AFRICAN DEVELOPMENT FUND

REPUBLIC OF BENIN

RESULTS-BASED 2005-2009 COUNTRY STRATEGY PAPER

COUNTRY DEPARTMENT WEST REGION

MAY 2005

SCCD: G. G.

Annexes

01 Republic of Benin: Administrative Map 02 Bank Group Operations 03 Bank Group’s Strategic Framework Matrix 04 Country Socio-Economic Indicators 05 Key Macro-economic and Financial Indicators 06 National Accounts (current prices) 07 National Accounts (constant prices) 08 Public Finance 09 Monetary Survey 10 Balance of Payments and Financing Requirements 11 Millennium Development Goals 12 Main Boxes on Benin 13 Benin Poverty Reduction Strategic Paper Monitoring Indicators

Boxes

Box 1 : Key Features of the Country Box 2 : Poverty Characteristics Box 3 : Summary of the Key Elements of the Government’s Agenda and Expected Outcome Box 4 : Donor Interventions by Sector Box 5 : Consultations on the Bank Group’s Strategy

Tables

Table 1 : Results-based CSP Framework

TABLE OF CONTENTS

Acronyms, Currency Equivalents and Executive Summary i-v

I INTRODUCTION 1

II RECENT DEVELOPMENTS 2

2.1 Political Context 2 2.2 Macro-Economic and Structural Context Issues 3 2.3 Sectoral Context Issues 6 2.4 Priority Cross-Cutting Issues 8 2.5 Poverty and Social Context Issues 13 2.6 Medium-term Economic Outlook and External Environment 15 2.7 Private Sector Business Climate and Issues 17

III. NATIONAL DEVELOPMENT AGENDA AND MEDIUM-TERM PROSPECTS 18

3.1 Key Elements of the Government’s Development Agenda 18 3.2 Assessment of the Implementation Progress of the Agenda 20 3.3 Partnership Framework 21 3.4 Challenges and Risks 22

IV BANK GROUP COUNTRY ASSISTANCE STRATEGY 23 4.1 Country Context and Strategic Selectivity 23 4.2 Portfolio Management and Lessons Drawn from Past CSPs 25 4.3 CSP Results Framework 26 4.4 CSP Pillars and Areas of Focus 29 4.5 Regional Dimensions of the Bank Group Assistance 34 4.6 Bank Group Assistance 34 4.7 Partnership and Harmonisation 37

V RESULTS-BASED MONITORING AND EVALUATION 37 5.1 Monitoring of CSP Outcomes and Bank Group Performance 37 5.2 Risk Management 38 5.3 Country Dialogue Issues 38

VI CONCLUSIONS AND RECOMMANDATIONS 39

This report was prepared following a mission of the Bank’s Country Team to Benin in December 2004. The mission was composed of Mr. R. KANE, Macro-economist, OCCW.2, (Head of mission), Mrs S. FORYT, Specialist on health issues, OCSD, Mr. M. SOUARE, Transport Expert, OCIN, and Mr. H. NOUDEDJI, Agro- economist, OCAR. During its stay in Cotonou, the 2005-2009 CSP preparation mission was also supported by an OCSD supervision mission headed by Mr. E. PORGO, Division Manager, OCSD.2, and including Mrs A. DAO SOW, OCSD.2 and Mr. I. SANOGO, OCSD. The 2005-2009 CSP validation mission was conducted in May 2005.

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ACRONYMS AND ABREVIATIONS

ADB : African Development Bank ADF : African Development Fund AIDS : Acquired Immunodeficiency Syndrome BCEAO : Central Bank of West African States CAA : Caisse autonome d’amortissement (Autonomous amortization fund) CENTIF : Cellule nationale de traitement des informations financières (National financial information processing unit) CFAA : Country Financial and Accountability Assessment CFAF : Franc of the African Financial Community CGP : Country Governance Profile CMVP : Cellule de moralisation de la vie publique (Public Life Improvement Unit) CNCS : Comité national de coordination et de suivi (National Coordination and Follow-up Committee CPAR : Country Procurement Assessment Review CSP : Country Strategy Paper DANIDA : Danish Cooperation Agency DWSS : Drinking Water Supply and Sanitation ECOWAS : Economic Community of West African States EU : European Union FECECAM : Fédération des caisses d'épargne et de crédit agricole mutuel (Federation of Savings Banks and Mutual Agricultural Credit Funds) FIAS : Foreign Investment Advisory Service GDP : Gross Domestic Product GNP : Gross National Product HDI : Human Development Index HIPC : Heavily-Indebted Poor Countries HIV : Human Immunodeficiency Virus IDA : International Development Association IMF : International Monetary Fund INSAE : Institut national de statistique et d’analyses économiques (National Statistics and Economic Analysis Institute) I-PRSP : Interim Poverty Reduction Strategy Paper JBS : Joint Budget Support MTEF : Medium-Term Expenditure Framework OHADA : Organization for the Harmonization of Business Law in Africa PADS : Health Care System Development Support Project PARB : Programme d’appui aux réformes budgétaires (Budget Reforms Support Programme) PASRP /PRSSP : Poverty Reduction Strategy Support Programme) PERAC : Public Expenditure Reform Adjustment Credit PGFP : Plan de gestion forestier participatif (Participatory Forest Management plan) PP : Public Procurement PRGF : Poverty Reduction and Growth Facility PRS : Poverty Reduction Strategy PRSC : Poverty Reduction Strategic Credit PRSP : Poverty Reduction Strategy Paper RBCSP : Results-Based Country Strategy Paper SAL : Structural Adjustment Loan SBEE : Société béninoise d’énergie électrique (Electricity and Water Company of Benin) SIGFIP : Système informatique de gestion intégrée des finances publiques (Integrated Public Finance Management System)

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SONACOP : Société nationale de commercialisation des produits pétroliers (National Petroleum Products Marketing Company) SONAPRA : Société nationale de production agricole ((National Agricultural Production Company) SP-CNDLP : Secrétariat Permanent de la Commission Nationale pour le Développement et la Lutte contre la Pauvreté (Permanent Secretariat of the National Committee for Development and Poverty Reduction) TOFE : Table of the State’s financial operations) UNDP : United Nations Development Programme WAEMU : West African Economic and Monetary Union

CURRENCY EQUIVALENTS (May 2005)

Currency Unit = CFA Franc

UA 1 = 758.03 FCFA

UA 1 = US $ 1.53199

Fiscal Year

1st January to 31 December

Weights and Measures

Metric System

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EXECUTIVE SUMMARY

1.1. Benin, with a gross national per capita income estimated at about US $ 440 in 2003, has registered remarkable progress since the adoption, in May 2003, of the Bank Group’s assistance strategy. At the macro-economic level, such progress was materialized through a real GDP growth estimated at 5%, inflation control and a bearable budget deficit. Benin has put into operation a system meant to monitor and evaluate its poverty reduction programmes, through the Social Change Observatory (Observatoire du Changement Social). Besides, a medium and long-term expenditure mechanism for the 2003-2005 period and performance indicators were finalized for the key priority sectors. With respect to governance, the country can boast of a remarkable political stability as well as progress in the entrenchment of democracy. The country’s performances were considered satisfactory by its development partners, particularly the IMF, despite the fact that a public expenditure overrun was observed in 2004. In March 2005, the rating agency Standard and Poors confirmed Benin’s “B+” long-term credit rating and “B” short-term credit rating. This rating reflects prudent public finance management, the scale of the financial support provided by the country’s development partners and the foreign debt relief granted to Benin. At the structural level, the implementation of reforms was pursued, notably in the fiduciary sector, liberalization and private sector promotion, as well as in building the capacity of the poor to participate in the decision-making and production process. The HIPC resources managed in the same way as the other public expenditures are identifiable in the budget.

1.2. However, after an average annual growth rate of about 5% between 2000 and 2003, the real GDP growth rate dropped to 2.7% in 2004. This downturn of economic activity is, among other things, a reflection of the decline in harbour operations and trade restrictions imposed on the country by Nigeria. Besides, the cotton sub-sector which is a source of income for more than two million people and is the country’s main export product, has been confronted with a major crisis since 2002, due to the decline in production and the appreciation of the Euro in relation to the dollar, which penalises Beninese exports to the Asian market. The developments registered since 2003 does not show any significant progress in the fight against poverty. On the contrary, the poverty divide has widened. The main factors that weaken the Beninese economy are the poor diversification of the country’s production, which essentially relies on the cotton sub-sector, as well as the fact that the added value of the tertiary sector, which contributes over a third of the GDP, is highly dependent on trade relations with Nigeria. Concerning liberalisation, the reforms initiated in 2004 have been delayed with regard to the privatisation of government-owned enterprises.

1.3. In the field of governance, despite the positive results registered as regards the improvement of democracy and budget management, Benin intends to pursue its actions relating to: (i) the consolidation of the fiduciary framework and the government procurement system, (ii) the reform of the judicial sector and the fight against corruption and money laundering (iii) the improvement of stakeholders’ participation by building the capacity of the private sector and removing barriers hindering private investments. Strengthening the structures and mechanisms meant to monitor and implement the poverty reduction strategy also contributes to the consolidation of the rule of law.

1.4. Benin has considerable assets capable of accelerating its economic growth and halving the poverty rate by the year 2015. These assets are mainly its agricultural potential and the development of services related to its position as a sub-regional hub. The thrusts of the Government Programme which are those of the PRSP, are hinged on : (i) consolidating the medium-term macro- economic framework, (ii) human capital development and environmental management, (iii) reinforcing governance and institutional capacities, and (iv) promoting long-term employment and building the capacity of the poor to participate in the decision-making and production process.

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Preparation of the PRSP involved broad-based negotiations between the Government, civil society, NGOs, and the private sector, and received donors’ suggestions and support. The ensuing Government programme seeks to attain a 7% economic growth rate during the 2005-2009 period, in order to significantly reduce the impact of poverty on income. To that end, the Government’s strategy should continue to be based on a stable medium-term macro-economic framework. As regards policies geared towards diversification of production, the Government seeks to massively attract the private sector to fields of activity such as agro-industry, tourism and the hotel industry, new information and communication technologies, transit activities and ensure that they constitute the basis of economic growth. The Government will pursue its efforts to improve access to basic social services.

1.5. The Bank Group’s operating strategy in Benin in 2002-2004 targeted poverty reduction by supporting agriculture and rural development, reinforcing basic infrastructure and developing human resources. Support to macro-economic reforms was also pursued with a view to attaining sustainable growth based on private initiative. During the ADF IX period, nine operations worth 83 million UA were financed in Benin. As regards the effectiveness of Bank operations in Benin, the shortfalls observed are recurrent and relate to: (i) the delay in starting up new projects, because of slippages on loan effectiveness, (ii) difficulties encountered in the utilization of rural credit in agricultural projects, (iii) non-compliance with procedures for the appointment and replacement of certain project managers, and (iii) insufficiency of funds allocated under the terms of the State’s investment programme.

1.6. The Bank Group undertook corrective measures consisting in assisting the Government to reduce the contract award period in 2004, establishing a quarterly assessment mechanism for operations undertaken by the Bank since April 2004 and enhancing the rate of supervision of its operations. Slight progress was made in 2004 in efforts to shorten ratification deadlines to a maximal duration of twelve months. Such progress should be consolidated by improving dialogue with national authorities and reinforcing the existing quarterly assessment mechanism for the Bank’s operations in Benin. Besides, the application and follow-up of recommendations of the quarterly review of the portfolio’s operations, the increase in supervision frequency, the follow-up of audit conclusions and the intensification of dialogue will help improve the global performance of the portfolio in Benin.

1.7. The Bank Group’s operating strategy proposed in the 2005-2009 CSP supports the Government’s programme defined within the context of the PRSP. It takes into account the concerns expressed during consultations with civil society and other development actors at the seminars organized jointly with the Government in Cotonou, in December 2004 and May 2005. The key constraints which the strategy seeks to overcome relate to the vulnerability of the Beninese economy whose growth essentially depends on the performances of cotton production, the poor redistribution of the growth dividends to effectively fight against poverty in Benin, the populations’ insufficient access to basic social services, particularly in the field of health, and the poor institutional capacity of the Government, private sector and civil society for an enhanced implementation of the poverty reduction strategy measures. The strategy is also based on the lessons drawn from the Bank Group’s operations in Benin which highlight the need (i) to consolidate the medium-term macro-economic framework with a view to increasing and diversifying production in order to improve the populations’ income, (ii) to pursue human capital development with a view to reducing the infant, child and maternal mortality rates and arresting HIV/AIDS propagation, (iii) reinforcing good governance and building institutional capacities to ensure more efficient government spending directed at poverty reduction.

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1.8. The Bank Group’s assistance strategy for 2005-2009 is underpinned by two essential pillars: diversifying production and broadening access to basic social services. This strategy backs up the Government in its efforts to accomplish the millennium goals. Support to reforms and good governance will also be pursued. In this regard, the Bank will contribute in the various budget support programmes as well as in strengthening the capacities of the public administration, Parliament and the Supreme Court. The strategy will be followed-up on the basis of result indicators defined for each of the Bank Group’s pillars of intervention. ADF will retain three criteria for the follow-up of the Results-Based Country Strategy Paper (RBCSP): annual budget implementation in accordance with the key PRSP issues, progress made in the implementation of structural reforms and the performance of its portfolio in Benin.

1.9. The Board of Directors is invited to approve the programme of activities and the priority areas of operation proposed for Benin during the 2005-2009 period on the basis of an allocation package of UA ….……million. The policy-based lending could account for 50% of this amount.

I. INTRODUCTION

1.1 The purpose of the Results-Based Country Strategic Paper (RBCSP) for Benin is to present the Bank’s strategy aimed at assisting the Government in the implementation of its Action Programme, which is directed towards the poverty reduction strategy. It presents the support provided by the Bank and highlights the other partners’ contributions to reduce poverty, with a view to achieving the millennium goals. The Bank’s strategy for 2002-2004, approved on 13 May 2003 (ADB/BD/WP/2003/19–ADF/BD/WP/2003/15), has already targeted poverty reduction by supporting agriculture and rural development, reinforcing basic infrastructure and developing human resources. Support to macro-economic reforms was also pursued in order to achieve sustainable growth focused on private initiative. During the consideration of the 2002-2004 Country Strategy Paper (CSP), the Board welcomed the progress registered since 1999 in the implementation of sectoral reforms, particularly in relation to opening the cotton sub-sector to private operators, with a view to increasing its productivity. It expressed its appreciation of the fact that budget reforms were being pursued in order to enhance the efficiency and transparency of public resource management. The Board also encouraged the Government to pursue and intensify its efforts to consolidate the macro-economic performances, in compliance with the requirements of the Convergence, Stability and Growth Pact between WAEMU member States, and achieve the millennium development goals. Despite the accomplishment of steady growth, the Board had, at that time, stated its concern about the persistence of poverty and underscored the inadequacies observed in the conduct of surveys on the poverty level. It further stated that targeted actions should be implemented to ensure the broader access of the populations, especially women, to education and health. In the governance sector, the implementation of the strategic action plan to fight against corruption as well as the consolidation of the judicial system should be pursued in order to improve the business environment, and thus facilitate the relaunch of private investments and reinforce actions geared towards poverty reduction.

1.2 In the face of the Board’s concerns, the update of the 2002-2004 Country Strategy Paper (CSP), in April 2004 showed that globally, Benin has made remarkable headway since the Bank Group’s assistance strategy was approved in May 2003. At the macro-economic level, such progress translated into a real GDP growth of 5%, inflation control and a bearable budget deficit. Since the adoption of the 2002-2004 CSP, Benin has put into operation a system meant to monitor and evaluate its poverty reduction programmes through the Social Change Observatory (Observatoire du Changement Social). Besides, a medium and long-term expenditure mechanism for the 2003-2005 period as well as performance indicators were finalized for the key priority sectors. These indicators are currently being monitored within the framework of the poverty reduction strategy support programme. Moreover, the government has initiated the survey on the level of corruption in Benin. It is worth noting, however, that the poverty level in Benin is still disturbing. Finally, as regards structural reforms, delays have been observed with respect to the Government’s programme schedule, particularly in the cotton sector.

1.3 This Results-Based Country Strategic Paper (RBCSP) was prepared on the basis of a new results-based approach. The latter gives more responsibility to the different actors. It also entails giving more pronounced attention to the results achieved by both the Bank and the country. The Results-Based Country Strategic Paper (RBCSP) is thus a tool meant to schedule all the Bank’s activities. It also has a management role and seeks to monitor the progress accomplished in the implementation of the Bank’s strategy and the efforts deployed by Benin to significantly reduce poverty. The 2005-2009 Results-Based Country Strategic Paper (RBCSP) was prepared, after the Bank’s country team effected a mission to Cotonou from 11 to 23 December 2004. The said mission was mandated to collect the most recent data on the political, economic, financial and sectoral situation, as well as on national development priorities, with a view to preparing the Bank’s Strategic Paper for Benin. The main documents consulted for the preparation of the Results-Based Country Strategic Paper (RBCSP) are listed in annex. These include the PRSP, the 2003 progress report on

2 the implementation of the PRSP, the different budget support programmes, sectoral policy documents, the prospective study « Benin 2025 », the population policy declaration, the returns of the general population census.

Box 1 : Key Features of the Country Situated in the Western part of the African Continent, on the Golf of Guinea, Benin is bordered on the north by Burkina Faso and Niger, on the east by Nigeria and on the west by Togo. It has a population of 6.700.000 inhabitants. Its political capital is Porto-Novo, while Cotonou is its economic capital. Benin became independent in August 1960. The south, with a sub-equatorial climate, is made up of plains where the forest gave way to oil palm trees. The centre, which is much drier, comprises plateaux, home to the savannah, where cotton is cultivated locally. The north is hilly and has a tropical climate. It is water reservoir for Benin and Niger. It is also the area used for stockbreeding by Peuls. The population of the area is 26.9% catholic, 21.6 % muslim, 9.5% protestant and 42% practice traditional religions. . • Area 114.763 km2 • Population (Est. 2004) 6.7 million Urbane (%) 43.8 • Population Growth (%) (2004) 2.7 • GNR/inhabitant (2003) US $ 440 • Human development index (rank) 0.457 (ranked 161st out of 77 countries) • Life expectancy-global (years) (2003) 50.7 • Life expectancy-women (years) (2003) 53.7 • Infant mortality (per 1000 births) 91.0 • Access to potable water (% of population in2002) 68 2003 • Literacy rate (in % of population 15 years old or more) 59.1 Men 45.2 Women 73.5 • Gross school enrolment rate (in % of school age population) 2001/02 Total 94.33 Boys 94 Girls 78.10 • Impact of poverty 1994/95 1999/2000 2001/2002 (% of population below the poverty line) National average 28.9 29.3 28.5 Urban area 24.2 23.3 23.6 Rural area 30.4 33. 0 31.6

II. RECENT DEVELOPMENTS

2.1. Political Context

2.1.1. Benin is one of the first African countries to have initiated the series of National Conferences to establish a political regime, based on liberal democracy with the separation of powers, in a context marked by the existence of an absolute multi-party system. The separation and balance between the legislative power, the executive and the judiciary in this country is provided for in the Constitution adopted in 1990. The democratic system that was thus established in Benin has been stable since then. As regards the balance of the said powers, the March 2003 elections brought in a presidential majority which dominates Parliament. The recent situation is marked by the issue relative to the credibility of voters’ lists and the efficiency of the "National Independent Electoral Committee" (NIEC). At the moment, the support provided by development partners is expected to result in the establishment of a Computerised Permanent Voter’s List for Benin. This will put an end to the establishment of periodic lists which are considered untrustworthy and extremely costly and are used for each election by the National Independent Electoral Committee. Regarding Benin’s geographical situation, a brief closure of its borders with Nigeria due to the development of cross-border crime, was observed in August 2003. After they reopened, the Beninese authorities decided to set up a ministerial committee to fight against this phenomenon. Besides, Benin pursues its efforts, through parties and within the State authority’s institutions, to entrench democracy (particularly with the creation of Communal and Municipal Councils in 2003), as well as promote and protect human rights.

3 2.1.2. Freedom of speech is a reality in the country with a plural press which contributes next to an active civil society, in organising discussions on all issues pertaining to economic and socio- cultural development. However, these actors are confronted with demands expressed by workers who have been intermittently on strike since October 2004. With the presidential elections a year away, a new Government was formed in February 2005. Contrary to those that preceded it, this Government does not include the traditional allies of the current President, who are non-members of the majority group of parties. In the field of decentralisation, municipal and local elections were held in December 2003 and the communes have been installed. The communal development plans are being drafted. The laws relative to the transfer of jurisdiction to the communes have been adopted.

2.2. Macro-Economic and Structural Context Issues

Macro-economic developments

2.2.1. Economic growth: Since the early 1990s, Benin has had an annual growth rate of 5% and an inflation rate of less than 3%. Growth was essentially due to the strong performance of the agricultural and tertiary sectors, which represent about 36% and 50% of GDP respectively. Following a growth rate of 4.8% between 2000 and 2003, due to a more sustained activity of the tertiary sector and increased investments which reached 19.8% of GDP in 2003 against 17.3% in 2002, the GDP growth rate was estimated at 2.7% in 2004. This downturn in economic activity reflects the decline in the added value of the tertiary sector whose contribution to growth dropped from 2.1% in 2003 to 0.5% in 2004. The downward trend is due to trade restrictions imposed by Nigeria on goods re-exported from Benin, which involved an increase in the number of prohibited products from 21 to 44. Another reason for this decline is the intensification of the competition between the Port of Lome and Cotonou Port, particularly after the degradation of the latter’s performance. Moreover, the cotton sector, a source of income for over 2 million people (out of a population of 6.7 million) and the country’s main export product, has been confronted with a major crisis since 2002, owing to the decline in production and the appreciation of the Euro in relation to the dollar, which penalises Beninese exports to the Asian market. The main factors that weaken the Beninese economy are the poor diversification of production, which essentially rests on the cotton sub-sector, whose production is poorly processed, as well as the fact that the added value of the tertiary sector, particularly trade, is highly dependent on the trend of relations with the Nigerian authorities.

