Document of The World Bank FOR OFFICIAL USE ONLY Report No. 88259-SC INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL FINANCE CORPORATION COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT FOR THE REPUBLIC OF SEYCHELLES FOR THE PERIOD FY12-16 November 14, 2014 Southern Africa Country Department 2 Africa Region International Finance Corporation Sub-Saharan Africa Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization. REPUBLIC OF SEYCHELLES COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT CURRENCY EQUIVALENTS Currency Unit: Seychelles Rupee (SR) US$1 = SR 14.01 (November 1, 2014) WEIGHTS AND MEASURES Metric System FISCAL YEAR January 1 – December 31 ACRONYMS AND ABBREVIATIONS AAA Analytical and Advisory Activities ISN Interim Strategy Note ADR Alternative Dispute Resolution MDG Millennium Development Goal AfDB African Development Bank MIGA Multilateral Investment Guarantee Agency APEI Accelerated Program and Economic MPA Model Petroleum Agreement Integration ASP Agency for Social Protection MSE Micro and Small Enterprises CAT-DDO Catastrophe Deferred Drawdown Option MTEF Medium-Term Expenditure Framework CPF Country Partnership Framework MTDS Medium Term Debt Strategy CPS Country Partnership Strategy NSDS National Strategy for the Development of Statistics DaLA Damage, Loss and Needs Assessment PBB Performance Based Budgeting DBS Development Bank of Seychelles PPBB Program and Performance Base Budgeting DeMPA Debt Management Performance PEFA Public Expenditure and Financial Assessment Accountability DPL Development Policy Loan PEMD Public Enterprise Monitoring Division DPO Development Policy Operation PER Public Expenditure Review DRM Disaster Risk Management PFM Public Financial Management EI-TAF Extractive Industries Technical Advisory PPIAF Public-Private Infrastructure Advisory Facility Facility EITI Extractive Industries Transparency PPP Public-private partnership Initiative EU European Union PUC Public Utility Company FDI Foreign Direct Investment RAS Reimbursable Advisory Services FIRST Financial Sector Reform and Strengthening SCD Systematic Country Diagnostic Initiative FSAP Financial Sector Assessment Program SEEREP Seychelles Energy Efficiency and Renewable Energy Project GDP Gross Domestic Product SEYPEC Seychelles Petroleum Company GFDRR Global Facility for Disaster Reduction and SIDS-DOCK Small Island Developing State DOCK Recovery Support Program GNI Gross national income SOE State Owned Enterprise GoS Government of Seychelles SPF Seychelles Pension Fund HFC Housing Finance Company SWIO South West Indian Ocean IMF International Monetary Fund UNDP United Nations Development Program IPSAS International Public Sector Accounting WHO World Health Organization Standards IBRD IFC Vice President: Makhtar Diop Karin Finkelston Country Director: Mark Lundell Oumar Seydi Task Team Leader: Thomas Buckley Kailash Sharma Ramnauth i Table of Contents Introduction and Country Context ............................................................................................................. 1 Recent Economic Developments .......................................................................................................... 2 Relevance of the CPS ........................................................................................................................... 4 Implementation Progress and Progress towards CPS Outcomes ............................................................. 5 Planned vs. Actual Deliveries .............................................................................................................. 5 Progress toward CPS Outcomes.......................................................................................................... 5 Pillar 1: Competitiveness and Employment. ....................................................................... 5 Pillar 2: Vulnerability and Resilience ................................................................................. 6 Foundation: Governance and State Capacity ...................................................................... 7 The CPS Program Going Forward ............................................................................................................. 9 Managing Risks .......................................................................................................................................... 13 Annexes ........................................................................................................................................................ 15 Annex 1: Seychelles CPS Results Framework FY12-16 – Revised .................................................... 15 Annex 2: Country at a Glance ........................................................................................................... 20 Annex 3: Selected Indicators of Bank Portfolio Performance and Management .............................. 23 Annex 4: Summary of Nonlending Services ....................................................................................... 24 Annex 5: Operations Portfolio (IBRD) .............................................................................................. 25 Annex 6: Statement of IFC’s Held and Disbursed Portfolio.............................................................. 26 Figures and Tables Table 1: Selected Economic Indicators, 2010–16 4 Table 2: Revised IBRD CPS Financing Program 11 Table 3: Revised IBRD Knowledge Program 12 ii Introduction and Country Context 1. Seychelles has achieved considerable economic and social progress since independence in 1976. A small, service-based, middle-income, island-state economy with a gross national income per capita of US$12,530 in 2013, Seychelles is classified as a high- middle-income country. The nation enjoys a stable political system and good public sector governance, ranking 4th in the Ibrahim Index of African Governance in 2013. Seychelles has better social indicators than comparator small countries; it has already achieved most of the Millennium Development Goals (MDG), especially for education, health, poverty eradication, and the environment. 1 Poverty in Seychelles is relatively low, with less than 2 percent of the population living on less than US$2 per day but inequality increased between 2000 and 2007. 2 2. Since enduring a major crisis in 2008, Seychelles has managed a remarkable turnaround in restoring fiscal sustainability and laying the groundwork for growth. Five years ago, the country was struggling with extreme challenges: an overvalued fixed exchange rate, rapidly depleting foreign exchange reserves, a bloated and pervasive public sector, and an unsustainable debt burden—all in the midst of the global financial crisis. By 2007, the fiscal deficit reached 8 percent of GDP, public debt stood at 131 percent of GDP (two thirds of it foreign), and reserves fell to two weeks of imports. An ambitious reform program launched in 2008 and supported by generous debt relief focused on a fundamental liberalization of the exchange regime, significant and sustained tightening of fiscal policy and a reduction in the state’s role in the economy to boost private sector development. Results include rebounding growth, substantial fiscal consolidation and declining debt. 3. Having successfully exited from crisis, the Government’s attention has turned increasingly toward consolidating progress on debt sustainability and increasing resilience by putting Seychelles on a higher, private sector-led growth trajectory. Seychelles still confronts the challenges of a small and remote island state, highly dependent on tourism, and vulnerable to a range of potential shocks. Limited land, capital, and human resources restrict its ability to benefit from economies of scale in production. The investment climate needs to be strengthened to harness private sector growth. 3 Bottlenecks in infrastructure remain critical constraints. In the social sectors, the health system needs to adapt to the growing burden of non-communicable disease while the decline in the quality of education outcomes, particularly in science, represents an important challenge. Seychelles is unavoidably vulnerable to natural disasters such as floods, rising sea levels, landslides, and tsunamis, all of which pose serious risks. 