Document of The World Bank FOR OFFICIAL USE ONLY Report No. 65874-TG INTERNATIONAL DEVELOPMENT ASSOCIATION INTERIM STRATEGY NOTE FOR THE REPUBLIC OF TOGO FOR THE PERIOD FY12-FY13 December 29, 2011 Country Management Unit for Togo (AFCF2) Africa Region This document is being made publicly available prior to Board discussion. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available unless otherwise decided by the Board. The last Interim Strategy Note was discussed by the Board of Executive Directors on May 29, 2008 CURRENCY EQUIVALENTS Currency Unit = CFA Franc (CFAF) CFAF 489 = US$ 1 (as of December 9, 2011) US$ 1.55 = SDR 1 (as of December 9, 2011) WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR January 1 – December 31 ACRONYMS AND ABBREVIATIONS AAA Analytical and Advisory Activities AfDB African Development Bank AfDF African Development Fund BCEAO Banque Centrale des États de l’Afrique de l’Ouest (Central Bank of West African States) BOAD Banque Ouest Africaine de Développement (West African Development Bank) CAS Country Assistance Strategy CFAF Franc of the African Financial Community CPAR Country Procurement Assessment Report DPO Development Policy Operation ECF Extended Credit Facility ECOWAS Economic Community of West African States EITI Extractive Industry Transparency Initiative ERGG Economic Recovery and Governance Grant EC European Commission ESW Economic and Sector Work EU European Union FDI Foreign Direct Investment GDP Gross Domestic Product HIPC Heavily Indebted Poor Countries HIV/AIDS Human Immunodeficiency Virus/Acquired Immune Deficient Syndrome IBRD International Bank for Reconstruction and Development IDA International Development Association IFAD International Fund for Agricultural Development IFC International Finance Corporation IMF International Monetary Fund ISN Interim Strategy Note LIC DSA Low Income Country Debt Sustainability Analysis LICUS Low-Income Country Under Stress MDG Millennium Development Goal MDRI Multilateral Debt Relief Initiative MEF Ministry of Economy and Finance MTEF Medium Term Expenditure Framework NSCT Nouvelle Société Cotonnière du Togo (New Togo Cotton Company) OHADA Organization for the Harmonization of Business Law PEFA Public Expenditure and Financial Accountability PFM Public Finance Management PEMFAR Public Expenditure Management and Financial Accountability Review PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper SIGFIP Système Intégré de Gestion des Finances Publiques (Integrated Public Finance Management System) SNPT Société Nouvelle des Phosphates de Togo (New Phosphate Company of Togo) SOTOCO Société Togolaise de Coton (Togo Cotton Company) UNDP United Nations Development Program UNFPA United Nations Population Fund UNICEF United Nations Children's Fund WAEMU West African Economic and Monetary Union WAMU West African Monetary Union   Preparation of the Togo ISN was led by Co-Task Team Leaders Evelyn Kennedy (Country Operations Officer, AFCCI) and Herve Assah (Country Manager, AFCTG) under the guidance of Madani M. Tall (Country Director, AFCF2) and Katrina Sharkey (Country Program Coordinator, AFCCI). The Core Task team included: Joseph Baah-Dwomoh (Consultant, AFCCI), Sylvie Nenonene (Communications Officer, AFRSC), Johannes Hoogeveen (Sr. Country Economist, AFTP4), Yemdaogo Tougma (Economist, AFTP4), Georgiana Pop (Economist, AFTP4), Kathy Li Tow Ngow (Sr. Program Assistant, AFCCI) and Nathalie Ramanivosoa (Team Assistant, AFCCI). From IFC, team members included Mary-Jean Lindile Moyo (Senior Manager, CFAW2), Bertha Rena Moniba (Investment Officer, CM2P6), James Emery (Head, CAFSC) and Frank Armand Douamba (Principal Strategy Officer, CAFSC). From MIGA, Conor Healy (Senior Risk Management Officer, MIGEP) and Moritz Zander (Consultant, MIGEP). The following Togo Country Team members actively contributed to the ISN: Leonardo Iacovone (Economist, AFTFW), Christian Berger (Senior Agricultural Specialist, AFTAR), Ayi Klouvi (Agriculture Economist, AFTAR), Anca Dumitrescu (Senior Transport Specialist, AFTTR), Mathieu Brossard (Senior Education Economist, AFTED), Kwabena Amankwah-Ayeh (Senior Urban Specialist, AFTUW), Adja Mansora Dahourou, Private Sector Development Specialist, AFTFW), Setareh Razmara (Lead Social Protection Specialist, AFTSP), Alain Hinkati (Financial Management Specialist, AFTFM), Brigitte Bocoum (Senior Mining Specialist, SEGOM), Shelley Mcmillan (Senior Water Resources Specialist, AFTWR), Maurizia Tovo (Lead Social Development Specialist, ECSS4), Fily Sissoko (Lead Financial Management Specialist, AFTFM), Saidou Diop (Senior Financial Management Specialist, AFTFM), Mathias Gogohounga (Consultant, AFTPC), Boutheina Guermazi (Senior Regulatory Specialist, TWICT), Franklin Koffi Gbedey (Energy Specialist, AFTEG), Susana Carrillo (Senior Governance Specialist, AFRCP), Andrew Osei Asibey (Senior Monitoring & Evaluation Specialist, AFTDE), Aminata Ndiaye (Junior Professional Associate, AFTFW), Christophe Lemiere (Senior Health Specialist, AFTHE), and Maria Elena Garcia Mora (Consultant, AFTPM).   INTERIM STRATEGY NOTE FOR THE REPUBLIC OF TOGO TABLE OF CONTENTS EXECUTIVE SUMMARY ........................................................................................................ III  I.  INTRODUCTION............................................................................................................. 1  II.  COUNTRY CONTEXT.................................................................................................... 1  A.  POLITICAL CONTEXT............................................................................................................ 2  B.  RECENT ECONOMIC DEVELOPMENTS ................................................................................... 3  C.  MACROECONOMIC PROSPECTS FOR SHARED GROWTH ........................................................ 5  D.  BUSINESS CLIMATE AND COMPETITIVENESS ........................................................................ 7  E.  SOCIAL CONTEXT ................................................................................................................ 8  F.  KEY DEVELOPMENT CHALLENGES AND OPPORTUNITIES ................................................... 10  III.  GOVERNMENT’S DEVELOPMENT PROGRAM ................................................... 14  A.  GOVERNMENT'S POVERTY REDUCTION STRATEGY ............................................................ 14  B.  IMPLEMENTATION OF THE PRSP ........................................................................................ 15  IV.  WORLD BANK GROUP INTERIM STRATEGY ..................................................... 15  A.  IMPLEMENTATION OF THE PREVIOUS ISN .......................................................................... 15  B.  LESSONS LEARNED ............................................................................................................ 18  V.  THE BANK GROUP INTERIM STRATEGY (FY12-13) .......................................... 19  A.  GUIDING PRINCIPLES OF THE ISN ...................................................................................... 19  B.  FIT WITH THE AFRICA REGIONAL STRATEGY ..................................................................... 20  C.  IDA FINANCING ENVELOPE AND WORLD BANK GROUP INSTRUMENTS OF ENGAGEMENT 21  VI.  OBJECTIVES AND EXPECTED RESULTS OF THE PROPOSED ISN ............... 25  A.  ISN OBJECTIVE I: DEEPENING THE ECONOMIC RECOVERY PROCESS AND PROMOTING SUSTAINABLE DEVELOPMENT............................................................................................ 26  ISN Outcome 1.1: Improved Business and Investment Climate ............................................ 26  ISN Outcome 1.2: Increased agricultural productivity and crop output .............................. 27  ISN Outcome 1.3: Improved access to and quality of productive infrastructure .................. 28  B.  ISN OBJECTIVE 2: IMPROVING ECONOMIC GOVERNANCE AND STATE CAPACITY.............. 29  ISN Outcome 2.1: Strengthen State Capacity and Management/Restructuring of key public enterprises and Banks............................................................................................................ 29  ISN Outcome 2.2: Improved and transparent public financial management ........................ 30  ISN Outcome 2.3: Enhanced procurement system and external budget controls ................. 32  C.  ISN OBJECTIVE 3: ADDRESSING URGENT POVERTY REDUCTION AND SOCIAL NEEDS ....... 32  -i- ISN Outcome 3.1: Improved access of communities to basic social and local development services (including youth employment) ................................................................................. 33  ISN Outcome 3.2: Improved quality of and access to basic education and health services . 33  ISN Outcome 3.3: Improved social protection and inclusion (including gender)................. 34  ISN Outcome 3.4: Improved management of the environment and natural disasters........... 35  D.  RESULTS MONITORING ...................................................................................................... 36  VII.  MAIN RISKS AND MITIGATION MEASURES ....................................................... 36  TABLES Table 1: Key Macroeconomic Indicators (2008-2013) ................................................................... 6  Table 2: Composition of Active IDA/Trust Fund Country Portfolio (as of 11/30/11) ................. 23  ANNEXES Annex 1: Togo Active Portfolio and Proposed Bank Group ISN Assistance Program FY12- FY13 ............................................................................................................................................. 38  Annex 2: Interim Strategy Results Framework – FY12-13 ......................................................... 42  Annex 3: Donor Coordination and Partnerships .......................................................................... 47  Annex 4: Donors’ Engagement – (FY11-13)............................................................................... 49  STANDARD CAS ANNEXES CAS Annex A2: Country At A Glance ............................................................................................. CAS Annex B2: Selected Indicators* of Bank Portfolio Performance and Management ................. CAS Annex B3: IBRD/IDA Program Summary .............................................................................. CAS Annex B5: Social Indicators .................................................................................................... CAS Annex B6: Key Economic Indicators ...................................................................................... CAS Annex B7: Key Exposure Indicators........................................................................................ CAS Annex B8: Operations Portfolio (IBRD/IDA and Grants)....................................................... CAS Annex B8: Statement of IFC’s Held and Disbursed Portfolio ................................................. Map IBRD Map No. 33497 - ii - INTERIM STRATEGY NOTE FOR THE REPUBLIC OF TOGO EXECUTIVE SUMMARY Background 1. This Interim Strategy Note (ISN) presents the Bank Group's assistance program to the Republic of Togo for FY12-13. It updates the 2008 ISN which ended in June 2010. It was considered appropriate for the Bank to prepare an ISN at this stage rather than a Country Partnership Strategy as Togo's PRSP ended in June 2011 and at that time, there was uncertainty regarding the timetable of PRSP-II. This latter was launched in October 2011 and completion is planned for June 2012. The interim period would be used to consolidate Togo's knowledge base, help build capacity to effectively implement the wide-ranging Bank Group and donor programs recently launched, and for showing measurable results through improved M&E and statistical systems. Government's demonstration of effective aid absorption capacity would help Togo increase partners' confidence and attract donor financing for the PRSP-II. 2. Togo’s good performance on the political and economic fronts offers significant opportunities for advancing the country’s reform agenda. Following the re-election of President Faure Gnassingbe in March 2010 and the formation of a Government of National Unity, Togo has been able to maintain its political stability and has laid the foundation for broad-based reforms. Economic growth has accelerated progressively, reaching 4.0 percent in 2010 and an estimated 4.1 percent in 2011. Public finances have strengthened markedly thanks to external debt relief under the HIPC Initiative and prudent fiscal policy. Guiding Principles 3. Selectivity will be the guiding principle in the context of the limited IDA envelope, Government's absorptive capacity and the Bank's comparative advantage vis-à-vis other development partners. The Bank Group will focus on activities that (i) induce broad-based growth; (ii) improve access to basic services and ensure greater efficiency of public expenditures; and (iii) promote better governance. The Bank will help leverage other donor financing (health, social protection, education) and additional private investments (energy, roads, the port) to complement its support, particularly in sectors where it is not directly present. Trust funds will continue to be mobilized particularly to step up support in the social sectors where UNICEF and WHO are the lead donors. Stronger partnerships will be pursued with IFC and MIGA, and analytical services will be used to broaden and inform the reform program and development dialogue. 4. Consistency with the new Africa Regional Strategy. The proposed World Bank Group assistance for Togo during FY12/13 aims to increase competitiveness and employment. It supports reforms and public investment in areas of highest growth potential, supports a healthy and skilled workforce, as well as regional integration. It addresses vulnerability and resilience issues through support to climate change and adaptation and social protection and inclusion (including gender). Furthermore, a foundation of the proposed ISN is governance and public - iii - sector capacity, and the program aims to help strengthen state capacity, support stable macroeconomic policies and to improve the investment climate in order to attract investment, know-how and promote job creation. Proposed Program 5. All proposed FY12/13 Togo operations deepen and expand upon ongoing operations. The effective implementation of the growing IDA/trust fund portfolio will be critical. Regular CPPRs will be conducted with a first review planned in the spring of 2012. 6. ESW will be critical as there has been limited analytical work done in the last ten years. An Energy study is planned for FY12. A number of ESWs are planned (FY12/13) to support fiduciary systems: PER, CPAR, Use of Country Systems, and Accounting TA. A multi- year programmatic series of demand-driven analytic/policy notes on poverty, gender and inclusive growth will be prepared. Finally, technical assistance in strategic areas requiring longer-term capacity support and advisory services, including phosphates, cotton, social protection and the free zone, will be continued. A comprehensive communication strategy and action plan are being developed to communicate key results and to ensure dissemination of the Bank’s knowledge products. 7. Limited IDA country allocation would finance investment and budget support operations and leverage additional IDA Africa Regional Integration and global trust fund resources. The Bank will continue the yearly DPOs and the successful CDD and Urban Infrastructure operations. An FY13 Energy Project will provide capacity strengthening, policy and institutional support, as well as investments in distribution of electricity. Climate change and disaster management will be supported through Disaster Risk Reduction (GFDRR) and other trust funds. Regional integration projects in agriculture, telecom and energy will leverage the important financing needs in these sectors. 8. IFC has financed recently large projects in energy, manufacturing and in the port. Its focus will continue on the financial sector, infrastructure development and manufacturing; product development for the microfinance and SME sectors, and investment climate reforms. Risk management 9. Risks include: (i) the country's history of political instability and the potential for a weakening consensus on the reform programs; (ii) macroeconomic risks resulting from exogenous shocks and/or from a slower than expected rebound from the global economic crisis; (iii) vested interests risks whereby reform efforts in the key sectors (phosphates, cotton and telecom) aimed at implementing structural reforms and enhancing governance in the public sector, could still face resistance; (iv) fiduciary risks which will be important to address in moving to use of country systems; and (v) weak capacity for implementing projects and for planning and executing reforms. The Bank is working closely with the Fund and other development partners to provide complementary support in all these key areas. A comprehensive communication strategy and action plan is being developed to communicate key results and the impacts of the Bank Group programs on the beneficiary populations and to ensure dissemination of the Bank’s knowledge products. - iv - I. INTRODUCTION 1. This Interim Strategy Note (ISN) presents the Bank Group's assistance program to the Republic of Togo for FY12-13. It updates the 2008 ISN which covered a two-year period ending in June 2010 and was based on the Government's first PRSP (2009-2011). At the time the 2008 ISN was completed in June 2010, a new Government of national unity was appointed and committed to prepare its Vision 2030 and second generation PRSP which would be results-based and include the participation of all stakeholders. 2. Togo's PRSP ended in June 2011 and at that time, there was uncertainty regarding the timetable of PRSP-II. This latter was launched in October 2011. It was thus considered appropriate for the Bank to prepare an ISN at this stage rather than a full-fledged Country Partnership Strategy. The PRSP-II, planned for completion in June 2012, will contain the Government's long term perspective on growth and poverty reduction and benefit from the results of the 2010 population census and the 2011 QUIBB (household welfare and consumption) survey. Analysis of the latter survey is ongoing and new poverty estimates are expected by December 2011. These will provide an essential input for the Technical Notes on Poverty and Gender Assessment scheduled for 2012 and which would be delivered in conjunction with the PRSP process. 3. Although Togo is on the path to economic recovery, it remains fragile. The interim period would be used to consolidate Togo's knowledge base, for example, with regard to building mechanisms for cost effective delivery of social needs, capacity to effectively implement the wide-ranging Bank Group and donor programs recently launched, and for showing measurable results through improved M&E and statistical systems. The Bank is increasing its presence in the field to be closer to the client and provide the needed fiduciary support and sector expertise. Government's demonstration of effective aid absorption capacity would help Togo increase partners' confidence and attract donor financing for the PRSP-II. II. COUNTRY CONTEXT 4. Togo is located on the Gulf of Guinea between Benin and Ghana, a position which represents for this small country an opportunity as well as a challenge. According to preliminary results of the 2010 population census, the population is estimated at 5.8 million in 2010 with an average annual growth rate of 2.6 percent. It is one of the poorest countries in the world, with a per capita GDP of US$490 in 2010 (according to the World Bank's Atlas methodology), and a ranking of 139 out of 169 countries in the 2010 UNDP Human Development Index. The country's main economic activities are in agriculture, phosphate mining, and trade and transport of goods. Agriculture employs two thirds of the population and accounts for about 45 percent of GDP. The secondary sector, including phosphates, cement manufacturing, construction and energy, employs about 12 percent of the population and accounts for about 22 percent of GDP. -1- Services, dominated by commerce and transport, employ about 21 percent of the population and generate about 33 percent of GDP. The most important exports are cement and clinker, which go entirely to the West Africa regional market, followed by phosphates and cotton, both processed and marketed by public enterprises. Togo produces cash crops, like coffee and cocoa, and has a considerable agricultural potential. As a small country, Togo's successful development lies in its ability to capitalize on greater integration with its neighbors, notably through (i) further development of its deep water port (the only one in the region) as a shipping hub, taking into account neighboring country port development activities; and (ii) the development of roads, railway and ICT networks. Togo also has the potential for service industry, including financial services, ICT and tourism. A. Political Context 5. During the decade between the mid 1970s and the mid 1980s, Togo built a good reputation as a dynamic business hub. However, the decade of the 1990s and the first half of the 2000s were marked by considerable political and social tensions. Togo made an important break with the past in August 2006 when the ruling party reached a Global Political Accord with the opposition. Togo undertook a national reconciliation process that culminated in multiparty parliamentary elections on October 14, 2007. The subsequent Government was politically inclusive and continued the process of political and economic reforms that paved the way for reengagement with the international community after a suspension period of more than 15 years. This was followed by a series of regulatory and institutional reforms needed for the consolidation of democracy, the rule of law and good governance. This included the creation of the permanent framework for dialogue and consensus-building, the national council for social dialogue, and a national commission on justice, truth and reconciliation. Since then, reengagement with the Fund, an arrears-clearance program with the Bank and other external donors, helped begin a new effort to restart an economic reform program. 