2.2.2. Public finances: During the 2000-2004 period, the Government pursued public finance reform but with mixed performances. Public Revenues, over 95% of which derive from tax receipts, increased from 15.8% of GDP in 2000 to 16.5% in 2004. It is worth noting that the performance of the Tax Administration were affected in 2004 by the difficulties confronting the cotton sector, the new outbreak of fraud through tax underestimation and the abusive granting of tax exemptions, and the slowdown in economic activities following a restriction of re-exports to Nigeria. Measures adopted to improve these performances essentially entail the harmonisation and simplification of the income tax system, as well as reinforcing the recovery and control capacities of the financial administration.

2.2.3. Government spending, estimated at less than 19.5% of GDP since 2000, represented about 20.9% of GDP between 2003 and 2004. The boost in spending is essentially due to salary readjustments which increased the wage bill from 4.6% of GDP in 2002 to 5.6% of GDP, and the expenditure planned for the organisation of the parliamentary and local elections, held 2002 and 2003. Global budget deficit, on the basis of orders to pay and excluding grants, rose from 3.3% of GDP in 2002 to 4.4% of GDP in 2004, due to the significant depreciation of budgetary revenue and the increase in overall spending and net loans. In order to contain overspending, the Government nvisaged the adoption of measures to restrict the budget to 30 billion CFA F during the 2004 fiscal year, applicable to all ministries. These restrictions contributed to the disorganisation of the chain of

4 spending and were conducive to the fact that the investments expected over the period as well as expenditures relative to the HIPC initiative, were not fully effected. The financing need, as defined, was met through the mobilisation of both internal and external resources.

2.2.4. Money and credit: Monetary expansion was sustained by a marked improvement in net foreign assets due to the combined effects of the intensification of efforts to repatriate export earnings and the increase in foreign support to the State. The banking system is healthy and the new prudence provision adopted by the Central Bank of West African States which became effective in January 2000 reveals that the minimum 8% currency risk hedging is a criteria which four out of six banks comply with. Interest rate policy still targets the maintenance of real positive rate so as to promote savings and capital flow.

2.2.5. Balance of payments: During the 2000-2004 period, the country’s external position was weakened by two main factors, namely the decline in cotton production, which represents 81% of Benin’s exports, and the deterioration of the price of cotton. Besides, the appreciation of the Euro in relation to the US dollar encourages the over-evaluation of the CFA F and thus penalises cotton exports to the Asian zone. These difficulties are exacerbated by the increase in imports, dominated by food products, which represented 18.8% of GDP in 2004 against 18.6% in 2000. Due to the low rate of current transfers, representing an average of less than 5% of GDP, it was difficult to make up for the imbalance in trade flows, thus causing a current balance deficit of 9.6% of GDP in 2004 against 7.5% in 2001. The overall balance of payments deficit improved, rising from 3.6% of GDP in 2002 to 2.5% of GDP in 2004.

2.2.6. Public debt: Benin reached completion point in March 2003 and has already prepared a first progress report on the implementation of the PRSP. As regards public debt servicing, the actual foreign debt service (excluding relief) dropped by about 19% between 2000 and 2004. Subsequently, the “actual foreign debt service /tax receipts” ratio was 4.4% in 2003 against 9.4% in 2002. The value of this ratio, estimated at an average of 15.4% during the 1995-2002 period, attests to the Government’s efforts to ensure foreign debt viability as well as the positive fallouts of the HIPC initiative. The debt service/exports ratio was 6% in 2004, a break from the ratio trend of the past seven years with an average value of 15.4%. The Debt/GDP ratio was 33.4% in 2004 compared to 55.8% in 2000.

2.2.7. Debt sustainability: Outstanding foreign debt totalled 48.1% of GDP in 2002 against 44.3% in 2003. In relation to total exports, the foreign debt service remained stable during the past two years, totalling 6% compared to 15.7% in 2000. This outstanding amount has registered a downward trend since 2001, because of the debt cancellation obtained by the country within the framework of the HIPC initiative (to the tune of 55.3 billion CFAF) after it reached decision point in July 2000 and completion point in March 2003. Benin concluded an agreement relative to debt reduction with the Club of Paris creditors in April 2003. The IMF and World Bank approved the debt relief of US $ 265 million in net present value (1998). At the same time, the Bank Group undertook to grant a debt relief worth US $ 37.57 million in net present value (1998), with effect from March 2003, out of which 41.1% were released in May 2004. No internal or external payment arrears has been registered in Benin over the past three years. It is however worth noting that Benin’s public debt sustainability depends on several factors, the most essential of which are: the strong dependence on the unpredictability of cotton prices, Nigeria’s trade policy changes which are unfavourable to Benin and the appreciation of the Euro in relation to the dollar since a significant portion –about 67% of the country’s exports – is exported to Asia, while 14% goes to Europe and 10% remain within the African continent.

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Structural developments:

2.2.8. The implementation of reforms were pursued, particularly as regards the fiduciary sector, liberalisation and promotion of the private sector and building the capacity of the poor to participate in the decision-making and production process.

2.2.9. As regards results-based budget preparation and implementation, all the ministries covering the priority sectors retained by the PRSP have a Medium-Term Expenditure Framework (MTEF). The annual budgets of these ministries fit into the Medium-Term Expenditure Framework, in compliance with the goals of the PRSP and thus facilitate a better identification of priorities and greater precision in the formulation of their financing needs. Such progress led the Government to present to Parliament, for the first time in 2003, the single budget which incorporates the operating expenditures and capital spending. Concerning budget implementation, the improvement of the Integrated Public Finance Management System (SIGFIP/IPFMS) in 2003 made the spending circuit more exhaustive and made it possible to integrate foreign debt management. HIPC resources managed like other public expenditures are identifiable in the budget and an audit exercise has been initiated to evaluate the impact of these resources. In terms of audit, control and monitoring- evaluation, the Chamber of Accounts has audited the performance of six ministries for the 2001- 2002 period. The pre-audit phase was decentralised by posting a financial controller delegate to each ministry, department and autonomous amortisation fund (AAF). It materialised through the suppression of the second endorsement after the payment order, thus accelerating the production of warrants. Within the framework of the MTEF performance, some ministries have set up monitoring- evaluation units in their Programmes and Projects Divisions. Following the assessment of the government procurement system (Country Procurement Assessment Report) in 2002, the Government set up the national committee in charge of coordinating and monitoring the reform pertaining to government contracts (CNCS) in Benin.

2.2.10. Liberalisation of the economy: As regards liberalisation, the reforms undertaken in 2004 essentially concerned the privatisation of public companies, notably the National Company for Agricultural Promotion (Société Nationale de Promotion Agricole (SONAPRA)), the Beninese Water and Electricity Company (Société Béninoise d'Eau et d'Electricité (SBEE)), l'Office des Postes et Telecommunications (OPT) and the Autonomous Port of Cotonou (Port Autonome de Cotonou (PAC)). The phase involving the pre-qualification of tenderers for the concessioning of SONAPRA’s ginning units was completed in late November 2004 and the process for the selection of the buyers has been launched. With respect to the reform of the Office des Postes et des Télécommunications (OPT), the company was split into two different entities (« Post and financial services » and «Telecommunications ») and the investment bank entrusted with inventorying the holdings of the two units has been designated. Within the framework of the privatisation exercise, the separation of Water and Electricity in the activities of the Beninese Water and Electricity Company (SBEE), initiated since 2000, became effective in 2003 with the launching of an invitation to tender for the auditing of accounts as well as the adoption of a law establishing an agency in charge of controlling this sector. The strategy relative to the concessioning of the “Electricity” branch of the SBEE was adopted and its implementation is expected to kick off in October 2005. As regards the Autonomous Port of Cotonou (PAC), an option for the participation of the private sector has been adopted, even though its implementation has not yet effectively taken off. Finally, Benin has registered slight progress in the diversification of production through private sector promotion, since the share of exports other than Cotton (Wood, palm oil, agricultural products) has increased from 16% between 1994 and 1999 to an average of 19% between 2000 and 2003.

2.2.11. With respect to building the capacity of the poor to participate in the decision-making and production process: access to credit and savings institutions as well as the development of community infrastructure were improved. In this regard, the Bank assisted the Government to set up a new Agricultural Credit Management Framework. In order to encourage the local populations’

6 involvement in the development process, local elections were organised in December 2002, and the communal and municipal councils were installed and mayors elected. Finally, in 2004, the budget assigned for the implementation of the programme for the Management of forests and bordering areas was increased by 30% compared to 2003. This programme is in keeping with the fight against poverty and the degradation of natural resources.

2.2.12 Despite restructuring and modernisation efforts, the Beninese economy is still not very diversified because it continues to depend heavily on cotton which represents 81% of exports. Subsequently, the persistence of poverty in a context of relatively strong growth makes it necessary to reinforce reforms focussed on the diversification of production. Besides, the process initiated to consolidate the statutory framework of the liberalised sector has been slow and the State should take the necessary measures to finalise its withdrawal from the productive sector. To that effect, the Government intends to complete its privatisation programme, which has been considerably delayed, in 2005 by implementing strategies and statutory frameworks apt to govern competition in the telecommunications (OPT), electricity (SBEE) and cotton (SONAPRA) sectors. Slight progress has been made in the water and port management sectors to achieve the millennium development goals. However, the electricity sector recently registered improvements which will be consolidated within the framework of the project for Access to electricity services.

2.3. Sectoral Context Issues

2.3.1 Rural development: By virtue of its potential, the rural development sector (agriculture, animal production, fisheries and hydraulics management) is one of the main sources of growth of the Beninese economy. This sector employs 70% of the active population and contributes about 33% of GDP and over 80% of the country’s export earnings. The animal production, fisheries and forestry sub-sectors account for about 11% of GDP. The diagnosis of the Hydraulics sub-sector reveals a low servicing rate (about 38%). In the field of agriculture, except for productions that in general ensure the country’s food security, cash crops remain dominated by cotton which accounts for about 81% of exports, substantially ahead of oil palm, cashew and pineapple which total about 10% of sales abroad. Agriculture is still highly dependent on rains, and is not very competitive due to high factor costs and poor mechanization. The insufficient attention paid to women’s needs (access to credit, land etc), despite the importance of their economic and social functions, particularly in the conservation, transformation and marketing of agricultural products, is also an impediment. Concerning food security, the rise in food production resulted from an increase in sown areas rather than from productivity. The latter is generally low in the entire agricultural sector. Despite the existence of a relatively stable food balance, there are still specific problems arising during certain periods or in certain places where food and nutritional insecurity pockets exist.

2.3.2 Forest resources occupy 65 % of Benin’s territory. They account for about 5% of GDP, play a key role in the country’s ecological balance (regulation of rains, water status of rivers, soil protection) and are an important source of income and food for the populations. With the rapid increase in land and firewood needs due to demographic growth, accrued pressure was exerted on the forests : over 60 000 ha are thus destroyed every year because of aggressions by agriculture, animal production, reckless logging and bush fires. The production of wood commodities has become extremely critical since forests are now very rare. The only relics are the central core of the reserved forests (examples Lama and Pobè). In the central zone (les Collines, le Nord du Zoua and sud de l’Atacora), the massive forests which existed in the past have been replaced by a dry savannah forest. A few forests which are less subjected to man-induced pressure, still exist in the North zone where they are being developed.

7 2.3.3 The key challenges facing the rural development sector in the medium-term are the need to diversify the production base in order to increase the contribution of the agricultural sector to GDP, the gradual passage from subsistence and cash crops to irrigated farming, greater access to credit and agricultural inputs, the increase in the farmers’ income by promoting their participation in rural production. The integration of animal production in agriculture is also of concern because of overgrazing, the degradation of pastureland, the poor commercial exploitation of products and by- products of the sector. In the forestry sub-sector, the main constraints which cripple the sustainable exploitation of resources are the poor knowledge of forest resources, their unequal distribution around the country and their remoteness from urban centres, the poor response capacity of the Department of Forestry and Natural Resources and the lack of coordination of development and environmental policies. Other constraints impeding the development of this sub-sector relate to the acceleration of erosion phenomena, decreased soil fertility, which in turn leads to new land reclamation, the drying-out of water courses and a deterioration of water quality, the disappearance of the natural habitats of numerous species, with a drop in the biodiversity potential and the degeneration of the plant biomass, the main source of energy and grazing land for animal production activities.

2.3.4 Industry: The industrial sector contributes about 14% of GDP. Most of the companies were set up during the 1974-1985 period, within the framework of the substitution import policy, thanks to public investments. Most of these companies were taken over by private businessmen as a result of the economic liberalism policy option adopted by Benin in 1990. Over 90% of these production units are established in the « Département du Littoral » in Cotonou, thus creating an imbalance in the distribution of the country’s development capacities. Tourism occupies 8% of the active population and is ranked second, after cotton, as regards foreign exchange contribution to the national economy. Its 0.7% contribution to GDP relates to accommodation and food services alone and do not include local transportations or the purchase of arts objects or other souvenirs. This amount does include revenues earned from other sectors either. The sub-handicrafts sector accounts for 7.5% of GDP and employs 10% of the labour force. It contributes in the fight against poverty with a job creation rate of 12.5%.

2.3.5 The key constraints thwarting the development of the industrial sector relate to the concentration of production in the cotton ginning companies, the unfavourable institutional and regulatory environment, the weakness of the material bases of the investment (absence of appropriate physical sites to receive investments for example), the high cost of public utilities, the invasion of national markets by Nigerian products, the low level of managerial and technical training. This situation is not conducive to private investments - particularly direct foreign investment -in the industrial sector. The tourism sub-sector is impeded by constraints relative to the inaccessibility of tourist sites and amenities, the absence of incentives for investments in the tourism sector, poorly developed sites, an inadequate, unsuitable and inoperative institutional framework, actors’ lack of professionalism and the insufficient accommodation capacity of hotels thus depriving the country of the possibility to host major congresses, seminars and other conferences. Finally, the development of the handicrafts sector is hindered by insufficient infrastructure and equipment, the craftsmen’s lack of qualification and inadequate access to bank credit. Its assets lie in its aptitude to preserve, transform and develop local resources. It is one of the main production centres for a wide range of goods and services adapted to the purchasing power of the economically weak social sectors.

2.3.6 The tertiary sector: It essentially comprises trade, transportation, the administration, tourism, hotels and other services. It represented about 45% of GDP between 2000 and 2004, about 17% of which derived from trade, and 8% from transport and telecommunications. Trade and transportation services benefited considerably from measures geared towards the liberalisation of the economy, particularly through the institution of marketing channels, prices, changes especially as regards agricultural trade and the informal sector of SME’s involved in mining activities. In the field

8 of transport, Benin has a system in which the most utilised modes, in order of importance, are the road, railroad, river and lagoons for internal transportation and the sea and air for international transportation. The transport sector accounts for about 7.5% of Gross Domestic Product (GDP). The sector is still thwarted by insufficient domestic and foreign financing for the rehabilitation of deteriorated infrastructure and the renewal of rolling stock and materials-handling equipment. At the technical and institutional levels, the shortcomings observed in the investments planning and programming activities due to insufficient human resources in relation to the different missions assigned to the sector, are being remedied through the recent recruitment of engineers and senior technicians at the Ministry in charge of roads and transportation. Moreover, the sector is confronted with institutional problems such as the insufficient training and information of users and businessmen.

2.3.7 The financial sector: In Benin, credit to the private sector represented only 12% of GDP. The financing system is limited to eight commercial banks (representing over 90% of its assets), two leasing companies, eight insurance companies and more than 98 recognized micro-financing institutions. The insurance sector is fragile. There in no local equity market and very few businesses resort to the regional stock exchange market. The banking sector, which is dominated by three banks and foreign capital, is relatively concentrated. All the banks, excepting one, are private. The Beninese banking sector is globally solid. Except in the risk concentration area, the banks have improved their profitability and their compliance with the prudential ratio. The banks are essentially based in the urban areas.

2.3.8 Micro-financing: Over the past ten years, the micro-financing sector has developed significantly throughout the country, particularly in the poorest regions where banking penetration is poor. SME’s increasingly turn to this sector for assistance. The communication on and visibility of possibilities of the sub-sector have significantly improved, with the regular publication of micro- credit products in Benin. However, 2004 was a difficult year for the sector because of the difficulties confronting the cotton sub-sector in which most of its clients operate. The Beninese micro-credit institutions have registered a 75% increase in their clients who are now estimated at 500 000. Benin has the largest number of micro-financing institutions in the WAEMU space. The mutual benefit activity (with the Fédération des Caisses d'Epargne et de Crédit Agricole Mutuel), which transforms savings collected into credit, and the direct credit institutions which are financed on the financing market by the authorities and donors, are the two networks of the sector. Micro-financing practices an interest rate of 2% per month. However, the loans granted particularly target agriculture and trade activities and sectors like handicrafts do not significantly benefit from them.

2.4. Priority Cross-Cutting Issues

2.4.1. Governance: The promotion of governance is one of the strategic axes of the PRSP. It is the main frame of reference for the definition and implementation of actions relative to the promotion of good governance and capacity building. The Beninese Country Governance Profile (PGP/CGP) which was restituted in February 2005 was able to define the elements of appreciation of accountability and examine how such accountability can be implemented at political, public administration and public finance levels.

2.4.2. At the political level, the democratic system established in Benin since the adoption of the 1990 Constitution, has registered remarkable progress in terms of institutional stability. Despite this political stability and the successful establishment of all the democratic institutions provided for in the Constitution, the State is not yet fully effective. In fact, the rule of law, the guarantee of security and tranquility are not yet a reality for all citizens because of the State’s poor institutional capacities and the malfunctioning of the judicial system. Moreover, even though the institutions in charge of controlling and regulating the Executive are officially set up, they are not completely operational for want of adequate human resources. This situation makes it difficult to practice

9 accountability at State level. Collaboration and synergy between the legislative authority, the executive and the judiciary are only superficial. In reality, the executive power has preponderance over the legislative. The latter has little leeway, due to the paucity of its capacities, as reflected in its incapacity to amend budget estimates. It is worth noting that four of the thirteen State budgets presented since 1991 were adopted by presidential order. The insufficient participation of the private sector and civil society in decisions concerning them also needs to be underscored. As regards the organisation and functioning of the regional administration, it is observed that the application of the constitutional orientation relative to decentralisation has been initiated, with the adoption of several texts and the organisation of local elections in 2002. Nevertheless, the implementation of the decentralisation policy is impeded by inadequate financial resources.

2.4.3. With respect to transparency, access to information has been significantly improved with the end of State monopoly over the media. However, despite the existence of a regulatory organ and an Observatory for Conduct and Ethics in the Media, the Beninese printed press is handicapped by factors such as lack of professionalism, the non existence of investigation journalism, non compliance with the code of ethics, reporting facts without proof or without ascertaining that they are true, which often leads to charges and even trials. The public’s access to information on economic priorities is frustrated, on the one hand, by the poor contribution of the national statistics system to transparency and, on the other, by the civil society’s incapacity to understand the information contained in specialised papers. Besides, despite the support provided by development partners for the institution of a mechanism to monitor and evaluate the Poverty Reduction Strategy (PRS) implementation, reports on the constraints encountered and the progress made in the implementation of the PRS are not circulated at the right time. Concerning public expenditure control, a key element in the fight against corruption and the institution of transparency, Benin is confronted with the multiplicity of structures, the redundancy of their missions and the insufficient means at their disposal. Despite development partners’ support, the government procurement system in Benin still does not provide the required guarantees of transparency and integrity, because of the non existence of a non-judicial mechanism in charge of control, through an independent and systematic technical audit of government contracts and the obligation to account for one’s decisions to the legislator in this regard.

2.4.4. The participation of stakeholders. Benin has the conditions required for its intensification. The civil society in this country is already relatively active and committed to the defence of human rights and the improvement of the conditions of the most needy social groups. Sensitisation and denunciation actions undertaken by civil society organisations (CSO) as well as pressure have generally had a significant impact on the greater awareness of the population in relation to the administration. For example, it instigated the adoption of the Audited Finance Act, with effect from 1998, which made it possible to consolidate the budget implementation control framework. These CSO have developed into real opposition forces. As regards the Army, a survey conducted by the American organisation, National Democratic Institute (NDI), on relations between civilians and the military in Africa, concludes that in the case of Benin: «by remaining neutral during the transition period (1990-1991) and during the presidential and parliamentary elections, the army contributes significantly in the holding of free and transparent elections and facilitates the smooth passage from one Head of State to the other. The Beninese army thus improves its credibility and its institutional status and is prepared to adapt to the recent transition, the multiparty system and contribute in the democratisation initiatives afoot in the country». Finally, as regards the consolidation of the rule of law, the PGP highlighted the constraints with which the citizens are confronted in the area of human rights protection. This situation is all the more disturbing since those concerned are, in addition, affected by difficulties deriving from objective situations such as the country’s poverty and the limits of the administration’s human and financial means. This results in women’s exposure to unenviable conditions, abusive child labour and a population ignorant of its rights. Civil servants, who disregard the legislation, are often tempted to use and even abuse their

10 status as authorities, thus amplifying the corruption in relations between the administered and the persons subject to trial.

2.4.5. In the final analysis, Benin has certainly made remarkable headway in the field of governance. However, on the basis of the analysis on the issue, there is need to implement the recommendations which were determined on the basis of priority needs identified in the PGP and of development partners’ current sectors of operation. The latter is structured around: (i) the enhancement of transparency in the management of public resources by improving the public expenditure control system, the establishment of the new institutional framework for the government procurement system, the reform of the judicial sector, the fight against corruption and money laundering ; (ii) strengthening the participation of stakeholders by providing direct support to the private sector, building the latter’s capacity and lifting barriers to private investments. The rule of law can also be consolidated by reforming the judicial sector as well as reinforcing the structures and mechanisms meant to monitor and implement the poverty reduction strategy.

