The World Bank Report No: ISR14651 Implementation Status & Results Mauritius Mauritius Second Private Sector Competitiveness DPL (P132510) Public Disclosure Copy Project Name: Mauritius Second Private Sector Competitiveness DPL Program Stage: Implementation Seq.No: 3 Status: ARCHIVED Archive Date: 11-Jun-2014 (P132510) Country: Mauritius Approval FY: 2013 Product Line: IBRD/IDA Region: AFRICA Lending Instrument: Development Policy Lending Implementing Agency(ies): Key Dates Board Approval Date 27-Mar-2013 Original Closing Date 30-Jun-2014 Planned Mid Term Review Date Last Archived ISR Date 26-Dec-2013 Effectiveness Date 12-Jul-2013 Revised Closing Date 30-Jun-2014 Actual Mid Term Review Date Program Development Objectives Program Development Objective (from Program Document) Program Development Objective of the DPL programmatic series is to strengthen the policy and institutional environment in Mauritiusto support competitiveness and enterprise development. The operation will achieve this by supporting reforms in three integrated and mutually reinforcing pillars: (i) improving enterprise growth and competitiveness, (ii) improving access to finance, and (iii) promoting ICT usage and e-Government reforms for increased efficiency and transparency gains. Has the Program Development Objective been changed since Board Approval of the Program? Yes No Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Implementation Status Overview Public Disclosure Copy The Second Private Sector DPL for US$15million for was approved on March 27, 2013 and is declared effective on July 12, 2013. The loan was fully disbursed in April 2014. This is the third and the final ISR before the project closes in June 2014. The development objective of this PSC DPL programmatic series is to strengthen the policy and institutional environment in Mauritius to support competitiveness and enterprise development. The operation is achieving this by supporting reforms in around three integrated and mutually reinforcing pillars (i) improving enterprise growth and competitiveness; (ii) improving access to finance; and (iii) promoting ICT usage and e-Government reforms for increased efficiency and transparency gains. Overall, steady progress is being made towards the implementation of the policy areas under the three pillars. Pillar 1:Improving enterprise growth and competitiveness: To ensure that the Government receives value for money for its support through BDS schemes to enterprises, a robust Monitoring and Evaluation (M&E) system is vital. It was thus agreed that the M&E arrangements put in place are introduced on a consistent basis for all BDS-related schemes being funded out of the NRF. This will allow relevant stakeholders to compare the value for money achieved by the various mechanisms of support currently being funded, given the similar objectives. The main objective of this exercise was to provide Page 1 of 6 The World Bank Report No: ISR14651 a broad framework for the establishment of a new M&E system that focuses on improved results through verifiable indicators, enhanced accountability and impact feedback learning mechanism. In addition, the proposed framework would also provide clarity regarding target groups and types of services, along with potential for cost-sharing for future SMEs programs. The development of the M&E Framework is being led by MoFED in order to capture all the relevant BDS schemes. An international M&E consultant was hired in November 2013 who is in the process of developing the overall M&E Framework using inputs provided by all the relevant stakeholders. Public Disclosure Copy Facilitating firm exit and promoting business rescue of viable firms: Strengthening the Mauritian credit environment through more effective debt resolution regimes has been identified as a priority area in the Government’s efforts to improve competitiveness and growth of enterprises. Insolvency proceedings in Mauritius are significantly faster, cheaper, and return more to creditors than those in other parts of Sub-Saharan Africa. However, according to the WBG’s 2013 Doing Business Report (DB 2013), Mauritius performs worse in the ‘Resolving Insolvency’ indicator than it does in any of the other nine indicators. Part of Mauritius’ weak performance in this indicator is due to several reforms relating to the Insolvency Act remaining outstanding or incomplete. Although the Insolvency Act represented a significant advancement in the development of Mauritius’ insolvency framework, in order to be fully operationalized and implemented, it requires significant secondary legislation that remains outstanding. In particular, although insolvency practitioners were given a greatly expanded set of responsibilities