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TRANSCRIPT
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Document of
The World Bank
Report No: ICR1639
IMPLEMENTATION COMPLETION AND RESULTS REPORT
(IBRD-74160)
ON 4 CREDITS
IN THE AMOUNT OF US$ 210 MILLION EQUIVALENT
TO THE
REPUBLIC OF MAURITIUS
FOR A
PROGRAMMATIC DPL 1-2-3-4 SERIES
May 25, 2012
Poverty Reduction and Economic Management 1
Africa Region
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Government Fiscal Year
January 1 – December 31 (starting 2010)
July 1- December 31 (2009)
July 1 – June 30 (prior to July 2009)
CURRENCY EQUIVALENTS
(Exchange Rate Effective as of August 27, 2009)
Currency Unit = Mauritius Rupee
US$1.00 = Rs.32.65
Weights and Measures
Metric System
ACRONYMS and ABREVIATIONS
AAA Analytic and Advisory Activities
AfDB African Development Bank
BOI Board of Investment
BOM Bank of Mauritius
CEB Central Electricity Board
CEM Country Economic Memorandum
DBM Development Bank of Mauritius
DDO Deferred Drawdown Option
DPL Development Policy Loan
DPO Development Policy Operation
DPs Development Partners
EAP Eradicating Absolute Poverty
EPZ Export Processing Zone
ESW Economic Sector Work
ICR Implementation Completion and
Results Report
ICT Information and Communication
Technologies
ICTA Information and Communication
Technologies Authority of Mauritius
IMF International Monetary Fund
IPLCs International Private Leased Circuits
MBGS Mauritius Business Growth Scheme
MFA Multi-Fiber Agreement
MOFED Ministry of Finance and Economic
Development
MRA Mauritius Revenue Authority
MTEF Medium Term Expenditure Framework
NEF National Empowerment Foundation
NLTPS National Long-Term Perspective Study
NPC National Pay Council
NTB Non-Tariff Barriers
NTMs Non-Tariff Measures
PBB Program Based Budgeting
PDO Program Development Objectives
PFM Public Financial Management
ROSC Report on the Observance of Standards
and Codes
SAFE South African Far East Cable
SEHDA Small Enterprise and Handicraft
Development Authority
SMEs Small Medium Enterprises
SMEDA Small and Medium Enterprise
Development Authority
SMSTs Sector Ministry Support Teams
WMA Waste Management Authority
ZEP Zones d‟Education Prioritaires
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Vice President: Makhtar Diop
Country Director: Haleh Z. Bridi
Sector Manager: John Panzer
Task Team Leader: Rafael Munoz Moreno
ICR Team Leader: Sawkut Rojid
This ICR was produced with contributions and support from Rafael Munoz (Senior Economist,
AFTP1), Alain D‟Hoore (Lead Economist, AFTP1), Zhanar Abdildina (Senior Operations
Officer), Khurshid Noorwalla (Team Assistant), and Wenda Rabot (Team Assistant). The team
thanks Fernando Blanco for peer reviewing the document.
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REPUBLIC OF MAURITIUS
IMPLEMENTATION COMPLETION AND RESULTS REPORT
CONTENTS
Data Sheet 5
A. Basic Information 5
B. Key Dates 5
C. Ratings Summary 6
D. Sector and Theme Codes 6
E. Bank Staff 7
F. Results Framework Analysis 7
1. Program Context, Development Objectives and Design: 13
1.1 Context at Appraisal 15
1.2 Original Program Development Objectives (PDO) and Key Indicators 16
1.3. Revised PDO 16
1.4. Original Policy Areas Supported by the Program 16
1.5. Revised Policy Areas 19
1.6. Other significant changes 19
2. Key Factors Affecting Implementation and Outcomes 19
2.1 Program Performance: 19
2.2 Major Factors Affecting Implementation 23
2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 25
2.4 Expected Next Phase/Follow-up Operation 26
3. Assessment of Outcomes 26
3.1 Relevance of Objectives, Design and Implementation 26
3.2 Achievement of PDO 28
3.3 Justification of Overall Outcome Rating 34
3.4 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 37
4. Assessment of Risk to Development Outcome 37
5. Assessment of Bank and Borrower Performance 38
5.1 Bank Performance 38
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5.2 Borrower Performance 41
5. Lessons Learned 42
6. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 44
Annex 1 Bank Lending and Implementation Support/Supervision Processes 52
(a) Task Team members 52
(b) Staff Time and Cost 53
Annex 2. Beneficiary Survey Results 54
Annex 3. Stakeholder Workshop Report and Results 54
Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR 54
Annex 5. Comments of Co financiers and Other Partners/Stakeholders 54
Annex 6. List of Supporting Documents 54
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Data Sheet
A. Basic Information
Country: Mauritius Program Name: Development Policy
Loan 1,2,3,4
Program ID: P101570, P106650,
P112369, P116608 L/C/TF Number(s): IBRD-
ICR Date: 10/04/2012 ICR Type: Core ICR
Lending Instrument: DPL Borrower: Government of
Mauritius
Original Total
Commitment: USD 210.00M Disbursed Amount: USD 210.00 M
Revised Amount: USD 210.00M
Implementing Agencies: Ministry of Finance and Economic Development
Co Financiers and Other External Partners:
B. Key Dates
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review:
DPL 1
DPL 2
DPL 3
DPL 4
21-Sep-2006
04-Sep-2007
08-Sep-2008
26-Aug-2009
Effectiveness:
DPL 1
DPL 2
DPL 3
DPL 4
31-Jan-2007
29-May-2008
22-May-2009
28-Jan-2010
Appraisal:
DPL 1
DPL 2
DPL 3
DPL 4
18-Oct-2006
18-Dec-2007
17-Feb-2009
21-Sep-2009
Restructuring(s):
Approval:
DPL 1
DPL 2
DPL 3
DPL 4
12-Dec-2006
28-Feb-2008
31-Mar-2009
12-Nov-2009
Mid-term Review:
Closing:
DPL 1
31-Dec-2007
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DPL 2
DPL 3
DPL 4
31-Dec-2008
31-Dec-2011
31-Dec-2011
C. Ratings Summary
C.1 Performance Rating by ICR
Outcomes: Highly Satisfactory
Risk to Development Outcome: Moderate
Bank Performance: Highly Satisfactory
Borrower Performance: Highly Satisfactory
C.3 Quality at Entry and Implementation Performance Indicators
Implementation
Performance Indicators
QAG Assessments
(if any) Rating:
Potential Problem
Program at any time
(Yes/No):
No Quality at Entry
(QEA): None
Problem Program at any
time (Yes/No): No
Quality of
Supervision (QSA): None
DO rating before
Closing/Inactive status:
D. Sector and Theme Codes
Original Actual
Sector Code (as % of total Bank financing) – DPL 1
Central government administration
45
General industry and trade sector 30
General education sector 15
Power 5
General water, sanitation and flood protection sector 5
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)
Bank Ratings Borrower Ratings
Quality at Entry: Highly Satisfactory Government: Highly Satisfactory
Quality of Supervision: Highly Satisfactory Implementing
Agency/Agencies: Highly Satisfactory
Overall Bank
Performance: Highly Satisfactory
Overall Borrower
Performance: Highly Satisfactory
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Theme Code (as % of total Bank financing) – DPL 1
Administrative and civil service reform 27
Public expenditure, financial management and
procurement 18
Debt management and fiscal sustainability 18
Export development and competitiveness 18
Education for the knowledge economy 18
F. Results Framework Analysis
Program Development Objectives (from Project Appraisal Document)
The objective of the program was to support the comprehensive structural reforms which
respond to two major challenges: (i) the “triple trade shock” of trade preference erosion and high
oil prices and (ii) the transition from low wage, low skill sugar and apparel exporter to
innovative, knowledge and skill based services economy. The reform program was anchored on
four pillars: (i) consolidating fiscal performance and improving public sector efficiency; (ii)
improving trade competitiveness; (iii) improving the investment climate; and (iv) democratizing
the economy through participation, social inclusion and sustainability.
