized in December 1987. Emphasis was also placed on financing studies to determineconditions needed to promote entrepreneurship and the private sector. Specific changes included:

3.31 On-lending annual interest rates under the Subsidiary Credit Agreement between the Borrowerand BDRN were reduced from 7.5% to 4.5% on the outstanding principal amount to be on-lent toinvestment enterprises which qualified as small-scale or labor-intensive, and from 10.0% to 6.5% onthe outstanding principal to be on-lent to all other investment enterprises. This adjustment wasprecipitated by a reduction of 2% in BCEAO's lending rates in 1986. BDRN's margins on these sub-loans were increased from at least three percentage points to at least four percentage points.

3.32 In November 1983, a consultant study on BDRN operations revealed the bank's precariousfinancial condition, which was, in fact, already known internally and to the GON. Based on theconsultant study, in October 1984 IDA presented the Government and BDRN with an action planspelling out specific measures aimed at restoring the bank's capital base and operational capability. Thisplan (see para. 4.21) became an integral part of the IDA Structural Adjustment Credit (SAL) undertakenin 1986 and the new center-piece of the Industrial Development Project.

3.33 Reflecting the shift in project emphasis, reallocation of Credit proceeds resulted in an increasein training and consultant services to BDRN from SDR 0.7 million to SDR 3.0 million and a 83%increase (from SDR 1.2 million to SDR 2.2 million) in technical support to OPEN. Two newcategories, "Studies" (SDR 0.5 million) and "Goods and Services for the Creation of Enterprises" (SDR0.45 million) were created. The latter category was included in a further attempt to stimulate privateentrepreneurship mainly by providing assistance to former civil servants, who had voluntarily resigned,to start their own enterprises. This component was added as Part D to Schedule 2 of the CreditAgreement and in Project Description (para. 3.2). The line of credit was reduced from SDR 2.18million to SDR 1.55 million for small-scale and labor-intensive investment projects and from SDR 8.28million to SDR 5.5 million for other investment projects.

3.34 Formalized in December 1987, the focus of the project had in fact shifted by 1985 fromdeveloping industry to salvaging BDRN.

4. Design and Organization

4.01 Conceived as a follow-up operation, the project design drew on the implementation experiencegained during the first project. The project design selected BDRN, OPEN and CMAN as theinstitutions responsible for implementing project strategy and achieving project goals. At the time ofproject preparation and appraisal, BDRN was judged to be a competent and sound financial institution.The performance of OPEN and CMAN was showing signs of improvement. Correction of institutionalweaknesses was incorporated into project design by earmarking credit proceeds to finance the technicalassistance needed for institutional strengthening.

4.1 Institutions

Bangue de Developpement de le Republigue du Niger (BDRN)

4.11 Since its inception in 1961, BDRN had been both a commercial and development bank. At thetime of appraisal, Government and parastatal entities controlled 59% of BDRN shares; the rest of theshares were distributed between Nigerien private investors (4.2%), BCEAO (12.3%) and foreignshareholders (24.5%). The Minister of Finance was the Chairman of the Board of Directors and the

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bank manager was generally a ministerial appointee. The Government and non-governmentshareholders (BCEAO and foreign shareholders) were represented on the Board. Commercialoperations represented 70% of BDRN's operations and its primary source of profits. BDRN was theleading term lending institution in the country and its Development Department was responsible for allmedium- and long-term financing. Interest rate structures for both commercial and development loanswere established and regulated by BCEAO.

4.12 Although it was judged to be one of the strongest development institutions in the Region,technical assistance was to be provided by the project to strengthen the Development Department andto improve the data processing and management information systems of the bank. The creation ofOPEN in 1978, and further support provided under the project, allowed OPEN to function as a technicalassistance partner to assist BDRN financed projects.

Office de Promotion de l'Enterprise Nigerienne (OPEN)

4.13 Essentially a state organization, OPEN was incorporated in 1978 with most of the technical andfinancial assistance provided by a UNDP/UNIDO project of US$ 1.5 million (including five expatriateadvisors). IDA contributed US$ 0.5 million to finance one senior advisor and some initial operatingcosts. At the time of appraisal, OPEN's budgetary requirements were being met by a Governmentsubsidy of CFAF 50 million (US$ 0.2 million) per annum. OPEN's General Manager (always a civilservant) was responsible to a board composed of representatives of various ministries and professionalorganizations. The Chairman of the Board was the Minister of Mines and Industry. The StaffAppraisal Report mentioned that OPEN had insufficient professional staff and that staff turnover washigh. The Report indicated that the Government would agree to second three additional professionalsto OPEN before December 1983. Records do not elaborate the extent to which this was achieved.