4. While the Government has made impressive progress on fiscal consolidation, these efforts will need to be sustained in order to achieve its debt reduction targets. The remaining agenda includes addressing contingent liabilities from state-owned enterprise (SOEs), ensuring the sustainability of the public pension system, and continued strengthening of public financial management. In the meantime, with elections scheduled in 2016, the Government will likely face 1 Gross enrollment in primary and secondary education is close to 100 percent. The country’s life expectancy at birth is 73 years, compared to 68.3 for Fiji and 70.7 for Cape Verde. 2 Source: Poverty and Inequality Database. Gini Index, The World Bank. Gini calculated based on consumption measures. 3 Seychelles is ranked 85 in the World Bank’s Ease of Doing Business Index for 2015, a fall from 74 in 2013. 1 pressures to increase spending, including for needed investment in physical and human capital to support longer-term growth. 5. This report reviews the progress in implementation during the first three years of the FY12-15 Country Partnership Strategy for Seychelles (CPS). The strategy is structured around two pillars: (i) Competitiveness and Employment, and (ii) Vulnerability and Resilience, and one crosscutting foundation: Governance and Public Sector Capacity. The strategy is aligned with the Bank Group’s twin corporate goals of reducing extreme poverty and increasing shared prosperity. While extreme poverty is negligible in Seychelles, reforms supported by the CPS program, particularly those aimed at improving the targeting of social assistance, are expected to enhance shared prosperity, as will reforms to support stronger growth and employment creation. During this period, in addition to delivering the lending envisaged in the CPS, the Bank’s engagement with Seychelles has expanded within the flexible framework of the CPS to include new lending and Analytical and Advisory Activities (AAA), in particular to address disaster risk management and to promote increased regional trade and economic diversification. This increased demand for IBRD financing has demonstrated the continued relevance of the CPS strategy and the value added that the Bank can bring in helping a middle income client to address the unique challenges faced by a small island developing state to build resilience and promote more inclusive and sustainable growth. In light of the continued strategic relevance of the CPS and its proven adaptability to Seychelles’ evolving needs, this progress report extends the CPS period by one year from FY15 to FY16. 6. Lending and AAA under the CPS has grown to meet increased demand from the Government of Seychelles. The CPS envisaged an indicative IBRD lending program of US$21 million to finance a programmatic series of three DPOs of US$7 million each. The DPO series has been fully delivered as planned and a new follow-on series is expected. In addition, a Development Policy Loan (DPL) with a Catastrophe Deferred Drawdown Option (CAT-DDO) of US$7 million has been approved and a regional DPO of US$5 million is planned. Indicative IBRD lending over the CPS period is now expected to be US$42 million over the FY12-16 period, an increase of US$21 million over the amount estimated in the CPS. The lending program is underpinned by analytical work, much of it supported by substantial trust funding, notably from the Financial Sector Reform and Strengthening Initiative (FIRST) and the Global Facility for Disaster Reduction and Recovery (GFDRR). Strong client demand for AAA has been demonstrated by the conclusion of two Reimbursable Advisory Services (RAS) agreements under the CPS totaling US$1.6 million. Additional RAS Agreements are under preparation. Recent Economic Developments 7. The economy continues to expand supported by growing tourism earnings. Real GDP growth reached 3.5 percent in 2013, compared to 2.8 percent in 2012. The tourism sector proved resilient, despite uncertainties in the European economy - the main traditional market - and the elimination of direct flights to Europe 4. Tourist arrivals for 2013 grew by 11 percent resulting in a more than 11 percent increase in tourism earnings for the year. Production in other sectors such as tuna and telecommunications also experienced strong growth of 17 percent and 4 In January 2012, Air Seychelles entered into a strategic partnership with Etihad Airways. The airline has reached profitability earlier than expected, posting a net profit of US$3 million for 2013 and US$1.1 million in 2012. 2 7 percent respectively. On the downside, tourist arrivals during the first half of 2014 were flat compared with 2013 and the state-owned Seychelles Petroleum Company (SEYPEC) continued to incur significant losses on its tanker operations. 8. Fiscal performance continues to be strong. The primary fiscal surplus for 2013 stood at 4.7 percent of GDP, in line with the 5 percent annual target until the debt-to-GDP ratio reaches 50 percent. Revenue collection at 32.4 percent of GDP was lower than forecasted in the 2013 public budget (37.6 percent of GDP), with most tax categories underperforming in relation to budget projections. This was partially compensated for by better than projected non-tax revenues (4.5 percent of GDP), mostly dividends from parastatal bodies. Government also reduced expenditure, particularly capital spending which declined to 9 percent of GDP (5 percentage points lower than budget projections). 9. The current account deficit improved in 2013, mainly due to increased tourism and tuna exports, and was comfortably financed by Foreign Direct Investment (FDI). The current account deficit stood at 16.9 percent of GDP in 2013, a decline from 25.2 percent of GDP in 2012. This was the result of an 18 percent increase in exports of goods and services, supported by an 11 percent growth in tourism earnings and a 25 percent increase in tuna exports. Import growth was moderate at 6.4 percent, with net oil imports—about 8 percent of GDP as two-thirds of oil imports are re-exported—remaining at the 2012 level. Despite a slowdown in FDI associated with the phasing-out of some large hotel projects, FDI stood at 13.2 percent of GDP, which together with high private inflows translated into a positive balance of payments. As a result, foreign exchange reserves increased by more than 40 percent to reach US$425 million, the equivalent of 3.7 months of imports, compared to 3.0 months of imports in 2012. More recently, a rise in imports and fall in tourism growth has put some pressure on the foreign exchange market. As a result, the rupee depreciated 6 percent against the dollar in August 2014 and inflation is expected to increase to 5.3 percent by the end of the year. 10. The medium-term objective to bring total public debt to 50 percent of GDP or less by 2018 remains attainable. Planned debt restructuring is now completed, as the last outstanding agreement (with India) was signed in mid-2013 5. Total public sector debt stood at 77.5 percent of GDP at the end of 2012 and declined to 65.2 percent by the end of 2013, faster than anticipated. The latest debt sustainability analysis projects that Seychelles’ public debt remains high but sustainable provided that the authorities maintain fiscal discipline. The debt-to- GDP ratio is expected to continue to fall until it reaches 50 percent by 2018. 11. The economic outlook is broadly positive, although with some downside risks. Real GDP growth for 2014 is forecast to edge up to 3.7 percent and remain at that level in the medium term. Growth over the medium term will continue to depend on prospects in the tourism sector and remain sensitive to developments in the euro zone. Potential downside risks stem from the global and domestic environments. Seychelles remains dependent on an economic resurgence in Europe for its tourism industry. Seychelles remains sensitive to changes in commodity prices, and rising fuel prices may have a moderate impact on imports, inflation, the exchange rate, and current account. Domestic fiscal risks also exist if substantial improvements in the management and sustainability of parastatals are not pursued further. The government’s growing external 5 In 2012, agreements with South Africa and Dubai were reached and signed for rescheduling on favorable terms. 