2.4.6. Labour market: Within the framework of the regulation of relations between employers and employees, a new Labour Code was adopted on 22/01/98 by law n° 98 – 004, which essentially provides for the liberalisation of recruitment and dismissal procedures. Besides, employers are obliged to register their employees with the « Caisse Nationale de Sécurité Sociale » (Social Security Fund) and to pay social security contributions covering both the employer’s participation and that of the employee. The population is mainly engaged in agriculture, which employs about 2/3 of the labour force and more than 1/4 of working youths below twenty years of age. Women account for 17.7% of agricultural employees. Less than 30 % of the jobs are in the modern sector and its absorptive capacity for additional employment has remained quite low, especially because of the restrictions on civil service recruitment. Owing to the low absorptive capacity of Benin’s economy, a considerable share of the 104.000 new job applications each year, increase the already very high unemployment rate, especially among youths. To reduce the unemployment rate, the Government set up an information system on the job market (Employment Observatory & CIPEN) which facilitated the early integration of 13,452 graduates in the economic administration and in education, the training of 254 youths, and the financing of 286 micro-projects between 1992 and 1998. The sustainability of these efforts comes up against the problem of financing and the capacity to monitor micro-projects. Besides, the unexpected checks conducted by the ‘Cellule de Moralisation de la Vie Publique’ (Unit in charge of improving public morals) made it possible to confirm that some businesses, including the major companies, do not comply with the labour code and do not declare all their employees to the Social Security Fund (CNSS)).

2.4.7. Child trafficking: Benin has been known for years as the child traffic hub. Due to the persistence of poverty, needy parents entrust their children to “smugglers” in exchange for money to the tune of between 10,000 to 20,000 CFA (15 to 30 euros). According to UNICEF reports, these traffickers promise to take charge of their education. The children are then sold to major operators, particularly in cocoa and sugar cane plantations in Cameroon, Gabon, Côte d'Ivoire and Nigeria, at prices that are ten times higher. For example, between September and October 2003, about 190 Beninese children who were victims of this traffic and worked abusively in the quarries of Abeokuta (about 100 km north east of Lagos) in Nigeria, were recuperated by the Abuja authorities and handed over to the Beninese government. To put a stop to this scandalous practice, the Government, backed by several partners, including UNICEF, has instituted training projects addressed to the prefectural and communal authorities of all the local administrative units with the aim of promoting and protecting the rights of children in Benin by sensitising the populations at grassroots level about the dangers of child mishandling and trafficking. Besides, educational spaces have been created in twelve social promotion centres throughout the country, to ensure the development of abused children and provide functional literacy training. The number of children victims of this traffic,

11 intercepted by the juvenile control squad, is in constant decline (from 1059 cases in 1998 to 102 in 2002) while the number of traffickers tried and convicted has markedly increased.

2.4.8. Regional integration: By virtue of its geographical position, Benin plays a major role in the development of the landlocked countries’ trade. Its system of transportation constitutes a key sector in the country’s economy, because of its double activity, providing internal service and serving as an international transit point towards landlocked countries (Burkina Faso, Niger, Mali), and neighbouring coastal countries, mainly Nigeria. Since 2000, the Autonomous Port of Cotonou has been handling about 30% of the freight of landlocked countries, most affected by the crisis in Côte d’Ivoire. Benin participates actively in the implementation of regional integration policies within the framework of ECOWAS and WAEMU, the African Union (AU) and NEPAD. On 31 March 2004, Benin adhered to the African Peer Review Mechanism instituted within the NEPAD framework. It undertook, within the framework of WAEMU, to harmonise taxes by applying the Common External Tariff (CET) with effect from 2000, without loosing revenue. Compared to the other members of the Union, Benin has relative control over the convergence criteria in budget matters. It complies with the basic essentials of the WAEMU directives concerning public finance and adopted the West African Accounting System (Système Comptable Ouest Africain (SYSCOA)) in 1998, and harmonised business laws with the OHADA uniform acts. It is worth noting, however, that Benin has not yet implemented the directive relative to the transformation of the Chamber of Accounts into a Court of Audit which still depends on the Supreme Court and has not yet set up the National financial information processing Unit (CENTIF). As regards NEPAD, Benin contributed in the implementation of regional economic integration projects, particularly in the energy sector in 2004. This contribution will be strengthened through the future Benin-Nigeria electrical interconnection and several other projects contained in the NEPAD action plan.

2.4.9. Population: According to the third General Population and Housing Census, conducted in February 2002, Benin has a population of 6,769, 914 inhabitants. From the first to the third General Population Census, held within a period of twenty three years, the Beninese population doubled, from 3,331,210 in 1979 to 6,769,914 inhabitants in 2002. The size of the population in 2002 compared to that of 1992 shows an average demographic increase of 3.25 %. Since the impact of the migration flow is insignificant, the growth observed is particularly due to a natural movement, with the combination of high fertility and a declining mortality rate. At such a pace, the Beninese population might double before the end of the first quarter of the 21st century. Urbanisation will continue to be a cause for concern because of the urban population’s growth rate in Benin. It is forecast that the urban population which was estimated at 39 % in 2002, will reach 45.8 % in 2012 rise to 56.2 % in 2025 and go up to 69.1 % in 2042. The analysis of the sex-age structure observed during the third General Population and Housing Census in February 2002 shows an enlarged base of the age pyramid, characterised by young populations with a high fertility rate, an expanding pyramid which augurs a rapid growth potential and a young population, 46,8% of whom are under 15 years old and more than 50% are less than 16. The demographic pressure is very high in Cotonou where some 30% of the population lives. The concentration of the population in the South increases the pressure on the land and accelerates deforestation. The weakness of demographic characteristics has led the government to adopt, in 1996, a Population Policy Statement, which resulted in the implementation of a health programme for the population focused on health protection for women and children. With the aim of controlling demographic growth, the programme projects a strategy based, among other things, on literacy and awareness about family planning, especially since women of child-bearing age and children under 5 represent respectively 24 and 18% of the total population and only 18.6% of these women of child-bearing age were using contraceptives in 2001-2003.

2.4.10. Gender parity: The promotion of gender has registered significant progress since the institution of the National Commission for the involvement of women in development, followed by the creation of a Department in charge of women’s status in 1966, and a Ministry responsible for the

12 advancement of women. Many non-governmental associations with women membership have emerged since 2002, when Benin adopted the National Policy for the Advancement of Women. The Family Code which was harmonised with the Constitution in 2003, provides for gender equality, prohibits female genital mutilations and does not accept polygamy. This code also entitles women to own means of production. Additional measures taken in favour of gender equality include the elimination of school fees for girls. However, the daily reality is characterised by a relative marginalisation of the Beninese female population, despite their weight in the economy.

2.4.11. Over 51% of the active population in 2002 were women, against 42.6% in 1992, with a growth rate of 4.6% per annum. More than 96.8% of active women work in the informal sector, mostly in the rural areas. Their participation is more substantial in the liberal professions and technical sectors in which they account for 21.6% of the working population. Despite attempts to reinforce women’s participation in politics since the 1990 National Conference, they are still not sufficiently represented in top official positions as well as in elective posts. Though their representation in Parliament has slightly increased (7.2% in 2002 compared to 6.3% in 1993), it is still very low. Similarly, 3.9% of women were elected as mayors during the municipal elections in December 2002. The proportion of wage-earning women in the public sector has slightly varied. Estimated at 25.4% in 1992, it rose to 26.9% in 2002. In the education sector where the country has deployed remarkable efforts to promote gender, girls’ gross enrolment rate was 78.1% in 2001/2002, while women’s literacy rate was estimated at 73.5% in 2003, which is high compared to the African average of 45.2%.

2.4.12 HIV/Aids and communicable diseases: HIV/AIDS prevalence in 2002 was estimated at 1.9% with a marked predominance among the 15 to 49 years age bracket (85.3% of cases) and women. This rate masks serious disparities, since some departments are more exposed and more affected than others. The National Statistics and Economic Analysis Institute (INSAE) has projected a progressive increase of new cases and of the percentage of annual seropositive births (1.67% in 200- against 1.3% in 2002). HIV/AIDS thus continues to spread within the population at a disturbing pace, despite the awareness and social mobilisation campaigns. It is believed that 200,000 people are currently living with HIV/AIDS; but the figure seems to have been underestimated due to the defective surveillance methods and the insufficiency of voluntary testing. By affecting the productive sector of the population, in particular, HIV/AIDS seems to be an impediment to the achievement of the poverty reduction objectives in the country. The Government seeks to confine the propagation of the AIDS pandemic to this level by 2007.

2.4.13 As regards transmissible diseases, the expanded immunisation programme registered high performances, thus reducing infant mortality due to diseases that can be avoided, through vaccination. Actually, the vaccination coverage rates of children under 5 against tuberculosis and measles in 2003 were respectively 99% and 83%. Despite the success of vaccinations, the deplorable socio-environmental and hygienic conditions are the source of endemo-epidemic diseases which are the most frequent causes for patient-visits. According to the data provided by the national health information system, the five main diseases registered in health structures in 2002, in descending order are: malaria (37%), acute respiratory infections (16%), gastro-intestinal diseases (8%), diarrhoeal diseases (6%) and traumatisms (6%). A fresh outbreak of tuberculosis, particularly the pulmonary type, has been observed and it has become a public health problem. As the first opportunistic disease which comes along with AIDS, tuberculosis should be monitored. The country is also confronted with the periodic outbreak of cholera and cerebro-spinal meningitis. The border regions are, in particular, exposed to epidemics due to the intense migratory movements. Life expectancy was 50.7 years in 2003. the Beninese health system has difficulty to face up to all these problems because of the imbalanced human resource deployment to the detriment of regions of the North, exorbitant health care costs, poor functionality of the district health system, and the rare visits

13 to health structures (34% in 2002 according to the 2002-2006 health sector development policy and strategy Paper).

2.4.14 Environment: As regards environmental management, the reforms undertaken between 2002 and 2003 resulted in the preparation of an Environmental Management Programme and the development of a system in charge of controlling the performances of these spending programmes. The said programme is justified by population growth which generates additional needs in farmable land due to the reduction of time required for fallowing, low agricultural productivity, deforestation, desertification and coastal erosion. Forest resources occupy 65 % of Beninese territory. For several decades, they have been subjected to serious degradation due to the combined effects of demographic pressure and declining rainfall. This resulted in the anarchic extension of farming spaces and pastureland, practices that are not conducive to the sustainable management of natural resources (shifting agriculture, over cutting, bushfires, land reclamation and overgrazing) and soil impoverishment. The savannisation of dry forests situated in the Centre and North of the country has been observed. The only relics are the central core of the reserved forests (examples Lama and Pobè). In the central zone (les Collines, le Nord du Zoua and sud de l’Atacora), the massive forests which existed in the past have been replaced by a dry savanna forest. A few forests which are less subjected to man-induced pressure, still exist in the North zone where they are being developed (ex. PAMF). In the urban areas, the environment and sanitation issues are linked to problems of pollution, in particular, in Benin’s large towns, especially Cotonou. The Government’s aim is to improve the population’s living environment with a view to contributing to poverty reduction. As a concrete measure to control pollution in urban areas, a tax based on the polluter-payer principle was introduced under the State Budget pursuant to the framework law on the environment.

2.4.15 Participation : To facilitate the populations’ appropriation of the poverty reduction strategy, the PRSP preparation process was based on a consultative and participatory approach, involving the administration, local communities, civil society organisations or representatives, NGOs, the private sector and development partners. The outcome of the various consultations contributed in establishing the diagnosis of poverty in Benin, and defining the major axis and priorities of the poverty reduction strategy. Development partners were also involved in the preparation of the first report on the implementation of the first PRSP year. In Benin, civil society participation is effective, particularly in human rights protection and the improvement of the conditions of the neediest social groups. In implementing the PRSP, the Government encouraged the participation of the civil society, private sector and employers in several bodies, such as the government contracting regulation organs, the observatory for the fight against corruption. Several NGOs active in the defence of the rights of women and disadvantaged sectors intervene in the PRSP appropriation process. Generally speaking, the Civil Society Organisations (CSO) refuse to be confined to a role of spectator and underscore the need to effectively participate in the preparation and monitoring of development programmes, notably those relative to the respect of workers’ rights, economic governance and the fight against corruption.

2.5. Poverty and Social Context Issues

Box 2: Poverty Characteristics in Benin

The first progress report on the implementation of the PRSP states that from the standpoint of the global poverty reduction objectives, the developments observed between 1999/2000 and 2002 do not show significant progress. Generally, the impact of monetary poverty remained almost stable (from 29.3% in 1999/2000 to 28.5% in 2002), with worsening inequality among the poor at national level particularly due the significant increase in the acuteness index, especially in the urban areas. In relation to the Millennium Development Goals (MDG), the poverty impact curve is above the MDG trail, i.e. the expected poverty reduction is not achieved. The gap between the MDG trail and the developments registered in Benin is still more significant if one takes into account the depth and acuteness of poverty. If this trend is maintained, the goals of halving poverty by 2015 might not be reached. As regards non-monetary poverty, a downward trend of the human poverty index (HPI dropped from 51.4% in 1999 to 49.9% in 2001 and 48.9% in 2002) has been observed. However, in relation to the MDG trails, it is observed that the 2002 HPI is 3.79 points less than the 45.1% expected. In other words, in relation to this indicator, Benin is not on the path expected to take it to the goals fixed for 2015 either.

14 2.5.1. Poverty trend: Poverty affects 28.5 percent of the Beninese population in 2002 (against 29.6% in 1999/2000). The effect of monetary poverty is more critical in the rural areas (31.6%) than in the urban areas (23.6%). Disparities among the poor worsened between 1999 and 2002, as a result of the increase in poverty acuteness in the urban areas. In the light of the shortcomings observed in the preparation of these data, the World Bank established «consumption, income and assets» indicators derived from the questionnaire on basic welfare indicators (QIBB). Results obtained in 2003, within the framework of these surveys, show that the poverty level is a lot higher. On the basis of the income poverty line resulting from the questionnaire on basic welfare indicators in 2003, 39% of the population is poor while 22% may be considered as extremely poor. However, the human poverty index1 has slightly improved (from 51.4% in 1999 to 48.9% in 2002). It reflects the authorities’ efforts to develop the socio-community infrastructure. Human poverty affects 43.1% of the population in 2002. The phenomenon affects 3.3 times more people in the rural areas than in the urban areas. About 84% of the country’s poor population is found in the rural areas. It is worth noting that the number of youths affected by poverty has increased tremendously. Its effects are more acutely felt among women who represent about 51.5% of the population.

2.5.2. Besides, the institutional and regulatory deficiencies observed within the framework of decentralisation and the land issue, are not conducive to poverty reduction. In terms of decentralisation, efforts still need to be made to provide local communities with sufficient financial resources to enable them to play the role entrusted to them as regards the realisation of basic infrastructure. The major constraint to land management in Benin is the coexistence of modern law and customary or traditional law on access to rural and urban land. Title deeds are not used for financial resource mobilisation, a phenomenon which impedes the development of the private sector. Actually, there are no mortgage loans or real estate credits worthy of the name. Moreover, land- based discrimination against women is still a reality, despite the fact that they contribute in feeding the ever-increasing population. This discrimination is perceptible in the unequal division of heritage between boys and girls, because of the patrilineal nature of the Beninese society. However, this problem has been successfully circumvented through alternative solutions such as sharecropping, gifts inter vivos, loaning a plot to women within the family, etc.

2.5.3. In the field of education, significant progress has been made at all levels of the education system, thanks to Government efforts and financing opportunities provided by the Education. For All Initiative (EFA) / Accelerated Procedure (achieving universal primary schooling by 2015). The gross primary enrolment rate rose from 49.66% in 1990/1991 to 79.99% in 2000 and reached 94.33% (78.10% for girls) in 2002. Benin is thus close to achieving universal education, even though sustained efforts still need to be made concerning girls’ education. However, the internal performance of primary education is still poor because of the high repeater (23.62%) and drop-out (13.48%) rates in 2003. Only 45 out of every 100 children enrolled in First Grade reach Sixth Grade. Out of these, 34 get to High School, Form One. The system’s poor performance is due to the fact that teachers are underskilled (51.50% in 2002).

2.5.4. Progress was also made in secondary school education where the gross enrolment rate, estimated at 16.34% in 1997, increased to 21.30% in 2002. The parity index rose from 0.42 to 0.47, thus showing a reduction in the gap between boys and girls in relation to attendance. The increase in the student population is most remarkable in the private education sector (from 11, 798 in 2001 to 53,471 in 2003). These indicators mask regional disparities between the various departments. As is the case with primary education, the internal performance of secondary education (public sector) is poor. Technical education and professional training are characterised by the insufficient public schools which, as a result, have an overabundant student population (in 1999/2000, the private education sector took in 49.1% of the total students’ population). The number of girls is on the

1 Based on the probability of dying before reaching 40, the illiteracy rate, the percentage of the population without access to potable water and the percentage of children under five suffering from underweight.

15 increase. From 26.7% in 1993/1994, they account for 32.6% of the student population in 1999/2000, but they are particularly present in the commercial, administration and management sectors. In public institutions of higher learning, the student population more than doubled between 1996 and 2002, while it tripled in the private sector. Finally, the literacy rate which was 59.1% in 2003 is still high compared to the African average (36.9%).

2.5.5. In the health sector, a coverage rate of 82 percent is observed among the Beninese health infrastructure, with acute regional disparities: it is only 50 percent for the Littoral, 67 percent for Zou, and 71 percent for les Collines. Similarly, while 56 percent of the urban population had access to improved health care in 2001, only 11 percent of rural households did. Apart from regional disparities, many district health centres have not yet complied with the standards in force and do not have the appropriate equipment. On the other hand, there is often a shortage of health workers because of the massive number of retired employees who have not been replaced, and the absence of a newly recruited competent staff. Finally, the health infrastructure are not sufficiently used (34% in 2002), and this reflects the inappropriateness of the services offered, as well as the obstacles to access (accessory expenses), which is dramatic in a context of generalised poverty among many sectors of the population. The significant number of health infrastructure that need to be up to standards, insufficient qualified staff, particularly in the rural areas, and the limited use of health services are the basic causes of the populations’ poor health coverage.

2.5.6. This poor health coverage results in women’s limited access to obstetrical services. Actually, with an average national coverage of 63.1%, the lowest obstetrical coverage is registered in Atacora with 34.6% while the departments of Alibori, Borgou, Atlantique, Collines, Couffo and Donga have coverage rates of between 40 and 60%. Moreover, this poor health coverage also impacts on the appropriate management of transmissible diseases. Malnutrition is among the most acute problems affecting maternal and child health. Only 38% of children under 6 months are feed exclusively with maternal milk and 31% of those under 5 suffer from growth retardation; 11% of whom have its severe form. Sixty-four percent of women suffer from anaemia and 2% have its severe form (rate of haemoglobin less than 7g/dl). This situation results in high maternal and infant mortality rates: 485 maternal deaths for 100 000 live births and 89.1 for 1000 (EDS 2001) respectively. The millennium development goals for the health sector cannot be reached unless well- targeted and reinforced measures are implemented: reducing infant mortality, improving maternal health and fighting against major diseases, malaria and HIV/AIDS, in particular.

2.6. Medium-term Economic Outlook and External Environment

2.6.1. Constraints: Despite an economic situation which globally registered favourable developments over the past five years, the progress made at the macro-economic level did not contribute to significantly reduce the poverty phenomenon which affects close to 30% of the population. Economic growth and poverty reduction efforts are essentially hindered by structural obstacles, namely the rigidity of the production machinery and structure, inadequate investments and limited diversity of exports dominated by cotton. The situation leads to the extreme vulnerability of the economy to external shocks and weakens the country’s macro-economic balances. Benin is also confronted with other constraints such as the legal protection of businesses, taxation and customs duties, the management of public utility services, and the development of infrastructure. Business competitiveness is considerably affected by these barriers.

2.6.2. Beyond institutional weaknesses and the problems of good governance mentioned above, investment is also confronted with the constraints of supply and production factor costs (electricity, communications, transport, land), which undermine the competitiveness of Benin’s economy. Competitiveness also depends on the quality of human resources, which the capacities of the present system cannot guarantee. Investments are also thwarted by the administrative red tape.

16 Benin is among the WAEMU member States which benefited the least from direct investment flows, estimated at 2% of GDP in 2004. At the social level, the analysis of the social context (section 2.5) shows that some indicators –notably those relative to health- do not have a favourable trend for the achievement of MDG II. In general, the key constraints concern the limited diversification of the economy which essentially relies on Cotton production, the predominance of the tertiary sector, dependence on Nigeria and the still limited access to basic social services, particularly in the field of health.

2.6.3. Perspectives: Despite the economic, structural and social constraints identified above, Benin has a real private sector development potential notably in the agriculture and food, tourism and handicrafts as well as the services sectors. During the 2005-2009 period, economic growth is expected to average 7 %, with a view to significantly reducing the impact of poverty on income. To that effect, the Government’s strategy should continue to be based on a medium-term macro- economic framework. The Government should pursue the basic infrastructure consolidation efforts and give priority to expenditure in sectors which contribute directly to poverty reduction.