under the Insolvency Act, and commensurately, their regulation was contemplated, they remain largely unregulated. As part of the ‘Prior Actions’ for DPL1, the GoM introduced regulations related to Insolvency Practitioners’ qualifications and appointment . The prior actions in DPL1 focused on operationalizing the Mauritius Insolvency Act 2009 through more substantive regulations, in particular, in relation to insolvency practitioners. PSC DPL2 sought to build upon these reforms, better implement the Insolvency Act 2009, and enhance the overall effectiveness of the country’s insolvency regime. In particular, the PSC DPL2 supported (i) the Publication of rules of professional conduct for insolvency practitioners which will enhance transparency, fairness and professionalism amongst insolvency practitioners, and ultimately will enable more effective processes under the law; (ii) the establishment of procedures by the Director of the Insolvency Service to deal with the suspension and removal of insolvency practitioners from the Registry and (iii) the publication of Out-of-Court Workout (OCW) guidelines by the Insolvency Service to promote safeguarding viable businesses: seeking to keep viable businesses alive can help maximize stakeholder returns, retain jobs and preserve supply networks. One Bank has reported using OCW guidelines and we are awaiting responses from the other banks. Pillar 2:Improving Access to Finance: This project looked at addressing both the demand and the supply side constraints to access to finance. On the supply side, the DPL supported the restructuring of the Development Bank of Mauritius and the establishment of a bank with a focus on MSMEs. Deloitte (India) has been appointed as the Transactions Advisor (TA) to assist the restructuring of the DBM by the State Investment Corporation led steering committee. The TA has prepared a restructuring plan which was approved by the Cabinet on April 11, 2014. With regards to the establishment of a new licensed commercial Bank with a focus on the MSME segment, GoM has hired an adviser who will prepare the application to be made at BOM. It is envisaged that the application will be made by Oct 2014. On the demand side, insufficient suitable collateral is cited as among the top constraints to accessing credit. Although the legislation in Mauritius provides for a wide range of movable property that can be used as collateral, its secured transaction system is fragmented and different security rights are available for different types of grantors and different types of assets. Credit is more readily available to businesses that have immovable property (land and buildings) to be used as collateral than those having movable assets as banks heavily prefer immovable property such as land or buildings to secure a loan. For immovable assets, ensuring formal property rights is fundamental. Effective administration of land is part of that. Around the world, movable assets, not land or buildings, often account for most of the capital stock of private firms and an especially large share of the assets for micro, small and medium-size enterprises. The existing legal and regulatory regime for secured transactions in Mauritius has not been reformed in recent years to reflect the new financial Public Disclosure Copy and commercial needs of the banking and business community. The Government has announced the decision to further facilitate the use of movable and intangible assets as collateral and the establishment of a modern movable collateral registry. In order to do so a stakeholder committee has been set up to review the necessary legislative amendments relating to secured transactions and collateral registries reform. The substance of this reform will address issues relating to the creation, registration and enforcement of security interests over movable collateral. The government has taken the decision to amend the Civil Code Mauricien to implement the secured transactions reform. Increasing coverage of Credit Bureau: Credit bureaus play an important role in financial stability by helping control over-indebtedness and are critical to the expansion of credit for both individuals and small businesses. The Mauritius Credit Information Bureau (MCIB) was established in December 2005 by the BoM as a public registry of borrower information with the main objective to ensure the development of an overall sound credit environment in Mauritius. The MCIB collects information from and shares information with financing institutions to enable them to make more informed lending decisions, thereby lowering their default rate and improving the quality of lenders’ loan portfolio. The prior action for DPL1 was to expand coverage of the credit