3 reserves, a flexible exchange rate, high government deposits, and a fiscal surplus provide some bulwark against external shocks. Table 1: Selected Economic Indicators, 2010–16 2014 2015 2016 Indicator 2011 2012 2013 (proj) (proj) (proj) National Income and prices (annual percent growth) Real GDP growth 7.9 2.8 3.5 3.7 3.8 3.7 Consumer Price Index inflation (end-of-period) 5.5 5.8 3.4 5.3 2.4 3.1 Government Budget (percent of GDP) Total Revenues 35.3 34.4 32.4 31.1 30.9 30.9 Expenditure and net lending 35.2 36.7 36.5 33.4 33.0 31.8 Overall balance, accrual basis (GFS) 2.4 2.2 0.0 0.6 -0.2 0.6 Primary balance, accrual basis (GFS) 5.3 5.7 4.7 4.0 3.2 3.2 Total public debt 73.3 77.5 65.2 66.1 62.5 58.2 Total domestic debt 27.7 32.2 27.7 27.8 25.0 22.8 Total external debt 45.6 45.3 37.5 38.3 37.5 35.4 External Sector and Gross Financing Requirements (in US million) Merchandise Exports 477 497 598 599 613 630 Tourism earnings 291 310 344 356 380 407 Merchandise Imports 915 967 1,023 1,132 1,134 1,164 Current account deficit, incl. official transfers 294 285 234 308 295 288 Gross official reserves (end of year) 277 307 425 456 485 511 Reserves in terms of months of imports 2.8 3.0 3.7 3.9 4.1 4.1 Memo Items GDP (US$ million) 1,075 1,129 1,387 1,433 1,509 1,624 Total external public sector debt (US$ million) 490 512 520 549 566 575 Current account balance, incl official transfers -27.3 -25.2 -16.9 -21.5 -19.6 -17.8 (% GDP) FDI (% GDP) 21.5 18.4 13.2 17.0 15.3 14.9 Exchange rate (Seychelles Rupee per dollar) 13.7 13.0 12.1 - - - Source: World Bank and IMF documents Relevance of the CPS 12. The strategic priorities of the FY12-15 CPS remain relevant and appropriate for Seychelles. Sustained fiscal consolidation and structural reforms have enabled Seychelles to emerge from crisis and laid the groundwork for continued growth. Nevertheless, the fundamental challenges facing Seychelles remain largely unchanged since the CPS was prepared. Seychelles confronts the challenges inherent in a small and remote island state that is highly dependent on tourism and vulnerable to a range of potential shocks. Its vulnerability is high given its exposure to the global economy, especially the predominance of European tourism in the Seychelles economy. Public debt is high and the need for external gross financing will remain significant due to growing debt service and a high (albeit declining) current account deficit, as well as an underdeveloped domestic financial market. Strengthening the foundation for private sector led growth requires continued attention to reducing infrastructure bottlenecks, improving the business environment and addressing domestic human resources constraints and limited technical skills. Reducing vulnerability and building resilience to absorb the impact of exogenous shocks requires strengthening the social safety net system and the institutions and capacity for disaster 4 risk management. These are underpinned by reforms that contribute to improved fiscal sustainability, including greater efficiency in public expenditure, (improved targeting in social protection and a more sustainable health financing strategy) and strengthened governance of SOEs to ensure cost recovery and the long-term financial sustainability. Implementation Progress and Progress towards CPS Outcomes Planned vs. Actual Deliveries 13. The CPS lending program has been delivered as planned. The first two of a three-operation DPO series were delivered in FY13 and FY14, while the third operation was approved in the first half of FY15. Knowledge services have also been delivered, including public expenditure policy notes on health and education, technical assistance to support reforms in social protection, and technical assistance in support of business regulatory reforms. Advisory support has been increasingly financed through reimbursable arrangements. Progress toward CPS Outcomes 14. As described in detail below, good progress has been made in achieving outcomes across all three areas of the CPS. In the area of Competitiveness and Employment, six out of eight CPS outcomes have been achieved or are on track to be achieved by the end of the CPS period, with significant progress in rationalizing energy tariffs and reforming housing subsidies. In the Vulnerability and Resilience pillar, 4 out of 5 objectives have been achieved, and one has been partially achieved. Notable accomplishments include the reforms to social protection programs to improve targeting and fiscal sustainability and strengthening of disaster risk management capacity. In the area of Governance and Public Sector Capacity, eight out of nine targeted outcomes have either been met or are on track to be met by the end of the CPS period. Pillar 1: Competitiveness and Employment. 15. The CPS program aimed to support the Government’s efforts to improve sustainability by reforming utility tariffs while encouraging increased energy efficiency and a shift toward renewable energy. Progress has been made in improving the financial viability of the Public Utilities Corporation (PUC). Government adopted an automatic mechanism to adjust price movements in line with key variables like the exchange rate and fuel prices on a quarterly basis. As a result PUC losses decreased by nearly 90 percent between 2011 and 2012. To help ensure the long-term sustainability of utilities, the government also approved a tariff rebalancing program that seeks to align electricity and water tariffs to cost-recovery levels over eight and ten years, respectively. 16. The CPS seeks to assist the government in pursuing its goal of diversifying its energy mix to generate at least 15 percent of its energy from renewable energy sources by 2030. Seychelles’ heavy reliance on diesel fuel for power generation (representing 25 percent of net imports) contributes to its vulnerability. Through a grant from the Small Island Developing State DOCK Support Program (SIDS-DOCK), the CPS program aims to facilitate private sector participation in renewable energy by supporting preparation of grid codes, feed-in tariffs, and model energy supply purchase agreements. A further planned SIDS-DOCK grant will pilot 5 installation of photovoltaic systems in government healthcare facilities. Through the Seychelles Energy Efficiency and Renewable Energy Project (SEEREP) IFC has helped the Government of Seychelles (GoS) to develop an incentive program for commercial banks to extend credit to households to acquire solar heaters and other household energy efficiency equipment. This sector could also support increased employment by creating small and medium enterprise (SME) business opportunities (e.g., in installation, repairs, energy audit, and light assembly) particularly when financing is extended to the hotel and hospitality sector. 17. The CPS also aimed to improve the business environment, targeting a reduction in the time and cost to start a business, promoting increased availability of capital products and redefining the role of the government in housing finance. The authorities have introduced a number of legislative and administrative amendments since 2009 to simplify the processes of registering a business and obtaining a business license and work permit. With the support of the DPO operations, a virtual one-stop shop for starting a business was implemented, and the Companies Act (1972) was modernized. Despite the implementation of the one-stop shop, challenges still exist, because of the outdated legal framework governing business entry, and progress in reducing the number of days to register a business has been limited, as reflected in the 2014 Doing Business report, where Seychelles’ ranking for starting a business dropped from 119 to 127. Reform of the Companies Act was put on hold thus maintaining the old paper-based, manual discretionary regime of company registration and regulation. 18. In the financial sector, major reforms were introduced in housing finance and financial leasing. To reduce price distortions and increase competition in the market, the government transformed the role of the Housing Finance Company (HFC) and introduced a more targeted housing subsidy program. HFC’s property management function has been spun off to a separate entity to address challenges related to HFC’s formerly conflicting mandates. 