2.6.4. In order to reduce the cost of production factors, the Government intends to pursue the modernisation of its financing and banking system and improve the performance of its public companies involved in the supply of strategic goods and services. Benin should accelerate the implementation pace of its privatization and liberalization programme in order to establish the long- term basis of its development through (i) the effective sale of SONAPRA’s ginning factories (ii) the la actual concessioning of the electricity company (iii) the completion of the telecommunications privatisation process (iv) the implementation of the second phase of the study on the privatisation of port management and the preparation of an action plan to implement its principle recommendations (v) the design and operationalisation of a new statutory framework for the electricity and telecommunications sectors. In addition to these measures which the Government intends to implement with a view to promoting the various sectors which constitute the sources of growth, Benin will take advantage of the American Growth Opportunity Act initiative which provides outlets for textile products.

2.6.5. Besides, the Government retained the conduct of studies on competitiveness, the investment climate and private sector needs and constraints. These studies will contribute (i) in strengthening Dialogue between the Public and Private Sectors ; (ii) in improving the business environment ; and finally (iii) in strengthening Public –Private Partnership for the Development of infrastructure.

2.6.6. Finally, the promotion of Good Governance and the fight against corruption are among the priority objectives of national authorities. In this regard, the Government adopted a national strategic plan to fight against corruption and launched a survey on corruption. Benin undertook to implement Directive n° 07/2002/CM/WAEMU of 19/09/2002 relative to the fight against money laundering in WAEMU member States with the submission to Parliament of the Law against money laundering. As regards public service reform, a public service reform strategy was adopted by the Government in August 2003, structured around the implementation of a wage plan for public servants, the State employees’ status, the modernisation of the public service and the implementation of the public service charter. In the judiciary sector, the implementation of the Integrated Programme for the reinforcement of legal and judicial services resulted in the adoption, in 2002, of laws relative to the status of the judiciary, the judicial administration, the status of the opposition and the new charter of political parties.

2.6.7. To meet the expenses of the poverty reduction strategy, the budget deficit anticipated by the medium and long-term economic framework is close to 5% of GDP, on average, during the 2005- 2009 period. In terms of policies focused on the diversification of production, the Government seeks

17 to massively attract the private sector in activity fields such as agro-industry, tourism and the hotel industry, new information and communication technologies, transit activities and to make them the basis of economic growth. Thus, growth perspectives would be underpinned by investment rates of about 21% with effect from 2006. As regards the macro-economic and financial framework, with a view to maintaining the poverty reduction efforts, the authorities have fixed a growth objective of close to 4% in 2005 and should contain inflation to about 3%. Tax effort will increase revenue by 15.8% in 2004, and 16.1% of GDP in 2005, with total expenses dropping from 21.26% in 2004 to 21.23% in 2005. The expected economic upswing essentially rests on the implementation of the economic recovery plan prepared by the Government in April 2004 but also on the reordering of the Cotton sub-sector. For the 2005-2009 period, the TOFE showed a gap of about 0.4% of GDP per annum. The Government intends to fill the gap by reducing deposits and requesting a budget support of about 39 Billion CFAF per year.

2.7. Private Sector Business Climate and Issues

2.7.1. Benin has assets of major importance for private sector development: political stability, existence of a viable commercial banking sector, and availability of airport and port facilities. The country’s geographical position enables it to play the role of ideal entry and transit port towards landlocked countries (Niger, Burkina) and Nigeria. The Beninese private sector was able to take advantage of this opportunity early enough, and assert this role of platform of the regional economy. For example, over the years, Cotonou Port has become the leading port of transit for used cars in West Africa, even though a preference for Lome port has been recently observed to its detriment.

2.7.2. In terms of achievements, several reform actions and measures have been taken since the adoption of the liberal option to improve the business environment and promote private national and foreign investments, by instituting a one-stop-shop through the Centre for Business Formalities (Centre de Formalités des Entreprises,) comprising a centre in Cotonou and three centres in the provinces, whose management comes under the responsibility of the Chamber of Commerce and Industry of Benin (CCIB); resuming the activities of the National Federation of Beninese Craftsmen (FENAB), the start of the economic sectors’ liberalization process, and the State’s withdrawal from productive sectors; modifying the Investment Code to broaden the scope of eligible activities and improve port management as well as simplify tax and customs procedures. Besides, the new Labour Code, adopted in 1998, eases the hiring and termination of employment procedures, while maintaining minimum wage and its periodic revisions due to social pressure. Finally, the Beninese judicial system integrates the Uniform Acts of the Organisation for the Harmonisation of Business Law (OHADA) and the Government undertook to implement an improved industrial free zone programme.

2.7.3. Despite the Government’s option to promote the market economy since 1990, the Beninese private sector is relatively weak. Apart from recently privatised facilities, the private sector comprises businesses operating in the informal sector. More than half of the modern businesses are involved in trade. Credit to the private sector represents only 12% of GDP. The legal and judicial framework is not conducive to the development of the private sector, because of the judges’ lack of qualifications and probity. The one-stop-shop does not play its investment facilitation role. Investments still come up against several barriers due to the bureaucratic red tape. The rate of business profit taxes levied on Beninese companies (38%) is still high and exceeds the 35% rate fixed within the WAEMU space. Other constraints related to the business climate and impacting negatively on the competitiveness of the economy concern: (i) the poor financial and institutional capacity of promoters; (ii) SME’s difficult access to bank financing because of scarcity of long-term resources and the non existence of a viable risk guarantee scheme; (iv) the unattractiveness of the investment code despite its amendment in 1998.

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III. NATIONAL DEVELOPMENT AGENDA AND MEDIUM-TERM PROSPECTS

3.1. Key Elements of the Government’s Development Agenda

3.1.1. The Government is currently engaged in the implementation of the Action Programme based on the general objectives of its Population Policy Declaration and the National Strategic Vision for 2025, adopted within the framework of the Studies on long-term perspectives. The programme content gives rise to the priorities of the Poverty Reduction Strategy Document which defines a national growth and poverty reduction strategy for the 2003-2005 period.

3.1.2. Focus of the Government Programme: It is similar to that of the PRSP structured as follows: (i) reinforcing the medium-term macro-economic framework, (ii) human development and environmental management, (iii) reinforcing governance and institutional capacities, and (iv) promoting long-term employment and building the capacity of the poor to participate in the decision- making and production process. The thrusts of this programme draw inspiration from the Governments’ Vision «Benin 2025» and will serve to prepare a second PRSP.

3.1.3. The consolidation of the macro-economic framework is a pre-condition for wealth creation through the diversification of production. The macro-economic and structural objectives of Benin’s programme are to attain accelerated growth, an imperative for significant poverty reduction, through increased national and foreign private investments. As regards structural reforms, the Government will pursue the liberalisation of infrastructure and privatisation of the cotton sector in order to increase the share of the sub-sector’s revenue devolved on producers. The Government will adopt a unique unginned cotton marketing mechanism making use of the existing structures comprising ginners, producers’ distributors and the State. In so doing, the Government essentially seeks to promote private initiative, particularly in the agro-industry, tourism and hotel business, new information and communication technologies and transit sectors with a view to making them the basis of economic growth. The key aim will be to improve the business environment by reducing the costs of transactions and strengthening the legal and judicial framework with a view to securing private investments. In addition to giving fresh impetus to the ongoing public sector/private sector dialogue, to show its commitment at the highest level in favour of private sector development, the Government intends to organise a Presidential Investors Council in Cotonou in 2005, with the support of its development partners, namely the World Bank, following the example of Mali, Senegal, Ghana and Tanzania.

3.1.4. Human capital development and environmental management should facilitate the broadening of access to basic services and an enhanced management of natural resources. In this e perspective, improving the supply, the quality and utilisation of these services and more specifically, the fight against HIV/AIDS and transmissible constitute the priority objectives of this component of the strategy. As regards education, the priority is to meet the pressing and growing demand for basic education (with a 60% increase in student population during the 1996-2006 period), technical education and professional training whose student size is expected to triple during the same period. In the field of water resource management and sanitation, the Government has adopted policies meant to improve access to potable water Guaranteeing the populations’ access to potable water is among the key points of the poverty reduction strategy because of its impact on health. To meet the pressing potable water access needs of the rural populations, the Government intends to adopt and implement a programme in compliance with identified priorities. It entails providing 700 boreholes in the rural areas, rehabilitating 300 water supply points and building two retaining reservoirs for stock watering, by December 2005 at the latest. These measures will be rolled over in 2006, with plans to increase the number of boreholes to 800. In anticipation of problems relative to the management of these water points, the programme provides for the adoption of an action plan for the development of partnership between the private sector and the State, to ensure an efficient

19 management of water supplies in secondary cities. This programme also supports communes in the planning and realisation of investments in the hydraulics sector, particularly through the preparation, in April 2005, of a guide on the establishment and management of potable water access points.

3.1.5. Concerning the management of Forests and bordering areas, which is an important component of the poverty reduction strategy, the Government will also pursue its policy geared towards the protection of the ecosystem and sustainable development by laying emphasis on rational natural resources management, the preservation of biodiversity and the fight against greenhouse gases and desertification. The rational management of natural resources is expected to reverse, in the long run, the degradation of the national forest heritage on which the populations in the rural areas depend for their living. The option adopted to that effect is to implement mechanisms aimed at enhancing the accountability of grassroots communities and promoting income-generating activities that can serve as an alternative to chaotic forest harvesting.

3.1.6. The key purpose of the Forests and Bordering Areas management programme is to ensure the sustainable management of 22 massive forests. It has three components: (i) institutional support and capacity building; (ii) participatory forest and bordering areas management; and (iii) sustainable management of energy wood and environmental impacts. The following actions will be implemented with effect from 2005: (i) institute a favourable tax system for firewood and charcoal products under management; (ii) complete the privatisation of the industrial branch of the National Wood Company (ONAB); and (iii) pursue the implementation of the participatory forest management plans. It will also entail broadening the community forest resources management to 7 reserved forests and 2 bordering areas, improving production techniques and logging as well as promoting alternative income-generating activities (a total of 12 reserved forests will be involved in 2005).

3.1.7. As regards the promotion of long-term employment and building the capacity of the poor to participate in the decision-making and production process, the Government’s priorities are still: employment promotion and income-generating activities, the development of micro-financing, securing vulnerable areas, promoting community development and regional development poles, as well as social welfare and the advancement of women.

3.1.8. As regards Governance and capacity building, the improvement and consolidation of governance and institutional capacities call for the implementation of the justice modernisation programme, pursuing budget reform, reforming and rationalising public expenditure control, budget reform, administrative reform and Public Service reform, Decentralisation and Deconcentration and the fight against corruption. To ensure the appropriation and implementation of the poverty reduction strategy by the populations, the document’s drafting process was based on a consultative and participatory approach, involving the administration, local communities, civil society organisations or representatives, NGOs, the private sector and development partners. The outcome of the various consultations contributed in the establishment of a poverty diagnosis in Benin, and the definition of the major axis and priorities of poverty reduction.

3.1.9. The macro-economic goals of Benin’s programme are to achieve accelerated growth, which is essential for significant poverty reduction, through an increased national and foreign private investment. The Government retained a certain number of results in the form of quantitative poverty reduction indicators. These indicators concern government priorities relative to (i) the consolidation of macro-economic stability in Benin ; (ii) the improvement of access to basic education, literacy, primary health care and potable water, (iii) the fight against HIV-AIDS and malaria, (iv) the fight against corruption, the consolidation of democracy and decentralisation, (v) the promotion of long- term employment and building the capacity of the poor to engage in income-generating activities and a proper national land-use management. The detailed table of Benin’s PRSP monitoring indicators is presented in annex 13.

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Box 3: Summary of the Key Elements of the Government’s Agenda and Expected Outcome African Main indicators average 2001 2005 2007 2015 Real GDP growth rate (%) 5.0 5 6 >7.0 Inflation (CPI) (%) 4.0 <3.3 <3.0 <3.0 Real per capita income growth rate (%) 2.82 3.01 3.55 - Impact of urban poverty (%) 21.7 21.0 20.0 10.85 Impact of rural poverty (%) 27 26.7 25.5 13.5 Life expectancy (year) 52 52.3 52.3 52.4 65 Infant-Child mortality (per 1000 live births) 174 118.9 116.3 111.2 90 Maternal mortality rate (per 100 000 live births) 917 495 490 480 390 Gross Primary school enrolment rate (%) 88.7 94.33 96 100 100 HIV/AIDS prevalence rate (%) <6 <6 <6 <6

SOURCE : PRSP

3.2. Assessment of the Implementation Progress of the Agenda

3.2.1. The implementation of the poverty reduction strategy is thwarted by serious deficiencies which need to be remedied by the Government, in accordance with the conclusions of the first PRSP progress report for 2003, which was finalised in early 2005, and was thus issued with considerable delay. The report took stock of the implementation of the poverty reduction strategy matrix of measures. A synthetic implementation index for each axis of the strategy, calculated by the Government is presented in annex. The study of the trend of indicators since 2001 and even in 1999/2000 shows that insignificant progress was made, despite the slight improvements observed as regards certain indicators. It is true that for most indicators Benin is short of the expectations aroused by the Millennium Development Goals (OMD). This could be justified, among others, by the fact that the first year’s activities were implemented within a climate marked by the downturn of economic activity (4.4% growth). The level of implementation of the PRSP matrix of measures is also very average. The reasons for the non implementation of certain measures also include the lack of capacities of major structures in charge of implementing the matrix of measures.

3.2.2. In relation to the first axis of the PRSP relative to strengthening the medium-term macro- economic framework, the objectives had to be reviewed to take into account the slow-down effect of the economic activity observed in 2004. The real GDP growth rate which reached 6% in 2001 dropped to 2.7% in 2004. Public finance management registered a downward spiral in 2004, with the increase in salaries.

3.2.3. In the human capital development and environmental management sector, Benin achieved progress thanks to the reforms implemented and the investments made in the priority sectors. In the field of health, budget credit allocation doubled over a four-year period (1998-2002), reaching 9.7% of the national budget in 2002 and 2003, a level that is rather close to the World Health Organisation (WHO) standard (10%). Thanks to HIV/AIDS prevention and eradication actions, Benin is considered in 2003 as one of the countries with the lowest prevalence rate in the sub-region, i.e. 1.9%.

3.2.4. With respect to environmental management, the reforms initiated between 2002 and 2003 resulted in the preparation of an environmental management programme and the development of a performance control system for these spending programmes. However, significant progress has not yet been registered because of the low rate of public expenditure execution in the education and health sectors as well as in the nutrition sub-sector. The contribution of the sanitation, energy and natural environment sub-sectors seem globally poor. As regards axis 4, namely the improvement and consolidation of governance and institutional capacities, the only measures which were properly

21 implemented relate to the organisation of municipal elections and the conduct of a survey on governance, initiated in late December 2003. Several cases of fraud have been identified and punished. Finally, several development partners support the implementation of the integrated programme for the consolidation of legal and judicial services.

3.2.5. As regards PRSP monitoring and implementation, like the statistical services, the monitoring-evaluation units set up within the ministries is confronted with human resource, material and financial problems. There is a shortage of qualified staff. Focal points which are the respondents of the monitoring-evaluation units in the technical structures of various ministries do not exist everywhere. And even when they do, they do not always have all the capacities and means required to do the work. Civil society organisations and the private sector have the required competence, but CSO are still not sufficiently involved in the implementation of the PRSP. The main monitoring activity undertaken in 2003 within the framework of the PRSP is the preparation and validation of the action plan for the involvement of the private sector and civil society in monitoring the implementation of the PRSP. Sectoral thematic committees were set up to prepare a draft guide on the monitoring and implementation of the Action Plan for the involvement of the private sector and civil society in the implementation of the PRSP.

3.2.6. Since it adopted the PRSP and attained completion point in 2003, Benin has globally registered mixed performances. At the macro-economic level, progress has been made with a real GDP growth rate of 5%, inflation control and a bearable budget deficit. The PRSP gave prominence to priority policy sectors, such as education, health and rural development. Benin implemented a system to monitor and assess its poverty reduction programmes through the Social Change Observatory (Observatoire du Changement Social). Besides, a medium and long-term expenditure mechanism (MMLT for the 2005-07 period and performance indicators were defined for several ministries. The indicators observed in 2003 give pride of place to the advancement of women.

3.2.7. However, concerning structural reforms, Benin lags behind in relation to the Government’s programme schedule, particularly in the implementation of the programme for the liberalisation and privatisation of basic infrastructure and in the cotton sector. Apart from the effects expected from the privatisation exercise, the regulatory framework and business environment registered slight improvements as regards the diversification of production. In the field of governance, the Government has initiated a survey on the level of corruption in Benin, whose results have not yet been published.

3.3 Partnership framework

3.3.1. Benin’s development partners jointly support the entire macro-economic, structural and institutional reforms programme contained in the PRSP, through assistance (loans and grants) as well as through budget support/grants (loans and grants) programmes. During the 2000-2004 period, Benin concluded the Poverty Reduction and Growth Facility (PRGF) Programme. As far as Benin is concerned, the World Bank opted for a programmatic approach through poverty reduction support credits, in accordance with its country assistance strategy, approved in July 2003. The Bank also supports Benin in the implementation of its PRSP. Thus, under the leadership of the Government, ADB and IDA co-financed two budget support programmes for 2004-2005, meant to support the implementation of the poverty reduction strategic axes. The content and concessional terms of such support are in line with the PRSP and result from a close coordination between the two banks. As regards government contacting reforms in particular, ADB and the World Bank coordinated the technical guidance component and agreed on a joint conditionalities and criteria framework. The European Union, Denmark, Netherlands and Switzerland have come together in a common approach to back-up the PRSP through joint poverty reduction budget support. (JPR-PR). The JPR-PR is a non- targeted contribution to State budget meant to finance all budget expenditures for the current year. The

22 approach that underpins the JPR-PR is based on the principle of budget support predictability. Partners of the joint framework are thus required to inform the Government of Benin, on time, about the envisaged budgets for the period covering the current and subsequent fiscal years corresponding to the duration of the Medium-Term Expenditure Framework (MTEF) and schedule their disbursement, by taking into account the country’s budget implementation cycle.

Box 4: Donor Interventions by Sector and Theme in Benin Sectors/Themes Lead Agency and Main Development partners Alternate Private Sector The Netherlands Germany, The Netherlands, Belgium, Denmark, France, leading multilateral Development Alternate: IDA donors (IDA, EU, IFAD, IDB, ADB), OPEC Fund and Arab Funds.

Rural Development and The Netherlands Germany, The Netherlands, Belgium, Denmark, France, leading multilateral the Environment Alternate: IDA donors (IDA, EU, IFAD, IDB, ADB), OPEC Fund and Arab Funds.

Hydraulics Denmark Germany, Netherlands, Denmark, France, Canada, leading multilateral donors Alternate: Germany (IDA, EU, IFAD, IDB, ADB), Arab Funds, Japan and UNICEF.

Health/Social Switzerland Germany, Belgium, Denmark, France, USA, Canada, leading multilateral Protection Alternates: Belgium donors (IDA, EU, IFAD, IDB, OPEC-Fund), Japan and UNICEF. and USA Advancement of Denmark Canada, USA, Denmark and UNDP. Women Alternate: UNDP Education USAID Germany, The Netherlands, France, USA, leading multilateral donors (IDA, Alternates: France EU, IDB, ADB), -OPEC Fund, Arab Funds, Japan, UNICEF and Denmark. Transport European Union Germany, Denmark, France, leading multilateral donors (IDA, EU, IFAD, Alternates: Denmark IDB, WADB, ADB), OPEC Fund, Arab Funds and ECOWAS. and IDA Private Sector IDA France, USA, Canada, UNDP, WADB, EIB, Denmark. Governance/Corruption Denmark France, Denmark, USA, Canada, UNDP and ADB. Control/Justice Alternate: France Governance: Electoral UNDP France, USA, Canada and UNDP, System Alternates: Canada and USAID Reform Support IDA USA, UNDP, ABC, ADF, IDA and Canada Alternate European Union Decentralization European Union Germany, Switzerland, Denmark, France, leading multilateral donors (IDA, Alternate: Switzerland EU, IFAD, IDB, WADB, ADB), OPEC Fund, Arab Funds and ECOWAS. and Germany Administrative European Union USA, UNDP, ABC, ADF, IDA, Canada and France Devolution Alternates: UNDP and The Netherlands Monitoring-Evaluation IDA USA, UNDP, ABC, ADF, IDA, Canada and France of the PRSP Alternate: UNDP Each sectoral or thematic group is chaired by a representative of the ministry concerned.

3.4. Challenges and Risks

3.4.1. Challenges: The key challenges facing Benin relate to the diversification of the sources of economic growth which essentially depends on cotton and trade, in order to reduce the poverty level significantly. In fact, for almost a decade, Benin has registered an average GDP growth rate that is well above that of demographic growth, but poverty continues to persist, paradoxically in cotton producing areas. This situation is due to the concentration of the production around a given sector and the unequal redistribution of the fruits of growth which could have contributed efficiently in the fight against poverty in Benin. At the structural level, the Government’s major challenge is to pursue its efforts to consolidate the infrastructure and implement the public businesses privatisation and liberalisation programme which has registered serious delays. The second challenge relates to the improvement of the populations’ access to basic social services, particularly in the field of health where the rate of visits to health structures is among the lowest in the region. The third challenge consists in maintaining and strengthening the reforms implementation pace, particularly relative to fiduciary issues and ensuring a broader participation of all actors in the dissemination and

23 implementation of the PRSP. The last challenge relates to the fact that the PRSP is not exhaustive enough with respect to private sector promotion and the diversification of market output.

3.4.2. Risks: The implementation of the poverty reduction programme is fraught with major risks. The first risk relates to the slackening of the PRSP content dissemination process with a view to ensuring its broader appropriation. This risk is still topical, with the 2006 presidential elections a few months away, and whose consequence might depend on the demobilisation of the highly politicised public administration. In these conditions, the implementation of the PRSP could be delayed but will certainly not be compromised because of the maturity of the Beninese political community and the experience it has acquired. The second risk relates to the slowness observed in the application of structural reforms, especially as regards fiduciary issues, which might not motivate private investments. This risk is expected to dwindle since the Government, with ADF and IDA support, is implementing the recommendations concerning the redesign of the current government procurement system. In this regard, the Government revised its Procurement Code in December 2004, with ADF support, for enhanced contract performance efficiency and effectiveness. The other aspects of the reform are also monitored within the framework of ADF budget support programmes.