6. Togo reached a major milestone in its move towards democratic governance with a new presidential election in March 2010. President Faure Gnassingbe was reappointed in an election considered by observers as generally free and fair. In May 2010, a 32-member government of national unity was formed led by the ruling party, the "Rassemblement du Peuple Togolais (RPT)". For the first time in Togo's history, the main opposition party "Union des Forces du Changement – UFC" agreed to participate in a government led by the RPT. However, this caused a deep split in the UFC with a good number of its members rejecting the rapprochement and leaving the party to form a new party, "Alliance rationale pour le changement (ANC)." In November 2010, nine members of parliament who joined the newly created ANC were stripped of their seats and replaced, following a ruling of the Constitutional Court. This has led to some political friction and tension between ANC and the Government leading to weekly demonstrations by the FRAC (Front des Républicains pour l’Alternance et le Changement), an opposition coalition supporting the ANC. The Government is aware of the need to continue to work for the consolidation of peace and to implement, in that regard, all the provisions of the 2006 Comprehensive Political Agreement. Discussions are currently underway on the institutional and constitutional reforms. Measures aimed at consolidating social dialogue are also being reinforced. The Government remains reform-oriented and determined to pursue the economic reform programs started under the previous cabinet. It is in this climate of renewed -2- hope that the proposed ISN aims to assist the Togolese Government in continuing the implementation of its reform agenda to support the country's economic and social recovery and lay the foundation for sustained pro-poor growth. B. Recent Economic Developments 7. Despite recent improvements in political stability and economic reforms, Togo's growth has remained low. Real per capita income growth stagnated over 2004-2008 (an annual average of -0.1 percent), the second lowest of the ECOWAS countries, but slightly improved during 2009-2010 (an average of 0.9 percent). Real GDP growth showed a modest acceleration from 2.4 percent in 2008, a year marked by flood damage and surges in international oil and food prices, to 3.4 percent in 2009, lower than projected before the international economic crisis unfolded (4 percent) and was estimated to have reached 4 percent in 2010, remaining below potential due to the external environment. GDP growth in 2010 was mainly driven by the extractive industries, especially clinker/cement, port activities and public works linked to public investment. Despite the steep increase in public investment over the last three years, the government has maintained a prudent fiscal stance. This is anchored by targets on the domestic primary balance, which was slightly negative in 2009 (-0.4 percent), but stood at 2.2 percent in 2010 reflecting strong revenue collection and spending discipline. The Togolese authorities, over the few years of reform, have demonstrated their commitment to fiscal prudence and expenditure management. The 2011 budget for example, continues to have a pro-growth fiscal stance by emphasizing public investment without compromising fiscal and debt sustainability. Public investment is expected to reach 8.1 percent of GDP. Improved revenue collection thanks to the ongoing reforms in the tax administration1 and disciplined current spending re expected to create space for additional public investment2. Despite an increase in domestically-financed investment, Togo's fiscal balances are expected to remain consistent with fiscal and debt sustainability. 8. Monetary developments have been favorable in 2009 and 2010. After a sharp increase in prices linked to global surges in food and oil prices in 2008, inflation decelerated sharply to around 2 percent in 2009 and remained at 1.4 percent in 2010 despite the increase in international and food prices, reflecting abundant local food production consumed by the population and petroleum product price subsidies as the Government temporarily suspended the automatic price adjustment mechanism. Following the rehabilitation of the banking sector undertaken in end-2008, both deposits and credits to the private sector have grown, reflecting increased confidence in the financial system and a resumption of financial intermediation. The privatization of the four state-owned banks is expected to further improve the financial sector viability. 9. The Government made progress in implementing the three-year IMF-supported ECF arrangement. The program aims to revive economic growth and improve living conditions within a stable macroeconomic environment by (i) bringing public debt to a sustainable level through gradual fiscal adjustment and HIPC/MDRI debt relief; (ii) facilitating the resumption of external 1 These reforms include reduction in corporate and income tax rates (with the objective of reducing informality), and placement of collectors in the tax administration. 2 The sale of a third mobile telephone license, conservatively estimated at 1.2 percent of GDP is expected to be an important one-off contributing factor. -3- assistance; (iii) increasing resources for infrastructure, health, agriculture, and education; (iv) strengthening fiscal governance; (v) restructuring fragile banks; and (vi) reforming the business environment and state-owned enterprises. In December 2010, Togo successfully reached the completion point under the Enhanced HIPC Initiative, and also qualified for additional debt relief under the Multilateral Debt Relief Initiative (MDRI). The IMF completed the implementation of the economic and financial program and has generally been satisfied with the results. The 2010 budget execution was consistent with the program objectives, and structural reforms have progressed well despite delays in some areas. The domestic arrears clearance process is continuing, although it is proceeding more slowly than desired because creditors have been slow to claim the amounts due to be paid. The authorities remain committed to the process for the privatization of public banks; this process is advancing with the establishment of a new privatization commission which outlined a timetable leading to a call for offers on the four banks before the end of the calendar year. In the phosphate sector, phase one of the recovery plan, which foresees an increase in investments and rehabilitation of equipment, is implemented and phosphate production is expected to increase significantly starting next year. Continued reforms are also pressing in the electricity and telecommunications sectors to reduce costs to consumers and improve competitiveness. A more complete review of the progress made during the ECF will be carried out with a national conference planned during the first quarter of 2012 to evaluate the impact of the program. This conference would inform the design of a successor ECF program. 10. The yearly DPOs have supported reforms in public financial management as well as in cotton, phosphates, energy and the port, sectors which are considered vital to strengthen economic performance and boost growth. The new DPO will continue to focus on these areas, while expanding the scope to include telecommunications, banking and infrastructure. The DPO will also pay closer attention to enhancing transparency with particular attention given to the EITI++. 11. Restructuring of the financial sector. This process is being supported by the Financial Sector and Governance Project. The authorities have committed to elaborate a Financial Sector Development Strategy. In-line with the challenges described below, and taking into consideration the ongoing efforts (with IMF/WB technical assistance) to stabilize and restructure the banking sector, the FSDS will provide a holistic and coordinated approach to expand the breadth and depth of the financial system, beyond the current efforts aimed primarily at establishing the necessary stability of the financial sector.  The banking sector: Three state-owned banks were recapitalized by an exchange of provisioned bad debt for Government securities (FCFA 88.1 billion) in December 2008, and measures are being taken for (ii) the privatization of state-owned banks and (iii) setting up a loan recovery mechanism for the non-performing loans acquired by the Government. The key challenge remaining is to complete the process of divestiture of the state-owned banks. An important milestone was first achieved in October 2010, with the adoption of a Privatization Law which sets the framework for the privatization process. The National Privatization Commission is now functional and is expected to launch the call for bids by the end of 2011 after the Government has formally adopted the privatization strategy proposed by the Commission. -4-  The microfinance sector is highly concentrated and counted over 820,000 clients, with around US$160 million in deposits and US$150 million in loans'. After a period of strong expansion, the microfinance sector has recently experienced turbulences (with the near collapse of a large institution) which are increasingly spreading to other institutions, hence the need to further strengthen the sector. Supervision of microfinance institutions needs to be improved: many of the problems in the microfinance sector are the result of insufficient oversight of MFIs, coupled with a too rapid growth of a sector characterized by poor governance and weak internal controls. Unless these issues are addressed rapidly, the microfinance sector may suffer from loss of confidence by the general population, which will negatively impact access to financial services. With the adoption of the new WAEMU microfinance law by the Togolese Parliament on May 11, 2011, large institutions will move under the supervision authority of BCEAO. The FSGP is providing technical assistance to the national supervisory authority and to large microfinance institutions to improve the stability of the sector, however, key decisions for crisis resolutions remain to be taken by the Government. The Government has created five working groups to elaborate background papers that will feed into the FSDS. The strategy itself is expected to be completed with technical assistance funded from the FIRST Initiative Trust Fund and to be formally adopted by the authorities by end of first quarter 2012.  