6 The reformed subsidy takes the form of a cash grant, available to first-time buyers earning less than SR 20,000 per month, paid as a down payment on a mortgage loan to build or buy a house. To benefit from this scheme, the grant recipients must have contributed a minimum 10 percent of the value of the loan toward the Home Saving Scheme. The government has also engaged in policy discussions aimed at substantially increasing private sector participation in the provision of housing finance. With IFC support, a Financial Leasing law was passed in November 2013 designed to ease access to finance, especially for SMEs. The legal framework for financial leasing is expected to achieve completion with the issuance of supplementary regulations in 2014 further to which the Central Bank of Seychelles will start processing applications for authorization/licensing of financial leasing entities. Pillar 2: Vulnerability and Resilience 19. Progress under Pillar II has been good with the Bank Group program focusing on helping to mitigate risks at the household and national level through support for disaster risk management and reforms to safety net programs. 6 The new structure is also necessary to facilitate the Central Bank of Seychelles’ supervision of HFC as a credit granting institution. 6 20. Good progress has been made toward achieving the CPS objective of putting in place a master plan for disaster risk management. Widespread flooding in January 2013 highlighted Seychelles’ vulnerability and prompted a request from Government to undertake a flood impact assessment. In addition to assessing the immediate impacts from tropical storm Felleng, the resulting Damage, Loss and Needs Assessment (DaLA) highlighted the need for a stronger regulatory framework for Disaster Risk Management (DRM) and a comprehensive risk financing strategy, including the establishment of a contingent line of credit. This was complemented by a new TA Grant focusing not only on preparedness and response as under the previous project but also on risk reduction and strengthening the regulatory framework. 21. The CPS objectives under social protection which aimed to improve the effectiveness and efficiency of Seychelles’ generous social protection system by improving targeting, strengthening administration, and increasing financial sustainability of the pension system, have been achieved. With support under the DPO series and a complementary Reimbursable Advisory Services (RAS), progress to date includes creation of the Agency for Social Protection (combining the Social Welfare Agency and Social Security Fund) with an integrated management information system and a more targeted methodology for determining eligibility for Social Welfare Assistance. Regulations regarding the certification process for disability and sickness benefits were revised to base disability policy and social security disability benefits on the “return to work approach” by applying a functional capacity assessment following the World Health Organization (WHO) International Classification of Functioning, Disability, and Health. The government also consolidated the Family Support Program and Home Care Program into one means-tested program, with well-defined eligibility rules. The recent reforms to the Seychelles’ Pension Fund (SPF) include an increase in the contribution rate and linking indexation of pensions to inflation both of which will contribute to improved long term sustainability. As a result of these improvements, total spending on social welfare assistance decreased from SR 47 million in 2011 to 45.9 million in 2012. The final DPO in the series targets reforms to strengthen the link between pension benefits and contributions and hence improve equity and incentives to participate. Foundation: Governance and State Capacity 22. In line with Government’s commitment to further reduce the burden of the public sector on the economy, the CPS targets improvements in the allocation and execution of public expenditures. Since 2008, Seychelles has substantially improved its management of public finances, as evidenced by better Public Expenditure and Financial Accountability (PEFA) ratings in 2011. In terms of budget management the CPS aimed to support integration of recurrent and capital budgets by 2015 and introduction of the Program and Performance Based Budgeting (PPBB). With Bank support provided under a RAS arrangement, progress has been good. With enactment of the Public Finance Management Act which became effective in 2013, both the recurrent and capital budgets (Public Sector Investment Program) are now appropriated by Parliament whereas previously only the recurrent budget was appropriated. Further, to link budgets to sector strategies, the government decided to pilot implementation of the PPBB for the 2015 budget in two Ministries (Ministry of Education and Ministry of Natural Resources). The PPBB will further be piloted in 3 additional Ministries in 2016 with full roll out in the 2017 budget. 7 23. In health, the CPS strategy aims to help the authorities to achieve greater efficiency in public health expenditure by exploring sustainable health financing policy options and improving the management of service delivery. Seychelles provides free primary and universal access to healthcare and is the top performer in Africa for health, nutrition, and population outcomes. However, as the population ages and the disease burden shifts to non- communicable diseases, sustainability is an issue. Recurrent expenditure in the health sector has almost doubled in the last five years and is expected to continue to rise, partly because of increased demand for expensive tertiary care. In 2009, the government accounted for 87 percent of health expenditure and the CPS targets a reduction in the share to 80 percent through policy reforms to address some of the key drivers of rising health costs. In support of this objective, in FY14, a public expenditure policy note on the health sector was delivered under a RAS arrangement. The policy note recommends developing a package of benefits and services that reflects the evolving disease burden and the most cost effective interventions while strengthening the incentives of providers to deliver these services. This should be supported by improved tracking of costs to support evidence-based decision making to address key cost drivers and inefficiencies. A sector strategy and specific policy reforms based on the recommendations of this note are expected to be adopted during the remainder of the CPS period with support through the DPL series and complementary TA. 24. Since initial oil exploration has yielded encouraging results, the authorities want to put in place an appropriate governance structure for the petroleum sector. In this context the CPS planned technical assistance to create the institutional framework to support oil production and make sure that appropriate benefits accrue to the country. To this end, PetroSeychelles has been created as the regulatory authority and the Seychelles Petroleum Taxation Act was enacted in August 2013, establishing an improved legal and fiscal framework for awarding and administering petroleum agreements, including safety, environmental, and operational standards and fiscal terms. The Government also issued the Model Petroleum Agreement (MPA) in June 2013, which includes health, safety and environmental regulations. In addition CPS support has focused on helping Seychelles to fully participate in the Extractive Industries Transparency Initiative (EITI). With support from the Extractive Industries Technical Assistance Fund (EITAF) the Government completed the requirements to join EITI and was admitted as an EITI candidate country in August 2014. 25. Progress in Statistical capacity has been achieved but sustained technical assistance and additional resources are needed to improve the quality of economic statistics, mainly at the level of sector ministries and other government agencies. Bank support has focused on building capacity for generating National Accounts and the Tourism Satellite Account. The African Development Bank (AfDB) supported the development a National Strategy for the Development of Statistics (NSDS). The IMF has provided assistance to improve statistical capacity mainly at the Central Bank and the Seychelles’ Revenue Commission. In FY13, the Bank started providing assistance to improve statistical capacity at the Ministry of Education and Ministry of Health, through the development of a BOOST 7 dataset for these two sector ministries. The Bank also supported capacity building for a National Health Account. Recently 7 BOOST is not an acronym. It is the name of a data tool developed at the World Bank to help enhance public sector performance. 8 the Bank also supported improving the survey instrument for Household Budget Survey which is currently ongoing. 