E. Bank Staff
Positions At ICR At Approval
Vice President:
Makhtar Diop
DPL 1:
Gobind T Nankani
DPL 2,3 & 4:
Obiageli Katryn Ezekwesili
Country Director:
Haleh Z. Bridi
DPL 1& 2:
Ritva Reinikka
DPL 3 & 4:
Ruth Kagia
Sector Manager: John Panzer
DPL 1:
Emmanuel Akpa
DPL 2,3&4:
John Panzer
Program Team Leader: Rafael Munoz Moreno
DPL 1 & 2
Robert Keyfitz
DPL 3 & 4:
Fabiano Bastos
ICR Team Leader: Sawkut Rojid
ICR Primary Author: Sawkut Rojid
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Revised Program Development Objectives (if any, as approved by original approving
authority) Program Development Objectives were not revised
(a) PDO Indicator(s)
Indicator Baseline
Value
Original
Target Values
(from approval
documents)
Formally
Revised
Target
Values
Actual Value
Achieved at
Completion or
Target Years
Value as at
December
31, 2011
Indicator 1: GDP Growth
Value (Quantitative or
Qualitative) 3.7 5
4.1
4.1
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement)
GDP growth rate indeed started to increase. It was 5.7% in
2007, 5.5% in 2008. However because of the global crisis, it
shrunk to 3.1 in 2009 but improved again in 2010 and 2011 to
4.1 %.
Indicator 2: Unemployment Rate
Value (Quantitative or
Qualitative) 9.5 550
542.2
600
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement)
Total number employed increased throughout the years and the
target of 550 was achieved in 2011.
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Indicator 4: FDI as a % of GDP
Value (Quantitative or
Qualitative) 1.6 >1.6
3.5
2.9
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved
Indicator 5: Stabilize Revenue as a % of GDP above 19.0
Value (Quantitative or
Qualitative) 20.1 >19
21.2
21.3
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved
Indicator 6: Public sector debt as a % of GDP
Value (Quantitative or
Qualitative) 68.8
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Indicator 9: Raise Exports as a % of GDP
Value (Quantitative or
Qualitative) 60.6 >60.6
52.5
53.4
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement)
Not achieved. Exports as a percentage of GDP fell since 2007
and stagnated around 53 percent.
Indicator 10: Increase Tourist Arrivals (million)
Value (Quantitative or
Qualitative) 0.78 >0.78
0.93
0.94
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved
Indicator 11: Unify regulatory regime across EPZ, non-EPZ sectors
Value (Quantitative or
Qualitative) No Yes
Yes
Yes
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved
Indicator 12: Increase international internet bandwidth (Mbps)
Value (Quantitative or
Qualitative) 123 >123
1864
1864
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved
Indicator 13: Increase ICT sector as a % of GDP
Value (Quantitative or
Qualitative) 5.2 >6
6.4
6.7
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved
Indicator 14: Increase FDI (million Rupees)
Value (Quantitative or
Qualitative) 2807 >10,000
12000
9,456
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved
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Indicator 15: Number of days to start a business
Value (Quantitative or
Qualitative) 46
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Indicator 21: Trained workers under empowerment program
(refer to placement program only)
Value (Quantitative or
Qualitative) 0 12000
8200 12200
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved in 2011
Indicator 22: Place women displaced from textile sector into jobs
Value (Quantitative or
Qualitative) 45 600
200 234
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Not Achieved.
Indicator 23: Number of SMEs supported through matching grants
Value (Quantitative or
Qualitative) 22 50
16 58
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved in 2011
Indicator 24: Raise Primary completion rate
Value (Quantitative or
Qualitative) 64.9 70
68.1
71.4
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Achieved in 2011
Indicator 25: Raise secondary completion rate
Value (Quantitative or
Qualitative) 78.4 80
78.8
79.2
Date Achieved 6/1/2006 6/1/2010
12/31/2010
Comments (incl. % of
Achievement) Almost achieved in 2011
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1. Program Context, Development Objectives and Design:
1. This Implementation Completion and Results Report (ICR) is prepared following the completion of the first Development Policy Loan (DPL) programmatic series in Mauritius. The
objectives of this series were to support the country to transit from an economy which benefited
from decades of preference agreements for its trade activities to one in which the firms were to
face more competition, and to transit from a low skill highly concentrated economy to a more
innovative service based economy. To achieve these objectives, the Government of Mauritius
implemented a program of structural reforms which was bold and covered a wide range of areas.
This program was strongly owned by the Government at the highest level and the commitment to
make the right changes, at times even politically sensitive, was strong. The program itself was
build based on rigorous analytical work. The reform program has been very successful as
measures by two factors: (i) the resilience of the economy during the crisis of 2008, and (ii) the
attainment of most of the targets on indicators identified to measure success.
2. The results of the reform program have been impressive, even at a very early stage in the process. Substantial progress was already achieved in just two years of reforms. By 2008,
for example, debt to GDP ratio already fell to 53.7 percent (from 68.8 in 2006), primary
spending 20.2 percent (from 21.6 in 2006), unemployment rate 7.2 percent (from 9.5 in 2006),
the number of days to start a business was 6 (from 46 in 2006), and tourist arrivals 0.93 million
(from 0.78 in 2006). When the financial crisis set in 2008, some of the measure had to be relaxed
in order to address the short-term concerns and to stimulate the economy, but commitment for
refrom and progress was sustained throughout the operation.
3. The response to the crisis was targeted and time-bound. As a result of structural reforms introduced since 2006 Mauritius entered the global crisis with strong fundamentals. In fact, the
fiscal space created due to the reform process until 2008 improved the economy‟s resilience to
better absorb the impact of the shock. The package of measures that were implemented to
counter the impact of the global crisis and to support in stimulating the economy was
comprehensive and innovative. The fiscal stimulus (around 5 percent of GDP) were primarily
focused to accelerate infrastructure investment projects crucial for long-term economic growth,
and to facilitate restructuring of firms to improve their competitiveness and at the same time
preserve jobs and improve capacity. Institutions were put in place (for example a project plan
committee) to ensure that only investments that have a satisfactory rate of return, and fast-
tracking and front loading public investments. To deal with capacity constraints, schemes were
put in place to facilitate recruitment of local/international expertise in specific areas to assist the
government in formulation, design and evaluation of projects and programs. Microeconomic
interventions targeting firms and protecting vulnerable employees were introduced. In this
context, an innovative initiative called the Mechanism for Transitional Support to Private Sector
(MTSP) was introduced. In the MTSP, the Government became an equity partner to guarantee
survival of, otherwise sound firms, facing severe distress during the crisis. However, the
Government would only intervene if the Banks and shareholders were jointly willing to finance
60 percent of the restructuring costs, thus ensuring only market conforming intervention.
Coordination between monetary policy loosening and fiscal policy stimulus was timely and well
calibrated. The floating exchange rate regime also played an important role as a shock absorber,
contributing directly to the balance of payments sustainability. Overall, a high quality
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macroeconomic policy framework effectively helped to sustain stability and avoid derailment of
achievements. The response to the crisis, of course, resulted in easing, to some extent, the fiscal
consolidation component of the reform program.
4. The momentum of the reform program has been maintained even after the crisis. The experience of improving the resilience of the economy during the crisis due to the reforms
undertaken until 2008 was in itself a motivating factor to continue the implementation of the
reform agenda. The authorities ascertained that they were on the right track and were determined
to continue the implementation of the reform program. This is evident from the results
framework of the DPO project. Despite some of the indicators fell off-track during the crisis
period, yet they have been brought on track after the crisis and most of them have been achieved.
For example, the debt to GDP ratio which increased to 60.2 percent in 2009 is back on a
declining trend and stood at 57.5 percent in December 2011, and tourist arrivals which fell to
0.87 million in 2009 is consistently increasing and reached 0.96 million in 2011.