4.14 OPEN was established to help promote new enterprises and investments, provide technicalassistance to new and on-going enterprises, prepare projects for BDRN financing and contribute tobuilding managerial, business and technical expertise in the country. Project appraisal recognizedweaknesses in OPEN's organization and operations. Provisions were made for augmenting theprofessional staff, including hiring a senior advisor to assist OPEN's management in the critical areasof strategy, organization and assistance to artisans. Funds were earmarked to improve OPEN'spromotion of training programs and a training unit was established to provide technical assistance tosmall indigenous contractors in the construction sub-sector. The project also made a significantcontribution to finance the construction of OPEN premises.

4.15 Strategy related studies to identify investment opportunities connected with export promotionand import substitution were included in the project design. Studies were to include a survey productsimported from neighboring countries and determine the level and nature of incentives required topromote identified opportunities/sub-sectors.

Centre des Metiers d'Art du Niger (CMAN)

4.16 The first project appraisal identified the leather artisan subsector as the most promising segmentof the traditional sector. CMAN was established as a self-governing cooperative under this project (in1980) to improve product design and production techniques and develop exports of leather artisanproducts. Appraisal of the second project recognized weaknesses in CMAN's management, accountingsystems and in-house technical expertise. CMAN was essentially functioning as a parastatal employingartisans and not as a promoter of artisanal entrepreneurship. The project was designed to address these

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institutional shortcomings by having CMAN prepare a three-year action plan and budget (1982-85) andratify statutes establishing itself as an independent corporation. The new focus was to be on providingtraining, support services and assistance to independent artisans. Disbursement of IDA funds was tobe contingent upon satisfactory implementation of these requirements.

4.2 Changes in Design: The project was officially redesigned in December 1987 to reflect changesin scope (para. 3.3).

4.21 BDRN: The rehabilitation of BDRN was based, inter alia, upon tightening of BDRN credit tothe Government sector, improved loan recovery (from the public and private sectors), liquidity injection(by Government), equity injection (from private and international entities) and a reduction in operatingcosts (mainly through staff reductions).

4.22 OPEN: Weak management (a senior advisor was never hired, an industrial engineer was hiredinstead), greater emphasis on promoting large scale enterprises (employing at least 50 persons) and theabsence of an effective mechanism to assist potential small enterprises prepare bankable projectsprecipitated an IDA led effort to improve OPEN performance through privatization. Technicalassistance to OPEN was discontinued in 1987 pending the results of an IDA funded study aimed atrestructuring the organization. Based upon the study's recommendation, OPEN was liquidated in 1989.

4.23 CMAN: Inability to meet IDA conditions (para. 4.16), partly due to lack of Governmentcommitment, led to the dissolution (at the Government's request) of this organization in 1985. Withthe dissolution of CMAN, this component was dropped from the project.

4.24 Studies (New category 6): Following the amendment to the Credit Agreement in December1987, IDA financed studies were conducted to deepen the Bank's knowledge of the structure ofentrepreneurship in Niger. Studies focussed on developing incentives for industrial investment. Studieswere also directed at banking sector reform, creating a "societe de caution mutuelle" and at improvingpetroleum distribution in the country.

4.25 Goods and Services for the Creation of Enterprises (New category 7): This category becameoperational in 1989. The beneficiaries of this component were largely government employees who hadvoluntarily retired to start their own enterprises. Part of these funds were also used to rehabilitateBDRN employees who lost their jobs as a result of the bank's restructuring.

4.3 Evaluation of Project Design: The project, as conceived and designed, recognized the risksposed by contemporary macro-economic developments and managerial weaknesses within OPEN andCMAN. However, risks to the project posed by banking sector (particularly BDRN) policies andpractices, and the ability and willingness of the Government to undertake sectoral reform were notadequately addressed. Where project risks were identified, conditionality or contingency planning wasvirtually absent. The BDRN rehabilitation action plan attempted to correct this weakness, butconditionality was not effectively applied.

4.31 Insufficient analysis was conducted on BDRN's asset structure and lending practices duringpreparation. BDRN's fragile financial condition was revealed by the consultant study completed inNovember 1983. The study indicated that BDRN had been plagued by inadequate management systems,improper banking practices and general management weaknesses for several years. The downturn ingeneral economic conditions further aggravated the bank's financial difficulties. Failure to identify and

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address sectoral and BDRN deficiencies during project preparation, meant that bolder, possiblyunrealistic, actions were required later on to rehabilitate the bank.