26. With the support provided through the DPO series, the authorities have established and operationalized a specialized Commercial List within the Supreme Court and improved the insolvency regime. The commercial list has substantially helped to address the problems of large backlogs and the slow pace of litigation. The improved insolvency regime (Insolvency Act, 2013), which was undertaken under DPO 2, aims to facilitate the exit of non- viable businesses or the rescue as a going concern of viable businesses that are experiencing short-term financial distress. This modern legislative framework for insolvency is the first step in facilitating business rescue and bankruptcy through the newly created commercial division at the Supreme Court (insolvency cases are commercial cases). Both initiatives have gone a long way toward improving the regulatory framework for business competitiveness in the Seychelles. The government also strengthened the commercial law framework by developing an Alternative Dispute Resolution (ADR) regime that came into force in 2013. In addition, the Commercial List has issued multiple standard forms that support the ADR process and will help ensure proper mediation case management. Upcoming assistance will focus on enacting a code of conduct, which was a prior action under DPO 3. The CPS Program Going Forward 27. Experience during the first half of the CPS period has validated the approach in the CPS while highlighting areas where additional Bank support can help the Government to achieve its development objectives. The CPS program remains well aligned with Seychelles’ medium term development program as the Government seeks to consolidate macroeconomic stability and accelerate economic growth and job creation. The main financing instrument in the CPS, the DPO series, has proven effective in supporting Government’s reform program and will continue to play an important role going forward, underpinned by AAA, much of it financed by Government through RAS agreements. Recognizing that sustaining growth while addressing risks to stability will require the implementation of a new generation of ambitious structural reforms and investment, the Government has requested additional IBRD financing and a broadening of CPS objectives to address emerging priorities in the Government’s program including enhancing regional integration, addressing infrastructure gaps, and enhancing the ability to cope with natural disasters. The CPS Results Matrix has been revised to update relevant outcomes from the ongoing WBG portfolio, and incorporates new or revised indicators to reflect some of the adjustments that are being made to the program as described below. 28. A key objective of Seychelles development strategy is to increase trade and foster economic diversification. Together with skills development and training, the aim is to foster more inclusive growth by increasing employment opportunities and incomes of those at the bottom of the income distribution. To this end Seychelles has taken a leading role in advancing the Accelerated Program for Economic Integration (APEI), an initiative by five countries to collaborate and jointly accelerate reforms to increase trade and investment, diversify exports of goods and services, raise incomes, generate new jobs, and increase food security. 8 The program 8 The five countries are: Malawi, Mauritius, Mozambique, Seychelles, and Zambia. 9 is designed to address trade barriers fragmenting African markets and makes use of an increasing body of knowledge on the economic benefits of deeper regional integration in Africa. The APEI targets reforms to: (i) remove barriers to trade in goods; (ii) promote trade in services; (iii) enhance measures to facilitate trade; and (iv) improve the business environment. Seychelles, together with the other APEI countries have requested support from the Bank in implementation of this initiative through a Regional DPO, which is planned to be presented to the Board in FY15. The reforms supported by this operation will contribute to boosting shared prosperity by reducing barriers to trade and thereby generating new opportunities for investment and job creation. 29. Recognizing that inadequate infrastructure could hamper growth and job creation Seychelles has requested IFC and Bank support to help mobilize private sector financing to address infrastructure constraints. The authorities see considerable potential to increase shared prosperity through increased production and value addition in the fisheries sector. However, the main seaport at Mahé is deteriorating and the lack of some cargo handling equipment limits the type of vessels that can serve the country, increasing shipping costs. At the same time, the Government’s debt reduction targets limit the scope for public financing of improvements. With a view to attracting private investment in alliance with a strong port operator IFC has undertaken a preliminary assessment of the Government’s proposed port modernization project under a Public-Private Partnership (PPP) scheme. Such a scheme could attract private finance, possibly making use of political risk insurance provided by Multilateral Investment Guarantee Agency (MIGA). Complementary IBRD financing through the planned regional Southwest Indian Ocean Regional Fisheries (SWIOfish) operation could support investment in strategic port infrastructure as well. In parallel, with Public-Private Infrastructure Advisory Facility (PPIAF) support, the Bank will assist with initial steps for advancing the wider PPP agenda, by diagnosing and making recommendations for improving the legal, regulatory, and institutional capacity for implementation of PPPs in Seychelles to support infrastructure investment and promote the role of the private sector. 30. Seychelles’ small size, exposure to disaster risks, and limited tools to cope with economic shocks pose serious challenges for macroeconomic management and sustained growth and job creation. Widespread flooding in early 2013 highlighted these risks and prompted the Government to seek Bank Group support for strengthening the technical capacity for DRM and put in place a disaster risk financing strategy. A recently approved US$7 million development policy loan (DPL) with a Catastrophe Deferred Drawdown Option (CAT-DDO) provides access to contingent financing to address immediate needs in the event of a disaster while supporting actions to improve DRM. The DPL supports the Government’s ability to respond to natural disasters by strengthening the legal and institutional framework for DRM and by integrating disaster risk reduction into development planning. The contingent financing for disaster response provided by the CAT-DDO serves as an important element of Seychelles’ national disaster risk financing strategy to manage the impact of natural disasters without compromising fiscal stability and other development objectives. The DPL will be complemented by a new regional TA grant for the five Indian Ocean Islands States (including the Seychelles) that aims to establish a multi-hazard risk profile and formulate a disaster risk financing strategy; this activity will also assess the feasibility for risk pooling among the South West Indian Ocean States. 10 31. The above requests represent a significant increase in the proposed CPS financing program. Indicative IBRD lending over the CPS period is now expected to be US$42 million over the FY12-16 period, an increase of US$21 million over the amount estimated in the CPS, reflecting the addition of the lending operations described above and the proposed extension of the CPS period by one year (see para 35). The revised financing program is shown in Table 2. In line with the Bank's exposure management framework, achieving this increase in lending will depend on the country’s performance, IBRD lending capacity, demand from other borrowers, and global economic developments. Table 2: Revised IBRD CPS Financing Program (US$ million) FY12 FY13 FY14 FY15 FY16 Total Disaster Risk Management DPL (DDO) 7.0 7.0 Accelerated Program for Economic Integration 5.0 5.0 10.0 Sustainability and Competitiveness DPL Series 7.0 7.0 7.0 4.0 25.0 Total 0.0 7.0 7.0 19.0 9.0 42.0 32. Looking ahead, IBRD financing will play a smaller role in meeting Government’s overall financing needs. Taking into account the need to limit overall external borrowing in line with the Government’s debt reduction targets, the financing amount under the new DPL series would be reduced from US$7 million to US$4 million per year. Over the medium term, the goal will be to leverage smaller IBRD financing in support of the Government’s overall reform program while also assisting the Government to mobilize additional sources of finance (for example PPPs) to address infrastructure constraints and other priorities. 