5. This programmatic series closely supported the Government in its policy reform agenda. This programmatic series has been used as a vehicle to harmonizing policy dialogue of
development partners with the Government and has also served as a mechanism to ensure
coordination among development partners in the country. This series was also flexible in
responding to the needs of the country. Initially this series consisted of three operations for an
amount of USD 90 million (USD 30 million each). However, to respond to the additional fiscal
challenges of the client in order to cushion the impact of the unexpected financial crisis of 2008,
the Bank increased the amount for the third operation to USD 100 million and introduced in the
operation a Deferred Drawdown Option (DDO). A fourth operation, of USD 50 million, was also
added to this series to continue supporting the reform agenda, since election was due in a year‟s
time and it would not have been the right timing to start a new series. This programmatic series
ended up with four operations for a total amount of USD 210 million.
6. The objectives set out for this series has been broadly achieved. Mauritius indeed transitioned from a low wage, low skill economy to an innovative and skill based economy. For
example, the country experienced a high real growth rate for the ICT sector (above 13 percent in
2009 and 2010). The value added of the ICT sector in 2010 was 14.1 percent higher than in
2009. Exports of ICT goods, including re-export rose by 68.1 percent in 2010 and exports of ICT
services increased by 21.6 percent in the same year. Employment in the ICT sector increased by
3.7 percent in 2010. The ICT Development Index (IDI) which measures countries‟ progress
towards becoming information societies improved to 4.03 in 2010 from 3.83 in 2009, and
Mauritius is ranked second among African countries after Seychelles. From 2001 to 2011, while
labor input for the whole economy grew by an average of 1.3 percent annually, labor
productivity grew by 3.0 percent. While attribution is not only linked to the reform program, yet
this denotes that the economy is becoming more skilled and productive. Employment in higher
skilled jobs (financial intermediation, education, health and real estate and business activities)
has increased by 2.5 percent between 2010 and 2011.
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1.1 Context at Appraisal
7. Mauritius had achieved important economic success since independence in 1968, but positive outcomes could not be sustained. Mauritius grew at a yearly average of 5 percent (6
percent between 1980 and 1990) causing GDP per capita to rise substantially from 48 percent of
the world average in 1980 to 78 percent of world average in 2004. This impressive achievement
was possible largely due to the opportunistic use of preferential trade agreements for sugar and
textiles, sound institutions to ensure growth and redistribution, and prudent macroeconomic
management. However, the positive outcomes could not be sustained, and growth rate deviated
downwards. In 2005, economic outlook became somber and the pessimism increased in the wake
of the phasing out of the Multi-Fiber Agreement (MFA) for textiles (December 2004), the
gradual decline of the EU guaranteed price of sugar (starting 2006), and the sharp rises in oil and
food prices at that time. These three factors are combined together as the „triple trade shock‟ in
the PDO.
8. At appraisal for the first operation, macroeconomic indicators were worrisome. Budget deficit was 5 percent and increasing. The International Monetary Fund (IMF) noted that if public
enterprise deficit and cash interest payments on an accrual basis is accounted for, then the overall
fiscal deficit is in fact 6.6 percent of GDP for 2004/05 and not 5 percent. Unemployment rate
was 9 percent, its highest level in 20 years, inflation was 11 percent, FDI declined 1.5 percent of
GDP, and public debt-to-GDP ratio stood at 72 percent at the end of June 2005, up from 55
percent in 1995. The Fund noted that a real GDP growth of about 3 percent would worsen the
fiscal deficit (widen to around 7 percent) over time and public sector debt would become
unsustainable. External accounts deteriorated. Current account deteriorated, following increased
trade deficit (fall in textiles exports coupled with increased import bill as fuel prices hiked) and
this led to a drop in the net official foreign reserves (from 7.5 months on imports in 2003/04 to
less than 5 months of imports in 2005/06) and depreciation of the real effective exchange rate
(3.8 percent in 2003/04 and 6 percent in 2004/05). The authorities, by the end of 2004 started a
comprehensive structural reform program to diversify the economy and enhance competitiveness
to maintain high growth rates. The team‟s assessment of the macroeconomic policy framework at
the start of each operation was sound and realistic, and this helped responding to the needs of the
client.
9. Economic reforms accelerated when a new government took office in 2005 and recognized the need for fundamental reforms to boost competitiveness and to ensure fiscal
sustainability over the medium term. The Government elected in 2005 maintained substantial
policy continuity but accelerated the on-going reform process, which were in line with the
National Long-Term Perspective Study (NLTPS). The goal was to diversify the economy by
moving towards high value-added, skill and knowledge intensive service sectors, with explicit
reference to the Information and Communication Technologies (ICT) sector. In 2006, the
implementation of a bold package of policies and institutional reforms started. It deepened many
of the efforts initiated in the preceding years and it aimed at addressing some politically-sensitive
reforms as well, like reduction in custom tariffs and linking wage increase to productivity. The
reform program was informed by the Aid for Trade Report in 2006 that the Government
prepared with the support of the Bank.
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10. The programmatic DPL series was the right vehicle to respond to the reform program set out by the Government. It provided both financial assistance and technical assistance to the
Government to undertake its reform program, and had in-built flexibility. This DPL series
completely aligned with the priorities of the Government. These priorities are outlined in the
Government‟s budget speeches and the Country Partnership Strategy (CPS) 2007-20131. The
CPS stressed that the challenge for Mauritius was to boost economic growth through higher
productivity; develop human capital through education and labor market reforms; promote new
emerging sectors and develop a knowledge based economy, while preserving its long standing
commitment to social welfare. The CPS objective was to help the Government deal with short-
term trade shocks and the transition to a more competitive and sophisticated economy, while
minimizing negative social impacts. The Government was consistent in its long term policy
objective throughout the series. Technical assistance was provided in a number of areas to
support implementation of policy decisions. For example, in the area of fiscal consolidation, the
WB Treasury provided assistance to the Bank of Mauritius (BOM) and the Ministry of Finance
and Economic Development (MOFED) to jointly develop an action plan for improving Public
Debt Management, and also provided training workshops which proved helpful in strengthening
the relationship with key counterparts and advancing this agenda. Due to its flexibility, at the
time of the crisis in 2008, this series responded rapidly to the needs of the authorities.
1.2 Original Program Development Objectives (PDO) and Key Indicators:
11. The objective of the program was to support the comprehensive structural reforms which respond to two major challenges: (i) the “triple trade shock” of trade preference erosion
and high oil prices and (ii) the transition from low wage, low skill sugar and apparel exporter to
innovative, knowledge and skill based services economy. The reform program was anchored on
four pillars: (i) consolidating fiscal performance and improving public sector efficiency; (ii)
improving trade competitiveness; (iii) improving the investment climate; and (iv) democratizing
the economy through participation, social inclusion and sustainability.
1.3. Revised PDO and Key Indicators, and reasons/justification:
12. The development objective was not revised during the series.
1.4. Original Policy Areas Supported by the Program:
13. Policy area I, Consolidating fiscal performance and improving public sector efficiency: In 2005/06, debt to GDP ratio already exceeded prudent levels, at 69.2 percentage of GDP. The
IMF has warned the authority of significant risks to the outlook and urged the authorities to make
bigger and faster adjustments in 2006/07. The IMF projected that with adverse developments in
growth and world interest rates, a no-adjustment situation could quickly get out of control
increasing debt to 112.3 percent of GDP. Demands on the state for discipline, strategic resource
allocation and economic restructuring increased. The government self-imposed fiscal rules in the
budget of 2006/07. These rules included the following (i) that Government should borrow only
for investment and not for recurrent expenditure, and (ii) that public debt to GDP should decline.
1 The CPS progress report prepared in 2011 extended the CPS period to 2015.
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To attain these objectives, the MOFED set up Sector Ministry Support Teams (SMSTs) to
coordinate budget preparation with sector ministries in line with the self-imposed rules. The goal
was to help sector ministries improve allocative efficiency in expenditure. The Government
program aimed at: (i) stabilizing total revenue at above 19 percent of GDP and (ii) reducing re-
current expenditure.
14. The DPL series supported a number of policy changes in these areas. On the revenue side, the program supported the Government to adopt policies to reduce distortions and increase
equity in the tax code, relinquishing discretionary powers to grant tax and duty exemptions and
operationalizing the Mauritius Revenue Authority (MRA)2. On the expenditure side, the program
supported the Government to adopt a Medium Term Expenditure Framework (MTEF), to
implement Program Based Budgeting (PBB) in order to increase predictability of resource
envelopes for planning purposes, to align the chart of accounts of the Treasury accounting
system to the Government Finance Statistics Manual 2001, to upgrade the Borrower‟s financial
management information system to enable budget implementation and reporting of financial and
non-financial data, and to prepare sector strategies in line with PBB requirements.