4.32 Although technical assistance was emphasized, performance based incentives and revenueschemes were not instituted to allow OPEN and CMAN to develop as independent, self-sustainingentities. If available, the inclusion of private capital and private sector management into theseorganizations at the early stages may have improved their effectiveness. In the case of BDRN, thefixing of lending margins by BCEAO resulted in margins which were often insufficient to cover thecosts of lending to SMEs and acted as a disincentive to promoting the bank's development portfolio.This was further aggravated by BDRN's internal inability to monitor the costs and revenues associatedwith its various activities.

4.33 Although the project could not be expected to bear the burden of overall sectoral reform, a lineof investment credit was made available without addressing the investment code, taxation policies,licensing procedures, etc. The absence of an enabling policy environment, in addition to the economicdownturn, resulted in the extremely sluggish demand for the line of credit.

4.34 Banking sector reform was not specifically addressed until a Banking Sector Study was initiatedin 1989. This aspect seems important in retrospect since BDRN, a commercial and development bank,was chosen as the central coordinating agency. Since it was not possible to separate the bank'sdevelopment and commercial operations, project preparation should have conducted a deeper, morecomprehensive analysis of the bank's practices and incorporated a reform component into the projectdesign.

4.35 The project was designed to take an integrative approach to achieving project objectives byhaving BDRN, OPEN and CMAN responsible for their respective components. However, inter-institutional relationships, particularly at the operating level, were not developed or addressed. The lackof understanding or rapport between OPEN and BDRN was frequently manifested in BDRN'sDevelopment department rejecting loan applications prepared by OPEN and criticizing OPEN's projectpreparation capabilities.

5. Project Implementation

5.1 Credit Effectiveness and Project Start-up: A change of government, coinciding with theappraisal mission in April 1981, resulted in the need for a post-appraisal mission in July 1981 toreconfirm the Government's commitment to the objectives and strategy of the project. Aside from thatthe project got off to a good start. The Staff Appraisal Report (SAR) was completed in February 1982and the Credit and Project agreements signed in April 1982. There was some delay in the signing ofthe Subsidiary Credit Agreement between the Borrower (Government of Niger) and BDRN and thecredit finally became effective in December 1982. Since proceeds were still available from the Industryand Artisan Sector Employment Creation Project the timing of credit effectiveness was of littleconsequence.

5.2 Imglementation:

5.21 The worldwide economic downturn beginning in 1980-81 and the continued decline in globaluranium markets magnified deficiencies in the banking sector and adversely affected the generalinvestment climate. Essentially, it was BDRN's commercial trade related portfolio and not itsdevelopment or term lending portfolio, which was predominantly responsible for the urgent need for

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the bank's rehabilitation and its eventual liquidation. BDRN staff's preoccupation with the commercialportfolio, insufficient margins from its development operations and OPEN's difficulty in preparingbankable projects contributed to the virtual stagnation in the development portfolio after 1983. GivenBDRN's important role in project implementation, its growing. difficulties seriously jeopardized theachievement of project objectives.

5.22 IDA's support to BDRN survival was contingent upon Government/BDRN implementation ofthe IDA action plan (para. 4.21). Some reforms were implemented - BDRN discontinued prefinancinggovernment investment and the Government assumed the financial liability for previous debts contractedby the bank on its behalf. On the other hand, there were long delays in reducing operating costs andimproving loan recovery and BDRN's situation continued to deteriorate. Government and BDRNmanagement lacked the political will to effect necessary cutbacks in employment and the collection ofoverdue loans. Bank supervision staff were not satisfied with GON and BDRN managementperformance. However, IDA funding continued based upon the rationale that rehabilitation measureswere being adequately implemented, that the only development bank in the country could not be allowedto collapse, and to prevent a "run" on the Nigerien banks --and its impact on the banking system-- ifBDRN collapsed.

5.23 In the case of the two other institutions, OPEN and CMAN, Bank supervision staff linked creditdisbursement more directly with project implementation by these agencies. Technical assistance andstudies aimed at performance improvement were financed by the project (para. 4.22-4.23). Strategyrelated studies directed at surveying official and unofficial imports, proved impractical and wereabandoned. Studies to identify regional investment opportunities proved largely fruitless. Theassistance to small indigenous contractors was hampered by the slowdown in construction activity.

5.24 The original Closing Date of December 31, 1987 was extended three times in order to adjustthe scope and conditions of the project (para. 3.3). The Credit was finally closed on December 31,1990.

5.3 Procurement: There were no particular procurement problems identified in the supervisionreports.

5.4 Disbursement and Project Costs: Disbursements under the line of credit were significantlyslower than planned owing to problems discussed above and eventually resulted in a change in projectscope and a reallocation of funds (para 3.3). In all, SDR 12.2 or about 87% of project proceeds weredisbursed with the final disbursement in March-April 1991. Variations in project costs betweenappraisal and implementation reflect the reallocation of credit proceeds rather than any divergence inactual costs.

