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Seychelles Country Case Study (FY07–15) Enhancing Competitiveness and Private Sector Development

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Seychelles Country Case Study (FY07–15) Enhancing Competitiveness and Private Sector Development Vulnerability non-communicable disease remoteness disaster risk management climate change RISING SEA LEVEL diseconomies of scale labor migration volatile growth natural disasters Cluster Country Program Evaluation on Small States Seychelles Country Case Study (FY07–15) Enhancing Competitiveness and Private Sector Development IEG Working Paper 2016 CLUSTER COUNTRY PROGRAM EVALUATION ON SMALL STATES Seychelles Country Case Study (FY07–15) Enhancing Competitiveness and Private Sector Development Florence Charlier © 2016 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e- mail: [email protected]. ii Contents Abbreviations and Acronyms ................................................................................................ v Acknowledgments .................................................................................................................. vi Summary ................................................................................................................................ vii Bank’s Contribution .......................................................................................................... viii Assessment of the Bank Group’s Overall Strategy and Program for Enhancing Competitiveness .................................................................................................................. ix Conclusions and Lessons .................................................................................................... xii 1. Country Context and Purpose of the Evaluation ............................................................. 1 Seychelles Development Challenges .................................................................................... 1 Evaluation Objectives and Report Structure ........................................................................ 4 2. The Bank’s Country Partnership Strategy....................................................................... 7 Context ................................................................................................................................. 7 The World Bank’s Strategy and Program ............................................................................ 7 Broad Assessment of Strategy and Program ........................................................................ 8 Conclusion .......................................................................................................................... 13 3. Evaluation of World Bank Group’s Assistance in Enhancing Competitiveness and Private Sector Development ................................................................................................. 15 Liberalizing the Incentive Framework ............................................................................... 15 Promoting a Business Friendly Environment ..................................................................... 18 Strengthening the Financial Sector ..................................................................................... 20 Improving Infrastructure Services ...................................................................................... 21 Fostering Fisheries Development ....................................................................................... 22 Overall Assessment ............................................................................................................ 24 Conclusion: Overall Ranking of Bank’s Performance ....................................................... 27 4. Conclusions and Lessons .................................................................................................. 30 Conclusions ........................................................................................................................ 30 Lessons ............................................................................................................................... 31 Tables Table 3.1. Summary Assessment for Pillar 2—Improving Competitiveness ......................... 27 iii Figures Figure 3.1. Seychelles Financial Deepening; 2005–14 ........................................................... 25 Figure 3.2. Seychelles Exports of Goods and Services, 2005–14 .......................................... 26 Figure 3.3. Market Share of Seychelles Exports in European Imports, 2005–14 ................... 26 Figure 3.4. FDI and Private Investment in Seychelles; 2005–14 ........................................... 27 Appendixes Appendix A. Seychelles Economic and Social Indicators, 2005–14 ...................................... 35 Appendix B. World Bank Group Operational Program in Seychelles FY07–15 ................... 37 Appendix C. World Bank Group Program Organized Along the Evaluation Pillars ............. 47 Appendix D. Short Summary of Bank Contribution under Pillar 1—Improving Resilience . 51 All volumes of the Cluster Country Program Evaluation on Small States are found online at http://ieg.worldbankgroup.org/evaluations/cpe-smallstates. iv Abbreviations and Acronyms AAA analytic and advisory services AfDB African Development Bank CEO chief executive officer CPS country partnership strategy DPL development policy loan DPO development policy operation DRM disaster risk management EEZ exclusive economic zone EFF Extended Fund Facility EU European Union FDI foreign direct investment FY fiscal year GDP gross domestic product GNI gross national income HFC Housing Finance Corporation IBRD International Bank of Reconstruction and Development ICT information and communications technology IFC International Finance Corporation IMF International Monetary Fund LME large marine ecosystem MDG Millennium Development Goal MIGA Multilateral Investment Guarantee Agency MTNDS medium-term national development strategy NLTA nonlending technical assistance OECD Organisation for Economic Co-operation and Development PBB performance-based budgeting PEMC Public Enterprise Monitoring Commission PFM public financial management RAS Reimbursable Advisory Services SFA Seychelles Fishing Authority SMB State Marketing Board SME small- and medium-size enterprise SOE state-owned enterprise STC Seychelles Trading Company SWIOFish South West Indian Ocean Fisheries Governance and Shared Growth SWIOFP South West Indian Ocean Fisheries Project TA technical assistance UNDP United Nations Development Programme All dollar amounts are U.S. dollars unless otherwise indicated. v Acknowledgments The Seychelles country case study was prepared by a team led by Florence Charlier and Chandra Pant with analytic support from Swizen Rubbani. It was conducted under the guidance and supervision of Nick York (director) and Mark Sundberg (manager) and the overall direction of Caroline Heider (director-general, Evaluation). Aimée Niane, Yasmin Angeles, and Gloria Soria provided administrative support. The report also benefitted from comments provided by peer reviewers Alan Gelb (Center for Global Development), Ali Mansour (International Monetary Fund), and Jyoti Shukla (World Bank Group). IEG is grateful to the numerous representatives of the government, private sector entities, and nongovernmental organizations who provided valuable insights into the Bank Group’s program in Seychelles. The team is also thankful to the Bank Group management and country team members, including both previous and current staff working on Seychelles, who provided valuable time, information, and feedback to the evaluation team. vi Summary Highlights Between 1976 and the mid-2000s, Seychelles had transformed itself from a poor subsistence economy into a high middle income country with low levels of poverty and many social indicators comparable to Organisation for Economic Co-operation and Development (OECD) countries. However, this growth could not be sustained and faced with a growing international financial crisis, severe shortages of foreign exchange resulted in the government defaulting in its international payment obligations in 2008. Starting that year, the government began implementing a radical program of macroeconomic stabilization and structural reforms. The centerpiece of these reforms was a strong fiscal adjustment to reduce the burden of external debt and a progressive dismantling of the role of the state in allocating resources. These reforms were supported by the Standby and Extended Fund Facility (EFF) arrangements of the International Monetary
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