15. Policy area II, Enhancing trade competitiveness: Mauritius faced ineffective regulation, anti-export biased policy distortions, red tape and discretionary interventions, which impacted
negatively on trade competitiveness thereby impeding flow of resources to growth sectors.
Incentives in place were geared more toward production for domestic markets than exports,
product and process innovations were not encouraged and policies to deal with the constraints of
Small Medium Enterprises (SMEs) were not priorities. The reform agenda put in place by the
government addresses these problems by revamping incentives, eliminating the distinction
between Export Processing Zone (EPZ) and non-EPZ firms, tariff liberalization, eliminating
investment tax credit, and lightening regulatory burdens.
16. The DPL series supported a number of reforms under this component. DPL1 and DPL2 focused on reducing the cost of international connectivity and increasing capacity, and DPL2
also called for a review of telecommunications regulation3. Informed policy dialogue in the area
of competitiveness and regulatory framework was enhanced following the Bank‟s Economic
Sector Work (ESW), which identified a number of inappropriate non-tariff trade-related
regulations and implementation, bottlenecks which compromise competitiveness in Mauritius.
Strong Government interest on the subject nurtured a productive policy dialogue and set-up of a
permanent regulatory review committee, as recommended. To support these policies, some of the
prior actions that the DPL series followed up are: acquisition of additional capacity on the South
African Far East Cable (SAFE) cable by Mauritius Telecom, issuing of decision by Information
and Communication Technologies Authority of Mauritius (ICTA) on Mauritius Telecom‟s
2 The MRA‟s legal basis dates from 2004, but it became fully operational only in July 2006 with new premises, a
full complement of professional staff having their own scheme of service, and equipped with a clear mandate and a
modern client focus 3 Regulatory challenges have centered on balancing the interests of the incumbent, Mauritius Telecom, with other
competitors in the sector, especially MT‟s exclusive control over the landing point for international communications
and participation in the SAFE consortium. Good practice thinking on regulation has evolved considerably since
2001 when the ICTA was established under the Telecommunications Act, shifting away from licensing entry to
promoting efficient market outcomes.
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application for 20 percent price reduction on asymmetric digital subscriber line (ADSL) charges,
initiation of regulatory review of ICTA, continue implementation of the duty free island policy
by significantly reducing average tariff rate and number of top rated tariff lines and establishing
a joint Public-Private Sector Standing Committee to review the design and implementation of
regulatory measures relative to import and export licenses with a view to eliminate unwarranted
barriers to trade.
17. Policy area III, Improving the investment climate: A number of constraints inhibited investment to the country. Some of these constraints were: shortage of human capital, rigidity in
regulation on entry of foreign workers, inflexible labor market, linking wage setting to
productivity rather than index-linked and poor port and road infrastructure. The Government
embarked on reforms to eliminate bureaucratic obstacles. The Registrar of Companies was
designated as a one stop focal agency for business registration and the Board of Investment
(BOI) converted from being an administrator of programs to a facilitator and promoter. Whereas
firms previously had to obtain ex-ante fire and health certificates to start operations, new rules
were set up for ex-post verification of adherence to published guidelines. Other measures include
merging development and building permits, easing entry of foreign workers by combining
residence and work permits into a single occupation permit and tying wages more closely to
productivity by replacing the tripartite wage setting mechanism with a National Pay Council
(NPC). In addition, land administration and management was being modernized with the
introduction of a cadastre system and establishment of transparent and predictable procedures for
transfers of ownership and usage.
18. The DPL series supported various components toward improving investment climate. In March 2004, the Bank submitted the “Report on the Observance of Standards and Codes
(ROSC) of Insolvency and Creditor Rights Systems for Mauritius” and made recommendations
on how to improve the statutory insolvency framework in Mauritius. Other areas of support
included the establishment and operationalization of a new wage negotiating mechanism,
introduction of a flexi-security scheme, and the appointment of the Competition Commission of
Mauritius.
19. Policy area IV, Democratizing the economy through participation, social inclusion and sustainability. The objectives are to make better use of available human resources, create job
opportunities, empowering people through active labor market programs, and providing adequate
social safety nets for the vulnerable. In this context, an Empowerment program was incorporated
for the following purposes/ activities: (i) land for social housing; (ii) land for small
entrepreneurs; (iii) a workfare program emphasizing training and re-skilling; (iv) special
programs for unemployed women; (v) tourist villages; (vi) assistance for outsourcing; and (vii)
support for development of new entrepreneurs and SMEs. Government also embarked on
reforms of the administration of social safety nets to strengthen financial viability and focus
support on the truly needy and emphasis was also laid on increasing access to education and
(re)training.
20. In this pillar, the DPL series supported the expanding opportunities through education, empowerment of people to increase their employability and better targeting of the needy. The
prior actions in the series were: (i) drafting of national education strategy to increase primary,
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secondary and tertiary levels and raise quality, (ii) preparation and submission to Cabinet of a
draft Education and Human Resources Strategy Plan and implementation of a targeted and
temporary policy action in the form of a work and training scheme, and (iii) production of a
poverty map with the objective of improving the capacity for geographical targeting.
1.5. Revised Policy Areas:
21. Policy areas were not revised.
1.6. Other significant changes:
22. During the crisis in 2008, the Bank responded quickly to meet the needs of the country. The initial plan was a programmatic series of three operations of USD 30 million each.
However, during the global financial crisis when the economic outlook was uncertain, the
country has serious concerns over declining revenues and the authorities needed to insure against
the negative impact of the crisis. The Bank responded and provided an increase of US$70 million
equivalent for the third operation as a self-insurance to adapt and protect against disruption to the
reform program. To allow for greater flexibility in responding to mounting uncertainties, the
operation was converted into a DDO operation and the credit was approved on a more favorable
term which included the elimination of the commitment fee. Although the request from the
authorities was higher than USD 100 million for DPL3, the Bank determined that given the
exposure limits for Mauritius and the then existing volume of loans outstanding, the DDO would
have to be limited to US$100 million.
23. A fourth operation (DPL4) was added to the program. During the preparation of DPL3, the Government requested for a new series of DPOs to support in the continuation of reforms.
However, to keep in step with the electoral cycle it was agreed to add one operation, DPL4, to
the series and to begin a new programmatic series in FY11. The Bank provided a further US$50
million in funding through DPL4, and this was well coordinated with other development partners
to close potential sizeable funding gap if the crisis continued to worsen. This amount was
matched by Euros 40 million of funding from AFD directed at support for projects meeting the
criterion of environmental sustainability. African Development Bank (AfDB), which was also
preparing a DPO series decided to make US$700 million available to Mauritius in three tranches
and the EU also scaled up its assistance through additional grants. DPL4 included joint missions
with all the development partners and development of common results framework with the
African Development Bank.
2. Key Factors Affecting Implementation and Outcomes
2.1 Program Performance:
24. The DPL series aligned with the priorities of the Government’s reform agenda. (The
four pillars are mentioned in section 1.2). The subsequent operations build on the previous ones
and the prior actions followed an incremental sequencing path to push the reforms deeper. Since
the program based budgeting (PBB) was formally introduced in 2008/09, this series made use of
some of the country‟s own indicators and targets to measure success and achievements.
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Table 1: Prior Actions for DPL1 – 4 Components
Prior Actions: All Successfully Met
DPL1 DPL2 DPL3 DPL4
Consolidating
fiscal
performance
and improving
public sector
efficiency
Reduce primary
spending by 0.5
percent of GDP
relative to 2005/06
Implementation of
a MTEF budget and
preparation of an
indicative PBB for
2007/08 budget
Enactment and proclamation of the Public
Debt Management Act 2008, which limits
the Borrower‟s public sector debt to a
maximum of 60-percent of gross
domestic product and provides for public
sector debt reduction to 50-percent by the
end of 2013.
Preparation of at least
four line ministries
strategies for the
Borrower‟s Fiscal
Year 2010 budget in
line with program-
based budget
requirements.