5.41 A fixed sum contract, to be paid from IDA project funds, was awarded for the final auditneeded to close out BDRN's accounts. The contract was terminated because the audit had not beencompleted by April 1991 and disbursements could not be continued as the project was officially closed.The audit cabinet worked until the final disbursement in April 1991, the full contract sum was notdisbursed and, to date, BDRN's accounts are not closed and its real portfolio situation is unknown.

6. Plroject Results

6.1 Attainment of Objectives: The attainment of project objectives ranged from marginal todismal.

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6.11 Industrial Development/Investment Projects: The extent to which the objective of industrialdevelopment was attained is difficult to assess from the Bank supervision reports, probably owing tothe preoccupation of supervision staff with institutional (mainly BDRN) support. About eleven small-scale enterprises were financed (SDR 0.33 million versus an initial target of SDR 2.18 million, modifiedto SDR 1.55 in 1987). Seven larger investments were financed (SDR 3.7 million versus an initial targetof SDR 8.28 million, modified to SDR 5.5 million in 1987). Of this latter amount, about SDR 1.6million was used to finance the inventories of the victims of Niamey's Grand Marche fire in 1982(mainly artisans and shopkeepers). The enterprises financed are listed in Annex 1. Interviews withBank Resident Mission staff (in June 1992) indicate that of the 11 small-scale enterprises financed, 7were doing reasonably well. These businesses included agricultural products processing, fisheries,poultry, electronics, printing and orthopedics. The larger investments were in areas includingpharmaceuticals, food processing and stationary. Excluding the financing of the inventories of theGrande Marche shopkeepers, only 2 of the other investments are performing satisfactorily.

6.12 BDRN: The credit appraisal capabilities of BDRN's development department were strengthenedand data-processing of the bank's lending operations were partially computerized. However this wasnot sufficient to save this institution. Internal management information systems inadequate and couldnot provide the early warning signs needed to avoid financial difficulties, especially during an economicslow-down. Billing information was often produced a year later than when loans/interest were due,internal audit reports were late, management was weak and equipment inadequate. The technical serviceprovided was unsuccessful in dealing with BDRN's weaknesses. Attempts to improve the bank's creditrecovery operations and reduce operating costs were hampered by the lack of political commitment bythe Government and BDRN senior management. In 1989, upon the recommendation of a banking sectorstudy, the Government agreed to privatize BDRN. The move to privatize BDRN concluded with itsliquidation in mid-1990 and the creation of SONIBANK, with Societe Tunisienne de Banque (STB) asthe major single shareholder and manager.

6.13 SONIBANK: The current ownership of SONIBANK is: STB-25%, BCEAO-25% and GON-20%; the 30% equity capital expected from the private sector is still to come. In all, SDR 3.85 millionwas spent on training and consulting services provided to BDRN. Part of the funds were used tofinance STB technical assistance to SONIBANK and to help get the bank off to a healthy start. Currentperformance of SONIBANK is good but on a virtually riskless portfolio, based upon customer deposits,low external loans and no term lending. STB's technical assistance contract expires at the end of 1992.Nigerienne counterparts are being trained and are expected to take over the management ofSONIBANK. (A major part of BDRN's office building is currently occupied by the Government mainlybecause high maintenance costs make the building unattractive to the private sector).

6.14 The attempt to save or restructure BDRN cost the GON about CFAF 30 billion in lost deposits,even more, if the lost deposits of the public enterprises which were forced to keep their accounts withBDRN are taken into account. In essence, the costs of keeping BDRN afloat were exorbitant and itsliquidation should have taken place much earlier.

6.15 OPEN/CMAN: As discussed above (paras. 4.224.23) OPEN and CMAN were dissolved.With CMAN's liquidation, support to the leather artisan subsector was dropped from the project.Supervision reports do not elaborate on the subsequent status of this subsector. The liquidation of theseinstitutions was justified based on insufficient commitment to reform, however alternative actions tosupport industrial development or the leather artisan subsector were not proposed nor attempted. Theproject financed OPEN office building is currently occupied by a political organization.

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6.16 Studies: Banking sector studies financed by the project supported the SAL program. The studywas weak in-so-far that it concentrated on the financial structure of banks but made no judgement onsectoral policy (this may have been a fault of the study's Terms of Reference). Recommendations havenot lead to any significant reforms and there is still no banking sector policy in Niger. Consultant studyon incentives to stimulate industrial investment was completed in 1989. Discussions are still continuingbetween IDA and GON on finalizing an Investment Code. Studies were financed for the possiblecreation of a "societe de caution mutuelle", however no "societe" was created. A Petroleum Sectorstudy was completed but there has been no implementation of the recommendations.