The pension institution for civil servants (CRT) has been facing increasing deficits, which are a drain on the country's budget. With technical assistance from the FSGP, the Government is currently developing a road map to tackle this growing and unsustainable deficit. C. Macroeconomic Prospects for Shared Growth 12. Following the difficult economic performance over the last three years, a modest rebound in economic growth is expected in 2011-13 (see Table 1). Growth is expected to remain below potential in 2011, reflecting domestic and global factors, in particular incomplete reforms in the banking, phosphate and telecom sectors, and subdued economic recovery of Togo's main export partners in the context of rising international oil and food prices. Real GDP growth rate is projected to exceed 4 percent in 2011-13. This will be driven largely by increases in public investment, improved business confidence3, growing regional trade, and expected rebound in cotton and phosphate production after the collapse of recent years. Over the medium-term, higher direct foreign investment (e.g. in banking, telecoms and phosphate sectors, and the port), a rebound in traditional export crops (including cotton, coffee and cocoa production) supported by high world prices and new programs in agriculture, improved financial intermediation and upgrades to public infrastructure to facilitate transit trade, would support further robust growth. 13. Inflation is expected to be contained over the medium term, despite a slight increase in 2011, anchored in the WAEMU currency union and fiscal prudence consistent with the regional monetary policy stance. Given the continuing high international oil prices, inflation is projected 3 The Bank, IFC, and other donors are supporting programs to improve Doing Business and improve the Business Environment through projects that directly target constraints faced by the private sector. -5- to increase at 3.5 percent (annual average) in 2011, but is expected to fall in the following years as external price pressures ease. Togo's current account deficit which worsened to more than 7 percent of GDP over 2009/10 is projected to continue on the same trajectory over the period 2011-13, with imports projected to remain high at approximately 55 percent of GDP driven by public investment. The balance of payments will stay vulnerable to terms of trade shocks (in particular from international oil prices) and further exchange rate volatility of the Euro (to which Togo's currency value is fixed) vis-à-vis the US dollar. Exports are expected to reach approximately 37 percent of GDP in the medium term due to the slower global growth and demand. Nevertheless, if the structural problems devolving from a large infrastructure gap, and inefficient state-owned banks and state enterprises are not speedily resolved, economic recovery would be slower. FDI and private medium- and long-term capital inflows are expected to begin to recover, as economic confidence benefits from a continuing commitment to economic and political reform. 14. Despite an increase in domestically-financed investment, Togo's fiscal balances are expected to remain consistent with fiscal and debt sustainability. Following high international oil prices, the government started stabilizing fuel prices to the tune of 2% of GDP. Despite an agreement with the IMF to gradually abolish the fuel subsidies, government cut short its attempt after only a partial implementation. Meanwhile, capital expenditures are planned to increase from 7.8 percent in 2010 to around 11.2 percent during 2011-13, and current expenditures are expected to remain at approximately 17 percent of GDP. The envisaged primary fiscal deficit of 1.0 percent of GDP reflects ongoing measures to improve revenue mobilization, but also difficulties in realizing all planned public investments. Revenues represent 18.8 percent of GDP in 2010 and are estimated at 19 percent during 2011-13. Pursuing a sustainable medium-term fiscal position will require managing the pressures to increase Government spending after the HIPC completion point, as public expectations may surpass resource availability. Table 1: Key Macroeconomic Indicators (2008-2013) Indicator 2008 2009 2010 1 2011 2 2012 2 2013 2 Real GDP growth (annual percentage change) 2.4 3.4 4.0 4.1 4.5 4.7 Real GDP per capita growth (annual percentage change) -0.1 0.9 1.5 1.6 2.0 2.2 Overall fiscal balance, payment order basis, incl. grants (percent of GDP) . -0.9 -2.8 -1.6 -3.4 -4.6 -2.1 Domestic primary balance 0.4 -0.4 2.2 -1.0 -1.1 -0.2 Current expenditures (percent of GDP) 14.7 15.8 14.7 17.4 17.2 15.2 Of which wages and salaries 4.9 6.3 5.2 5.9 6.1 6.1 Capital expenditures (percent of GDP) 3.2 5.5 7.8 8.1 10.6 9.6 Total revenues (percentage of GDP) 15.6 16.9 18.8 18.1 20.0 18.5 Tax revenues (percentage of GDP) 14.9 15.4 15.7 16.59 16.8 16.6 Current account balance, including official transfers (percentage of GDP) -6.4 -6.6 -7.1 -7.4 -7.7 -8.3 Exports (percentage of GDP) 30.1 36.7 37.1 37.5 37.2 37.2 Imports (percentage of GDP) 44.5 52.3 53.5 55.0 55.0 56.0 -6- Indicator 2008 2009 2010 1 2011 2 2012 2 2013 2 Reserve coverage (months of prospective imports of goods and services) 4.9 6.5 6.1 .. .. .. CPI annual average (annual percentage change) 8.7 1.9 1.4 3.5 2.3 2.4 Total public sector debt (percentage of GDP) 89.3 67.8 32.3 27.4 27.1 27.8 External public debt (percentage of GDP) 60.9 52.7 17.2 16.0 17.1 19.2 External public debt service as percentage of exports 6.5 4.6 5.1 2.9 2.9 3.1 1/ Estimated; 2/Projections. Source: IMF, Ministry of Finance and staff estimates. 15. Togolese authorities successfully implemented all the triggers for reaching the completion point under the Enhanced HIPC Initiative. Upon reaching the completion point under the Enhanced HIPC Initiative, Togo also qualified for additional debt relief under the Multilateral Debt Relief Initiative (MDRI). Debt relief under the MDRI covered almost all remaining debt service obligations to IDA and the African Development Fund (AfDF). MDRI relief reduced nominal debt service by US$749 million over a period of 39 years4. Full delivery of HIPC, additional multilateral and bilateral assistance beyond HIPC, and MDRI debt relief at the completion point reduced Togo's external debt burden significantly. The LIC DSA, however, indicates that Togo is at moderate risk of debt distress post-HIPC completion point and debt vulnerability will depend on strong and continued efforts to mitigate the risk of adverse shocks and prudent debt management. Togo's debt dynamics are particularly sensitive to lower growth, export shocks devolving from fluctuating commodity prices and lower concessionality of new financing. These results highlight that positive debt dynamics after the completion point depend on pursuing sound fiscal policies, especially a prudent debt strategy and sustainable fiscal balances, and on promoting economic growth, especially exports, through reforms of the business climate and key sectors. D. Business Climate and Competitiveness 16. The business environment in Togo shows many weaknesses. Despite the Government’s commitment to move ahead with reforms to improve the investment climate and support the rehabilitation of the private sector, the pace of implementation has been very slow. A new investment code has been revised but not yet adopted by the Parliament, and a new Free Zone Law has been revised and approved. The business climate suffers from heavy tax burden, an opaque tax administration, difficulties in accessing finance and burdensome (and expensive) process to create a company. According to the 2012 Doing Business assessment, the country ranks 162 out of 183 countries. Despite the constrained business environment, however, Togo has an enormous potential and this is attracting increased levels of donor and investor involvement with large scale projects being implemented in the country. This includes the launching last year of the first pan African private airline “Asky� and the signing, in December 2011, of the single largest private sector investment in the country for the construction of the Container Terminal at the Lomé port. This financing, arranged by IFC, includes a large consortium of DFIs (IFC, DEG, FMO, AFD, ADB, China Development Corporation), and is 4 Debt relief assistance provided by the World Bank totaled USD 665.7 million of which US$ 129.1 million were arrears clearance and US$ 536.6 corresponded to MDRI. -7- sponsored by the Geneva-based Mediterranean Shipping Company (“MSC�). The Government has embarked on reforms especially on the simplification of enterprise creation through a one- stop shop (Business Formality Center) but these efforts need to be deepened to have an impact. In addition, Togo is setting up a public-private sector consultation mechanism through a Presidential Investors’ Council to accelerate reforms. The IDA-supported Private Sector Development project is supporting these reforms. It is also supporting establishment of a free trade zone to help boost the private sector. Topic Rankings DB 2012 Rank DB 2011 Rank Change in Rank Starting a Business 174 169 -5 Dealing with Construction 146 143 -3 Permits Getting Electricity 92 88 -4 Registering Property 162 160 -2 Getting Credit 126 152 26 Protecting Investors 147 145 -2 Paying Taxes 161 157 -4 Trading Across Borders 98 98 No change Enforcing Contracts 151 151 No change Resolving Insolvency 93 89 -4 Overall 162 158 -4 17. Another key weakness to competiveness is related to very weak managerial capacities among Togolese companies (especially MSMEs), as a consequence micro and small enterprises’ employment growth appears to be particularly weak. Accordingly, in order to promote job creation, the Private Sector Development project is supporting the development of entrepreneurial capacities of 3,000 MSMEs through a package of complementary interventions including managerial training, mentoring and matching grants. E. Social Context 18. The extended period of socio-political crisis of the past two decades had a negative impact on Togo's social indicators. As a result, poverty has become pervasive in Togo. Based on the Core Welfare Indicators Questionnaire (CWIQ) survey of 2006, the latest year for which figures are available, about 61.7 percent of the population lived below the poverty line of about $400. According to the data, poverty is essentially rural with a poverty incidence of 74.3 percent in the countryside, accounting for 79.9 percent of the total poor population. In urban areas, the incidence of poverty is 36.7 percent, representing 20.1 percent of the total poor population. In geographical terms, the poor population is concentrated particularly in the maritime and Plateaux regions which alone have a little less than half the total poor population (44.6 percent). The incidence of poverty is particularly high in Central, Kara and Savanes regions with the latter region having the highest incidence at 90.5 percent. 