The World Bank Implementation Status & Results Report Madagascar Integrated Growth Poles and Corridor SOP-2 (P164536) Madagascar Integrated Growth Poles and Corridor SOP-2 (P164536) AFRICA EAST | Madagascar | Finance, Competitiveness and Innovation Global Practice | IBRD/IDA | Investment Project Financing | FY 2019 | Seq No: 4 | ARCHIVED on 16-Nov-2020 | ISR42724 | Public Disclosure Authorized Implementing Agencies: PIC National Project Secretariat, Republic of Madagascar Key Dates Key Project Dates Bank Approval Date: 18-Sep-2018 Effectiveness Date: 08-May-2019 Planned Mid Term Review Date: 29-Oct-2021 Actual Mid-Term Review Date: Original Closing Date: 18-Dec-2023 Revised Closing Date: 18-Dec-2023 pdoTable Project Development Objectives Public Disclosure Authorized Project Development Objective (from Project Appraisal Document) The development objective is to contribute to the sustainable growth of the tourism and agribusiness sectors by enhancing access to enabling infrastructure and services in the Target Regions of Madagascar. PIC 2.1 (SOP1) has supported economic recovery by improving the investment climate, increasing investor confidence, investing in key infrastructure and restoring economic governance, to lay the foundation for inclusive growth and shared prosperity in the target regions. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Public Disclosure Authorized Leveraging private investment in tourism and agribusiness:(Cost $11.50 M) Removing key binding constraints for private investment in tourism:(Cost $32.50 M) Removing key binding constraints for private investment in agribusiness:(Cost $22.00 M) Project Implementation:(Cost $4.00 M) Immediate Response Mechanism Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Substantial Substantial Implementation Status and Key Decisions Public Disclosure Authorized The project has disbursed 15 percent of its resources to date (USD 10.45 million), in line with disbursement predictions. The implementation of some project activities earlier this calendar year has suffered delays due to the measures imposed in response to COVID-19, including movement restrictions and closure of international borders. This has affected the project’s overall level of financial execution: as of October 2020, 46 percent the activities in the Annual Work Plan for 2020 had been committed, but with only a 14 percent rate of disbursement. Implementation of infrastructure activities have been the most affected. Nevertheless, following the easing of confinement measures starting end-August 2020, the 11/19/2020 Page 1 of 9 The World Bank Implementation Status & Results Report Madagascar Integrated Growth Poles and Corridor SOP-2 (P164536) implementation pace has picked up again and several delayed activities are being readied for implementation, most notably MIARY grants, road rehabilitation works in Sambirano, and water works in Tulear. COVID-19 response and Activation of the PIC2.2 IRM Component: Following the Government’s request for the activation of the Immediate Response Mechanism (IRM) on August 10, 2020, to support the implementation of the Government’s Multisectoral Emergency Plan (PMDU), the teams have worked to design, approve and prepare for implementation a group of activities to mitigate the COVID-19 impacts on private businesses (formal and informal), particularly in the Tourism and Agribusiness sectors in the targeted poles. In total, USD 33 million of PIC2.2 funds have been activated for the IRM response, with USD 15 million targeted for activities under the PIC2.2 project, and USD18 million to be used by the Financial Inclusion project (P161491) to support the expansion of the Partial Portfolio Credit Guarantee (PPCG) Fund. Collectively, these activities will support Pillar 3 of the PMDU (related to economic resilience and the private sector). The activation of the project IRM was done by reallocating undisbursed project funds (amounting to US$ 33 million) to the IRM component of the PIC2.2. The IRM component activities to be implemented by the PIC2.2 project include: (i) provision of grants to micro, small and medium enterprises (MSMEs) in the tourism sector (the hardest hit sector so far), or groups/associations of firms, for implementation of projects that will enhance their resilience and competitiveness and prepare them for recovery; (ii) training for tourism sector workers to maintain human capital during the crisis; (iii) financing of key investments and initiatives to increase resilience and competitiveness of targeted value chains linked to both the tourism and agribusiness sectors; (iv); support to public and private sector tourism stakeholders in the overall management of the crisis, with a focus on support to the Ministry of Transport, Tourism and Meteorology (MTTM), and (v) financing of grants to SMEs in the Agribusiness sector for projects that help their value chains, including input providers, build resilience and competitiveness vis-à-vis the effects of the crisis. Design of these activities was done jointly with the PIU and related Ministries, in particular MTTM, with a final validation done with the Ministry of Economy and Finance. Several consultations sessions were also held with private sector stakeholders (business associations and individual firms) to ensure that activities being planned will address most important constraints faced by businesses. These activities are ready for implementation, but are awaiting government administrative approvals, specifically approvals for the opening of a Designated Account for the IRM funds. Project restructuring and Additional Financing: The WB team is currently processing an Additional Financing and project Restructuring request, in order to replenish the funds diverted for the activation of the CERC at the portfolio level and to ensure that originally planned project activities under PIC2.2 will be financed and implemented. The restructuring of the original loan is needed in order to (i) update the project’s PDO to include a reference to the IRM activities, (ii) update project results indicators (including targets for PDO indicators) to reflect the impact of the crisis on economic activity and the project’s crisis-related response[1]; (iii) adjust definition of eligible expenses under project activities; (iv) formalize reallocation of undisbursed funds to the IRM disbursement category, and (v) reallocate some funds across components/sub-components based on demand seen under current implementation and adjustment to COVID19 context. Component 1. Leveraging Private Investment in Tourism and Agribusiness Window 1 (MIARY grants) of the Madagascar Business Investment Facility (MBIF), intended to provide small grants to entrepreneurs, is currently finalizing evaluation of first wave of applicants, and commencement of grant projects is expected for early 2021. Window 2 (MBIF Agribusiness) has received unexpectedly large number of proposals and the selection is progressing well, and commencement of implementation of projects approved should begin in early 2021. Window 3 (MBIF Tourism), had been on hold due to uncertainty over COVID19 impact on the sector. However, it has been agreed that the window will now open on a rolling basis to allow more flexible submission and evaluation of proposals, in order to better leverage the interest/resources of private sector applicants during the crisis. Component 2. Removing Key Binding Constraints for Private Investment in Tourism Achievements against tourism-related indicators will be significantly influenced by the current pandemic, airspace closure and economic uncertainty for the sector. For instance, air passenger traffic was at a standstill from late March to early October, and investments for new hotel projects have been put on standby. The restructuring represents an opportunity to adjust targets for many of these indicators to take into account the impact of the crisis in the sector. The crisis and the lockdown measures have also affected the ability of the project to implement consultancies conducted by international experts given ongoing travel restrictions, leading to some delays. Finally, it has been agreed with the WB Transport group that while the PIC2.2 project may provide some targeted technical support in the area of air transport if required and agreed with WB Transport colleagues, the dialogue on these issues and primary engagement will be led by the WB Transport group, especially any discussions related to support for Air Madagascar or Tsaradia. Roads rehabilitation in Nosy Be (V1 and V2 roads) and in Diego (Ramena roads) have started despite some delays, as the contractor had difficulties getting their equipment to the worksites given the restrictions on movement of goods and people that were in place earlier in the pandemic; however the urban road rehabilitation in Ambanja is delayed. Activities linked to water supply distribution in Tuléar are now moving well, with the tender for bids having been launched in October, after some delays in its preparation and finalization. Component 3. Removing Key Binding Constraints for Private Investment in Agribusiness International travels restrictions have prevented consultants from doing field missions [CQT1] (contracts signed in the first semester of 2020). This is generating delays in the delivery of consultancy