6.17 Goods and Services for the Creation of Enterprises: According to supervision reports there wasmodest success in the creation of new businesses by retired civil servants however no information isprovided about their performance.

6.2 Impact: In the area of industrial development, the small-scale enterprises financed by theproject are doing reasonably well. They however constituted less than 3 percent of projectdisbursements. In terms of institution building, technical assistance and studies financed by the projecthave not resulted in improved sectoral policies nor has a single institution supported by the projectoutlived the project closing date. On the other hand there may have been some social and economicdestabilization caused by the project. BDRN was a poorly functioning institution even before IDAinvolvement and may have failed sooner without IDA intervention. In the case of OPEN and CMAN,their creation and functioning were influenced by IDA intervention; their failure may have had anegative impact of the sectors they were supposed to support. Supervision reports do not attempt toassess this impact.

7. Project Sustainability

As indicated above, not a single one of the institutions which were to be developed outlived theproject closing date. Studies financed have not been followed by implementation.

8. Bank Performance

8.01 Preparation was conceptually accurate in its attempt at integrating the objective of industrialdevelopment with institution strengthening. However, deficiencies in project design made subsequentproject supervision by Bank staff extremely difficult. The CFAF 8 billion cost of BDRN's new officebuilding (being built during project preparation/appraisal) was not included in the appraisal assessmentof the bank's financial condition.

8.02 The shortcomings in project design made it imperative for Bank supervision missions to ensurethat bold, difficult and timely corrective actions were taken by the GON and BDRN management. Thisnecessitated close and responsive monitoring of project implementation by Bank staff in order to quicklyidentify and address key problem areas. Bank supervision was mainly preoccupied with BDRNrehabilitation (possibly owing to time constraints). The depth of supervision, especially in monitoringthe quality of technical assistance, is difficult to assess from supervision reports. Interviews, and finalresults, suggest that supervision staff were unable to get the GON and BDRN support needed to salvageBDRN and the project. Demands/conditions imposed by the Bank were often too late to be realisticallyimplemented. For example, the target of CFAF 5 billion per year of bad loan recovery set by IDA in1984 was never achieved nor modified. The continued deterioration in BDRN's creditworthiness shouldhave resulted in credit termination much earlier. In other areas, there was virtually no

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supervision/evaluation of the sub-projects supported by the line of credit and the technical assistanceprovided to the various organizations.

8.03 In the case of OPEN and CMAN, Bank supervision staff linked credit disbursement moredirectly with institutional development and performance. As discussed above (paras. 4.22 and 4.23)both these institutions were dissolved. IDA assisted in their creation because they were judged to beimportant for supporting industrial development. Their closure reflects project design deficiencies inhelping build sustainable institutions, lack of government willingness to disassociate itself from themanagement of these institutions and probably the general scarcity of expertise within IDA/GON indeveloping entrepreneurship in developing countries.

9. Fmding-s and Lessons Learned

9.01 Key lessons learnt include the need to integrate the financing of investment projects andtechnical assistance for institutional support with the reform or introduction of critical sectoral policies.The objective of industrial development can only be adequately fulfilled in the presence of an enablingenvironment. In the case of BDRN, and the performance of development banks in general, the hugelosses did not originate from term lending activities, but from (usually profitable) short-term lending.If funds are given to the wrong institution, working under skewed incentives, without properaccountability mechanisms, the result will be disastrous, even if the activity financed (either trade orindustrial development) is by itself profitable.

9.02 In addition, project design should attempt to identify, and adequately prepare for, the downsiderisks to a project. Since all contingencies cannot be predicted during preparation, the responsibility ofsupervision staff to identify key problem areas and implement on-going course corrections in a timelymanner becomes essential for achieving project goals.

9.03 Investment and technical assistance projects should incorporate some key measures by whichsupervision teams can evaluate project progress and the quality of technical assistance. In the case ofthe subject project, about 50 percent of total project costs were disbursed for technical assistance andconsultancy services, yet there was virtually no critical assessment of whether, and to what extent, theobjectives of this assistance were being met. A corollary to this is the need for Task Managers todevote careful and critical attention to the preparation/approval of Terms of Reference for technicalassistance and consultant services.