19. Togo was severely affected by the rise in oil and food prices as well as the global recession of 2008/09. The impact was compounded by severe flooding in 2008 and 2010, and -8- these factors seem to have combined to worsen poverty from the already high levels reported by the CWIQ surveys of 2006. In order to have a better idea of the current levels and trends of poverty, following the completion of a new CWIQ survey towards the end of 2011, the Bank would prepare technical notes on poverty and gender that will: (i) provide assistance to the National Statistics Directorate in preparing robust poverty estimates and a poverty profile that will include gender disaggregated analysis; (ii) a poverty map that is able to identify the worst pockets of poverty; (iii) highlight the relation between real sector reforms and inclusive growth in particular with respect to cotton, telecommunications, land and the business environment; and (iv) develop tools that enhance transparency and the ability to better monitor the implementation of the PRSP. The technical notes on gender would focus on women’s access to land and this will be complemented by the findings of a qualitative study on economic decision-making in the household conducted in FY11 in four communities in Togo. These products are expected to provide important inputs for the Vision 2030 and the PRSP-2. 20. Expenditures on health, education and social programs have been far below regional averages, largely reflecting low external assistance and poor expenditure prioritization. Thus, though some progress has been achieved toward reaching the Millennium Development Goals (MDGs), notably, the goals of universal primary education and the combat of HIV/AIDS, Togo is unlikely to meet about six of the eight goals by the 2015 deadline. 21. Recent surveys show that in the health sector, mortality is higher among women. This is consistent with one of the main findings of the 2012 World Development Report on Gender Equality and Development that underlines high female mortality levels as one of the major gender gaps that need to be addressed. In addition, access to health facilities varies widely depending on the region and the state of poverty. Despite a few signs pointing to some recent improvement in maternal health, it appears very unlikely that Togo would achieve MDG 5 concerning the improvement of maternal health as well as the goal of reducing child mortality which seems to be out of reach. Many constraints remain to be addressed to improve the performance of the health system, including strengthening the capacity of the ministry both at central and decentralized levels, and increasing the overall financing of the health sector and improving access of the poor to quality health. 22. Over the last two decades, education expenditure has followed a downward trend, but Togo achieved an important milestone in early 2010 by qualifying for support under the Education for All initiative, after developing and adopting a credible and financially viable Plan for the education sector. Key challenges include persistent geographic and gender disparities, low quality of education, and the need to further define measures to address issues in higher education and vocational training. Overall, achieving the MDGs in education remains a significant challenge and further progress in this area will require accelerating and sustaining economic growth and strengthening policies designed to improve coverage, quality and delivery of basic services. 23. Unsustainable management of land and forest exacerbates erosion and has intensified climate risk especially that of flooding. Togo still largely depends on its productive natural capital for the country's food security and well-being of the Togolese population. Thus, efforts to reduce such practices and their impact on agricultural production and rural livelihoods -9- should be part of the strategy for poverty reduction. Like most countries in West Africa, Togo has suffered from heavy precipitation and flooding which is a recurring phenomenon over the past years. While Togo is no stranger to flooding (there have been six major floods in the last ten years), last year, in October 2010, heavy rainfall caused wide-spread flooding in Togo, affecting over 83,000 people in both urban and rural areas mainly in low-lying pockets of the capital Lomé. With the persistent threat of climate change, it appears that flooding will be an annual occurrence, requiring longer-term solutions. The proposed Bank assistance strategy would therefore include programs to address ecosystem service restoration to contribute to mitigating natural disasters and to assist the country to implement in a harmonious manner its national strategy for disaster risk reduction. F. Key Development Challenges and Opportunities 24. Togo continues to face several challenges and constraints in its development effort. While the peaceful outturn of the 2010 presidential elections clearly improved the socio-political outlook, and chances for success of the ongoing economic reforms, the several years and prolonged period of political instability, the weak economic and public financial management, have so far negatively affected the country's economic performance and dramatically reduced living standards for large segments of the population. 25. Fostering private sector involvement in the development of key economic sectors is essential for overcoming Togo's key constraints on growth, including high prices of imports, governance, and poor infrastructure. The business climate in Togo remains very poor, even when compared to countries at the same level of development. Access to credit constitutes one of the biggest challenges for the private sector in the country and impedes enterprise development. Weaknesses are also noted with regards to the fight against corruption, protecting investors, and starting a business. IFC, in collaboration with the World Bank and other development partners, would combine advisory, technical assistance, and investment operations to introduce innovative ways to mitigate risk, help improve the investment climate, and strengthen the financial sector. It will also support private participation in infrastructure through PPPs, facilitate the revival of agribusiness, advise and participate in investments in the real sector, as well as support the emergence of small and medium-size enterprises linked to the bigger projects being implemented in the country and mobilize local and foreign investors. The Bank and IFC are also working with Government to implement a program focused on reforms to improve the business climate and improve Togo's Doing Business indicators. Two IDA-supported projects aim at supporting restructuring of Togo's financial sector, repositioning of the free trade zone, improvement of the business climate and promotion of entrepreneurship. 26. The weak national capacity is a major impediment to development in Togo. There is a lack of sufficient professional staff in key ministries and weak institutional capacity and coordination in the wake of the long recent history of socio-political instability and suspended foreign assistance. Since the previous ISN and to date, technical assistance and policy advice has been provided under IDA operations and by other donors: the LICUS grant for Economic Recovery and International Reengagement, the EU-funded PEMFAR, Country Economic Memorandum, the ongoing Financial Sector and Governance and Private Sector Support Projects, the Private Sector Revitalization Trust Fund and Agriculture Support Project. The - 10 - Government has recently requested further scale-up of this support. The Bank will help Government develop an overall strategy for capacity development as well as for public investment, the latter with IMF support. The IFC will increase its investments and advisory services support to SMEs and strengthen the financial sector and increase access to finance. An important contribution to the government's efforts would be the setting up of a distance learning center in Togo over the next 2-3 years. The distance learning center will support the upgrading of professional skills, in country, and facilitate "South-South" knowledge sharing and peer-to-peer learning. Togo will also benefit from an economic research center which was established in Lomé through the African Capacity Building Foundation. 27. Two decades of underinvestment in infrastructure including transport, energy, and telecommunications have led to high production costs and reduced competitiveness. Electricity rates are well above the regional average, which jeopardizes Togo's competitiveness in the manufacturing industry where electricity is a key input. With respect to communications, costs for mobile services are higher than other countries in the sub-region where the sector is open to full competition. The lack of direct access to international communications infrastructure coupled with the current market structure in Togo have also resulted in high costs for internet communications in general and broadband access in particular. For the road network, major construction and rehabilitation works are necessary, as well as effective maintenance. The importance of the Port of Lomé to the economy of Togo cannot be overemphasized and improvements aimed at maintaining its competitiveness are crucial. In light of changes and reforms in the sub-region, greater streamlining of procedures and their incorporation into the establishment of a one-stop shop for all import/export operations are taking on a sense of urgency. To strengthen competitiveness, the Government is investing in infrastructure, including in a Container terminal at the Port of Lomé, and taking measures to reduce factor costs, by improving road transport, port services, energy services, and opening up of the telecommunications sector. 28. Togo needs to continue reforms and investments in the key sectors driving economic growth. To help Togo restart the engines of growth, the recent CEM suggests the following priority areas for focus: phosphates, cotton, food crops, expansion of the Togo Free Zone, investment in port infrastructure and improvement of port services, and promotion of legitimate transit and re-export trade. a) Cotton remains one of the country's main cash crops, but faces several structural bottlenecks that limit its profitability. Cotton's share in exports declined from 19.3 percent of total exports in 2003 to 1.7 percent in 2010. The decline in cotton production was the result of weak management and poor governance in the former cotton company (SOTOCO), the accumulation of arrears to producers and of financial losses by SOTOCO. Several reforms have been undertaken mainly focusing on clearing debts, creating a new cotton company, 60 percent Government-owned and 40 percent farmer- owned (the New Cotton Society of Togo – NSCT) and adopting a pricing formula linked to the world cotton price in 2009. Looking forward, there are several strategic measures that will require action, in particular: (i) building capacity of the producers’ association to transfer the sector management responsibility to its stakeholders; (ii) attracting a strategic investor for the NSCT that will provide technical and management expertise and funding; - 11 - and (iii) restoring farmers' confidence in the sector to take advantage of favorable international cotton prices. b) The phosphate industry has suffered from years of mismanagement and decline, and now requires swift actions for its rehabilitation and structural