Reduce tax
expenditures by 0.5
percent of GDP
relative to 2005/06
Reduction of
primary spending
by 1.0 percent of
GDP in 2007/08
compared to
2005/06.
Implementation of performance
management pilots in the Borrower‟s
civil service by individual line ministries
and the Ministry of Civil Service and
Administrative Reforms.
Pass legislation to
abolish ministerial
discretion over tax and
duty exemptions
Enactment and
proclamation of the
Public Procurement
Act 2006, including
the appointment of
senior officials for
the Procurement
Policy Office, the
Central
Procurement Board
and the
Independent
Review Panel, as
prescribed under
the Act
Alignment of the chart of accounts of the
Treasury accounting system with the
Government Finance Statistics Manual
2001 and upgrading of the Borrower‟s
financial management information system
to enable budget implementation and
reporting of financial and non-financial
data, under the efforts of the MOFED, in
coordination with the department of the
Accountant General
Use fiscal rules to set
budget envelope and
strengthen monitoring
to ensure allocations
to line ministries
accord with preset
ceilings
Submission of
paper to cabinet
establishing
Parastatal Reform
Steering
Committee.
Evaluation of state
of health of selected
parastatals (SPMP,
Central Electricity
Board (CEB),
CWA, Wastewater
Management
Authority (WMA)
and establishment
of remedial action
plans to address the
problems
Begin implementation of the respective
parastatal reform action plans, by the
Central Water Authority, Wastewater
Management Authority, Central
Electricity Board, and Sugar Planters
Mechanical Pool Corporation, to improve
operational efficiency and service
delivery by: (a) introducing a
performance management system,
promoting staff proficiency in multiple
areas of expertise, reducing overtime and
eliminating unfilled posts; (b) increasing
capacity utilization of capital equipment
(i.e., vehicles, tractors), and reducing fuel
and lubricating oil costs; (c) outsourcing
transport and security services, cutting
delivery time and cost, and reducing
pilferage; and (d) improving inventory
management by reducing the number and
volumes of items carried.
Operationalize MRA
to strengthen tax
administration
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Improving
trade
competitiveness
Implement first year
of phased tariff
reduction toward
eventual duty free
island by cutting top
ad valorem rate from
65 to 30 percent and
reduce average tariffs
by 2 percent
(i) Acquisition of
additional capacity
on the SAFE cable
by Mauritius
Telecom; (ii)
Issuing of decision
by ICTA on
Mauritius
Telecom‟s
application for 20
percent price
reduction on ADSL
charges; (iii)
Initiation of
regulatory review
of ICTA
Continue implementation of the
Borrower‟s duty free island policy by
significantly reducing average tariff rate
and number of top rated tariff lines by the
MOFEE.
Revision of the legal
and regulatory
framework of the
Information and
Communications
Technology (ICT)
sector in line with the
international best
practices and changes
resulting from
technological
convergence for
modern competitive
ICT markets, as shall
be evidenced by: (i)
reduction of the prices
of International
Private Leased
Circuits (IPLCs) from
Mauritius to Paris; (ii)
preparation and
approval by the Board
of ICTA of draft
proposals for
amendment to the
Information and
Communication and
Technologies Act;
and (iii) appointment
of the Data Protection
Commissioner
pursuant to the Data
Protection Act.
Unify tax and
regulatory regimes for
EPZ and non-EPZ
firms, with the
exception of labor
regulation
Establishment of a
joint Public-Private
Sector Standing
Committee to review
the design and
implementation of
regulatory measures
relative to import and
export licenses with a
view to eliminate
unwarranted barriers
to trade.
Reduce cost of IPLCs
by 20-35 percent
Improving the
investment
climate
Facilitate doing
business by
streamlining
registration
procedures
Establishment and
operationalization
of new, NPC during
2007 pay round.
Introduction of a flexi-security scheme, as
reflected in the workfare program
provisions contained in section IX of the
Employment Rights Act 2008.
Enactment of the
insolvency legislation
(Insolvency Act No 3
of 2009).
Designate the
Registrar of
Companies as a one-
stop center for
business registration
Appointment of the
Competition
Commission of
Mauritius
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Ease entry of foreign
professional and
skilled workers by
issuing single
residency and
occupation permits
within three working
days
Democratizing
the economy
through
participation,
social inclusion
and
sustainability
Set up machinery for
Empowerment
Program to spend Rs5
billion over 5 years on
social protection,
retraining and SME
support
Drafting of national
education strategy
to increase primary,
secondary and
tertiary output and
raise quality,
including through:
increasing
enrollment at
tertiary level;
reducing the failure
and marginal pass
rate of the CPE, in
particular in Zones
d‟Education
Prioritaires;
offering a
vocational stream
to those who fail or
barely pass the
CPE; upgrading
teacher training;
implementing a
new curriculum
with a greater
emphasis on
languages, science,
math and ICT.
Preparation and submission by the
Ministry of Education, Culture and
Human Resources to Cabinet of a draft
Education and Human Resources Strategy
Plan that diagnoses education sector
needs, identifies objectives and priorities,
and outlines options, which will be costed
and, together with human resources
requirements, incorporated into a medium
term action plan and a fully financed,
program based budget submission.
Implementation of a
targeted and
temporary policy
action in the form of a
work and training
scheme by the
National
Empowerment
Foundation (NEF) to
mitigate the risks of
widespread layoffs in
the context of the
economic slowdown.
Design measures to
facilitate growth of
formal SME sector
through access to
finance, technical
assistance and
capacity building and
consultancy services
Production of a final
poverty map by the
Central Statistic
Office of Mauritius
(CSO) combining the
Borrower‟s FY
2001/02 Household
Budget Survey and
2000 Population
Census data with the
objective of
improving the
capacity for
geographical
targeting.
Replace consumer
subsidies with targeted
cash transfers, with
additional measures to
increase support and
opportunities to the
poorest
25. Flexibility was instilled in the series to increase effectiveness. The third operation in the series was prepared with DDO and with an increase in the amount of the operation to respond to
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the Government needs in light of the financial crisis and its associated uncertain outlook at that
time (sees section 1.6). Even during the global crisis in 2008, momentum for reforms remained
high. The reforms implemented in the first two operations of the series provided the fiscal space
to surmount the fiscal challenges that the crisis created. The authorities realized the benefits of
the reforms implemented and therefore continued implementation of the reform program.
26. Partnership with other development partners (DPs) was important to reduce transaction costs by the authorities. There are a limited number of development partners that
operate in Mauritius. These are the European Commission (EC), the World Bank (WB), the
African Development Bank (AfDB) and the United Nation Development Program (UNDP).
Except the AfDB, the other three DPs have an office in Mauritius. The AfDB opened an office
after the end of this program. Donor coordination was very effective; all donors participated in
the DPO missions and were attending several meetings, especially in the areas that they were
also engaged. This was very helpful both for the donor community as well as the Government.
In fact the Government requested that mission around the DPO should be conducted jointly with
the DPs to reduce Government‟s transaction costs but also to ensure that there are no duplication.
DPs were also conducting donor meetings to share views and identify joint working areas. The
Government highly values the DPL operations as a vehicle for coordination on policy dialogue
among all stakeholders involved. During the DPL4 preparation, AfDB and the WB worked
closely in preparing their respective operations.
2.2 Major Factors Affecting Implementation:
27. A number of factors contributed to the successful implementation and outcome of the programmatic series. These include: (i) adequacy of Government‟s commitment, (ii) soundness
of background analysis, (iii) assessment of the operation‟s design, and (iv) risks identified at
appraisal stage and effectiveness of mitigation measures.
28. Adequacy of Government’s commitment: Commitment to economic reform was expressed at the highest level by the President of the Republic during his address to the nation in
July 2005 (President‟s address: Government Programme 2005-2010), by the Finance Minister‟s
statement to Parliament, Setting the Stage for Robust Growth in August 2005), and the budget
speech of FY 2006/07 in June 2006. The reform program was strongly owned by the
Government and the Ministry of Finance was the champion leading the reform process. The
areas for reform were set out by the Government and it was highly committed to attain its
objective. The reform agenda had the political backing at the highest level, and consultations
with stakeholders were quite thorough. The private sector and the public sector were both
formally and informally meeting to discuss relevance of policy changes. Government‟s
ownership throughout this series grew as the Government officials gained more capacity and
build confidence to discuss on policy changes with the Bank and understood the necessity for
these reforms.