10. Borrower Performance

10.01 The Borrower and IDA generally seemed to be in agreement on critical issues, such as the needfor BDRN restructuring, private sector development, sectoral adjustment of the banking sector and animprovement in investment incentives. However the extent to which actions agreed upon wereimplemented and their timeliness left much to be desired. The Government's and BDRN's inability toinstitute sufficient measures to improve loan recovery and reduce operating costs through employmentcut-backs resulted in the continued deterioration in BDRN's already critical financial condition. Therewere delays in the commencement of the incentive study to stimulate investment which was to have beencompleted by 1984 but finally began in November 1988. After some reluctance, a banking sector studywas initiated in 1989. To date, banking sector policy and an investment code have not been issued.

10.02 The Borrower and other beneficiaries exhibited difficulty in complying with Agreementcovenants. There were delays in obtaining audited, and unaudited, reports from CMAN, OPEN and

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BDRN: as BDRN's situation worsened, its reporting became increasingly erratic. Lack of Governmentcommitment in instituting IDA recommendations aimed at improving the performance of CMAN andOPEN resulted in their dissolution.

11. Performance of Consultants

11.01 Supervision reports and interviews do not indicate significant problems with consultantperformance in relation with their terms of reference. Consultants performed well in diagnosingweaknesses in BDRN's financial structure and recommending a rehabilitation plan. A consultant studyundertaken on artisan clusters around Niamey in 1984 recommended the relocation of one such clusterfrom the downtown to outside Niamey. The Bank rejected this proposal indicating that financial costswere too high and that the action would disrupt a functioning, independent and profitable occupation.The consultant study on measures to stimulate investment was criticized by local organizations for beingtoo general. The consultant held a follow-up seminar in order to elaborate on recommendations.

11.02 Interviews with Bank Resident Mission staff, and general project outcome, point to severeweaknesses in the quality of technical assistance provided to the various institutions. Ultimately, aboutSDR 6 million, or about 50% of total project disbursement, was spent on technical assistance andconsulting services, however, there is virtually no evaluation of this component in Bank supervisionreports.

12. Project Documentation and Data

12.01 Legal documents were adequate and appropriate for achieving project objectives in the keyorganizational and financial areas. The Appraisal Report provided a useful framework for the reviewof project implementation. As the project took seven years to implement, was closed over a year agowith no completion mission taking place, and all the institutions supported by the project have beendissolved, a project assessment by the Borrower will be difficult to obtain.

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ANNEX ISTATUS OF LINE OF CREDIT

(As of July 1990 in '000 SDR equivalent)

ActualAmount

CAT Subproject Disb. Type of Activity and Status

1-A Other' Investment ProiectsA SUBPROJECTS

(SDR 5,495 alloc. on 12/87)

A-1 Soc. Nig. des Ind. Alimentaires 975.9 Food processing - Closed

A-2 Gr. Marche Fire Victims 1,574.4 Inventory replacement of shopkeepersEmergency Financing

A-3 Moulins du Sahel 367.4 Flour/wheat processing - In defaultwith IFC and BDRN

A-4 SONICO 326.8 Confectioner - Closed

A-5 SOTRAMIL 83.6 Millet processing - Closed

A-6 ENITRAP 197.6 Stationer - in arrears due to non-payment of dues by GON.

A-7 Off. Nat. des Prod. Pharm. 160.4 Medicines - Well managed.

TOTAL 3,686.1

1-B Small-Scale EnteririsesB SUBPROJECTS

(SDR 1,550 alloc. on 12/87)

B-1 TOUTELEC 33.7 Electronics - well managed.

B-3 Elhadj Hamidou Dourfaye 42.3 Contractor - failed

B-5 Boulangerie de Doutchi 66.8 No info.

B-6 Hama Amadou 9.6 Fishing-well managed (ex-civil servant)

B-7 Trefiliere de Dosso 16.6 No info.

B-9 Mme. Rico Angela 24.2 Poultry - good business

B-10 IAON 31.0 Printing - good business

B-1I Boulangerie a Kollo 51.2 No info.

B-12 Soc. Nig. de Prod. Frais et 37.5 Fish & fruit imports - well managedCongoles (ex-civil servant)

B-13 Cab. prive de Kinestherapie 8.2 Orthopedics - well managedALZOUMA

B-14 Boubacar Bello (garage) 5.9 No info.

327.0

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PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE

No Part II has been provided by the Borrower (see Preface).

PART III: STATISTICAL INFORMATION

1. Related Bank Loans and Credits

Loan/Credit Year ofTitle Purpose Approval Status Comments

Credit 809-NIR Employment creation and 1978 Completed Project objectivesIndustrial and institutional strengthening in 1983 only partiallyArtisan Sector through the provision of achieved. ProjectEmployment technical and financial under review was aCreation Project assistance follow-up to this

project.