information bureau to include all non-bank financial institutions. This led to an increase in coverage from 407,160 customers in June 2011 representing 49.8 percent of the adult population to covering 554,809 registered entities representing 67.8 percent of the population in December 2012. Participants of the MCIB Page 2 of 6 The World Bank Report No: ISR14651 currently comprise 17 banks including the Bank of Mauritius, nine leasing companies, eight insurance companies, the Mauritius Housing Company Ltd, the Development Bank of Mauritius, the National Housing Development Co Ltd, the Mauritius Civil Service Mutual Aid Association, and the Employees Welfare Fund. Another critical source of data especially for those who are outside the credit mainstream is utility companies. These include the Central Electricity Board and the Central Water Authority, waste water management and companies offering information, communication and telecommunication services. In order to make it obligatory for these utility companies to share information with the Bank of Public Disclosure Copy Mauritius, it was proposed that Section 52 of the Bank of Mauritius Act be amended to add the definition of the words ‘Utility Body’ as a corporate body which provides utility service to the public and includes the Central Electricity Board, the Central Water Authority, the Waste Water Management Authority, companies offering information, communication and telecommunication services, which is the prior action for this operation. Further, in order to facilitate the transfer of data from the utility companies to MCIB, there have been system enhancements that have been undertaken to facilitate data transfer and decrease the transactions costs involved. Future enhancements would include the development of a file transfer protocol to make the transfer possible online expeditiously. The amendment to the Banking Act, directly increases the coverage of the MCIB by including utility companies which is critical towards achieving the objective as laid out in this component. Pillar 3: Promoting ICT usage and e-Government reforms for Increased Efficiency and Transparency Gains ICT is considered a key pillar for supporting competitiveness, and indeed the hope is that it will become a “fifth pillar” in the national economy contributing at least 7 percent of national GDP. Given its potential to have significant positive spill-over effects on other sectors of the economy, the Government of Mauritius has prioritized the development of a high performance broadband infrastructure on which ideas and services can be transmitted. Mauritius lacks strong Internet Service Providers (ISPs) that are independent of the main operators. The ongoing work to define markets and determine which operators have SMP should provide the impetus for regulatory action to encourage the development of independent ISPs by providing equal access to core facilities. A first step would be to carry out a study, and assess stakeholder opinions, on the possible need to consider structural separation of the incumbent’s network, and to extend open access principles inland from the cable landing stations. This operation supports a more transparent process of spectrum allocation. The civil radio frequency spectrum is an increasingly vital resource for information and communication services, especially for mobile broadband. The new legislation recognizes class licenses and introduces a new section 24B on spectrum management. This inter alia creates a framework for allowing spectrum auctions, spectrum sharing and even secondary spectrum trading. Further, ICTA published the tariff guidelines that will not only promote transparency but should, in the longer term, reduce the requirement for pre- approval of tariffs by non-dominant operators, thereby promoting greater price innovation. Meanwhile there is an increase in the number of public services that can be executed via secured online transactions that include online application and payments of services for incorporation of a company, annual registration fees of a company, and ePayment for the lease of state land. Results Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Number of Enterprises accessing generic BDS Number Value 200.00 555.00 250.00 increases. Date 27-Feb-2012 06-May-2013 30-Jun-2014 Comments Source: SMEDA Number of Enterprises accessing specialized Number Value 80.00 247.00 120.00 Public Disclosure Copy BDS increases. Date 27-Feb-2012 15-Mar-2013 30-Jun-2014 Comments Source: MBGS Development of an M&E Framework for BDS Text Value No No Yes Schemes Date 27-Feb-2012 07-May-2014 30-Jun-2014 Comments In progress Number of insolvency practitioners registered Number Value 0.00 61.00 50.00 Page 3 