29. Operations based on sound analytical work: The DPL series was designed on the basis of the analytical work undertaken prior to the preparation of the first operation and other
Analytic and Advisory Activities (AAAs) undertaken during the implementation of subsequent
operations. The program largely benefitted from the Bank‟s technical assistance in parallel with
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24
analytical work. The main underpinning analytical study which informed the reform program is
the Aid for Trade piece that the Bank completed in 2006. Throughout the series, the operations
benefitted from the Investment Climate Assessment in 2009, a study on the social protection
system of the country, a Public Expenditure and Financial Accountability Review in 2007 and
work on private sector development by the annual Doing Business Surveys. In addition, the
operations benefited from other works undertaken by other DPs and the IMF, in particular the
various Article IV documents, and the African Economic Outlook. During the last operation, the
Bank conducted an ESW on trade and labor4 to gather more knowledge which has been used to
inform policy reforms in the area of competitiveness for a subsequent programmatic series of
new DPLs. These knowledge products, in addition to those done by others provided analytical
background for the design of the different operations.
30. Assessment of the operation’s design: The program aligned to the priorities of the Government, and covered a wide range of reform areas. The implementation of the reform
program required buy-in from a number of actors, several agencies/ institutions/ ministries, some
of which had weak implementation capacity. During the design phase, areas where
implementation capacity was limited were identified and technical assistance was provided either
by the Bank or through partnerships with other development partners. Based on past experience
(see section 5.1) the first operation of the series was designed in such a way that the actions were
in themselves of standalone strategic importance but were concurrently connected to the
remaining operations. These areas were mainly debt management, Public Financial Management
(PFM) and trade competitiveness. The DPs ensured effectiveness of their engagements, avoided
duplication, and limited transaction costs to the authorities. The DPO programmatic series
provided a platform for DPs to coordinate their support to the Government. Joint missions
(identification, preparation and appraisal) carried out with other DPs have been instrumental in
harmonizing the donor community around the Government‟s program. The Government highly
values the DPL operations as a vehicle for coordination on policy dialogue among all
stakeholders involved. The DPL and parallel financing from other DPs have supplied around a
quarter of the public sector borrowing requirement over the period.
31. Risks identified at appraisal stage and effectiveness of mitigation measures: Three risks were identified during the appraisal stage of the operations and mitigating measures were
proposed. These were related to the ability of the Government to keep up the momentum of the
reforms, maintaining of the macroeconomic stability and capacity constraints. Because the
reform agenda included some policy changes that would affect and be unpopular with some
segments of the population, and given the knowledge that eliminating subsidies and targeting of
pension payments to only the needy have proved unacceptable in the past, the team identified
that the authorities may slip off track for some of the politically sensitive reforms. However, this
risk would be mitigated since the Government‟s priority pillars included the democratizing of the
economy and adopted an Empowerment Program to enhance opportunities and protect the
vulnerable groups who are at risks from changes taking place. The mitigating factors worked.
32. Maintaining macro stability was identified as a risk as poor debt management policy was a concern. For the last two operations, the risk of instability of the macroeconomic situation
4 Although the ESW was completed after DPL4 declared effectiveness, yet the recommendations were adopted
during the preparation of the operation.
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25
was higher due to the fiscal and balance of payments effects of the financial crisis. However, this
risk of macroeconomic instability was mitigated by the Government‟s continuing commitment
and leadership to a sound medium term economic framework, capacity building in debt
management, Government‟s cognizance of the importance of a sustainable and good quality
fiscal response as demonstrated by its fiscal measures and the operation of an exchange rate
policy conducive to external adjustment. The Bank, as well as other DPs, scaled up their
operations. Despite the effects of the global financial crisis, macroeconomic stability was
maintained.
33. Capacity constraints were identified as major risk in all the operations. This included both lack of high technical skills in some areas and lack of human resource in some other areas
to implement the reform program. To mitigate this risk, initiatives such as Service to Mauritius,
Capacity Building program or redeployment from public enterprises were also being undertaken
by the authorities. The donor community supported substantially with technical assistance. For
example, the UNDP and IMF provided technical assistance to modernize the budget process
through adoption of a MTEF and PBB. A key PBB requirement was the development of sector
strategic plans, and this was supported by the Bank. To improve the capacity for geographic
targeting of the poor, as part of the support in the „democratizing the economy‟ pillar, there was
a need for a poverty map to be developed by the Central Statistical Office. Since the statistical
office had limited capacity to undertake such an activity, the UNDP provided support for the
construction of a Social Registry containing information on beneficiaries of social programs in
Mauritius. The EC has supported the setting up of a poverty observatory in Mauritius to monitor
the effectiveness of poverty alleviation policies and to produce high frequency information for
policy makers through the use of qualitative methodologies. This technical assistance was timely
and well coordinated with the Bank which helped to providing advice towards rationalization of
social programs and identifies short/medium-run actions that could generate efficiency and
financial gains.
2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: The PDO were clear since the beginning of the program and this helped in the designing process
of the M&E parameters to follow up on the achievements of the objectives.
34. M&E Design: The results matrix highlighted the linkages between policy actions and expected outcomes for each of the four main priority area of the Government. This matrix was
prepared jointly by the Government (involving sector ministries), the Bank and to some extent
other DPs. The results matrix of the first operation included target values for some of the
monitoring indicator and in DPL2, the results framework was updated to assigned target values
to all the indicators. At the time of the crisis, the program document reflected well the potential
economic impact and highlighted that the impact may negatively affect some of the targets set in
the monitoring indicators. There were four indicators mentioned in the program document but
which were not linked to any policy actions and were not mapped to any of the four different
pillars of the series. These indicators are: GDP growth, unemployment rate, total number
employed (000) and FDI as a percentage of GDP. Since these indicators were not linked to the
policy changes supported by this series, they have not been assessed.
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26
35. M&E Implementation: The data used for M&E purposes were all official data collected from the Central Statistical Office, sector ministries of the Government, principally MOFED and
the central bank. Data from these institutions are highly reliable and very up to date and
disseminate data on a timely basis – monthly, quarterly and yearly. For the pillar on widening the
circle of opportunities, there was a need to gather data to measure low frequency event of
absolute poverty and in this context the UNDP provided technical assistance to the statistical
office to conduct a Survey of Living Conditions (SLC). To better monitor poverty parameters,
the statistical office lacked capacity. The Bank provided assistance to building capacity at the
CSO for production of poverty maps so that the institution can develop necessary tools to
monitor poverty. The assistance from the Bank and UNDP further improved capacity for the
local institutions to produce reliable and frequent data on important factors.
36. M&E Utilization: During the design stage of subsequent operations, the Bank and Government teams would go through the monitoring indicators to assess progress made and
whether the results show large deviations from expected and targeted outcomes. During the
preparation of this ICR, the team did not have any difficulty in gathering data required to fill out
the indicators table, except for one indicator for which data is no longer kept – percentage of
mentored SME firms that shows increase in profitability.
2.4 Expected Next Phase/Follow-up Operation:
37. Following the successful completion of the programmatic series, the Government requested two subsequent DPL programmatic series – one focusing on public sector
competitiveness and other focusing on private sector development. The public sector
competitiveness series builds on dialogue that the first programmatic series initiated on civil
service reforms, public enterprise reforms and trade competitiveness. This series focuses more
specifically on: (i) social protection reform, (ii) public enterprise and parastatal reform, (iii) civil
service reform, (iv) raising competitiveness (trade), (v) improve social sector delivery (education
and health). The private sector development programmatic series is a sector budget support that
draws on the policy and institutional dialogue that underpinned two investment lending
operations that were cancelled. The series focus on (i) enhancing competitiveness through skills
development and technology up-gradation; (ii) access to finance and regulatory reform for SME
growth; and (iii) ICT and e-Government support for increased efficiency and transparency gains.