Credit 1660-NIR Adjustment to correct 1986 Reform ofFirst Structural inefficiencies in public parastatals and theAdjustment Credit resource management and financial sector had

parastatals, and private an important bearingsector promotion. on the project under

review.

2. Project Timetable

Item Date Planned Date Revised Date Actual

Identification

Preparation 11/80

Appraisal 2/82

Negotiations

Board Approval 3/82

Credit Signature 4/82

Credit Effectiveness 7/82 12/82

Credit Closing 12/87 12/88-89-90 12/90

Credit Completion 4/91

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3. Credit Disbursements (US$ '000)

Bank Fiscal Year Estimated Actual Actual as %and Quarter Cumulative Cumulative of Estimated

1983 1 1002 500 1,260 2523 1,100 1,510 1374 2,100 2,020 96

1984 1 2,900 2,790 962 4,100 2,980 733 5,100 3,340 654 6,400 3,580 56

1985 1 7,300 4,000 552 8,500 4,240 S03 9,700 4,670 484 10,500 5,400 51

1986 1 11,500 5,510 482 12,500 5,750 463 13,500 6,110 454 14,500 6,290 43

1987 1 15,100 6.450 432 15,700 6,700 433 15,900 7,010 444 16,000 7,450 47

1988 1 - 7,680 482 - 7,780 493 - 8,440 534 - 9,030 56

1989 1 - 9,170 572 - 9,620 603 - 9,900 624 - 10,910 68

1990 1 - 11,240 702 - 11,820 743 - 12,300 774 - 12,640 79

1991 1 - 13,050 822 - 13,370 843 - 14,580 91

SDR US$Original Amount 14,000,000 16,000,000

Less Disbursed 12,233,431 14,580,000Less Canceled 1,766,569 (2,020,000) at appraisal exchange rate

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4. Project Costs and Financing

Expenditures from Credit by Category/Component (in '000 SDR equivalents)

CAT Description TPlanned Revised Actual

1. Goods and services for Investment Proiects(Part A of Project)

a. Small-scale investment enterprises and labor- 2,180 1,550 327intensive Investment projects

b. Other Investment Projects 8,280 5,495 3,686

2. BDRN: Technical Assistance & Consultant services 700 3,025 3,851(Part A of Project)

3. OPEN (PartB of Project)

a. Studies and Training 440 680 715

b. Goods and services for OPEN's operations 90 285 242

c. Tech. unit to assist civil works contractors 660 1,210 1,210

4. OPEN: Goods & services for construction of new 470 499 498facilities

5. CMAN (Part C of Project)

a. Training 210 0 0

b. Common Services 580 95 95

c. Technical Assistance 260 201 200

l -- Unallocated 130 l

6. Studies (Amendment December 1987) - 505 423

7. Goods and services for enterprise creation - 455 948(Amendment December 1987)

TOTALS 14,000 14,000 12,195

5. Project Results

A. Direct Benefits: Line of Credit

Category Number inpact: Status and CommentsFinanced

Small & labor 11 Generally performing quite well. Only one known failure (Seeintensive enterprises Annex 1)

Other Enterprises 7 Except for 1 or 2, all enterprises have failed.

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B. Technical Assistance (TAl and Studies

Category/Description Impact/Comments

BDRN: Technical Assistance & TA not able to sufficiently strengthen BDRN. BDRNConsultant services (Part A of Project) liquidated in 1990 and SONIBANK, with reduced

Government participation, created. IDA financed TAprovided by STB to help SONIBANK get off to ahealthy start. SONIBANK is currently well-managed.

OPEN (Part B of Project) Based on recommendation of IDA funded study, OPENliquidated in 1989. Component dropped from project.

Studies and Training(a) Investment Code commission's Shifted to broader group of studies under SAL.

work and price control revision

(b) Survey of artisan clusters in Boukoki study completed in 1985. IDA not in agreementNiamey, etc. with study's rec. to dislodge artisans.

(c) Survey of recorded and unrecorded IDA concurred with OPEN that subproject identificationimports to identify SME best made through regional surveys. OPEN failed toinvestment opportunities. follow up on identified projects. TA used by OPEN

mostly to salvage enterprises in which OPEN or GONwere participants.

Tech. unit to assist civil works No assessment in supervision reports.contractors

Construction of new facilities New premises were constructed. Currently used bypolitical organization.