transformation. In the 1990s, Togo exported more than 3 million tons of phosphate. Current production is, however, only around 800,000 tons. Phosphate exports fell from CFAF 42.5 billion in 2009 to CFAF 34.3 billion in 2010 as a result of sector weaknesses and falling international prices. The Société Nouvelle des Phosphates du Togo (SNPT) has registered regular losses that have resulted in a lack of maintenance and repair. Over-staffing and poor governance have aggravated the situation. During the past few years, the government has initiated reforms to address legal and institutional issues affecting the sector and to increase the transparency and governance including getting Togo to achieve EITI candidate status in October 2010. While current reserves are nearing exhaustion, exploiting the new untapped carbonated reserves require new technological skills, improved management and additional investment as well as adequate human resources and environmental management skills to compete in the international market. A strategic and financial audit has suggested several strategic options, including partial-to-full privatization, attracting a strategic private partner, restructuring and spinning off non-core operations. To address the challenges of the sector, it is important to deepen the initiated reforms including: (i) updating the regulatory framework; (ii) improving internal controls and corporate governance; (iii) streamlining the organizational structure and optimizing the utilization of human resources; (iv) introducing CSR standards to address the social and environmental concerns of affected populations; and (v) concurrently conducting a competitive search for a strategic partner for investment in the sector's rehabilitation to develop the carbonated reserves and launch the industrialization phase (the production of phosphoric acid). c) Several bottlenecks constrain the competitiveness of the Port of Lomé. Created in 1967, it is the only deep-water port in the region. It enjoys financial autonomy and autonomous management. In 2001, the Government turned over to the private sector responsibility for the handling of conventional traffic at the port (four berths) and at the container terminal (two berths). However, there are several bottlenecks that dent the port competitiveness compared to the other ports in the region, in particular: (i) lack of synergy between the actions of the port and its concessionaires; (ii) insufficient marketing and promotional activities, and disappointing customer service; (iii) high rates for cargo storage and slow loading and unloading of non-containerized cargo; (iv) congested traffic inside the port; (v) insufficient organizational and management capacity to enable the integration of the new projects into the port infrastructure; and (vi) the port's regulatory regime; although it has the statute of a (state-owned) commercial company, it is under the "supervision" of several ministries, and many strategic decisions are taken without consulting the Port Authority. Some of these issues are being tackled, such as the capacity issue through the construction of the up-coming private container terminal. An updated Port Master Plan was finalized in June 2011 and will enable a new port development strategy based on recent traffic projections. Further actions are also required: (i) to introduce a traffic management software, (ii) to introduce a single window for all business procedures (an activity supported by the World Bank), and (iii) to - 12 - improve the operations. At the same time, the port of Lomé performs significantly better than the neighboring West Africa coastal countries, with lower costs to import and export: US$963 to import a container compared to the coastal WA average of U$1,500, and $940 to export a container compared to a WA costal average cost of US$1,263. d) Enhancing competitiveness of cocoa and coffee industries requires a comprehensive new strategy. The importance of coffee and cocoa production is significant, as this is the main source of income for around 40,000 producers. The production of coffee dropped from 15,000 metric tons in 1996/97 to around 10,000 metric tons in 2009. Similarly, cocoa production dropped from 14,500 metric tons in 1996/97 to around 8,000 metric tons in 2009. Nevertheless, the revitalization of the coffee and cocoa sectors is possible, as outlined by a new sector development plan5, revolving around the following pillars: (i) rehabilitation of aging plantations and increasing the area under cultivation with robusta coffee and hybrid cocoa varieties; (ii) introduction of an efficient support arrangement to assist replanting/grafting and with expanding areas under cultivation, improving plantation maintenance and cultivation practices, including the improvement of the quality; (iii) introducing a structure to define and ensure compliance with the regulatory framework replacing the Coffee and Cocoa Sector Coordination Committee by an inter-professional body responsible for coordinating sector activities; and (iv) improving sector infrastructure such as rural access roads and storage infrastructure and equipment. The IDA-supported Agriculture Sector Support Project designed assistance to the cocoa/coffee sector to implement the results of the new sector development plan. e) Other promising value chains with growth potential are rice and poultry, whose opportunities lie in replacing some imports and responding to rising demand stemming from urbanization and higher incomes. Potential within other food production chains (maize, cassava and other products) exists, but will require both the encouragement of exports to the sub-region for crops which already satisfy local demand and efficient import substitution. Priority investments in food production chains are being addressed by three new agriculture operations designed and approved together in FY11: the PADAT6 project, the IDA-funded PASA7 project and the regional WAAPP-1C8 program. These projects derive from the CAADP process in Togo and are implemented under the PNIASA9 umbrella. As a general rule: (i) PADAT targets small farm productivity enhancement of strategic food crops (rice, maize, cassava) and the construction of rural infrastructures (including rural roads, water management infrastructures, post-harvest storage facilities); (ii) WAAPP-1C is geared at research and technology development/dissemination activities for food crops and livestock (including capacity building of the relevant ICAT and ITRA agencies); and 5 The Togolese Government recently initiated the preparation of an emergency recovery program for the coffee/cocoa sector. In 2010, the World Bank supported a study that helped define the details of this recovery program. 6 Projet d’Appui au Développement Agricole du Togo (IFAD/GAFSP/BOAD/BIDC) 7 Projet d’Appui au Secteur Agricole (IDA/GAFSP/GFRP) 8 Regional West Africa Agriculture Productivity Program 9 Programme National d’Investissements Agricoles et de Sécurité Alimentaire - 13 - (iii) PASA combines emergency activities for the recovery of the livestock sub-sector (small ruminants and poultry) with medium to long term structural actions to support other productive sub-sectors (strategic food and export crops, freshwater fisheries) through better organized food chains, processing and related market access. Other donors are expected to join in the future and help support additional investments outlined by the Togo-PNIASA. f) Togo's export processing zone has attracted a growing number of enterprises, but has also been confronted with difficulties, requiring a new strategy to attract increased investment. In spite of the country's political instability, the number of enterprises in the zone has gradually grown, with total employment of over 9,000, and output of around USD 300 million in 2008. Exports in the same year were equal to USD260 million. Clinker and chemical and plastic products account for half of total exports, while 81 percent of exports go to ECOWAS states and 14 percent to other African countries. The main explanation for the success of the zone appears to be linked to: (i) the generous fiscal regime; and (ii) the opportunity to export duty-free into the regional market. The real net benefit to the economy has, however, been questionable.10 A repositioning of the export processing zone is necessary to promote labor-intensive exports and attract new investment to generate new jobs rather than shuffling investment between countries within the region. This would build on the comparative advantages that Togo has regarding its low-cost labor and port. A Private Sector Development Support Project is supporting the Government of Togo to develop a new Free Zone, with a focus on ensuring that the new Zone yields important economic benefits to the country (notably in terms of revenue contribution and job creation). III. GOVERNMENT’S DEVELOPMENT PROGRAM A. Government's Poverty Reduction Strategy 29. Togo's first Poverty Reduction Strategy was adopted in July 2009 and discussed by the Boards of the IMF and IDA in November and December 2009, respectively. It lays out the strategy for growth and poverty reduction for the period 2009-2011 based on four strategic pillars: (i) strengthening of governance; (ii) consolidation of the bases for strong and sustained growth; development of human capital; and (iv) reduction of regional imbalances and promotion of community development. For these pillars, the PRSP integrates cross-cutting themes related to the environment, HIV/AIDS, gender and human rights. Taking into account the lessons learned during the I-PRSP implementation, the PRSP lays out a strategy that aims at promoting sustainable growth, enhancing capacity, and at working towards strengthening the newly restored social consensus and entrenchment of the principles of good governance. 