The first operation of both series were presented to the Board in March 2012.
3. Assessment of Outcomes
Overall rating: Highly Satisfactory
3.1 Relevance of Objectives, Design and Implementation:
Rating for relevance of Objective: Highly Satisfactory
Rating for relevance of Design: Satisfactory
Rating for relevance of Implementation: Highly Satisfactory
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27
38. This relevance of the program is rated highly satisfactory. It reflects proper diagnosis of development priorities that remains relevant at the time of the ICR. The program was flexible
and responded quickly to the needs of the client during the global crisis.
39. Objectives: The program‟s objectives (as set out in section 1.2) have been broadly achieved and remain relevant in the current country context. The objectives set in this series are
still consistent with the objectives of the Mauritius‟s reform program, as set out in the
Presidential Address to the Nation (2010-2015) in 2010. The four pillars of the program were
highly relevant at the time of appraisal and still relevant in the current context. This is reflected
by the CPS progress report (2011). The objective of the CPS (2006) was to help Government
deal with short-term trade shocks and the transition to a more competitive and sophisticated
economy and was centered on the four pillars of the Government‟s strategy. The CPS progress
report notes that “the objectives of the CPS remain relevant and aligned to the country’s
development agenda.” The two current DPO series that was approved by the Board in March
2012 recognize the importance of transitioning to knowledge and skill based services economy,
while consolidating the base. The emphasis on public sector efficiency, competitiveness, and
social safety nets is very strong. While business environment has substantially improved during
the program implementation, yet there are challenges ahead. There is a need for further
streamlining of regulations, remove unnecessary hurdles and improve institutions at the customs
for more transparency. Improving public sector efficiency continues to be of high relevance for
Mauritius in the current context, despite improvements have been achieved so far and as
reflected by two indicators in the World Governance Indicators 2011 – Government
effectiveness and regulatory quality. As highlighted in section 1, the ICT sector has gained
substantially more importance in terms of value added, exports and employment. Greater use of
IT system for transactions and modernizing the civil service are key areas.
40. Design: The project design was consistent with the project objectives and such a design remains relevant in the current context. The program, overall, included reforms that were
strongly owned by the authorities, underpinned by strong analytical foundation and
complemented by financial and technical assistance by the donor community. The program was
developed in close coordination with other development partners to ensure that it reflected the
expertise of the institutions engaged and build synergy for the benefit of the country.
Partnerships with donors and local stakeholders will remain crucial, going forward. Mauritius
wants to make a leap to become a developed economy in the next ten years or so. There is a
knowledge gap in terms of key policy changes that are required to make this leap, and robust
analytical work in required to lay out the foundations.
41. Implementation: Flexibility was instilled in the program and the program‟s focus was on the development objectives. Whenever there were changes in indicative triggers to firm up prior
actions, it was ensured that these changes do not altered the thematic content of the DPL and
were fully consistent with its development objectives. The program was aligned to government
medium term priorities but supported the country to address short term challenges. For example,
such that during the time of the global crisis, the program was adjusted to respond to the
immediate needs of the client, by scaling up the amount of the operation and also adding the
DDO facility to it. On capacity, it should be noted that the authorities have upgraded their skills
to a large extent in some areas, for example on fiscal management. The same model of
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engagement is relevant in the current context. The technical capacity for implementation of some
specialized reforms is still limited. Therefore the combination of knowledge, technical assistance
and financing will continue to be relevant.
3.2 Achievement of PDO:
42. Achievement of the PDO is highly satisfactory. Momentum for reforms was high throughout the program. Despite external shocks in 2008/09 and 2010 due to the financial and
Euro zone crisis, the Government maintained macroeconomic stability and stayed the course of
reforms. The economy defied the negative consequences and observed overall positive growth
throughout the crisis period, although lower than forecasted at the beginning of the DPO
program. Economic activity slowed down during the crisis period but Government was able to
weather the negative consequences thanks to the fiscal space created due to the reform program.
The policy actions supported by the program were critical in achieving the objective of the PDO.
As reflected in section 1 (using examples from the ICT sector), Mauritius indeed transitioned
from a low wage, low skill economy to an innovative and skill based economy.
Objective 1: Consolidating fiscal performance and improving public sector efficiency-
Consolidating fiscal performance rating: highly satisfactory
Improving public sector efficiency rating: satisfactory
Overall rating: satisfactory
43. The program supported reforms to improve fiscal and debt conditions. Fiscal discipline was therefore critical. The aim in this area was to undertake measures to stabilize fiscal
performance at a sustainable level. Measures implemented were twofold: (i) stabilizing revenue
and (ii) reducing expenditure. On the revenue side, a number of policy changes in the tax system
were introduced to stabilize revenue above 19% of GDP. Discretionary power to grant
preferential import duty rates at ministerial level were abolished, tax administration were
strengthened through the operationalization of the MRA and personal income tax was simplified
by consolidating allowances and exemptions on emoluments, retirement pensions, pension
contributions, secure loan interest and more into a single general exemption set according to
household income. Passing legislation to abolish ministerial discretion over tax and duty
exemptions, and operationalization of the MRA to strengthen tax administration were prior
actions supported by this program. Revenue as a percentage of GDP indeed stabilized above 19
percent during the course of the program, but also beyond. In 2011, this ratio was at 21.3
percent.
44. On the expenditure side, the objective was to contain recurrent expenditure. This was to be achieved by annual cuts in primary spending by an additional 0.5% each year. The aim
was to reduce debt to GDP ratio below the 68.8 percent (the 2005/06 level). In 2006/2007 the
Government took a decisive step to cut primary spending by 2 percent of GDP, far exceeding the
target of 0.5 percent envisaged. Primary spending as a percentage of GDP by end 2007 was 20
percent. Greater fiscal responsibility in the form of lower government spending along with strong
GDP performance led to a reduction of debt-to-GDP ratio from 69.2 percent of GDP in 2006 to
57.5 percent of GDP in 2011. The Government showed firm intentions to reduce the debt burden
in Mauritius, demonstrated by the establishment of a Debt Management Unit, preparation of a
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debt management strategy and enacting of the Debt Management Act 2008. The reforms
implemented helped the Government build resilience and weather the impact of the financial
crisis by creating fiscal space with permitted the authorities to unveil a stimulus package of Rs
10.4 billion. Reduction in primary spending and enactment and proclamation of the Public Debt
Management Act were prior actions supported by this program. Although primary spending did
not reach the targeted value by the end of the operation, there is a move in that direction. The
target was not met by December 2010 due to injection of public funds to stimulate the economy
during the crisis period.
45. Progress on public sector efficiency has been satisfactory. To improve public sector efficiency, this program supported the preparation of sector strategies, implementation (on a pilot
basis) of performance management system, and preparation and implementation of reform plan
for 5 parastatals. Progress in this area has not been very strong. When the program was initiated,
it was expected that by DPL3, all sector ministries would have produced sector strategies to feed
into the national budget of 2008/09. The logic of this choice is that effective budgeting demands
a clear vision of sector objectives and a menu of strategically relevant, costed programs from
which policymakers can choose as they make tradeoffs within and across sectors. However, the
authorities postponed the preparation of the strategies to DPL4, but at the same time reduced the
number of sector strategies to only four. The implementation of performance management
system was indeed piloted within the Ministry of civil service, and is expected to be extended to
all ministries and parastatals. Implementation of the action plans produced to address the
challenges that 5 parastatals face is slow. Reforms in this area are politically sensitive and
progress in this area might take quite long. The DPO series that went to Board in March 2012,
has one pillar on parastatals reforms.
Table 2: Indicators for pillar 1, and baseline, target and actual values
Monitoring Indicators
Baseline
Value
6/1/2006
Target
Values
12/31/2
010
Actual
values
12/31/2
010
Actual
values
12/31/2
011
Consolidating fiscal
performance and
improving public sector
efficiency
Stabilize Revenue as a % of GDP
above 19.0 20.1 >19 21.2 21.3
Public sector debt as a % of GDP 68.8
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number of tariff lines with zero rated tariffs increased from 74 percent in 2005/06 to 87 percent
in 2010. The Government continues in this direction. In 2012 the Government abolished duties
on further 80 tariff lines (0.64% percent of total tariff lines). It should be noted that the target in
this area was too ambitious. The authorities planned to eliminate tariffs on 95 percent of tariff
lines. But, this was unrealistic to achieve. Analyses were not undertaken to assess the possible
negative consequences that accelerated tariff reductions may have on domestic producers. In
fact, substantial reduction in tariffs resulted in unanticipated effects on domestic producers.