of 6 The World Bank Report No: ISR14651 Date 27-Feb-2012 09-May-2014 30-Jun-2014 Comments Number of banks that have used the Out of Number Value 0.00 1.00 4.00 Public Disclosure Copy Court Workout guidelines. Date 27-Feb-2012 20-May-2014 30-Jun-2014 Comments Only 1 bank had responded as having used OCW DBM restructured by the sale of its non Text Value No No Yes banking assets Date 27-Feb-2012 20-May-2014 30-Jun-2014 Comments In Progress. Restructuring plan approved Cabinet on April 11, 2014 A new licensed commercial Bank with a focus Text Value No No Yes on the MSME segment established Date 27-Feb-2012 20-May-2014 30-Jun-2014 Comments Restructuring not yet concluded. Hired adviser who will prepare application to be made to BOM for the license. Application will bemade by Oct 2014 Reduction in time taken to register property Days Value 15.00 2.00 2.00 Date 27-Feb-2012 20-May-2014 30-Jun-2014 Comments Completion of necessary legal amendments to Text Value No No Yes facilitate secured lending transactions Date 27-Feb-2012 20-May-2014 30-Jun-2014 Comments The government has taken the decision to amend the Civil Code Mauricien to implement the secured transactions reform. Public Disclosure Copy Increase in coverage of the Credit Information Percentage Value 50.00 74.00 70.00 bureau Date 27-Feb-2012 20-May-2014 30-Jun-2014 Comments Increase in number of broadband subscriptions Percentage Value 300200.00 5.40 15.00 with actual speeds of at least 10 Mbit/s Date 27-Feb-2012 20-May-2014 30-Jun-2014 Comments For the broadband subscription figures as at May 2014,the same would not be available for this particular Page 4 of 6 The World Bank Report No: ISR14651 connection. Normally, there is an annual survey where ISPs are asked to provide their subscriber distribution in Public Disclosure Copy terms of speed, but the highest denominationused in Mauritius is for 'advertised speeds greater than 6 Mbps'. Decrease in the price per 1Mbit/s per month of Percentage Value 27.83 15.00 10.00 fixed broadband service Date 27-Feb-2012 09-Dec-2013 30-Jun-2014 Comments decreased to $23.6 Decrease in the price per 1Mbit/s per month of Percentage Value 17.38 48.00 10.00 mobile broadband service Date 27-Feb-2012 20-May-2014 30-Jun-2014 Comments Decreased to $9.00 Number of public services that can be Number Value 0.00 7.00 10.00 executed via secured online transactions Date 27-Feb-2012 20-May-2014 30-Jun-2014 Comments These include online application and payments of services for incorporation of a company, annual registration fees of a company, and ePayment for the lease of state land. Data on Financial Performance (as of 25-Apr-2014) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P132510 IBRD-82480 Effective 27-Mar-2013 19-Apr-2013 12-Jul-2013 30-Jun-2014 30-Jun-2014 Disbursements (in Millions) Public Disclosure Copy Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P132510 IBRD-82480 Effective USD 15.00 15.00 0.00 16.14 0.00 108.00 Tranches Tranche 1 Amount (USD) Expected Release Date Actual Release Date Status Page 5 of 6 The World Bank Report No: ISR14651 0 Pending Released Key Decisions Regarding Implementation Public Disclosure Copy The Second Private Sector DPL for US$15million for was approved on March 27, 2013 and is declared effective on July 12, 2013. The loan was fully disbursed in April 2014. This is the third and the final ISR before the project closes in June 2014. The development objective of this PSC DPL programmatic series is to strengthen the policy and institutional environment in Mauritius to support competitiveness and enterprise development. The operation is achieving this by supporting reforms in around three integrated and mutually reinforcing pillars (i) improving enterprise growth and competitiveness; (ii) improving access to finance; and (iii) promoting ICT usage and e-Government reforms for increased efficiency and transparency gains. Overall, steady progress is being made towards the implementation of the policy areas under the three pillars. Restructuring History There has been no restructuring to date. Related Operations P126903-Mauritius - Priv Sec Competitiveness Development Policy Loan (PSC - DPL), P131666-Rwanda Second Support to Social Protection System, P131775-Vietnam Climate Change Development Policy 3, P143032-2nd DPL to Support Inclusive Green Growth and Sust Devlp in HP, P146452-Rwanda Third Support to the Social Protection System (SSPS-3), P146619-Poverty Reduction Support Credit II, P146650-Economic Growth and Governance Credit 7, P146953-Third Governance and Competitiveness Development Policy Operation, P147015-Cape Verde Ninth Poverty Reduction Support Credit, P149963-Second Economic Reform Support Operation Public Disclosure Copy Page 6 of 6