10 Issues with the zone have included allegations of labor exploitation, companies which close when their tax holidays expire, fiscal evasion through leakages into the local market, the lack of transparency, and the retroactive change in the fiscal regime in the 2009 budget that put at risk a number of investments. - 14 - B. Implementation of the PRSP 30. In November 2010 and December 2010, respectively, staff of the IMF and the World Bank finalized a Joint Staff Advisory Note (JSAN) covering the implementation Progress of the PRSP and prepared a Completion Point Document for the Enhanced HIPC Initiative. The PRSP and JSAN confirm that progress has been achieved during the first year in a number of areas but progress has been uneven across pillars. Good progress was achieved in consolidating macroeconomic stability and public finances, in the implementation of actions required to become an EITI candidate as well as completion of the HIPC triggers. In the domain of governance, the APR cites progress in the area of procurement and external controls, while noting that many challenges remain including strengthening the capacity of entities for internal and external controls and enhancing budget planning and execution. Improving the environment for private sector development is pivotal to promote growth, but key reforms were yet to be implemented, namely the national "one stop window" at the port and the approval of key legislation. With regard to human capital, remarkable progress has been achieved in the education sector, but full implementation of the health sector plan may prove difficult due to capacity and financial constraints. Reforms have been undertaken in key sectors of the economy, including in cotton and phosphates, but they need to be deepened. Other areas that would require emphasis going forward include: moving swiftly with the decentralization agenda; pursuing reforms in the agriculture sector, including strengthening systems for sanitary and quality control, and supporting the restructuring of the rural economy. Since progress in reducing poverty continued to be hampered by limited infrastructure and capacity and financing constraints, the Togo Government would do well to prioritize its efforts, according to their catalytic role and impact on poverty reduction. IV. WORLD BANK GROUP INTERIM STRATEGY A. Implementation of the Previous ISN 31. The previous ISN (FY08-FY10) discussed by the Executive Directors on May 29, 2008, supported implementation of the three pillars of Togo's Interim PRSP. The ISN was aimed at helping Togo recover from a long period of instability and suspension of aid and begin laying the foundations for sustained, shared growth over the medium term. It was accompanied by an Economic Recovery and Governance Grant, ERGG (a Development Policy Operation for US$167 million) that facilitated the clearance of Togo's arrears to the Bank and budgeted fiscal needs in the period following arrears clearance. 32. Progress towards the first ISN objective of improving governance and transparency has been satisfactory. There were three main programs: (i) reform of public expenditure and financial management, (ii) the promotion of good governance and transparency in state enterprises, and (iii) strengthening the financial sector. The various reforms and measures undertaken with Bank and IMF support under this pillar in particular enabled Togo to reach the Decision Point (2008) and finally the Completion Point (2010) under the HIPC Initiative. Results included: - 15 - a) better control of budget execution, with the establishment of an integrated system of budget execution, and a unit for financial audit and inspection; b) better institutional framework for public procurement including the adoption of a procurement code, guidelines reflecting WAEMU standards, and contract awards regularly published for transparency; c) reforms in the cotton sector leading to the creation of a new cotton company, with strong participation of producers, and new mechanisms put in place to improve management of the sector; d) a strategic plan for the development of the phosphate industry developed and adopted, a new phosphate company created, and steps taken to improve management and transparency in the sector, with Togo becoming a candidate country in the Extractive Industries Transparency Initiative (EITI); and financial sector restructuring of the banks was initiated. 33. With regard to ISN Objective 2 - Promotion of economic recovery and sustainable development, good results were achieved with IFC supporting important investments in the port and energy sectors. These included: a) Preparation, adoption and start of implementation of the strategic development plan for the Port of Lomé, and improvement of key port services; b) Improved urban infrastructure: cleaning of 70 km of drains (of 42 km planned) to limit flooding in some areas of Lomé, construction and paving the second lane of the Boulevard de l'OTI; launching extra studies and tenders for the rehabilitation of urban roads, and setting up mini-autonomous systems to supply drinking water in Lomé; c) Rehabilitation and strengthening of the Togo Electric Energy Company (CEET) power grid (supply and installation of transformers, charts, and repairs to 75 existing transformer stations), and actions to promote energy efficiency and improved availability of electricity; d) A study leading to adoption of a plan to clear domestic arrears and payment of domestic debt. 34. Several analytical and policy studies accompanied the programs. The CEM/Diagnostic Trade Integration Study completed in 2010 provided in-depth analysis of economic sectors, including transport, re-exports, and the export processing zone. The 2009 PEMFAR and 2008 PEFA provided valuable input to developing the Government's public finance management program. A Private Sector Revitalization Trust Fund (FY10) paved the way for the preparation of a Private Sector Support project (FY11). 35. The IFC provided support for a Greenfield transshipment container handling terminal / port being developed by Lomé Container Terminal ("LCT"), a company affiliated with Mediterranean Shipping Company ("MSC"). The Project is to construct, develop and operate a new state-of-the art transshipment container handling in Togo. Ideally located to serve as a transshipment hub for the African west coast, the Project will be the first modern container - 16 - transshipment hub in WCA capable of handling today's large container ships. This will enable shipping lines to deploy larger container vessels in WCA, provide the shipping lines and the region with economies of scale benefits enjoyed elsewhere in the world and significantly lower transportation costs for the Terminal's customers. The Concession Agreement between the Sponsors and the Government is still being finalized. In support of strengthened reforms in the power sector, IFC approved and committed (March 31, 2010) a $14 million equity investment with Contour Global, an American Sponsor, for the construction of a 100MW IPP in Lomé which is already operating using Heavy Fuel Oil (HFO) until gas becomes available from the West Africa Gas Pipeline. The Contour Global project is currently one of the few large IPPs, with experienced international partners, being implemented in West Africa and represents one of the largest foreign investments in the country for years. Since starting operations in October 2010, the plant’s availability has exceeded 98%. However, dispatch has been slightly lower than expected due to an increase in cheap imports from Nigeria & a good hydrology year leading to above average levels of hydropower. Although the plant had low levels of dispatch, it is regarded as a reliable provider of electricity, complementing supply for the whole region when needed and sometimes up to the full 100MW in peak periods. 36. In addition, under the umbrella of FIAS Investment Climate Advisory Services Program, the WBG has been supporting OHADA member countries since 2007 in modernizing the OHADA laws ("Uniform Acts") and developing registries for companies and secured transactions. In December 2010, the OHADA Council of Ministers adopted two revised laws (General Commercial Law and Secured Transactions Law) and new regulations for the modernization (including computerization) of registries for companies and secured transactions (RCCM). The Program supported the organization of a regional training on the revised laws, which took place in Porto-Novo in July 2011. Four people from each member-State (+DRC) benefited from this training and are now in charge of duplicating it at national level. The Program is planning for further adoptions of revised laws by the OHADA Council of Ministers: Insolvency and Company law in June-July 2012; Arbitration, Debt recovery, and Transport of goods by road in June 2013. 37. Good results were achieved under the third objective of the ISN to support urgent social needs. To help Togo deal with emergencies (including flood-related), the Bank went beyond what was expected and supplemented the Community Development project by additional financing under the Crisis Response Window (CRW) and the Global Food Price Response trust fund. The Bank also provided additional financing for the 2010 floods. The main activities and results were as follows: a) A Community Development Project (CDP) of US$17.2 million, launched in 2009 received two tranches of additional financing in FY09/10 which brings it to US$ 32.9 million. Achievements include: (i) social and community infrastructure (education, health, rural roads, latrines, wells, and markets), (ii) income generating activities, (iii) a school feeding program, (iv) a food security program to respond to the global food crisis, and (v) a labor-intensive works program. The assessment of the school feeding project, completed in FY2011, shows that it goes far beyond the expected results of an emergency safety nets mechanism by having also positive impact on selected education indicators, - 17 - nutritional status of children, as well as household resources and the local economy. An evaluation of the public work project is planned for FY2012. b) Following outbreaks of bird flu recorded in Togo since June 2007 and which severely affected the rural poor whose income depend heavily on poultry farming, the Bank funded a program to fight avian flu including the creation of a centralized unit for the management of avian influenza and an establishment of an interdepartmental committee on avian influenza. c) An Education for All/Fast Track Initiative (EFA/FTI) Program ($45 million) was approved in FY11. The project aims to facilitate access to primary school and improve the quality of teaching and will be implemented during the period of the proposed ISN. d) Last year’s heavy rainfall (October 2010) had caused wide-spread flooding in Togo, affecting over 83,000 people (mostly very poor) in both urban and rural areas mainly in low-lying pockets of the capital Lomé. The Government of Togo called upon the World Bank to support it in conducting a Post-Disaster Needs Assessment (PDNA). The PDNA (completed in FY11) achieved the following: better understanding of the impact of the 2010 floods and further strengthening national awareness and knowledge of the phenomenon; (ii) develop a reference document that brings out prominently the impacts of floods on national economy, particularly the country's GDP; (iii) develop an appropriate program of recovery, rehabilitation and reconstruction after the floods; and (iv) identify lessons learned and derive policy recommendations and appropriate actions at all levels of intervention. The PDNA pointed out an important need of assistance at the country level to help for a harmonious implementation of the national strategy for risk reduction and disaster. B. Lessons Learned 38. The following lessons emerged: a) Community development is an effective tool for achieving quick results and for fighting poverty. The results achieved under the LICUS-financed Emergency Program for Poverty Reduction (EPPR) and the follow-up Community Development Project (CDP) have shown that community-driven interventions can produce visible impacts within a short time. The social and political destabilization and mismanagement of the economy of the 1990s and the first half