There were no accompanying policies to mitigate this impact, nor was producers given enough
lead time to accommodate the policy changes. To counteract these effects, the Government
provided for funds in the budget of 2007/08 to support the local firms to strengthen their capacity
in product innovation, marketing and export promotion. Besides elimination of tariffs for 88
percent of tariff lines, the highest tariff band was also reduced from 60 percent to 30 percent. In
2005/06, 13 percent of tariff lines were subject to a tariff rate of 30 per cent or above and this
reduced to 1 percent in 2010. Phased tariff reduction by cutting top ad valorem rate from 65 to
30 percent, reducing number of top rated tariff lines and reducing average tariffs by 2 percent
was a prior action supported by this program
48. With reduction in tariffs, inappropriate regulations hindering trade became more evident. A number of inappropriate regulations and implementation bottlenecks which
compromise competitiveness in Mauritius. The program supported the setting-up of a permanent
regulatory review committee (the Non-Tariff Barriers (NTB) Review Committee) with
responsibility to: (i) define the general principles of regulatory reform based on international best
practice and to ensure that these are applied consistently across line ministries and departments;
(ii) review all new and important existing regulations; (iii) oversee the introduction of regulatory
impact analysis as a key tool across the government; (iv) facilitate the intra-ministry coordination
that is essential to address a wide range of the regulatory constraints, including duplication of
requirements and (v) encourage and assist the roll out of IT solutions for trade facilitation across
ministries and agencies. This Committee effectively served as a platform for private sector to
voice out their complaints. This is an area where the Bank is providing continued assistance as
part of the new DPL series. The reforms include revamping of business regulations, streamlining
of Non-Tariff Measures (NTMs), and promoting services trade. Government actions to reduce air
transport costs by liberalizing air access has partially contributed towards the increased in
number of tourist arrivals in the country from 0.78 million in 2005/06 to close to 1 million in
2011.
49. To boost exports a common regulatory regime across all sectors of the economy were introduced and measures to improve international connectivity were undertaken. The
distinction between EPZs and non-EPZ producers was eliminated and the incentive regimes for
EPZ and non-EPZ firms have been unified, for example by setting all corporate taxes at 15
percent. Anti-labor bias in the tax system was eliminated by removing a 25 percent investment
tax credit, and the application process for licenses and permits streamlined to emphasize more on
ex-ante approvals of business registration rather than ex-post verification of safety and health
standards. Unifying tax and regulatory regimes for EPZ and non-EPZ firms was a prior action
supported by the program. The Government implemented reduction in IPLC prices by 50 percent
between 2003 and 2008. Also, to be in line with international standards, amendments have been
made to the Information and Communication and Technologies Act. These changes, which were
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prior actions of the program, led to substantial increase in ICT-enabled business. The share of the
ICT sector as a percentage of GDP has increased from 5.4 percent in 2007 to 6.4 percent in 2010
and met the set target. International internet bandwidth has increased from 123 Mbps in 2005/06
to 1864 Mbps in 2010. However, the target for the indicator „increase exports as a share of GDP‟
was not achieved as exports suffered considerably during the global crisis period. Exports/GDP
fell to 47 percent in 2009. However, sustained effort led to increase in export to GDP both in
2010 (50 percent) and 2011 (53.4 percent).
Table 3: Indicators for pillar 2, and baseline, target and actual values.
Pillars Monitoring Indicators
Baseline
Value
6/1/2006
Target
Values
12/31/2
010
Actual
values
12/31/2
010
Actual
values
12/31/20
11
Improving trade
competitiveness Trade tariff lines with 0 tariff rate 74 95 87 88
Raise Exports as a % of GDP 60.6 >60.6 50 53.4
Increase Tourist Arrivals (million) 0.78 >0.78 0.93 0.94
Unify regulatory regime across EPZ,
non-EPZ sectors No Yes Yes Yes
Increase international internet
bandwidth (Mbps) 123 >123 1864 1864
Increase ICT sector as a % of GDP 5.2 >6 6.4 6.7
Objective 3: improving the investment climate – Highly Satisfactory
50. The program supported the government to improve the investment environment by revising the regulations and streamlining unnecessary processes that were unnecessarily
retarding investments. To achieve this objective, the Government initiated the following: (i)
investment facilitation, (ii) increasing labor market flexibility, and (iii) attracting skilled foreign
workers. With a rank of 20 in the Ease of Doing Business indicators, Mauritius is one of the best
ranked African countries. The Doing Business index takes into account several factors including
the following factors which were monitoring indicators in this operation: number of days to start
business, number of days it takes to enforce commercial contracts, public credit registry, and
number of days spent dealing with construction permits, and difficulty in firing index. All target
related to these indicators were achieved. Improved investment environment helped in raising
FDI from 2.8 billion rupees in 2005/06 to greater than 12 billion rupees in 2010.
51. The program supported dismantling barriers that caused delays in registering businesses. Prior to the policy changes that the program supported, unnecessarily complex
procedures created uncertainty and often required long waits for clearances and permits. One of
the key areas of policy change that this program supported through its prior action was to
facilitate doing business by streamlining registration practices. To this end, the Government
enacted the Business Facilitation (Miscellaneous Provisions) Act 2006 which included a wide
range of measures to expedite business registration, amending and abrogating several laws. This
Act made the Registrar of Companies a one-stop shop for and changed the role of the BOI from
granting discretionary approvals for investment projects to facilitation. It also relaxed restrictions
on granting work and residency permits. The number of registered companies increased from
29,330 in 2007 to 33,002 in 2011, an increase of around 12 percent.
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52. To forge competition by domestic business, the creation of a Competition Commission was supported by this operation. The setting up of this mechanism was crucial to prevent anti-
competitive behavior. If investigations show that firms are involved in anticompetitive
behaviors, the Commission has powers to intervene and correct the situation through fines and/or
other punitive measures. The commission has so far completed investigation on two cases and is
currently investigating on six additional cases.
53. The program supported policy changes towards easing entry of foreign skilled workers by facilitating permit issuance and towards improving labor market efficiency by introducing a
flexi-security scheme. The problem of shortage in skilled labor was partially resolved by easing
entry of foreign workers in the labour market by creating a single occupational permit by
combining residency and work permits, and legalizing conversion of tourist to business visas.
With the promulgation of the Employment Rights Act (2008), a “flexi-security” scheme was
introduced with the aim of increasing labour market efficiency by strengthening worker
protection rather than jobs. To reduce employee resistance to necessary structural changes in the
labour market, the scheme provides for a maximum of twelve months of transitional assistance to
employees who wish to take opportunity of the scheme to seek job replacements, undergo
training and reskilling or start a small business, and these employees benefited from financial
assistance. As of December 2010, around 3000 workers (52% female and 48% male) benefited
from this scheme, of which 80 percent sought job replacement.
54. The program supported wage increase linked to productivity rather than wage being consumer price index linked. To this end, the program used as prior action the establishment
and operationalization of a new NPC during the 2007 pay round which would replace the
tripartite wage bargaining mechanisms so as to tie wages closely to worker productivity. In 2010,
a new system for wage negotiation has been set up - the tripartite wage bargaining system. This
is a hybrid of the system supported by the program and the former system whereby wage was
negotiated based on index changes.
Table 4: Indicators for pillar 3, and baseline, target and actual values.
Pillars Monitoring Indicators
Baseline
Value
6/1/2006
Target
Values
12/31/20
10
Actual
values
12/31/20
10
Actual
values
12/31/20
11
Improving the
Investment Climate
Number of days to start a business 46
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Objective 4: Democratizing the economy through participation, social inclusion and
sustainability – Satisfactory.
55. The programme supported reforms to shield the vulnerable from negative impacts of the transition towards higher value a