3.4.3. The third risk concerns the vulnerability of the Beninese economy, due to the existence of a monoculture-based export (cotton represents the key export receipt) and rainfall fluctuations which affect agricultural production and the dams’ low water marks. This risk is expected to subside with the headway made in the implementation of the privatisation and liberalisation programme, as well as the application of the private sector promotion strategy which is being formulated. The last risk concerns the dependence of the Beninese economy on the political and economic developments in Nigeria. As Benin’s leading trade partner, the situation in Nigeria constitutes an opportunity as well as a risk for the development of Benin and for its poverty reduction efforts. The risk is toned down by the structural reforms, particularly those relative to the competitiveness of Cotonou autonomous port, with a view to making it a commercial platform. Besides, Benin intends to consolidate its customs system in order to take advantage of its strategic position as a gateway to Sahel countries.

IV. BANK GROUP COUNTRY ASSISTANCE STRATEGY

4.1. Country Context and Strategic Selectivity

4.1.1. The Government’s programme is inspired by the PRSP which is a unique reference framework of all the support provided by development partners. Since Benin attained completion point under the HIPC initiative, its implementation benefited from three budget support programmes in 2003, 2004 and 2005 respectively. The support concerned the four PRSP axes and gave prominence to actions geared towards an increase in market output, access to basic social services and the promotion of governance. Since 2003, considerable effort has been made to align all development partners to the PRSP and harmonise their operations. The support provided by the partners consists in their recognition of the progress made by the country in implementing reforms targeting poverty reduction.

4.1.2. However, as attested by the government programme assessment, the results obtained since the adoption of the PRSP in 2003, call for the consolidation of the macro-economic and structural reforms in order to broaden the production base and improve the efficiency of existing industrial units. At the macro-economic level, the Government pursues its effort to strengthen the customs administrations, fight against fraud and institute an enhanced expenditure control. Within this framework, the Government is negotiating with the IMF to conclude a new Poverty Reduction and Growth Facility by the end of the third quarter of 2005. The initial results of these negotiations, which are considered positive, indicate the need for the Government to implement measures meant to choke off the decline in tax receipts. With a view to compensating the loss in customs earnings, the

24 Government is currently bent on improving port management and is engaged in negotiations with the Nigerian authorities to ensure the lifting of trade restrictions imposed by the latter. It also intends to quicken the pace of structural reforms implementation with a view to creating an environment conducive to the development of the private sector, increasing the populations’ income, notably in the agricultural sector which employs about 70% of the labour force, strengthening good governance and building capacities for more efficient public spending, in compliance with the PRSP axes. The expected results will, in the long run, ensure the promotion of a diversification of production, an increase and better distribution of income. These results are in line with the PRSP axes and seek to achieve the millennium development goal consisting in reducing poverty and doubling per capita income by 2015. Diversification of production seems to be one of the pillars of the Bank’s operations during the 2005-2009 period. The Bank’s ongoing operations are expected to be strengthened during this period, notably in the field of agriculture, structural reforms support and capacity building. (See section 4.2).

4.1.3. More generally, the Government seeks to reduce poverty through strong, sustained and balanced economic growth. In this regard, the authorities intend to curb one of the main causes of poverty identified in Benin, i.e. difficulties to access basic social services, especially in the health, basic education and literacy sectors and to have access to potable water. In the field of health, the improvement of the offer, quality and utilisation of these social services and, more specifically, the fight against HIV/AIDS and transmissible diseases are the most important components of the country’s strategy geared towards the improvement of access to basic social services. In the education sector, the strategy aims to improve accessibility, the completion rate and efficiency of the sector, on the one hand, and the efficiency in the delivery and management of services in basic education, on the other. As mentioned in section 2.5, some indicators, notably the gross enrolment rate, registered positive developments as a result of projects initiated by the Bank and other partners which are being implemented. However, the analysis of health indicators shows the need to consolidate operations, notably as regards reducing mortality rates, improving the accessibility, quality and use of health care.

4.1.4. Besides, to improve the rural populations’ access to clean water, the maintenance and management of existing hydraulic installations, the Government provided significant budget funds and sought the development partners’ support to complete its action. In this regard, the Bank has already approved support in the sanitation and potable water access fields, within the framework of ADF IX. Finally, concerning hygiene and sanitation, all IEC (Information, Education, Communication) activities will be implemented in all communities with access to potable water facilities and 500,000 public latrines will be built. On the basis of the foregoing, it seems that these objectives, which generally fall under access to basic social services, require ADF support. This second priority relative to the improvement of access to basic social services will enable the Bank to strengthen its operations in this sector. The priority seeks to contribute to the achievement of several Millennium Development Goals (see chart on page 28) and deal with axes 2 and 3 of the PRSP.

4.1.5. The Bank’s priority sectors or pillars of operation adopted through this Results-Based Country Strategy Paper refer to the MDG, the strategic axes of the PRSP and are also based on the lessons drawn from past CSP as well as the Bank’s portfolio management in Benin (see section 4.2). The Bank decided to concentrate its support on the PRSP axes (cf. presentation of the Government’s strategy, point 3.2) which contribute most in poverty reduction and comply with its vision and strategic plan. On that basis, the Bank’s operations during the 2005-2009 period fits into the global framework of two priorities: (i) promoting the diversification of production, (ii) improving access to basic social services. These two pillars were adopted during a series of consultations with the Government, the private sector and civil society. The Bank also took into consideration the operations of the other development partners in Benin to retain these choices, in collaboration with the Government. On the basis of these two pillars, and to follow-up the strategy during the next three years (2005-2007), ADF

25 will give prominence to indicators in the agriculture and health sectors. Special emphasis will be placed on good governance, capacity building and support to reforms. Halfway through the implementation of the Results-Based Country Strategy Paper (RBCSP), and on the basis of lessons which will be drawn from the implementation of recently approved operations (Education, Water and Sanitation, Health), the Bank will broaden its operations in other sectors with effect from 2007.

4.2 Portfolio Management and Lessons Drawn from Past CSPs

4.2.1. The Bank Group’s operating strategy in Benin in 2002-2004 targeted poverty reduction by supporting agriculture and rural development, reinforcing basic infrastructure and developing human resources. Support to macro-economic reforms was also pursued with a view to attaining sustainable growth based on private initiative. The Bank Group’s commitments in Benin, since 1972, when it first intervened in this country, is presented in annex 2. During the ADF IX period, nine operations worth UA 114.27 million were financed in Benin.

4.2.2. As regards support to agriculture and rural development, only one operation was implemented, namely the traditional fishing support programme. The loan agreement entered into force 14 months after the project was approved and the auditing of the project accounts was tremendously delayed. On the whole, the disbursement rate in the agricultural sector is 26%, less than the global disbursement rate of all ongoing operations. In the agricultural sector, the delay observed in the institution of a new micro-credit management framework was the main shortfall registered during the ADF IX period. This constraint explains the low disbursement rate of projects in the agricultural sector and of one project in the social sector comprising a « micro-credit » component. Corrective measures undertaken by the Bank and Government resulted in the institution of an Agricultural Credit Management Unit which has started processing applications submitted by four projects financed by the Bank and eligible for micro-credit. The Bank’s performance in this sector should be improved to ensure the enhanced monitoring and supervision of ongoing projects.

4.2.3. With respect to the consolidation of basic infrastructure, particularly in the transport sector, the Bank approved two road projects : the Djogou Ndali road rehabilitation Project (11.11 million UA for ADF and 4 million UA for the National Solidarity Fund (FSN)) and the Pobé Kétou Illara road rehabilitation Project (7. 8 million UA for ADF). The latter was approved during the last quarter of 2004 and the Government has just met the conditions set for the Djogou Ndali project effectiveness. However, the implementation of other projects falling within the portfolio has been successfully launched. They are expected to be concluded by June 2005. On the whole, the transport sector has a disbursement rate of over 32% and absorbs 21% of the resources of the portfolio of ongoing operations. As regards community facilities, two operations have been approved during ADF IX: the second rural electrification project (12.3 million UA) and the AEP/EPA project, approved in November 2004. All in all, the projects relative to community facilities were poorly implemented, because of delays in their ratification. As regards human resource development and health promotion, the portfolio of ongoing operations absorbs about 20% of resources. Apart from projects financed through grants, all the operations in this sector started with over a year’s delay. Operations afoot in this sector contributed in improving the school enrolment rate which reached 94.3%, in 2001/02 -a rate close to the MDG- and strengthening educational support in primary schools.

4.2.4. The disbursement rate of all ongoing operations falling under the portfolio is low and is estimated at 36%. The contribution of ADF-financed operations to the implementation of its intervention strategy between 2002 and 2004, was essentially thwarted by the long delays in the ratification process which exceeded the 12-month period, with the exception of reforms support operations. In fact, the poverty reduction strategy support programme worth 24.23 million UA, whose final tranche is being disbursed, was satisfactorily implemented. This operation contributed in

26 the realisation of the strategic axes of the PRSP, namely: growth acceleration (axis 1), human capital development and environmental management (axis 2) and reinforcing good governance and institutional capacities (axis 3). In addition to national projects, ADF operations through lending and grants programmes for multinational projects for the benefit of Benin, contributed in achieving results pertaining to the restructuring of the cotton sub-sector, with a view to increasing producers’ income, ensuring improved water resource protection through the control of floating plants and the promotion, maintenance and development of peace.

4.2.5 As regards the efficiency of the Bank’s operations in Benin, the shortfalls observed are recurrent and relate to : (i) the delay in starting up new projects, because of slippage on loan effectiveness, (ii) difficulties encountered in rural credit utilization in agricultural projects, (iii) non- compliance with procedures for the nomination and replacement of certain project managers, and (iv) the insufficiency of funds allocated under the terms of the State’s investment programme. The Bank Group undertook corrective measures consisting in assisting the Government to (i) reduce the contract award period in 2004 from 80 to 65 days, (ii) establish a quarterly monitoring mechanism for operations undertaken by the Bank since April 2004, and (iii) enhance the rate of supervision of its operations. Slight progress was registered in 2004 in efforts to reduce ratification deadlines to a maximal duration of twelve months. Such progress should be consolidated by improving dialogue with national authorities and reinforcing the existing quarterly assessment mechanism for the Bank’s operations in Benin. During the execution of the Results-Based Country Strategy Paper (RBCSP) for 2005-2009, the implementation of operations in the agricultural sector is expected to improve, since the General Credit Management Framework has kicked off its activities which concern four ongoing projects out of the six retained in the development sector. Besides, the application and follow-up of recommendations of the quarterly review of portfolio operations, the increase in supervision frequency, the follow-up of audit conclusions and the intensification of dialogue will help improve the overall portfolio performance.

4.3 CSP Results Framework

4.3.1. The results expected from the CSP aim to handle the major issues identified in point 3.4, within the framework of the Government programme implementation. These issues essentially concern the expansion the market output base by diversifying production and promoting the populations’ broader access to basic social services. With respect to its strategy, the Bank intends to give prominence to the PRSP axes relative to the consolidation of the medium-term macro-economic framework, human capital development and environmental management, reinforcing good governance and institutional capacities. Below is an indicative diagram of the Bank Group’s strategy consistent with the MDG and the strategic axes of the PRSP. The CSP results framework takes into account the Government’s long- term policies, since the Government’s course of action as well as the Bank’s operations target the achievement of the MDG. Moreover, this framework underscores the results which will be obtained during the implementation of the 2005-2009 Results-Based Country Strategy Paper (RBCSP). Some of the activities adopted in this connection, will be implemented in collaboration with other partners. Depending on the priorities, the specific activities to be backed-up within the 2005-2009 Results-Based Country Strategy Paper (RBCSP) are presented in 4.4.

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BANK GROUP’S STRATEGY FOR BENIN

Millennium National Development Strategy Strategic Priorities of the Results expected in the long-term Development of Benin 2005-2009 CSP Goals

Goal 1 Consolidating the medium-term Create an environment conducive to economic growth macro-economic framework

PROMOTE THE Enhance the competitiveness of the agricultural sector and DIVERFICATION OF improve the income of farm operators PRODUCTION

Human capital development and Promote good governance and build institutional capacities Goal s 2 to 7 environmental management

Reinforcing good governance and Improve the overall management of the health sector institutional capacities

Goal 1,7 Promoting long-term employment IMPROVE ACCESS TO and building the capacity of the BASIC SOCIAL SERVICES poor to participate in the decision-making and production processes

Improve the accessibility, quality and use of health treatment

28 MATRIX OF THEMATIC RESULTS Long-term strategic Short-term achievements of the CSP Bank’s priorities and performance objectives Sectoral issues Products and Intermediate indicators for the Strategies/Actions for the Bank operations and foreign Bank performance achievements of the achievements of the CSP intermediate indicators partners assessment process and CSP which the Bank and realisations implementation intends to influence Public utility companies (Post Office, Continuing the Implementing the second Joint mid-term review telecommunications, Water and SONAPRA and poverty reduction strategy Electricity) are privatised in 2007 telecommunications support programme privatisation process (ADF/IDA, ABC*) Business registration fees are reduced Progressive removal of Implementing the second FIAS study Create a business Sources of production in compliance with the standards administrative barriers poverty reduction strategy Joint mid-term review environment conducive to are diversified referred to in the survey on the relative to investments support programme PRSSP II growth investments climate.

Title deeds are used for resource Revising and Implementing the second Study on land profile mobilisation in 2007 implementing the land poverty reduction strategy regulations support programme Reduce poverty by 15% and Texts regulating the internal and The public expenditure Implementing the control Periodic supervisions with double per capita income by Public expenditure external audit system are adopted control system is improved institutions support project co-donors 2015 execution rate targeting before 2007 within the framework of Promote Good priority sectors has the result-based Governance and strengthen improved and the fight management reform institutional capacities against corruption has All priority sectors of the programmed Pursuing budget reform Implementing the second Joint mid-term review registered progress budgets are backed by the Medium- poverty reduction strategy Term Expenditure framework in 2008 support programme 10% increase in the revenues of the Supporting community Implementing the community Supervision Mission zone considered in 2008 forest management forest management support Increase the The rural populations’ project competitiveness of the income has increased Plantations increased by 25% in 2007 Capacity building Implementing the community Supervision Mission agricultural sector forest management support project Reduce maternal mortality rate Number of people with The rate of coverage in health Quality health care is Health system development Supervision Mission by three quarters in 2015 easy access to health infrastructure increased from 83% in provided to the populations support project centres 2001 to 90% in the areas of by community service intervention in 2007 providers

Stop and reverse the HIV/AIDS Improve health care propagation trend, as well as accessibility, quality and eradicate malaria and other utilisation diseases in 2015 Improve the quality of SMI and IEC activities on hygiene, Health workers’ Health system development Supervision Mission health care malaria and STI/HIV/AIDS are competence and support project undertaken and impregnated mosquito management skills are nets are available reinforced

29 4.4 CSP Pillars and Areas of Focus

4.4.1. The Bank’s strategy in Benin for the 2005-2009 period is first, based on the poverty reduction strategy axes and the lessons drawn from the progress report on the implementation of the PRS for 2003. The preparation of the said strategy was based on a participatory approach, within the framework of which broad consultations were held with the various stakeholders. In the light of discussions which the Bank held with ministries, the private sector, NGOs, multilateral and bilateral organisations represented in Benin, the Bank and national authorities reaffirmed that the purpose of the Bank’s strategy is to reduce poverty through a strong, sustainable and equitable economic growth. On that basis, the strategy proposed for Benin takes into account the challenges confronting the country, the lessons drawn from the Bank Group’s operations and the ongoing dialogue with other development partners.

4.4.2. The key constraints which the strategy seeks to attenuate relate to the vulnerability of the Beninese economy, whose growth depends on the performances of the cotton sub-sector, the inequitable distribution of the fruits of growth that could have contributed to efficiently fight against poverty in Benin, the populations’ inadequate access to basic social services, particularly in the field of health and the poor institutional capacities of the Government, the private sector and the civil society to implement poverty reduction strategy measures. This strategy is also based on the lessons learnt from the Bank Group’s operations in Benin which highlight the need (i) to strengthen the medium-term macro-economic framework in order to increase and diversify production with a view to improving the populations’ income, (ii) to pursue human capital development in order to reduce infant, child and maternal mortality rates and arrest the propagation of HIV/AIDS, and (iii) strengthen governance and institutional capacities to ensure a more efficient public expenses execution targeting poverty reduction. In this regard, the strategy lays emphasis on two priorities, pillars or sectors of intervention for the 2005-2009 period:

- PILLAR I : PROMOTING THE DIVERSIFICATION OF PRODUCTION : For the Bank, this entails contributing in creating a business environment conducive to growth, striving towards greater competitiveness of the agricultural sector while preserving natural resource management, promoting good governance and strengthening institutional capacities;

- PILLAR II: IMPROVING ACCESS TO BASIC SOCIAL SERVICES : For the Bank, this entails contributing in improving the management of the health sector, the accessibility, quality and utilisation of health care with a view to reducing infant and maternal mortality and ensuring the proper management of epidemics.

4.4.3. The selection of these priorities was based on the Bank’s comparative advantages resulting from its acquired experience in the rural development and health sectors which have always taken up more than 45% of its portfolio. The activities retained in connection with these pillars give prominence to two sectors of intervention, namely rural development and the health sector. Halfway through the implementation of the Results-based Country Strategy Paper (RBCSP), and on the basis of the level of implementation of recently approved operations in the potable water supply, sanitation and education sectors, the Bank will lay emphasis on the monitoring of results indicators in other sectors which comply with the two pillars of intervention. The implementation of the activities pertaining to the 2005- 2009 Results-based Country Strategy Paper (RBCSP) will facilitate the pursuit and further extension of the reforms that have already been initiated with the Bank’s support. The Bank’s strategy will also lay emphasis on cross-cutting actions relative to gender and environmental protection which are priorities in the government programme. In order to ensure greater synergy of the Bank’s operations with those of other partners and strengthen its impact on poverty reduction, the progressive adoption

30 of the programme approach will be given special weight in priority sectors where the absorptive and management capacities will continue to be strengthened. Finally, as regards governance, the Results- Based Country Strategy Paper (RBCSP) is in line with the Bank’s policy consisting in creating the conditions of a sustainable and more equitable economic growth in favour of the poorest sectors through a healthy, efficient, transparent and more focussed public expenditure management likely to considerably reduce poverty.

Table 1: RESULTS-BASED CSP FRAMEWORK Long-term results Results expected from the CSP Connections between the CSP and the PRSP priorities PILLAR 1: PROMOTING THE DIVERSIFICATION OF PRODUCTION 1.1. Creating a business In 2007 Paragraphs 3.1.1. and environment 1.1.1. Achieve a 6% economic growth rate; 3.2.2 of the PRSP conducive to 1.1.2. The cotton ginning units are all privatised; relative to the growth 1.1.3. The dialogue between the Government and private sector is improved; consolidation of 1.1.4. An action plan for the promotion of the private sector is formulated. macroeconomic In 2009 stability and the 1.1.1. Achieve a 7% real GDP growth rate ; diversification of 1.1.2. All the public utility companies are privatised; sources of growth 1.1.3. The cost of technical production factors reduced by 10%; 1.1.4. Administrative obstacles impeding the promotion of private investments are reduced, in accordance with the FIAS recommendations; 1.1.5. Title deeds are used to mobilise resources. 1.2. Promote good In 2007 Paragraphs 3.3.1 , 3.3.2 governance and 1.2.1. The statutory instruments for the improvement of the public expenditure and 3.3.4 of the PRSP strengthen control system are adopted; relative to the fight institutional 1.2.2. The Audited Finance Acts are prepared, examined by the Court of Accounts against corruption and capacities (chamber) and transmitted to Parliament within the statutory deadline public resource In 2009 management, 1.2.1. Reducing by half the duration of the public expenditures process administrative and 1.2.2. All priority sectors have a programme budget backed by the Medium-term judiciary reform Expenditure Framework in 2009 1.3. Strive towards In 2007 Paragraph 3.1.2.1 of the greater PRSP relative to the competitiveness of 1.3.1 Implement participatory forest management plans for six reserved forests reform for a diversified the agricultural 1.3.2 Increase the share of private and public investments in the agricultural and enhanced sector and improve sector agriculture the income of farm operators In 2009 1.3.3 Agricultural services rendered to producers have increased income of the populations concerned increased by an average of 10 % in 2009 in the ADF intervention areas PILLAR II : IMPROVING ACCESS TO BASIC SOCIAL SERVICES 2.1. Improve the In 2007 Paragraph 3.2.3 of accessibility, the PRSP relative to quality and 2.1.1. The health infrastructure coverage rate rises from 83% in 2001 to 90% in human capital utilisation of health the selected poor health zones development care, contributing to In 2009 the achievement of 2.1.2. The maternal mortality rate drops from 485 maternal deaths for a hundred the objectives thousand births in 2001 to less than 388 (reduction of at least 20 %) relative to the 2.1.3. Infant mortality rate drops from 89 per thousand in 2001 to less than 75 per eduction of infant thousand in 2009 (reduction of at least 15%) and maternal mortality and the management of epidemics. 2.2. Increase the In 2007 Paragraph 3.2.3 of populations’ 2.2.1. Service financing mechanisms for the poor are instituted and assessed. the PRSP relative to accessibility to 2.2.2. Obstetrical cover increases from 34.6 to 55% in the Bank’s areas of human capital quality health intervention development services In 2009 2.2.1. From 2002 to 2009, the rate of consultations for the purpose of treatment increases from 32% to 60% in Zou, from 30% to 50% in Donga 2.2.2. The CPN coverage rate increases from 70% in 2002 to 90% in 2009 in Donga

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4.4.4 PILLAR 1: Promoting the Diversification of Production: This priority is meant to promote accelerated growth in a macro-economic framework of quality. The Government admits the need to diversify its exports and broaden the production base. The model based essentially on cotton farming has reached its limits and is not favourable to an increase in the income of the disadvantaged sectors. The Bank, in close collaboration with other development partners, will support the Government to (i) create an environment conducive to the development of the private sector particularly through the continuation of the liberalisation and privatisation process, (ii) increase the production and competitiveness of the agricultural sector and finally (iii) promote good governance and strengthen capacities to effect public expenditure, in accordance with the axes of the PRSP.