33. Beyond the additional planned lending outlined above, the authorities have requested analytical support to address emerging priorities and deepen engagement in key areas. In line with the goal of increasing shared prosperity, the work will focus on poverty analysis, education and skills, and financial inclusion. Building on previous work, the authorities have also requested scaled up support in the area of state-owned enterprises. The focus in these areas will be on technical assistance to strengthen Government’s analytical capacity and mobilize global expertise to tackle specific challenges. This work will feed into the follow-on DPL series and the Systematic Country Diagnostic (SCD) and related outcomes will be identified in the next Country Partnership Framework (CPF). These new AAA activities are reflected in Table 3 below. Specific areas of focus include: • Poverty Analysis. While poverty in Seychelles is low, with less than two percent of the population living on less than US$2 per day, inequality appears to have increased significantly with the Gini coefficient increasing substantially between 2000 and 2007. Government has requested technical assistance in poverty analysis to explore the possible drivers of this trend. A first priority will be technical support to the National Bureau of Statistics (NBSS) for analysis of a recently concluded household survey to ensure that the observed increase does not stem from measurement or methodology issues. Planned technical assistance on poverty statistics and inequality will also build capacity for analysis of poverty and income disparities and aid in the formulation of the Government’s poverty reduction strategy. 11 • Education and Skills. Seychelles is faced with a shortage of manpower and adequate skills, at all levels, from low to semi-skilled to management. While access to post-secondary education has increased and a new university opened in 2010, the quality and relevance of post-secondary and tertiary education remain weak, and links between the education system and the labor market are tenuous. A review of education spending was completed as part of a recent Public Expenditure Review (PER) and further support through the DPL series is planned. • Financial Inclusion. While the financial sector remains strong, limited access to credit and high lending spreads continue to be issues. High lending spreads reflect perceived risks of lending to the private sector and high costs of operations in a small market, as well as limited competition in the banking sector. Other challenges include weak capacity in the commercial banking sector to serve micro and small enterprises (MSEs). To address these and other sector challenges, the Government has requested technical assistance to support implementation of its Financial Sector Development Plan, which has been prepared with World Bank assistance. During the remainder of the CPS period the Bank will assist the government and Central Bank with policy, legal and institutional reforms to expand access to finance available to Seychellois entrepreneurs, households and businesses, thereby ensuring greater participation of the population in reaping the benefits from rising incomes and modernization of the economy. • State-Owned Enterprises (SOEs). SOEs have traditionally played a large role in the Seychelles economy and budgetary transfers to the sector have represented a significant drain on public expenditures and presented significant fiscal risks. There have been substantial achievements in SOE reform over the last five years. SOEs have been governed by a new legal and institutional framework and the institutional arrangements for oversight of the sector have been clarified. Government successfully sold most of its shares in the Seychelles Savings Bank and is planning to divest minority shares in other SOEs. SOE losses have been reduced significantly with a consequent reduction in the need for direct support for the sector from the Budget. The quality and regularity of reporting and disclosure has improved and the most important SOEs now issue annual statements of corporate objectives. However there is an unfinished reform agenda with a number of areas which still require action, particularly in the areas of SOE governance, the profitability of key SOEs, and weaknesses in the monitoring system. To further strengthen oversight of state owned enterprises, technical assistance will be provided to improve the legal and institutional framework and build capacity for SOE monitoring. Table 3: Revised FY15-16 IBRD Knowledge Program Project Name Financing Financial Sector Development Implementation (TA) FIRST Initiative Implementation of the Extractive Industries Transparency Initiative MDTF for EITI PPP Regulatory Review (TA) PPIAF SW Indian Ocean Risk Assessment & Financing Initiative GFDRR Poverty Statistics & Inequality (TA) Bank Budget Strengthening Governance of SOEs (TA) RAS Implementation of Program and Performance-Based Budgeting RAS Education Sector TA Bank Budget 12 34. The Bank Group will continue to harmonize its activities with those of other development partners. A relatively small number of donors and development partners are engaged in Seychelles. AfDB is providing support, including a budget support operation, to enhance the environment for private sector activity. The United Nations Development Program (UNDP) is providing technical assistance in a range of areas. The European Union (EU) supports the government’s PFM reform agenda and the Education sector, through a sector budget support operation. The Government has indicated that it would like to strengthen the coordination of donor activities and the Bank will actively participate in these efforts. 35. The CPS Progress Report extends the CPS period by one year. The CPS was prepared for a four year period, FY12–FY15. In light of the continued strategic relevance of the CPS and its proven adaptability to Seychelles’ evolving needs, this progress report extends the CPS period by one year from FY15 to FY16. This extension will also align the CPS calendar with election cycle in Seychelles as elections are scheduled for early 2016. This will allow the Bank Group to undertake an SCD in 2015 and prepare the next CPF taking into account the economic program of the new government. Managing Risks 36. The macroeconomic risks to the CPS program remain relevant but manageable in light of Seychelles’ track record of sustained reform and increased resilience to possible adverse developments. The country remains exposed to uncertain global developments that could threaten macroeconomic stability. These are heightened by its relatively high debt levels, small size, dependence on tourism, and limited risk diversification options. Hence there is a risk that the macroeconomic framework could become inadequate to support development policy lending which would prevent delivery of the planned CPS lending program and achievement of CPS outcomes. This risk is mitigated somewhat by the increased level of international reserves (3.8 months of imports vs 2.8 months at the time of the CPS) and the fiscal cushion provided by the Government’s 0.2 percent of GDP (US$3.7 million) contingency fund coupled with the contingent assistance provided by the Bank DPL with CAT DDO (see para 30). The recently agreed successor IMF program will also help ensure that the authorities continue to benefit from financial and technical support to consolidate macroeconomic stabilization. If, despite these measures, the macroeconomic framework deteriorates, planned budget support operations would be replaced by advisory support, closely coordinated with the IMF, aimed at restoring macro and fiscal stability. 