CMAN (Part C of Project) Liquidated in 1985. Support to leather artisans dropped

Studies

1. Study for restructuring OPEN OPEN liquidated based on study recommesidations.2. Industrial Incentives study Study completed in 1989 however recommendations have

yet to be adopted in the form of a new Investment Code.3. Study for the 'creation de societe Initial progress (with French assistance) on a pilot

mutuelle" scheme started in 1989 however no 'societe" formed.4. Banking sector study Completed end 1989. Recommended, inter alia,

improved banking legislation and reduced state equityparticipation. Has not resulted, so far, in a new bankingsector policy.

6. Petroleum distribution study Completed August 1989. No implementation.

Goods & services for enterprise Operational in 1989. Over 100 voluntarily retired civilcreation servants benefitted under this component's support of

GON's 'Programme d'Appui aux Initiatives Privees et ala Creation d'Emplois (PAIPCE)". No evaluation of thiscomponent by Bank supervision missions.

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6. Status of Covenants

Credit Agreement (Between IDA and Borrower)

Covenant Compliance(Section) Subject Deadline Status

3.01 a Facilitate BDRN, OPEN and CMAN to - Slow implementationcarry out their obligations of corrective measures

3.01 b-e On-lending to BDRN; grants to OPEN/CMAN; - Complied with

3.01 e Accomplishment of purposes of Credit - Insufficientlyimplemented

3.02 Employment of consultants - IDA concurred withappointments

3.03 a-b Import and use of Goods & Services - Complied with

3.04 a OPEN & CMAN progress reports semi-annual & Not complied withquarterly after initial phases

3.04 b Maintain records to monitor progress of Complied with. SomeParts B & C. Furnish IDA with timely info. delays

3.04 d Assessment of Project execution 6 mths. of Not complied withclosing date

3.05 OPEN: Furnish proposed budget Annual-by Sept Partially complied with

3.06 CMAN: Three year plan and budget Condition for CMAN dissolved dueeffectiveness to non-compliance

4.01 b Provide 3 additional qualified persons to Dec. 1983 Complied withOPEN

4.03 Provide externally audited financial accounts 6 mths. of end Extensive delays inof OPEN & CMAN to IDA of year compliance (OPEN)

4.05 GON & IDA to review investment promotion Initial review Not complied with.policies; GON to implement improvements by June 1984 Study completed '89.

4.06 OPEN-Equity Participation and Guarantee June 1983 Not complied withFunds: adopt statutes

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6. Status of Covenants (cont'd.)

Project Agreement (Between IDA and Banque de Developpement de la Republique du Niger)

Covenant Compliance(Section) Subject Deadline Status

2.02 Presentation of investment projects to IDA Complied with- description, appraisal report, etc.

2.03 BDRN to monitor and ensure satisfactory No info. availableoperations of investment projects from supn. reports

2.06 BDRN to ensure its continued existence - BDRN liquidationand not sell assets agreed to by IDA

3.02 BDRN: Audit of financial accounts and 6 mths. of year end Delays in compliancesubmission to IDA

7. Use of Bank Resources

A. Staff Inguts

Stage of Project Cycle Staff Weeks Comments

Through Appraisal 43.1 Some project preparation occurred while supervisingCredit 809-NIR.

Appraisal through 8.2Board Approval

Board Approval -

through Effectiveness

Supervision 81.9 Missions devoted time to sectoral reform supervision inaddition to project supervision.

Lending Preparation 14.8

TOTAL 148.0

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B. Supervision Missions

Types ofNo. of Days in Perform. Problems

Date Persons Field Specialization Rating 1/ m

5/82 1 7 Operations officer

6/82 1 4 Operations officer

10/82 2 4 Operations officers 2 M

2/83 1 8 Operations officer 1

7/83 1 4 Operations officer 1

12/83 (3/) 1 6 Operations officer -

10/84 1 6 Operations officer 2 F,M

4/85 1 10 Operations officer 3 F,M

2/86 1 7 Operations officer 2 M

11/86 1 7 Operations officer 2 M

4/87 (3/) - Operations officer 2

2/88 2 7 (4/) Operations officer + Consultant 2 F,M

6/88 (3/) 1 14 (4/) Operations officer - F,M

11/88 1 12 (4/) Financial Analyst 3 F,M

7/89 1 - Financial Analyst 3 F,M

11/89 (3/) 1 12 Financial Analyst - F,M

4/90 (3/) 1 6 (4/) Loan Officer -

6/90 1 Financial Analyst 3 F,M

7/91 1 Task Manager 3 F,M

1. Problem free or minor problems2. Moderate problems3. Major problems

2/ F. Financial (mainly related to BDRN rehabilitation)M. Managerial (minly related to OPEN and CMAN. Also BDRN after 1988)

3/ No form 5904/ Mission devoted some time to supervision of another project.