4.4.5 The creation of an environment conducive to economic growth will result in a 5 to 6% increase in economic growth by 2007 and of 7% with effect from 2009. The Government will (i) finalise the privatisation of the major public utility services in 2007, (ii) reduce the costs of technical production factors by 10% in 2009 and the imported goods issue time by 30% in 2009, (iii) improve the legal and judicial framework of businesses, (iv) reduce administrative obstacles impeding private investments and, (v) strengthen the public expenditure control system in order to contribute in reducing poverty. With respect to the increase in the competitiveness of the agricultural sector, the ADF strategy will contribute in improving the overall agricultural sector management, broaden the producers’ access to agricultural services, promote public and private agricultural investments. The Bank’s contribution to this component of the strategy will help boost by 20% the income of the populations concerned in its areas of intervention in 2009 and increase the plantations in these areas by 50% in 2009. The Bank’s specific achievement will, by 2009, result in (i) an increase in agricultural productivity and production ; (ii) support to efforts to make available agricultural infrastructure and equipment; (iii) sustainable management of natural resources ; (iv) market access improvement and (v) an enhanced administration and management of the agricultural sector. During the implementation of the 2005-2009 Results-Based Country Strategy Paper (RBCSP), the Bank will support the Government’s efforts to develop community forest management, in accordance with the PRS, by laying emphasis on a better organisation of grassroots communities to take up the sustainable management of existing forest resources or create and intensify agro-sylvo-pastoral production.

4.4.6 Finally, as regards the promotion of good governance and strengthening institutional capacities, the Bank will contribute in the various programmes instituted to build the capacities of the public administration, Parliament, Supreme Court and private sector. As regards good governance, the Bank’s support will be hinged on: (i) pursuing the improvement of the fiduciary framework and the government procurement system, (ii) supporting capacity building of the private sector employers’ organisations, (ii) reducing administrative obstacles impeding private investments; (iii) the reform of the judiciary, (iv) the fight against corruption and money laundering, and (vi) strengthening the poverty reduction strategy monitoring structures and mechanisms. With respect to government procurement, the Bank will pursue its assistance for the creation of the National contracting regulation organ, the National government procurement Department and Acquisition Units in technical ministries. Concerning the consolidation of the public expenditures control system, the Bank will back-up the following specific objectives: (i) reinforce and rationalise internal control; (ii) reinforce and rationalise external control institutions and (iii) increase the efficiency of parliamentary control on the Executive with regard to public resource management. The Government also needs to be supported in its efforts to back-up the required production diversification, in view of the improvements expected in the business environment, aimed at strengthening the capacities of the private sector.

32 4.4.7. Apart from the said support, there is need to indicate that concerning the fight against corruption and money laundering, the Bank is currently supporting the Government to conduct the preparatory phase of the survey on corruption and the state of governance as well as the implementation and dissemination of recommendations of the survey, in partnership with the World Bank. The Bank will also support the Government’s efforts to ensure the functioning of the National financial information processing unit (CENTIF) by providing it with expertise. Finally, the Bank will pursue the ongoing reinforcement of the poverty reduction strategy monitoring structures and mechanisms: such reinforcement is justified by the need to improve the mechanisms for the coordination, boosting and monitoring of cross-cutting programmes. The implementation of the PRSP is monitored by the Permanent Secretariat of the National Committee for Development and Poverty Reduction (SP/CNDLP) and the Observatory for Social Change. To offset the deficiencies of these structures, the Bank is currently complementing the support provided by Danish cooperation to strengthen the Permanent Secretariat of the National Committee for Development and Poverty Reduction (SP-CNDLP) team in its efforts to coordinate the Poverty reduction strategy support programme (PRRSP I).

4.4.8 PILLAR 2: Improving Access to Basic Social Services: This priority is meant to improve access to potable water and sanitation in the rural and semi-urban areas, the performance of the health system, access to quality basic education. As regards access to potable water, the Bank is already intervening through the Drinking Water Supply and Sanitation (DWSS) project in the rural areas. The ongoing activities of the said project are expected to (i) improve the potable water supply to the rural populations; (ii) guarantee appropriate sanitation to the rural populations; and (iii) contribute in improving the performance of the water and sanitation sub-sectors in the rural areas. With respect to the education sector, the current operations conducted within the framework of the Education IV project are meant to: (i) contribute in improving access to basic education and technical and professional training; (ii) contribute in improving the quality and pertinence of the education system; and (iii) strengthen the institutional capacities of the education/training sector.

4.4.9 In connection with the current Results-Based Country Strategy Paper (RBCSP), ADF support will give weight to the monitoring of indicators in the health sector which benefits from two operations: the HIV/AIDS project and the Health Development Support project (PADS III). On the whole, the quality of programmes falling under this sector is improving. They are inspired by the PRSP, the MDG and the national socio-sanitary develop policies and strategies for 2002-2006. In particular, efforts –albeit insufficient- are being deployed to reduce child and maternal mortality and fight against major diseases notably malaria, tuberculosis and HIV/AIDS. Several initiatives are taken to protect the most disadvantaged and ensure their access to quality health services. The Bank’s operations will complete those of other partners.

4.4.10 The Bank will support Benin to take up the following major challenges : (i) identification and implementation of operations in favour of the poorest, (ii) the recurrent issue of quality human resources in sufficient quantity as well as their distribution around the country, (iii) the fight against major diseases, namely HIV/AIDS and transmissible diseases, as well as malnutrition among children between 0 to 5 years old, (iv) the implementation of the maternal and child health programme, (v) the quality and proper use of health services. For the Bank, this entails pursuing the implementation of ongoing actions with a view to achieving the MDG, particularly in the field of health. Its intervention, which is complementary to those of BADEA, UNICEF and Germany, will give prominence to the standardization and completion of health infrastructure in the Departments of Littoral, Zou and Collines. In the maternal and child health sector, in particular, the Bank will give special weight to the Atacora, Alibori, Borgou, Atlantique, Collines, Couffo and Donga Departments.

33 4.4.11 The selected areas of intervention for the 2005-2009 period concern (i) Improving the global resources management in the health sector, (ii) Improving the quality of care by developing human resources, (iii) Developing partnership between the public and private sectors; (iv) Promoting family health. The overall management of the health sector will be improved, thanks to the resources which will be allocated to health districts and zones on the basis of the poverty criteria, health needs and performance and the establishment of the performance contract with the Public Health Ministry, for central and departmental hospitals which will be transformed into autonomous public institutions. Concerning the improvement of health care accessibility and quality, the ADF contribution will help increase the rate of consultations for treatment from 32% in 2002 to 60% in 2009 in Zou, from 30% to 50% in Donga, increase the CPN coverage rate from 70% in 2002 to 90% in 2009 in Donga and boost the obstetrical coverage rate in 2010 to 70% in Donga (42% in 2002), and to 90% in Zou (77% in 2002). Finally, with respect to the utilisation of health services, ADF contribution will improve the doctor/inhabitant ratio from 1/23777 to 1/15 000 in Zou, and from 1/46 861 to 1/20 000 in Donga by 2009 and treat at least 60% of malarial cases in health centres of the intervention areas in 2010 ( 33.33% in 2003 ).

4.4.12 Finally, the Bank will intervene in the education and potable water and sanitation sectors, with effect from 2007 and on the basis of lessons drawn from our operations. In fact, several development partners are already operating in these sectors and the key indicators have registered trends favourable to the achievement of the MDG. During the first three years of the Results-Based Country Strategy Paper (RBCSP), the Bank’s operations will consist in accelerating the pace of operations already launched, notably in connection with the Drinking Water Supply And Sanitation (DWSS) project and the Education IV and Human Resource Development Programme projects whose implementation rate is very low (less than 5%). Halfway through the implementation of the Results- based Country Strategy Paper (RBCSP), and on the basis of lessons drawn from the implementation of ongoing projects in the education, water and sanitation sectors, the Bank will appreciate the need for fresh operations in conformity with the RBCSP priorities relative to the improvement of access to basic social services.

4.4.13 The Bank’s intervention strategy is based on the lessons learnt from cooperation with Benin. The bank will also develop partnerships with the various actors of the economy, namely donors, private sector and NGOs. The realisation of this partnership will be facilitated by the fact that the Bank has selected as its geographical area of intervention the same departments chosen for the two pillars, namely the departments of Zou, Donga and Borgou. These areas of concentration will be fine tuned during a participatory seminar in which the different development actors will participate.

Box 5: Consultation on the Bank Group’s Strategy Pursuant to the directives of the Board of Directors of the Bank’s management, the preparation of the 2005-2009 CSP for Benin was based on a participatory approach. The mission entrusted with preparing the 2005-2009 Country Strategy Paper (CSP) for the Republic of Benin visited the country from 11 to 22 December 2004. It was composed of representatives of the Bank’s Country Team. The mission was received by the Senior Minister in charge of Planning, Forecasting and Development and the Minister of Finances and the Economy. Technical meetings were held with the Permanent Secretaries, Secretaries General, General Managers and Technical Directors including those responsible for Forecasting and Programmes. The mission held sectoral working sessions followed by a plenary meeting.

The mission had working sessions with the representatives of : i) bilateral and multilateral donors (Swiss Cooperation ; European Union ; Netherlands, Denmark, France ; USAID ; UNDP, UNFPA, WHO; UNICEF ; and the World Bank) ; ii) the private sector (Chamber of Commerce and Industry ; Chamber of Agriculture) ; iii) Central Labour Bodies ; and, iv) ONGs. At the end of the mission an aide-mémoire based on the data collected from national authorities, cooperation agencies represented in the country, the private sector and civil society representatives was prepared and discussed at a wind-up meeting held at the Ministry in charge of Planning, Forecasting and Development.

The mission organised three workshops with all the sectoral and cross-cutting ministries. During the workshops, each ministry made a brief presentation of the state of the sector and of the medium and long-term strategy, in compliance with the strategic axes of the PRSP. The presentation was based on a framework proposed by the Bank which held working sessions with the major development partners present in Benin, and identified the areas requiring to be strengthened in its collaboration with the different partners. The Bank also met with representatives of the private sector and trade unions.

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4.5 Regional Dimensions of Bank Group Assistance

4.5.1. The Bank Group’s mission is to promote cooperation and the regional integration of PMR. As mentioned in paragraph 2.4.8, Benin is actively participating in the implementation of regional integration policies within the framework of ECOWAS and WAEMU, the African Union (AU) and NEPAD, and complies with the basic essentials of the WAEMU convergence criteria, particularly the leading ones. By virtue of its geographical position, Benin is also among the countries which take advantage from trade, in particular with Nigeria, Burkina and Niger. A substantial part of these customs receipts derive from re-export trade. This situation is facilitated by the fact that visas are not required of ECOWAS nationals travelling within the community space. Besides, ECOWAS has adopted measures to facilitate the free movement of persons and goods; these include the institution of a passport and a brown card for vehicle insurance. With effect from 2005, Benin will benefit from the implementation of regional economic integration projects, notably in sectors relative to the fight against floating plants, energy, gas production and distribution (CEB Togo-Benin). This contribution will be strengthened by the planned establishment of the Benin-Nigeria electrical interconnection (CEB/NEPA).

4.5.2 Besides, Benin is among the countries which agreed to adhere to the African Peer Review Mechanism instituted within the NEPAD framework, in order to evaluate the progress accomplished with respect to good governance. The said review, scheduled in 2006, will be based on the conclusions of Benin’s governance profile, among others. The Bank intends to provide intellectual assistance for the realisation of this review.

4.6 Bank Group Assistance

4.6.1 On the basis of the abovementioned selected strategic priorities, the Bank Group’s programme of assistance to Benin will combine the project operations, financed by both the public and private sector windows, with the non-project operations. For the 2005-2009 period and in keeping with the two priorities set out in the Result-Based Country Strategy Paper (RBCSP), the public sector operations will contribute to the attainment of the following three key objectives of the Government’s poverty reduction strategy: (i) strengthening of the medium-term macro-economic framework, (ii) strengthening of the basic social services and environmental protection; and (iii) enhancement of good governance and capacity building.

4.6.2 The Bank’s overriding priority consists in promoting the diversification of production. The components of this priority are support to the management of village forests and capacity building. The Bank will also support programmes for the integrated management of soil fertility in the villages where soil degradation is very pronounced. This objective will be attained through two operations which will complement the rural development activities initiated under 2002-2004 CSP. Indeed, rural development support was a priority in the preceding CSP as well but it benefited from only one operation in the artisanal fisheries sub-sector. In addition to the above-mentioned two operations, the Bank’s assistance will also involve reform-support programmes. If attained, the objectives of these reform-support programmes will help establish the measures required to create a growth-conducive business environment. As for the vital component of governance promotion and capacity building, it will continue the operations implemented by the Bank under ADF-IX. The Bank’s support to this key component will be provided in close cooperation with IDA and the other development partners working together under a joint budgetary support (JBS) exercise. The Bank’s second priority involves improving access to basic social services in the drive to attain the millennium goals. In addition to the operations being implemented under the 2002-2004 CSP in the areas of sanitation, access to drinking water, education and the fight against HIV/AIDS, the Bank

35 will contribute during the 2005-2009 period to (i) improving the overall management of the health sector, (ii) improving the supply and quality of health services; and (iii) increasing the utilization of health services.

Bank Group Assistance: Project Activities

4.6.3 The overall allocation for the implementation of the 2005-2009 RBCSP includes resources that will be allocated to Benin within the context of ADF-X (2005-2007) and part of the ADF-XI resources. Under ADF-X, following the evaluation of Benin’s performances, the maximum allocation to the country was set at UA xxxxxx million for the 2005-2007 period. The allocation for the first two years of ADF-XI covered by the 2005-2009 RBCSP will also be determined on the basis of Benin’s overall performance. Within the context of ADF-X, the Bank will pay particular attention to monitoring the weaknesses identified during last evaluation of Benin’s performance. These weaknesses concern: (i) public finance management; (ii) the private sector environment; and (iii) governance.

4.6.4 With regard to public finance management, the Bank will maintain its monitoring of the ongoing process of generalizing to all the ministries the programme budgets backed by the Medium- term Expenditure Framework. Indeed, during the RSCSP implementation period, these programme- budgets will be generalized in order to continue the rationalization of the resource allocation by taking into account the development priorities in keeping with the objectives defined in the PRSP. Furthermore, having participated in the latest Country Finance and Accountability Assessment (CFAA) on Benin, the Bank and IDA have decided to monitor the deficiencies identified, particularly in the area of public expenditure control. The objective is to reduce by 50% now and against 2007, the time it took to go through the public expenditure circuit in 2005 and to improve the public-expenditure-control capacity.

4.6.5 To improve the private sector environment and continue the structural reforms, the Bank will closely monitor now and against 2007 (see Section 2.6.4) to: (i) the effective sale of SONAPRA’s2 ginneries; (ii) the effective concessioning of the electricity corporation; (iii) completion of the telecommunications privatization; (iv) conduct of the second phase of the study on the privatization of the port management as well as the preparation and launching of an action plan to implement its key recommendations; and (v) the design and operationalization of a new regulatory framework for the electricity and telecommunications sectors. In the same vein, the Bank and the other partners such as the IDA closely monitor the strengthening of public-private sector dialogue and partnership. The gradual lowering of administrative barriers to private investment will also be monitored.

4.6.6 In the area of Governance3, the Bank’s monitoring will be based on the recommendations of the Benin governance profile, particularly for the finalization and publication of the study on corruption in Benin, the launching of the anti-corruption action plan, effective establishment of CENTIF to combat money laundering, capacity building for the employer and professional organizations and enhancement of the land tenure environment to ensure wider and more secure access to land ownership (see Section 2.6.6). In consultation with the UNDP and the African Capacity Building Foundation (ACBF), the Bank will encourage the Government to create mechanisms for monitoring the recommendations of the CGP.

2 The price of cotton is one of the reasons for the sustainability of Benin’s debt 3 Governance Profile Report ADF/BD/IF/2005/52

36 4.6.7 Finally, portfolio management and monitoring continue to be Bank priorities. In addition to current efforts aimed at shortening the ratification period, the Bank will monitor, in keeping with the 20044 portfolio review, the elimination of weaknesses relating to (i) delays in the start-up of certain projects owing to the time it takes to comply with the conditions precedent to disbursement, (ii) the use of rural credit for agricultural projects, (iii) non-compliance with the rules for the appointment and replacement of managers in some projects and (iv) and the insufficiency of budget allocations under the State’s investment programme. The Bank will strongly encourage the Government to permanently establish the monitoring-evaluation function within CAA projects and to implement the recommendations of the different audits and of the quarterly Bank operations review.

4.6.8 Activity Plan for the 2005-2009 period: Five operations are scheduled during the ADF X lifespan. One of them will be devoted to a second budget support (PRSSP II) to back-up the Government in the implementation of the poverty reduction strategy, particularly in sectors relative to the sustainable production increase, access to basic social services and good governance. Two other operations are devoted to the support of community forest management and the promotion of local development of the Zou department. These operations are in line with the first priority of the Results-Based Country Strategy Paper (RBCSP), namely the promotion of production diversification. This priority also takes into account an operation meant to back-up control institutions in order to reinforce good governance in the public expenditures sector. The last operation concerning the development of the health system (PADS IV) is meant to support the second RBCSP priority, i.e. improving access to basic social services. For ADF XI, the operations will be specified within the framework of a mid-term review of the Results-Based Country Strategy Paper (RBCSP).

Bank Group Assistance: Non-lending Activities

4.6.9 In connection with the implementation of the PGP recommendations, Benin will conduct a certain number of studies with the Bank’s support. These studies relate to the results-based management reform, the land profile, the study on « Public Expenditure Financial Accountability », the Country Financial and Accountability Assessment (CFAA) and Country Procurement Assessment Review (CPAR). Other studies relative to the land issue will be carried out by 2009. Moreover, the Bank will maintain regular dialogue with all partners in order to achieve the millennium development goals and improve the Bank’s portfolio. On 31 March 2004, Benin adhered to the African Peer Review Mechanism institution mechanism within the NEPAD framework. Thus, Benin will be subjected to a review in 2006. The Government, in collaboration with UNDP and the Bank intends to use the PGP results, among other elements, to undertake this review. Finally, IDA and ACBF will work closely to carry out economic studies.

4.6.10 Contribution to the HIPC initiative: The Bank will continue to provide assistance within the framework of the HIPC initiative. In this regard, it has approved a nominal contribution of US $ 46.39 million, 51.6% of which were delivered as at 31 March 2005. The Bank Group’s relief accounts for about 20% of the assistance provided by multilateral creditors and 14% of the total relief granted by creditors. The Bank Group’s debt relief will apply to a total amount of US$ 46.5 million in nominal terms to be disbursed over an initial period of 6 years, up to the end of 2009.

4 Portfolio Review Report ADF/BD/WP/2004/135

37 4.7 Partnership and Harmonization

4.7.1. Every year, Benin turns to the international community to finance its budget. Partners intervening in this context back-up the implementation of the poverty reduction strategy through budget support (cf. paragraph 3.4) in the form of poverty reduction stand-by facilities (Poverty Reduction Strategic Credit (PRSC) for IDA and Poverty Reduction Strategy Support Programme (PRSSP) for ADB) and project loans. The global objectives of the PRSC/PRSSP facilities are to support the PRSP implementation in Benin and strengthen the Government’s capacity to design and implement the development and poverty reduction programmes. The assessment of development partners’ intervention procedures in Benin show progress in the harmonisation of approaches. Thus, in 2004, the World Bank, African Development Bank, the Delegation of the European Commission, the Royal Embassies of Denmark and Netherlands and the Development Department of the Swiss Cooperation embarked on a process expected to result in the coordination/harmonisation of their interventions as regards budget support to Benin, within the framework of the implementation of its PRSP. The process currently entails the joint organisation of (i) appraisal mission, (ii) annual PRSP reviews; and (iii) sectoral reviews. The common purpose is to step up the impact of budget support both on the results and on dialogue with the Beninese Government.

4.7.2. Sectoral and thematic meetings are organised on a permanent basis with a donor taking the lead role. These meetings particularly concern the health sector, education, governance, agriculture and rural development, decentralisation, transport and the monitoring of the poverty reduction strategy. As from 2004, ADF and IDA supported the implementation of the Poverty Reduction Strategy Support Programme. In 2003/2004 the Bank maintained discussions with major donors, particularly in the strategic sectors and, in collaboration with the Bretton Woods Institutions and the European Union, coordinates the progression of reforms in the country and the implementation of PRSP measures. On this account, the Bank, in collaboration with IDA, undertook in 2003 a study on the diagnosis of government procurement Units in technical ministries. In April 2004, it conducted a joint mission with IDA on the monitoring of PRSSP disbursement conditions. Furthermore, in collaboration with UNDP and ACBF, the Bank finalised the PGP for Benin. Still in the field of good governance, a National Plan to fight against corruption was adopted in 2002 and a survey on corruption was initiated in the course of 2004. Finally, ADF pursues its collaboration with IDA to improve the government procurement system.