37. Limited capacity and political opposition to reforms could delay or derail the reform program and undermine delivery of planned lending and achievement of CPS objectives. While capacity constraints have so far proven manageable, the program has experienced some delays due to capacity gaps and challenges in coordination across government ministries. To mitigate this risk, parallel technical assistance and knowledge development and dissemination, often financed by the government in collaboration with other partners, is planned to help implement reforms and build capacity. Trust Funds and Reimbursable Advisory Services will continue to be important to supplement available TA resources. Opposition to reforms continues to be a risk that could slow the reform program and this risk may increase as elections in 2016 draw near. However the Government has so far demonstrated an ability to communicate 13 effectively and address impacts through targeted mitigation measures. Some contentious reforms, such as more narrowly targeting housing finance and welfare assistance to households have already been implemented. Others, such as increasing pension contributions, linking benefits and contributions to the Seychelles Pension Fund (SPF), and increasing utility tariffs may pose some political risks. We will continue to work with Government to support the reform program through communications and outreach and to put in place mechanisms to support affected populations, where appropriate. 14 Annexes Annex 1: Seychelles CPS Results Framework FY12-16 – Revised 9 Country Main Constraints to CPS Outcomes Milestones / Process Indicators Progress to date (outcomes and CPS Instruments Development Achieving Medium Term milestones) Objectives Objectives Strategic Objective: Reduce vulnerability and provide the basis for long term sustainable development Government overall indicator: Economic growth at 5 percent on average per annum Pillar 1: Competitiveness and Employment Encourage energy Power generation is Electricity tariffs and Market based utility rates applied Achieved. GoS has adopted a quarterly LEN: Sustainability and efficiency and currently provided only regulatory framework are by 2014 compared to ad hoc tariff adjustment mechanism passing on Competitiveness DPL Series increase the by diesel fuel and energy revised to encourage subsidized rates in 2011. to consumers at least 70% of future AAA: contribution of efficient consumption is efficiency, reduce losses increases in the fuel prices. As a result, Grid Codes and Feed in Tariffs for • Preparation of Grid Code and Feed renewable sources almost nil. and promote renewable utility losses decreased to SR 12,978 renewable energy are in place by in Tariffs for Renewable Energy of energy to overall energy. compared to SR 123,511 (prior to 2016. (SIDS-DOCK grant) power generation government subsidies) in 2011. PUC is • Seychelles Energy Efficiency and to 5% by 2020 and expected to have no operational losses by Renewable Energy Project (IFC) 15% by 2030. 2015. The government has also adopted a road map to rebalance electricity tariffs, removing cross-subsidization and gradually increasing electricity tariffs to cost recovery levels over eight years for households using less than 200 kWh and commercial consumers using 200 to 400 kWh. On Track. Grid codes and feed-in tariffs for renewable energy have been developed. The business Cumbersome and lengthy Reduced time and cost to Number of days to register Delayed. The number of days to register LEN: Sustainability and environment will be procedures to register start a business. business falls from 39 in 2011 to 1 a business remains at 39. To date, only Competitiveness DPL Series improved, and business. in 2016. the name reservation function of the AAA: procedures to future automated system is online. The An online system for registration of • Business Regulatory Reform TA register business rest is manual paper-based submission • Private Sector Development 9 New objectives, milestones and interventions are shown in bold text. 15 Country Main Constraints to CPS Outcomes Milestones / Process Indicators Progress to date (outcomes and CPS Instruments Development Achieving Medium Term milestones) Objectives Objectives streamlined. companies is set up by 2016. and processing of documents only in the Reform TA Victoria Office. The Companies Act • IFC Advisory Services reform has been put on hold by the Cabinet. Seychelles Doing Business ranking fell from 77 to 80 in 2014. Competition in the The Housing Finance Increased competition and Government has approved a Achieved. Targeted subsidies for Housing LEN: Sustainability and banking system Corporation performs a reduced role for the housing subsidy policy that better finance were introduced in 2013. Competitiveness DPL Series increased and multiple tasks, public sector in the targets low-income households in capital products inefficiently and the housing finance market. need of assistance. Achieved. The HFC’s functions have been AAA: developed. private sector mortgage split into two areas. While the HFC • Housing Finance TA, (FIRST TF) market is under- Housing Finance Company (HFC) continues to offer housing finance, the • Financial Sector Development developed. has been reformed to address management of social (rental) housing Implementation Plan (FIRST TF) challenges related to its has been transferred to the Property • IFC Advisory Services conflicting mandates. Management Company. .This new • Strengthening the Insurance structure has facilitated CBS’ supervision Regulatory Framework (FIRST TF) of HFC as a credit granting institution. Foster Non-transparent and Reduced non-tariff Abolition of existing export permit Achieved. The Government abolished LEN: Accelerated Program of diversification unpredictable border barriers to trade in good requirements in line with WTO the system requiring general export Economic Integration Regional DPL. through greater procedures together and Improved commitments. permits for all products in September integration with with a range of non-tariff transparency of trade 2013, replacing it with a system of economies on the barriers continue to procedures and product specific regulations and permits, African mainland. segment markets. These processes. reducing the overall burden on traders. barriers contribute to, and compound, high Achieved. To improve transparency, regional transport costs Implementation of an online governance, and speed up trade which particularly affect system to apply for import/export transactions, the Government regional trade and trade permits, improving transparency introduced an online import and export in agricultural products. and accelerating processing of permit application system in February applications. 2014, and plans to set up a trade portal. Pillar 2: Vulnerability and Resilience Reduce High exposure to changes Strengthened National DRM Act adopted by the Achieved. The National Assembly LEN: Disaster Risk Management DPL vulnerability to in climatic conditions and institutional/legal National Assembly and updated adopted the Disaster Management Act, w/ CAT DDO climate and lack of geological risk framework for disaster risk DRM Policy approved by the which provides a legal framework for disaster risk management including both AAA: 16 Country Main Constraints to CPS Outcomes Milestones / Process Indicators Progress to date (outcomes and CPS Instruments Development Achieving Medium Term milestones) Objectives Objectives disaster risks. assessment. management. Cabinet of Ministers. a National Disaster Risk Management • Flood Damage Loss and Needs Plan, an integrated emergency Assessment (GFDRR) management system, and catastrophe • Strengthening DRM TA (GFDRR) risk financing mechanisms. • South West Indian Ocean Risk Assessment & Financing Initiative Achieved. An updated policy for disaster A Master Plan for Disaster Risk risk management establishes an early Management is developed. warning system, increases preparedness through updated sector contingency plans and provides for the carrying out of information dissemination activities. Improve the Welfare assistance Improved targeting, Multiple agencies providing Achieved The Agency for Social LEN: Sustainability and efficiency and program not effectively administration and welfare assistance merged into a Protection (ASP) was created in 2012. Competitiveness DPL Series effectiveness of the targeted and pension financial sustainability of single Agency for Social Protection ASP has since strengthened systems and social protection system not sustainable. the social protection by 2012. processes to improve targeting and AAA: system. system. administration of social protection • Safety Nets/Social Protection TA programs, including adjusting the • Pensions Disability and Safety Nets methodology for determining eligibility TA for benefits. A single robust social protection Achieved. The MIS system has been put Management Information System in place and ASP has linked its databases (MIS) in place by 2013. with those of the five other government agencies relevant to perform automated cross-checks on beneficiaries’ declarations. Partially Achieved. Effective 1 January 2014, the pension rate contribution The pension contribution rate is which is applicable to all Seychelles increased to 5% by 2014 from 3% citizens has been increased to 4% from in 2011. 