V. RESULTS-BASED MONITORING AND EVALUATION

A far as the Government is concerned, the implementation of actions and programmes stipulated in the strategy will lie within the competence of ministries, departments or the concerned decentralised authorities. However, in order to ensure the enhanced synergy among these various actions, the coordination of all the actors and the monitoring-evaluation system will be effected through an institutional framework. This machinery will also provide the Government with the opportunity to collect the grassroots populations’ views on the effectiveness and efficacy of public expenditures of which they are the beneficiaries. The populations could thus evaluate the policies and delivery of public services addressed to them. This three-tier mechanism starts with the commune and goes up to the central level through the department (see box in annex).

5.1. Monitoring of CSP Outcomes and Bank Group Performance

The Results-Based Country Strategy Paper (RBCSP) is based on the strategic axes of the PRSP. For this reason, monitoring the results of the Government programme as well as the Bank performances will be analyzed in relation to the poverty reduction indicators defined in the PRSP and the progress report on the implementation of the PRSP. The Bank will make use of three criteria to monitor the RBCSP: annual budget implementation in accordance with the PRSP axes, the headway made in the

38 implementation of structural reforms and the performance of its portfolio in Benin. The indicators attesting to the country’s performance will be monitored on an annual basis and will facilitate the timely adoption of the required corrective measures, in the event of performance differences in relation to the objectives, particularly in the rural development area and the health social sector. For this purpose, periodic reports will be prepared by the Observatory for Social Change, which is a permanent mechanism for the collection and analysis of data regarding poverty and households’ living conditions. Furthermore, the IMF’s General Data Diffusion System (SGDD) integrated by Benin in 2001, should also make it possible to monitor the impact of national policies on the poverty trend, through macro-economic statistics and sectoral, social, demographic and environmental data. Besides, the Bank has the means to verify and monitor social indicators in the field within the framework of project supervision and sectoral public expenditure reviews. Finally, pursuant to its policy, the Bank will conduct a mid-term review of the RBCSP implementation in 2007, and will seize the opportunity to assess the initiators’ state of realization.

5.2. Risk Management

5.2.1. Two types of risks will be considered at this point: the global risks already identified, and mentioned in section 3.4 above and risks that are inherent to the realization of activities contained in the Bank’s strategic priorities. At the global level, one of the major risks concerns lack of appropriation in the PRSP implementation. This risk is aggravated by low capacities, the exogenous shocks related to the cotton sector, political instability and loss of advantages expected from the institution of the regional market following the persistence of instability at sub-regional level. At the sectoral level, the risks relate to activities adopted in connection with the two pillars of the RBCSP. With respect to the first priority, namely promoting the diversification of production, the risks concern the slow progression of structural reforms and those related to decentralization. In fact, delays in adopting acts for the application of the law on decentralization might not help clarify the role of actors and the responsibility of each of them in the implementation of some of the Project’s activities.

5.2.2. With respect to the reinforcement of basic social services, one of the risks identified during the implementation of activities meant to broaden health care is the failure to implement the findings of the study on human resources development in the depressed areas. Actually, the newly built and equipped infrastructure will not improve the management of referred patients unless competent staff is available. The Ministry’s low absorptive capacity, as shown by the low implementation rate of the 2004 budget, following the delegation of funds to the departmental health units and health districts, may also be considered as a risk. Mitigating factors include the partners’ adoption of the programme budget approach and budget support which has the advantage of ensuring the better coordination of aid. Moreover, the improvement of the fiduciary and public expenditure control framework will offset these risks by improving public expenditure implementation. For the cotton sub-sector, the institution of an autonomous cotton price fixing mechanism and the finalisation of the privatisation process will ensure a producer price in keeping with the world market and a more equitable distribution of the income deriving from the sector in favour of the rural population.

5.3. Country Dialogue Issues

Dialogue with the Government will be pursued essentially as regards the improvement of the portfolio performance, particularly through the mechanism for the quarterly monitoring of operations financed by the Bank, implementation of the second poverty reduction strategy support programme and the recommendations resulting from the governance profile which is being prepared. In connection with the poverty-reduction-strategy implementation, the dialogue will focus on: (i) the pursuit of efforts to improve the fiduciary framework and the government procurement system, (ii) support to private-sector capacity building and the removal of barriers impeding private investments; (iii) reform of the judicial sector, (iv) the fight against corruption and money laundering, and (v) strengthening of the poverty reduction strategy monitoring structures and mechanisms.

39 VI. CONCLUSIONS AND RECOMMENDATIONS

Conclusions

6.1 During the past five years, Benin pursued, in accordance with the focal points of the PRSP, the implementation of the structural reforms and the improvement of the macro-economic framework within a context of political and social stability. However, in spite of the results obtained, economic growth did not exceed an annual average of 5% owing in particular to the limited diversification of production, which still depends considerably on cotton, the persistence of obstacles to private sector promotion and an inadequate capacity for efficient implementation of public expenditure with a view to poverty reduction. In some sectors, the social indicators did indeed improve notwithstanding a high population growth rate but these performances were insufficient to reverse the poverty trend in Benin

6.2 The Bank Group’s assistance strategy for 2005-2009 will contribute to diversifying production and broadening access to basic social services. This strategy is in line with the Government’s objective to reduce poverty through a strong, sustainable and balanced economic growth. During the 2005-2009 period, the Bank’s strategy was focussed on creating an environment conducive to economic growth, improving the competitiveness of agriculture and farm operators’ income, promoting good governance and finally, improving the accessibility, quality and utilisation of health care. Support to reforms and good governance will also be pursued: in this regard, the Bank will contribute to different budget support programmes as well as to building the capacities of the public administration, Parliament and Supreme Court.

Recommendations

6.3 The Board of Directors is invited to approve the programme of activities and the priority areas of operation proposed for Benin during the 2005-2009 period on the basis of an allocation package of UA ….……million. The policy-based lending could account for 50% of this amount.

Annex 1 REPUBLIC OF REPUBLIC OF BENIN

ATLANTIC OCEAN

This map was prepared by the African Development Bank Group exclusively for the use of readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the Bank or its members, any judgement concerning the legal status of a territory nor any approval or acceptance of the borders.

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BENIN: BANK GROUP COMMITMENTS IN BENIN AS AT 5 MAY 2005 Annex 2

Date of Window Date of Approval Date of Last Deadline of Disburse Signature Disburse- Date of Date of First Last Amount Amount Amount Net Commit- ment PROGRAMMES/PROJECTS/STUDIES ment Effectiveness Disbursement Disbursement Approved Cancelled Disbursed ments Rates Status

Agriculture

1 OUEME VALLEY IRRIGATION ADB 10/19/1972 04/24/1973 12/31/1973 05/15/1973 11/20/1973 06/11/1976 310,000 0 310,000 310,000 100 COMP

2 ANIMAL PRODUCTION DEVELOPMENT ADF 06/29/1978 07/29/1978 12/31/1985 07/30/1978 07/04/1979 10/15/1987 4,144,734 0 4,144,734 4,144,734 100 COMP

3 FIREWOOD PLANTATIONS, SOUTH BENIN ADF 08/27/1982 05/12/1983 12/31/1998 08/24/1983 06/04/1984 02/09/1999 11,052,624 90,998 10,961,626 10,961,626 100 TERM

4 OUEME INTEGRATED RURAL DEVELOPMENT ADF 06/17/1985 08/16/1985 12/31/1998 03/25/1986 09/09/1986 01/13/1999 8,123,679 67,929 8,055,750 8,055,750 100 COMP

5 SADEVO II ADF 09/19/1975 11/25/1975 12/31/1982 12/26/1975 06/01/1976 03/20/1981 3,223,682 143,312 3,080,370 3,080,370 100 COMP

6 INTEGRATED RURAL DEVELOPMENT IN MONO PROVINCE ADF 04/28/1988 12/28/1989 06/30/1999 12/13/1991 12/20/1991 12/22/1999 11,973,676 706,000 11,267,676 11,267,676 100 TERM

7 AMEN. MASSIFS FORESTIERS * PRJECT ADF 01/20/2000 03/24/2000 12/31/2005 04/18/2001 04/18/2001 04/01/2005 10,540,000 0 4,778,648 10,540,000 45 OnGo

8 RURAL DEVELOPMENT IN OUEME (PHASE II° ADF 10/07/1999 01/13/2000 12/31/2006 01/26/2001 01/01/2002 05/09/2005 11,680,000 0 2,442,509 11,680,000 21 OnGo

9 ANIMAL BREEDING PROJET III ADF 12/15/1997 02/05/1998 12/30/2005 08/05/1999 11/26/1999 04/11/2005 8,000,000 0 6,884,679 8,000,000 86 OnGo

10 MONO AND COUFFO RURAL DEVELOPMENT SUPPORT (PADMOC) ADF 04/18/2001 05/30/2001 12/31/2009 01/10/2003 09/30/2003 9,130,000 0 389,912 9,130,000 4 OnGo

11 ANIMAL PRODUCTION DEVELOPMENT PHASE 2 ADF 10/26/1987 12/04/1987 12/31/1996 08/15/1988 10/31/1989 04/03/1997 12,894,728 883 12,893,845 12,893,845 100 COMP

12 FIREWOOD PROJECT - PHASE II (PBF II) ADF 10/31/2001 12/21/2001 06/30/2008 12/19/2002 12/22/2004 10,000,000 0 215,746 10,000,000 2 OnGo

13 TRADITIONAL FISHING SUPPORT PROGRAMME ADF 11/27/2002 12/23/2002 12/31/2009 01/10/2004 01/10/2004 11/03/2004 7,310,000 0 363,701 7,310,000 5 OnGo

14 STUDY ON WATER COURSES OF SOUTH BENIN ADF 07/16/1997 10/24/1997 06/30/2001 05/12/1998 04/16/1999 03/14/2002 1,085,000 12,691 1,072,309 1,072,309 100 COMP

Sub- total 109,468,123 1,021,813 66,861,505 108,446,310 62%

Percentage 24% 16% 23% 26%

Industry and Banking ADB 15 LINE OF CREDIT I (BBD) 07/16/1976 03/10/1977 12/31/1979 03/11/1977 11/30/1977 04/11/1980 1,000,000 0 1,000,000 1,000,000 100 COMP ADB 16 LINE OF CREDIT II 03/30/1981 05/11/1981 12/31/1984 02/05/1982 05/05/1983 12/04/1989 2,500,000 389,054 2,110,946 2,110,946 100 COMP ADB 17 FLUDOR BENIN S.A. 12/08/1997 03/13/1998 12/31/1999 03/31/1999 05/04/1999 11/09/1999 1,372,879 0 2,083,000 2,083,000 100 COMP

Sub- total 4,872,879 389,054 5,193,946 5,193,946 100%

Percentage 1% 6% 2% 1%

Community facilities

18 WATER AND ELECTRICITY SUPPLY STUDIES ADF 03/22/1979 05/17/1979 12/31/1992 01/01/1982 05/05/1982 10/05/1990 691,710 29,585 662,125 662,125 100 COMP

19 TELECOMMUNICATIONS DEVELOPMENT PROJECT ADF 04/18/1990 11/30/1990 06/30/1998 07/14/1992 10/13/1992 09/29/1997 6,926,311 500,124 6,426,187 6,426,187 100 COMP

20 TELECOMMUNICATION NETWORK MAINTENANCE ADF 10/26/1987 02/26/1988 03/31/1999 05/25/1989 01/22/1990 12/20/1996 10,721,045 84,649 10,636,396 10,636,396 100 COMP

21 RURAL TELECOMMUNICATIONS STUDIES ADF 05/09/1993 08/05/1993 12/31/1997 05/20/1994 12/19/1994 09/03/1998 690,789 208,383 482,406 482,406 100 COMP

22 TELECOMMUNICATIONS DEVELOPMENT FSN 04/18/1990 05/30/1990 06/30/1998 06/30/1992 02/24/1993 01/06/1998 7,000,000 283,443 6,716,557 6,716,557 100 COMP

23 ELECTRICITy (SUPPLEMENTARY LOAN) ADB 12/20/1976 03/10/1977 12/31/1977 06/18/1977 01/31/1978 04/24/1979 1,900,000 0 1,900,000 1,900,000 100 COMP

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BENIN: BANK GROUP COMMITMENTS IN BENIN AS AT 5 MAY 2005 Annex 2

Date of Window Date of Approval Date of Last Deadline of Disburse Signature Disburse- Date of Date of First Last Amount Amount Amount Net Commit- ment PROGRAMMES/PROJECTS/STUDIES ment Effectiveness Disbursement Disbursement Approved Cancelled Disbursed ments Rates Status ADB 24 ELECTRIFICATION OF CEMENT WORKS 10/17/1978 10/31/1978 12/31/1982 08/31/1979 12/31/1979 06/30/1983 5,000,000 1 4,999,999 4,999,999 100 COMP ADB 25 ELECTRICITY (INITIAL LOAN) 04/05/1974 08/16/1974 04/30/1978 12/20/1974 12/11/1975 01/31/1978 1,600,000 0 1,600,000 1,600,000 100 COMP ADF 26 WATER AND ELECT. SUPPLY FOR 9 DISTRICTS 03/18/1982 01/06/1983 06/30/1994 07/29/1983 09/19/1983 12/14/1989 8,289,468 0 8,289,468 8,289,468 100 COMP ADF 27 RURAL ELECTRIFICATION PROGRAMME 06/28/2000 07/26/2000 12/31/2005 08/14/2001 04/12/2005 4,800,000 0 3,763,450 4,800,000 78 OnGo ADF 28 SECOND RURAL ELECTRIFICATION PROJECT 10/29/2003 01/12/2004 12/31/2008 12/08/2004 12/08/2004 05/09/2005 12,320,000 0 387,778 12,320,000 3 OnGo ADF 29 STUDY ON A RURAL ELECTRIFICATION PROGRAMME 11/12/1997 01/13/1998 06/30/2002 09/01/1998 10/22/1999 07/31/2002 700,000 33,362 666,638 666,638 100 TERM ADF 30 WATER SUPPLY AND SANITATION PROGRAMME IN THE RURAL AREAS 11/10/2004 11/29/2004 10,740,000 0 0 10,740,000 0 APVD ADF 31 CLEANING UP COTONOU - PORTO N. (DON) 10/30/1991 05/12/1992 06/30/1998 08/14/1992 12/03/1993 06/17/1998 1,289,473 119,688 1,169,785 1,169,785 100 COMP

Sub- total 72,668,796 1,259,236 47,700,788 71,409,560

Percentage 16% 20% 17% 17%

Transport

32 BRIDGE AND BARRAGE S-LAGUNE OF COTONOU ADB 01/17/1975 06/06/1975 09/30/1979 08/22/1975 07/08/1976 07/17/1981 4,000,000 147,548 3,852,452 3,852,452 100 COMP ADF 33 REHABILITATION OF SAVE-PARAKOU ROAD 11/20/1985 6,550,000 0 0 0 0 COMP ADF 34 DOGBO-AZOVE-ABOMEY ROAD CONSTRCIN(UPEETR) 12/03/1981 8,000,000 0 0 0 0 COMP ADF 35 ABOMEY-BOHICON-KETOU-ILLARA- ROAD STUDIES 11/19/1984 11/30/1984 06/30/1994 05/31/1985 04/03/1986 09/19/1991 874,999 -171,202 1,046,201 1,046,201 100 COMP ADF 36 DOGBO-AZOVE ROAD CONSTRUCTION 11/23/1977 12/21/1977 06/30/1982 06/01/1979 08/06/1979 06/02/1983 7,368,416 217,691 7,150,725 7,150,725 100 COMP ADF 37 POBE-KETOU ROAD CONSTRUCTION 11/27/1980 12/11/1980 12/31/1984 03/24/1982 04/22/1982 09/30/1986 7,368,416 -8,086 7,376,502 7,376,502 100 COMP ADF 38 PARAKOU-SAVE ROAD CONSTRUCTION 11/20/1985 12/17/1985 12/30/1996 07/08/1986 07/28/1986 10/22/1996 7,368,416 36,279 7,332,137 7,332,137 100 COMP ADF 39 DOGBO-AZOVE ROAD STUDIES 03/22/1974 11/13/1974 12/31/1975 12/31/1975 10/12/1976 07/31/1978 147,368 0 147,368 147,368 100 COMP ADF 40 COTONOU ACCESS ROAD AND LEVEL CROSSING PROJECT 04/21/1992 10/08/1992 12/31/1999 10/20/1994 11/22/1994 09/10/1999 11,973,676 263,334 11,710,342 11,710,342 100 COMP ADF 41 EMERGENCY COTONOU-PORTO NOVO ROAD DEVELOPMENT PROJECT 09/11/1996 09/23/1996 06/30/2005 02/25/1998 03/03/1999 04/25/2005 10,000,000 0 8,031,137 10,000,000 80 OnGo ADF 42 REHABILIT. OF THE PORTO-NOVO-POBE ROAD 10/26/1987 02/26/1988 12/31/1996 02/12/1990 06/05/1990 10/21/1996 7,230,258 120,189 7,110,069 7,110,069 100 COMP ADF 43 "STUDY OF COTONOU ACCESS AND CROSSING 08/19/1987 10/07/1987 06/30/1994 11/16/1987 07/25/1989 01/02/1991 709,210 -1,097 710,307 710,307 100 COMP ADF 44 DJOUGOU-NDALI ROAD REHABILITATION PROJECT 07/22/2003 01/12/2004 12/31/2007 10/12/2004 03/11/2005 11,110,000 0 0 11,110,000 0 APVD ADF 45 PROJET DE REHA. ROUTE POBE-KETOU-ILLARA 09/29/2004 11/29/2004 7,800,000 0 0 7,800,000 0 APVD ADF 46 POBE-KETOU-ILLARA ROAD REHABILITATION PROJECT 10/07/1999 01/13/2000 12/15/2004 04/21/2000 04/21/2000 11/28/2003 590,000 0 252,723 590,000 43 OnGo

47 REHABIL.PARAKOU-NIKKI-SEGBANA ROAD ADF 08/28/1991 05/12/1992 06/30/1997 08/17/1993 10/25/1993 11/29/1996 1,381,578 509,468 872,110 872,110 100 COMP

48 CONSTRUCTION OF COTONOU PORT FSN 10/17/1978 10/31/1978 12/31/1983 11/07/1979 01/02/1980 05/08/1981 2,420,000 10,501 2,409,499 2,409,499 100 COMP

49 EMERGENCY COTONOU-PORTO NOVO REHABILITATION PROJECT FSN 09/04/1996 09/23/1996 06/30/2005 02/25/1998 03/29/1999 04/26/2005 6,000,000 0 4,536,434 6,000,000 76 OnGo

50 DJOUGOU-NDALI ROAD REHABILITATION PROJECT FSN 07/22/2003 01/12/2004 01/12/2007 10/12/2004 03/11/2005 4,000,000 0 0 4,000,000 0 APVD

Sub- total 104,892,337 1,124,626 62,538,005 89,217,711 70%

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BENIN: BANK GROUP COMMITMENTS IN BENIN AS AT 5 MAY 2005 Annex 2

Date of Window Date of Approval Date of Last Deadline of Disburse Signature Disburse- Date of Date of First Last Amount Amount Amount Net Commit- ment PROGRAMMES/PROJECTS/STUDIES ment Effectiveness Disbursement Disbursement Approved Cancelled Disbursed ments Rates Status

Percentage 23% 18% 22% 21%

Social ADF 51 HEALTH SECTOR STUDIES 10/24/1985 12/17/1985 06/30/1994 08/20/1986 10/29/1987 11/22/1989 419,079 73,394 345,685 345,685 100 COMP ADF 52 HEALTH SECTOR INSTITUTION BUILDING 10/24/1985 12/17/1985 06/30/1994 12/17/1986 09/14/1987 04/21/1990 676,052 72,840 603,212 603,212 100 COMP ADF 53 POLITECHNIQUE COMPLEX 04/26/1979 05/17/1979 06/30/1991 12/13/1979 05/19/1983 06/05/1991 7,368,416 0 7,368,416 7,368,416 100 COMP ADF 54 DEVELOPMENT OF MEDICO-HEALTH SERVICES 06/27/1977 07/29/1977 12/31/1981 11/25/1977 04/22/1983 09/17/1986 4,605,260 0 4,605,260 4,605,260 100 COMP ADF 55 PROMOTION OF OUEME WOMEN’S ECONOMIC ACTIVITIES 12/12/1996 02/07/1997 12/31/2005 10/01/1998 12/07/1998 04/14/2005 2,000,000 0 1,147,816 2,000,000 57 OnGo ADF 56 EDUCATION III 12/15/1997 02/05/1998 06/30/2005 06/30/1999 02/03/2000 05/06/2005 8,000,000 0 7,385,615 8,000,000 92 OnGo ADF 57 TECH. EDUCATION DEVELOP - TEACHERS 08/29/1990 11/30/1990 03/31/1999 05/22/1992 10/30/1992 02/08/1999 9,477,625 151,589 9,326,036 9,326,036 100 COMP ADF 58 HUMAN RESOURCE DEVELOPMENT PROGRAMME 03/15/2000 07/11/2000 12/31/2005 10/10/2001 05/06/2005 10,000,000 0 1,336,478 10,000,000 13 OnGo ADF 59 HEALTH II 08/31/1993 01/20/1994 06/30/2003 01/27/1995 06/13/1995 01/15/2004 7,370,000 1,626,021 5,743,979 5,743,979 100 OnGo ADF 60 CONST. REGION AL PUBLIC HEALTH NSTITUTE OF COTONOU 05/02/1991 05/09/1991 03/30/2003 02/15/1994 05/20/1994 11/21/2003 9,210,520 562,608 8,647,912 8,647,912 100 OnGo ADF 61 EDUCATION IV 12/04/2002 12/23/2002 12/31/2008 02/12/2004 12,000,000 0 0 12,000,000 0 APVD ADF 62 DEVELOPMENT OF HEALTH SYSTEM III 04/22/2005 22,000,000 0 0 0 0 APVD ADF 63 TECHNICAL EDUCATION DEVELOPMENT - TECHERS (DON) 08/29/1990 10/20/1990 03/31/1999 05/22/1992 11/25/1992 12/22/1998 2,785,261 63,461 2,721,800 2,721,800 100 COMP ADF 64 HUMAN RESOURCE DEVELOPMENT PROGRAMME 03/15/2000 07/11/2000 12/31/2005 10/10/2001 12/06/2001 05/04/2005 2,000,000 0 715,711 2,000,000 36 OnGo ADF 65 HIV/AIDS ERADICATION SUPPORT PROJECT 06/23/2004 08/23/2004 06/30/2009 2,700,000 0 0 2,700,000 0 APVD