3%. 17 Country Main Constraints to CPS Outcomes Milestones / Process Indicators Progress to date (outcomes and CPS Instruments Development Achieving Medium Term milestones) Objectives Objectives Foundation: Governance and Public Sector Capacity Improve fiscal Capital and recurrent Strengthened budget Full inclusion of recurrent costs of Achieved. From 2013 budget, both LEN: Sustainability and sustainability budgets are management practices capital into the recurrent budget recurrent and capital budgets (Public Competitiveness DPL Series through better disconnected, and adopted. by 2015 compared to no linkages Sector Investment Program) are planning, increased budgeting not link to in 2011. appropriated by Parliament. Previously AAA: fiscal discipline, and sector strategies which only recurrent budget was appropriated. • PFM TA improved are indeed missing for Reduction in the difference budgeting. many ministries. between budgeted and executed On Track. Cabinet has decided to pilot budget from 4.2% in December Program Performance Based Budgeting 2011 to 2.5% by December 2015. (PPBB) from 2015 budget in two Ministries – Ministry of Education and Full adoption of Program and Ministry of Natural Resources with full Performance based budgeting by roll out in 2017. 2017. Improve efficiency Weak management of Government expenditure Development of sustainable health Delayed. Government expenditure on AAA: in health health service delivery on health as a share of financing strategy. health as a share of total health • Programmatic PER – Policy Notes expenditure. and current health total health expenditure expenditure increased to 93% in 2012. on Health, Education and Public financing arrangement falls from 87% (2009 Investment Management presents fiscal baseline) to 80% by 2016. challenges. Put in place Legal and regulatory Increased transparency Petroleum Regulatory Authority is Achieved. Legal and regulatory LEN: Sustainability and transparent framework for the and strengthened established and petroleum framework has been revised; Competitiveness DPL Series governance petroleum sector is regulation in the legislation revised by 2014. PetroSeychelles has been created as the framework and underdeveloped and a petroleum sector. regulatory authority. AAA: structures for the fully functional • Petroleum Sector TA (Extractive oil sector. petroleum regulatory Achieved. The Seychelles Petroleum Industries TA Facility) authority is not in place. Taxation Act was enacted by the President and the National Assembly in August 2013. The Government also issued the Model Petroleum Agreement (MPA) in June 2013, which includes health, safety and environmental regulations. Seychelles has formally requested to join EITI report submitted to EITI the EITI after complying with all the Secretariat for evaluation by end 18 Country Main Constraints to CPS Outcomes Milestones / Process Indicators Progress to date (outcomes and CPS Instruments Development Achieving Medium Term milestones) Objectives Objectives 2015. required candidacy steps. Improved statistical Capacity at the statistics Strengthened capacity of Quarterly National Accounts report Achieved. Quarterly National Accounts LEN: Sustainability and capacity. bureau is limited. National Bureau of is released to the public by 2014. report is available on the NBS website. Competitiveness DPL Series Statistics to provide economic and Capacity at the NBS has been AAA: demographic data. strengthened; the HBS instrument has • Poverty Statistics and Inequality also been strengthened and a new HBS TA has been rolled out and included, for the first time, long- term demographic projections. Improving access to No bankruptcy regime in Adoption of a modern Commercial Division at the On track. The Commercial Division is LEN: Sustainability and justice for the place, and manual system legislative framework for Supreme court established and established and operational; mediation Competitiveness DPL Series business and for commercial case insolvency and alternative operational by 2013. rules have also been enacted as well as private sectors. registration. dispute resolution. case management templates. Since the AAA: The backlog of commercial cases commercial division was first introduced • Business Regulatory Reform TA registered by December 2011 is in April 2012, 71 commercial cases have • IFC Advisory Services processed by December 2016. been filed (including the 3 cases filed in 2014). As of March 12, 2014, 37 cases have been completed, with 34 cases pending . 19 Annex 2: Country at a Glance 20 21 22 Annex 3: Selected Indicators of Bank Portfolio Performance and Management CAS Annex B2 - Seychelles Selected Indicators* of Bank Portfolio Performance and Management As Of Date 10/20/2014 Indicator 2015 2014 2013 2012 Portfolio Assessment Number of Projects Under Implementation a 2 1 1 1 Average Implementation Period (years) b 0.1 0.1 0.1 0.1 Percent of Problem Projects by Number a, c 0.0 0.0 0.0 0.0 Percent of Problem Projects by Amount a, c 0.0 0.0 0.0 0.0 Percent of Projects at Risk by Number a, d 0.0 0.0 0.0 0.0 Percent of Projects at Risk by Amount a, d 0.0 0.0 0.0 0.0 Disbursement Ratio (%) e 0.0 0.0 0.0 0.0 Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 5 1 Proj Eval by OED by Amt (US$ millions) 28.2 8.7 % of OED Projects Rated U or HU by Number 20.0 0.0 % of OED Projects Rated U or HU by Amt 15.3 0.0 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 23 Annex 4: Summary of Nonlending Services Cost Product Completion FY (US$000) Audiencea Objectiveb Recent completions Safety Nets TA 2012 232 G/B K/PS The Economics of Piracy 2012 253 G/D/B/P K/PD/PS Safety Nets/Social Protection TA 2013 118 G/B K/PS Social Protection TA (RAS) 2013 320 G/B K/PS Sustainability and Competitiveness TA (RAS) 2014 744 G/B K/PS Flood Damage, Loss and Need Assessment 2014 73 G/D/B/P K/PD/PS Programmatic PER (Health, Education and Public Investment Management) 2014 178 G/B/P K/PS/PD Strengthening the Insurance Regulatory Framework 2014 100 G/B K/PS Underway Business Regulatory Reform 2014 190 G/B K/PD/PS Financial Sector Development Implementation Plan 2015 336 G/D/B/P PS Strengthening Government M & E Systems 2015 25 G/B K/PS Private Sector Development Reform TA 2015 75 G/B K/PS PFM TA (RAS) 2015 200 G/B K/PS Petroleum Sector TA 2015 250 G/B K/PS Housing Finance TA 2015 100 G/B K/PS South West Indian Ocean Risk Assessment & Financing Initiative 2015 1,300 G/B K/PS Planned Strengthening Disaster Risk Management 2015 389 G/B/P K/PS PPP Regulatory Review 2015 110 G/B K/PS SOE Reform TA (RAS) 2015 150 G/B PS Pension, Disability & Safety Nets TA (RAS) 2015 70 G/B K/PS Health Sector Reform TA (RAS) Poverty Statistics & Inequality (TA) 2015 65 G/B K/PS a. Government, donor, Bank, public dissemination. b. Knowledge generation, public debate, problem-solving. 24 Annex 5: Operations Portfolio (IBRD) CAS Annex B8 - Seychelles Operations Portfolio (IBRD/IDA and Grants) As Of Date 10/20/2014 Closed Projects 6 IBRD/IDA * Total Disbursed (Active) of which has been repaid 0.00 Total Disbursed (Closed) 32.04 of which has been repaid 2.69 Total Disbursed (Active + Closed) 32.04 of which has been repaid 2.69 Total Undisbursed (Active) 14.00 Total Undisbursed (Closed) 0.00 Total Undisbursed (Active + Closed) 14.00 Active Projects Difference Between Last PSR Expected and Actual a/ Supervision Rating Original Amount in US$ Millions Disbursements Development Implementation Project ID Project Name Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd Objectives Progress P148861 SC-DPL with a Cat DDO # # 2015 7 7 P146567 Sustainability and Competitiv # # 2015 7 7 Overall Result 14 14 25 Annex 6: Statement of IFC’s Held and Disbursed Portfolio B8 (IFC) for Seychelles Seychelles Committed and Disbursed Outstanding Investment Portfolio As of 9/30/2014 (In USD Millions) Committed Disbursed Outstanding **Quasi Partici **Quasi Partici FY Approval Company Loan Equity Equity *GT/RM pant Loan Equity Equity *GT/RM pant 2010 Universal hotels 16.15 0 0 0 0 16.15 0 0 0 0 Total Portfolio: 16.15 0 0 0 0 16.15 0 0 0 0 * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. 26 27