Sub- total 100,612,213 2,549,913 49,947,920 76,062,300 66%

Percentage 22% 40% 17% 18%

Multisector ADF 66 INSTITUTIONAL SUPPORT TO MINISTRY FINANCE - PLAN 05/25/1992 10/08/1992 12/31/2003 09/23/1994 11/14/1995 03/01/2004 3,592,103 177 3,591,926 3,591,926 100 COMP ADF 67 STRUCTURAL ADJUSTMENT PROGRAMME II 11/25/1991 12/27/1991 12/31/1995 04/02/1993 04/14/1993 11/02/1994 13,815,780 0 13,815,780 13,815,780 100 COMP ADF 68 PROGRAMME D'AJUSTEMENT STRUCTUREL 03/14/1990 04/03/1990 06/30/1994 07/17/1990 08/28/1990 11/04/1991 11,052,624 -10 11,052,634 11,052,634 100 COMP ADF 69 POVERTY REDUCTION BUDGET REF SUPPORT PROG. 05/09/2001 05/30/2001 12/30/2003 09/10/2001 11/15/2001 11/13/2003 14,000,000 11,832 13,988,168 13,988,168 100 COMP ADF 70 POVERTY REDUCTION STRATEGY SUPPORT PROG 12/10/2003 01/12/2004 12/31/2006 08/09/2004 10/19/2004 11/08/2004 23,290,000 0 11,502,881 23,290,000 49 On go ADF 71 POVERTY REDUCTION STRATEGY SUPPORT PROG 12/10/2003 01/12/2004 12/31/2006 01/12/2004 12/08/2004 12/16/2004 1,000,000 0 45,849 1,000,000 5 Ongo

Sub- total 66,750,507 11,999 53,997,238 66,738,508 81%

Percentage 15% 0% 19% 16%

TOTAL GENERAL 459,264,855 6,356,640 286,239,403 417,068,336 69% Comp : Completed Ongo : Ongoing APV : Approved

Strategic Framework Matrix for Benin: 2005-2009 Annex 3

Challenges facing the country Government Programme Bank Group’s Strategy Bank Group’s activities Other Reference points PRSP Axes Recent and ongoing Proposed Bilateral MDG Objectives of the RBCSP termination and period multilateral Strategies PILLAR I : PROMOTE WEALTH CREATION

Overcome the vulnerability of the Reinforcing the macro- 1. Create an environment conducive to FIREWOOD PROJ. 1.Second and PRSC Reduce poverty by 1.1..Raise the economic growth rate to at economy by diversifying economic framework growth PHASE II (PBF II) ; third poverty 15% and double least 6% by 2007 and 7% with effect production reduction per capita income from 2009 2. Enhance the competitiveness of the MASS. FOREST strategy support by 2015 agricultural sector DEVELOPMENT programmes 1.2. Public utility companies are privatised Managing solidarity and PROJET before 2009 building the capacities of Project the poor to participate in 3. Promote good governance ANIMAL – 1.2 Business registration fees decision-making and PRODUCTION 2. Forest are reduced production process PROJECT III Programme project Projects 2.1. The income of populations of the area TRADITIONAL increase by 20% and community FISHING SUPPORT (Other plantations in the intervention areas Consolidate Governance PROGRAMME 3. Control partners) increased by 50% Restrain the drifts observed in the and institutional Institutions 3.1 All priority sectors have a programme implementation of the PRSP capacities OUEME II Support Project budget backed by the Medium-Term RURAL Expenditure Framework in 2009 DEVELOPMENT PROJECT 3.1The Audited Finance Acts are produced, examined by the Chamber of SUPPORT TO Audit and forwarded to the National RURAL DEV. OF Assembly in compliance with the statutory MONO AND deadline as from 2007. COUFFO PILLAR II : IMPROVING ACCESS TO BASIC SOCIAL SERVICES Step up the rate of visits to health Human capital development HIV/AID Project Health Reduce the Maternal mortality rate drops from 485 infrastructure Health III Development PRSC maternal mortality deaths for 100,000 births in 2001 to less Support Project rate by three than 388 in 2010 1. Improve the accessibility, quality (PADS IV) quarters in 2015 and utilisation of health Infant mortality rate declined from 89 for Improve the utilisation of health interventions contributing to the Stop and reverse 1000 in 2001 to less than 75 for 1000 in services infant, maternal mortality reduction the HIV/AIDS 2010 and epidemic management Project propagation trend, objectives. roll back malaria and other diseases by 2015 2. Increase the populations’ financial accessibility to basic health services Increase the of quality number of people using potable water

Annex 4

Benin COMPARATIVE SOCIO-ECONOMIC INDICATORS

Develo Develop Year Benin Africa ping ed countri countrie Basic indicators Area ('000 Km²) 113 30 061 80 976 54 658 GNI per capita (US $ ) 800 Total Population (millions) 2003 6,7 849,5 5 024,6 1 200,3 700 Urban Population (% of Total) 2003 43,8 39,2 43,1 78,0 600 Population Density (au Km²) 500 2003 59,8 28,3 60,6 22,9 400 Gros National Income (GNI) per Capita (US $) 2003 440 704 1 154 26 214 300 Labour Force Participation - Total (%) 200 2003 45,6 43,3 45,6 54,6 100 Labour Force Participation - Female (%) 2003 48,3 41,0 39,7 44,9 0 Gender-Related Dev elopment Index Value 2002 0,406 0,476 0,655 0,905 Human Dev elopment Index (Rank among 174 countries 2002 161 n.a. n.a. n.a. Population liv ing on less than $ 1 a day (%) 1999 29,0 46,7 23,0 20,0 Bénin Afrique

Demographic Indicators Population Grow th rate - Total (%) 2003 2,7 2,2 1,7 0,6 Population Grow th rate-Urban (%) 2003 4,4 3,8 2,9 0,5 Population < 15 y ears old (%) 2003 46,6 42,0 32,4 18,0 Population >= 65 y ears (%) Population growth rate 2003 2,8 3,3 5,1 14,3 (%) Dependency ratio (%) 2003 92,4 86,1 61,1 48,3 3,5 Sex Ratio (men per 100 w omen) 2003 96,8 99,0 103,3 94,7 3,0 Female Population 15- 49 y ears (%) 2003 23,8 24,0 26,9 25,4 2,5 Life ex pectancy at Birth - global (y ears) 2003 50,7 50,7 62,0 78,0 2,0 Life ex pectancy at Birth - female (y ears) 2003 53,0 51,7 66,3 79,3 1, 5 Gross birth rate (per 1000) 2003 41,1 37,0 24,0 12,0 1, 0 Gross mortality rate (per 1000) 2003 14,2 15,2 8,4 10,3 0,5 Infant mortality rate (per 1000) 2003 91,0 80,6 60,9 7,5 0,0 Under 5 mortality rate (per 1000) 2003 153,2 133,3 79,8 10,2 Maternal mortality rate (per 100000) 1996-99 498 661 440 13 Total fertility rate (per w oman) 2003 5,6 4,9 2,8 1,7 Bénin Afrique Women using contraceptiv es (%) 2001-03 18,6 40,0 59,0 74,0

Health and Nutrition Indicators Number of doctors (per 100000 inhabitants) 2001 14,5 57,6 78,0 287,0 Life expectancy at birth Number of Nurses (per 100000 inhabitants) 2001 40,2 105,8 98,0 782,0 (Years ) Births assisted by qualified health personnel (%) 2001 66,0 44,0 56,0 99,0 Access to Safe Water (% of population) 2002 68,0 64,4 78,0 100,0 71 61 Access to Health serv ices (% of population) 1991-99 42,0 61,7 80,0 100,0 51 Access to sanitation (% of population) 2002 32,0 42,6 52,0 100,0 41 Percent. of adults (aged 15-49) liv ing w ith HIV/AIDS 2003 2,18 6,4 1,3 0,3 31 Incidence of tuberculosis (per 100000) 2000 43,1 109,7 144,0 11,0 21 Child immunization against tuberculosis (%) 2003 99,0 81,0 82,0 93,0 11 Child immunization against measles (%) 2003 83,0 71,7 73,0 90,0 1 Underw eight (% of children under 5) 2001 23,0 25,9 31,0 … daily calorie supply per Capita 2002 2 548 2 444 2 675 3 285 Bénin Afrique Public Ex penditure on Health (in % of GDP) 2002 4,7 3,3 1,8 6,3

Education Indicators Gross Enrolment Ratio (%) Primary School - Total 2001/02 94,33 88,7 91,0 102,3 Primary School - Girls 2001/02 78,10 80,3 105,0 102,0 Infant mortality rate (per 1000 ) Secondary School - Total 2001/02 26,0 42,9 88,0 99,5 Secondary School - Girls 2001/02 16,0 41,3 45,8 100,8 12 0 Female teaching staff in primary schools (% du total) 2001/02 23,1 46,3 51,0 82,0 10 0 Adult Illiteracy Rate - Total (%) 2003 59,1 36,9 26,6 1,2 Adult Illiteracy Rate - Male (%) 2003 45,2 28,4 19,0 0,8 80 Adult Illiteracy Rate - Female (%) 2003 73,5 45,2 34,2 1,6 60 Ex penditure on Education in % of GDP 1998 2.5 5,7 3,9 5,9 40

Environmental Indicators 20 Arable Land (in % of total surface area) 2003 15,4 6,2 9,9 11,6 0 Annual Deforestation Rate (%) 1995 1.2 0,7 0,4 -0,2 Annual Reforestation Rate (%) 1990 5,0 10,9 … … Bénin Afrique

Annex 5

Annex 6 2000-2005 national Accounts Billions of CFAF

Annex 7 National Accounts at constant prices Billions of CFAF

Annex 8

Annex 9

Annex 10

Annex 11 Box 3: Benin: Millennium Development Goals

Goal Goals and actions initiated for their achievement Role of the Bank 1. Reduce poverty by 15% in From the standpoint of the global poverty reduction goals, even though the available data All of the Bank’s projects 2005 and double per capita do not provide indications on the real level of monetary poverty in 2003, the participate to the income by 2015. developments registered between 1999/2000 and 2002 do not show any significant achievement of this goal. progress. Globally, the incidence of monetary poverty has remained almost stationary Besides, the Bank (from 29,3% in 1999/2000 to 28,5% in 2002) with an intensification of inequalities among contributes in the HIPC the poor at national level essentially due to the significant increase in the acuteness index, initiated in favour of particularly in the urban areas. Benin. . 2. Achieve universal primary The primary school enrolment rate rose from 56,8% over the 1990-1991 period, to 80% in Monitoring the education by 2015 2004. In view of the targeting of social spending, the objective of a 100% enrolment rate implementation of the will be attained by 2008. Education IV project 3. Eliminate gender disparities The proportion of girls who complete primary schooling in the rural areas is 14%, against Monitoring the in primary and secondary 70% of boys in the urban areas. This inequity in the education offer is not favourable to implementation of the education the achievement of the MDG for the education sector. The gender disparities is still Education IV project enormous because for the whole of Benin, the gross enrolment rate was 94.33% for boys in 2001/02. The government’s programme of action seeks to increase the girls’ primary school enrolment rate from 78.1% to 80% and their secondary school enrolment rate from 10 to 20% in between 2001 and 2006 4. Reduce infant and child The infant mortality rate dropped from 103.5 p. 1000 live births in 1996 to 94.8 p. 1000 Monitoring the mortality rates by two-thirds live births in 2001 and 91% live births in 2002 (RGPH3). The child mortality rate also implementation of the between now and 2015 declined from 183.9 p. 1000 in 1996 to 162.7 p. 1000 in 2001 and 146.4 p. 1000 in 2002 Education III and UV (RGPH3) . Like most countries of the sub-region, Benin made efforts to reduce mortality and Health II among children, but the results obtained in terms of survival were wiped out, essentially because of the HIV/AIDS infection epidemic. 5. Reduce by three quarters the According to the data from the 1992 and 2002 General Population and Housing Census, Monitoring the maternal mortality ratio in 2015 maternal mortality was still estimated at 474.4 p. 100.000 live births in 2002 against 498 implementation of the p.100.000 live births in 1992. A gap is observed between the rural and urban areas, with a HIV/AIDS and Health II higher rate in the rural areas (505.4 p.100.000 live births in 2002), but maternal mortality project, PADS has stabilised in the both areas during the past ten years. With a view to reducing maternal mortality, the Beninese State embarked on the reinforcement of the nutritional surveillance of mothers, the development of emergency neo-natal obstetrical assistance and essential obstetrical care as well as information, education and communication (IEC) operations; 6. Halt and reverse the spread HIV/AIDS prevalence among pregnant women checked during prenatal visits has The Bank is participating of HIV/AIDS in 2015, and the dropped since 2001. The prevalence rate which was 0.3% in 1990, progressively increased in the HIPC Initiative and incidence of malaria and other reaching 3.7% at national level in 1997 and 4.1% in 2001 before dropping again to 1.9% AIDS and malaria control major diseases in 2002. It is believed that more than 200.000 persons are currently living with are components of the HIV/AIDS. The 2002 prevalence was obtained after a national survey involving pre-natal HIV/AIDS and Health II consultants and STI consultants, based on a broader sample compared to that of 2001. project. Malaria is considered as the leading disease registered in Benin.. It represents 37% of causes of visits for treatment in health structures. Lethality due to malaria has dropped from 316 in 1995 to 70 ‰ in 2002. 7. Increase the proportion of The 2002 data concerning potable water show that 61% of the population have access to Monitoring the people using potable water potable water. This former Beninese electricity and Water Company (SBEE) supplies this implementation of the water to about 22% of consumers while 15.5% get their supplies from village pumps, Rural Hydraulics Project 8.3% from protected wells and 5.7% from boreholes. Contrary to these, 39% of the population are still vulnerable because they turn to non potable water sources [unprotected wells (22.6%), rivers and side channels (13.2%), tanks and other sources (3.1%)]. The populations’ rate of access to potable water has been stable over the past years (61.1%). This situation reflects a 9 points deficit compared to the 2003 target (70.3%). At this pace, is highly unlikely that the 78% target will be attained in 2015. the situation is due, among others, to the non existence up to 2003 of a water resources management strategy. Besides, the reforms undertaken in the ex-company in charge of producing water (SBEE) resulting in the separation of the “water” sector from the "electricity" sector will start yielding fruits with effect from 2005. 8. Develop a global Partnership was established in various fields , particularly in the poverty reduction sector. NEPAD partnership for development Regional Office Co-financing

Annex 12 Main boxes

Box : National AIDS Eradication Strategic Framework : objectives, strategies and priority actions. The general objectives defined in the National AIDS Eradication Committee are 14 in number and are formulated as follows 1. Create an institutional framework favourable to the multi-sectoral nature of the fight against STI and HIV/AIDS, and an enhanced management and

monitoring of the National Programme for the fight against AIDS and STI in Benin ;

2. promote through communication, the community’s awareness and appropriation of the fight against STI/HIV/AIDS ;

3. reduce the prevalence of sexually transmissible infections in Benin ;

4. increase the preservatives utilisation ;

5. guarantee a 100 % blood transfusion safety with respect to HIV and minimise HIV transmission during any other invasive practices ;

6. reduce the prevalence of HIV/AIDS infection among youths in the 10 to 24 years age bracket;

7. build the capacities of women in the rural and urban areas to be involved in the fight against STI/HIV/AIDS ;

8. reduce the mother-child AIDS transmission rate by at least 15 %;

9. reduce significantly the prevalence of STI/HIV/AIDS among the mobile populations ;

10. reduce the prevalence of STI and HIV/AIDS among sex workers and their clients ;

11. ensure that all PLHIV in Benin are properly cared for ;

12. optimise the reliability of the HIV/AIDS epidemiological surveillance in Benin ;

13. monitor the target populations’ behavioural trend towards STI/HIV/AIDS;

14. promote biomedical research on STI/HIV/AIDS.

POVERTY REDUCTION OBJECTIVES ACHIEVABLE BY 2015

On the basis of its population policy statement and those of the Copenhagen, Cairo, Beijing and Rio de Janeiro Summits, reaffirmed at the Libreville meeting, the Government defined the following poverty reduction objectives expected to be achieved by 2015 :

ƒ Reduce by half the proportion of the Beninese population living below the poverty line. This would amount to lowering the poverty index from 30 % in 2000to 15 % in 2015 ; ƒ Increase life expectancy at birth from 54 years in 2000 to 65 years in 2015 ; ƒ Reduce infant-child mortality rate from 165 per 10000 in 1998 to 90 per 1000 in 2015 ; ƒ Reduce maternal mortality rate from 500 per 100 000 live births in 1998 to à 390 per 100 000 in 2015 ; ƒ Reduce by half the number of persons suffering from malnutrition in relation to the current level, by 2015 ; ƒ Attain universal primary education by increasing the gross enrolment rate from 81 % in 2000 to 99 % in 2015 ; ƒ Facilitate access to reproductive health services to each individual of child bearing age, through the primary health care system, by 2015 ; ƒ Reduce the AIDS and STD prevalence rate.

PRSP Matrix of Measures Implementation Index

Rating Maxi. Rating Achievement Obtained Index

Axis 1 Consolidating the medium-term macro-economic framework 22.5 46 0.489 Axis 2 Human capital development and environmental management 28 53 0.528 Axis 3 Reinforcing good governance and building institutional capacities 6 22 0.273 Axis 4 Promoting long-term employment and building the capacity of the poor to participate in 20 31 0.645 the decision-making and production process.

Total axes 76.5 152 0.503 Source : SP/CNDLP, 2004

Annex 13

PRSP MONITORING-EVALUATION INDICATORS BENIN Reference Source of Year 2001 Sectors Indicators information (Initial Value) 2003 2004 2005

CONSOLIDATING THE MEDIUM-TERM MACRO-ECONOMIC STRUCTURE

Economic growth rate (real)

Macro TBS 5,0 % 5,8 % 6,8 % 7,0 % economic Inflation rate TBS 3,8 % <3 % <3 % <3 %

GDP/inhabitant growth rate TBS 2.8 % 3,2 % 3.5 % 3,8 %

HUMAN RESOURCES DEVELOPMENT AND ENVIRONMENTAL MANAGEMENT ECVR Incidence of urban poverty ELAM 23,3% 21,1% 20,1% 19,1%

Poverty ECVR Incidence of rural poverty 33 % 29,9 % 28,4 % 27,1 % ELAM

Human development index RNDH 0,492 0,506 0,520 Utilisation of health care services MSP 34 % 35 % 36 % 37 %

HIV/AIDS prevalence MSP 4,1 % 3,4 % 3,1 % 2,8 %

Infant mortality rate (per 1000 births ; 0-1 year ; o/oo) MSP 89 76,1 70,3 65,0 Vaccination coverage rate EVP (DTCP3) MSP >80 % >80 % >80 % >80 % Vaccination coverage rate EVP (VAR) MSP >=80 % >=80 % >=80 % >=80 %

Preservative prevalence MSP 50 % 65 % 65 % 65 %

Health Malaria-related mortality rate per 10,000 inhabitants MSP 7,6 % 6,2 % 6,2 % 6,2 % Cured tuberculosis rate MSP 57 % 57 % 57 % 58 %

Delivery assistance rate MSP 74 % 74 % 75 % 75 %

Pre-natal consultation MSP 82 % 83 % 84 % 84 %

Use of modern methods of contraception MSP 8,9 % 10 % 10 % 11 % Child mortality rate (per 1000 births ; 0-5 years ; o/oo) MSP 160 136,8 126,5 116,9

Literacy rate TBS - 83,5 % 85,83 % 88,11 %

Literacy rate among women and girls TBS 79,65 % 73,1 % 68,65 % 60 % Drop-our rate (primary) TBS 29,0 % 27,01 % 26,44 % 25,23 % Education Gross registration rate TBS 81 % 88,18 % 90,87 % 93,56 %

Pupil/teacher ratio TBS 53 % 52,86 % 52,13 % 51,38 %

Percentage of girls in first grade MEPS 42,7 % 44,0 % 45,0 % 46,0 %

Percentage of failures from Grade 1 to Grade 6 MEPS 45,0 % 50 % 54,0 % 57 %

Proportion of the population with access to potable water TBS 66,4 % 70,3 % 72,3 % 74,4 % Potable water Rate of water sources maintenance by the rural population TBS - 49 % 60 % 64,7 %

Nutrition Percentage of underweight children TBS 23,0 % 21,0 % 20,0 % 19,1 %

Percentage of urban households with electrical Housing connections TBS 21,9 % 28,7 % 43,37 % 55.8 % Percentage of households with latrines Sanitation MEHU 32.2 % 45.5 % 57.19 % 67.0 % SOCIAL SOLIDARITY AND PARTICIPATION OF THE POOR IN THE PRODUCTION PROCESS

Vulnerable groups Gender specific development indicator RNDH 0.448 % 0.453 % 0.458 % Rural Electrification Number of households with electrical connections RNDH 10.69 % 15.41 % 19.98 %

Source : PRSP : 2005-2009