of the 2000s resulted in little to no socio-economic investments in rural areas and a worsening of the living conditions of the rural population. The poverty- fighting impact of revenue-generating activities in community-driven programs supported under the EPPR and the CDP has demonstrated the need to continue with this type of approach and would be supported under the proposed ISN. b) Close collaboration between the Bank and other donors, especially the Fund, and commonality of purpose between donor institutions and Government greatly enhances the chance for success. The policy and structural reforms supported under the ISN were embedded in the Government's own reform agenda articulated in the Government's I- PRSP and taken up in the full PRSP. These same reforms were part of the ECF program - 18 - agreed between the Government and the IMF in close collaboration with the Bank and other donors. This close partnership with the Fund and other donors is expected to continue and would be deepened during the period of the proposed ISN and as Government finalizes its second PRSP. c) Structural reforms have a higher chance of success if accompanied by operations providing financing for technical assistance or investment. The Bank used a combination of development policy operations (supporting policy and structural reforms) and specific investment operations to support the Government's economic recovery and reform program during the ISN period. Thus, during the period of the proposed ISN, the Bank would continue to use a combination of development policy and investment operations complemented by analytical work, and the efforts of other active donors in the reform areas. d) Given the generally limited capacity within the public sector in fragile countries such as Togo, it is important to be selective in the choice of policy and institutional reforms, and to keep operations simple. Similarly, understanding the political economy of reform is a key element in enhancing the chances of success of such reforms. Capacity building components embedded in investment operations and through policy support are useful to help support the limited local capacity. Under the proposed ISN, the reform agenda will continue to take into account Government's implementation capacity. The ISN will therefore support simple but effectively targeted operations supported as necessary by punctual outside assistance to help deepen the reforms in public financial management and in the country's critical sectors (phosphates, cotton, energy and telecommunications) as well as well-defined investment programs that would be simple to implement. V. THE BANK GROUP INTERIM STRATEGY (FY12-13) A. Guiding Principles of the ISN 39. Be selective and focus on results. Selectivity will be the guiding principle in the context of the limited IDA envelope, Government's absorptive capacity and the Bank's comparative advantage vis-à-vis other development partners. The Bank will focus on activities that (i) induce broad-based growth; (ii) improve access to basic services and ensure greater efficiency of public expenditures; and (iii) promote better governance. 40. Results from a Client Survey and consultations conducted in 2011 have highlighted priority areas for Bank Group support. These include: growth acceleration programs comprising agriculture and private sector development (including employment promotion); (ii) basic infrastructure development and community development programs in urban and rural areas; and (iii) governance. A new area of focus, climate change and disaster management, requested by the Government following the 2010 floods, will be supported through trust funds mobilized under the Global Facility for Disaster Risk Reduction (GFDRR). Regional programs in agriculture, telecommunications and energy will leverage the important financing needs in those sectors. - 19 - 41. Promote donor harmonization and coordination: In November 2011, the government initiated a framework to better coordinate development actions and donors’ activities. Thus, sectoral thematic groups have been formed with heads of sector. The Government has asked the Bank to serve as a catalyst to mobilize other partners and sources of finance. Under the leadership of the Government, the Bank will help leverage other donor financing (health, social protection, education) and additional private investments (energy, roads, the port) to complement its support, particularly in sectors where it is not directly present. Trust funds will continue to be mobilized to step up support in the social sectors where UNICEF and WHO are the lead donors. The Bank will also pursue stronger partnerships with IFC and MIGA, and use its analytical services to broaden and inform the reform program and development dialogue. 42. Ensure adequate dissemination of analytical work: The 2011 Client Survey revealed the need to strengthen communication and outreach efforts with key constituencies and various stakeholders. A comprehensive communication strategy and action plan is being developed to communicate key results and the impacts of the Bank Group programs on the beneficiary populations and to ensure dissemination of the Bank’s knowledge products. Trust funds will be solicited to (i) support and promote the social accountability initiatives of some leading CSOs, (ii) promote public debate around development programs, and (iii) to engage more strategically with key stakeholders. The ISN will also support and help Government develop appropriate instruments as part of government’s efforts to better communicate its development programs. B. Fit with the Africa Regional Strategy 43. The Proposed ISN is consistent with the objectives set forth in the new Africa Regional Strategy, which was discussed by the Executive Directors on March 1, 2010. The proposed World Bank Group assistance for Togo during FY12/13 aims to raise competitiveness and employment. (ISN Objective 1). It supports reforms and public investment in areas of highest growth potential (including energy and telecommunications), supports a healthy and skilled workforce, as well as regional integration. It addresses vulnerability and resilience issues through support to climate change and adaptation and social protection and inclusion (including gender). Furthermore, a foundation of the proposed ISN is governance and public sector capacity, and the program aims to support stable macroeconomic policies and to improve the investment climate in order to attract investment, know-how and promote job creation. 44. Reducing Vulnerabilities and Improving Resilience: This is supported under Objective 3 of the ISN. The Government of Togo is concerned with promoting inclusive growth (the theme of PRSP-2). Progress in meeting social needs has stagnated due to the past 15 years of international isolation; in light of the fiscal constraints, it is vital to improve social services for the populations in cost effective ways, especially to the most vulnerable. Social needs are expected to become even more acute due to the global oil and food price surges. During the period of the ISN, a new CDD/Safety Net project is included in FY12. It will benefit from lessons of the safety net mechanisms piloted under the ongoing project and pilot a cash transfer program. The safety nets system will be an integral part of the social protection policy that the government is in the process of developing with the technical and financial support of donors (World Bank, UNICEF, UNDP and ILO) and that is expected to be officially adopted in 2012. In addition, the Bank is supporting the PRSP process through technical assistance to the - 20 - preparation of a poverty profile and poverty maps which would include a gender perspective. Instead of a Poverty Assessment, a series of Poverty Policy Notes demonstrating the link between inclusive growth and real sector reforms would be prepared. A Gender policy note on women’s access to land would build on a background study on household welfare and gender roles completed in FY11. Finally, in response to the 2010 floods which are a recurring phenomenon, a Post Disaster Needs Assessment (FY11) led to the preparation of an Integrated Disaster and Land Management Project (FY12). 45. Improving Governance and State Capacity (Africa Strategy Foundation Pillar): A detailed program is included under Objective 2 of the ISN. The Bank Group, in coordination with the IMF and other donors, would support reforms started since 2008 through the Financial Sector and Governance Project and the DPOs to improve the financial sector, public financial management and economic governance and transparency in key sectors. IFC will continue its investments and advisory services support to SMEs and strengthen the financial sector and increase access to finance. 46. Efforts will be made to pursue enhanced access to information, strengthen citizens’ voice: Exchanges will be facilitated between Government departments responsible for the reform program and the press as well as civil society organizations. In particular, the Bank proposes to create a series of monitoring briefs to reflect ongoing debates. Topics would vary but could include the abolition of fuel prices subsidies but also the transparency of the budget process. 47. The Government has requested stepped-up support for building state capacity for longer-term strengthening of certain key functions in the national administration. The Bank will explore partnerships with other donors and availability of trust funds to support capacity building programs. It will facilitate access to specialized skills, such as those needed to negotiate mining contracts and the promotion of knowledge sharing and peer-to-peer learning. An IDF grant proposal is under preparation to help strengthen M&E capacity and practice in the public sector in Togo. A Use of Country Systems is planned for FY12 and a Trust Fund to support statistical capacity building. A medium to LT strategy for capacity development would be prepared for the next Country Partnership Strategy. C. IDA Financing Envelope and World Bank Group Instruments of Engagement 48. IDA Envelope: Togo received an indicative IDA16 allocation of SDR 60 million (about US$90.1 million equivalent11) to support IDA operations in FY12-14. This includes a firm allocation of SDR 21.7 million in FY12 and indicative allocations of SDR 20.4 million in FY13 and SDR 17.9 million in FY14. Actual allocations in FY13/14 will depend on: (i) total IDA resources available in the respective fiscal year in IDA16; (ii) the country’s performance rating; (iii) the terms of IDA's assistance to the country (grants or credits) in the respective fiscal year based on its debt sustainability position; (iv) MDRI debt relief from IDA that the country 11 This is based on the IDA16 replenishment exchange rate of 1 SDR=US$1.50233. The exchange rate for each IDA operation depends on the applicable prevailing exchange rate at the time of project approval. - 21 - receives; (v) the performance and assistance terms of other IDA borrowers; and (vi) the number of IDA-eligible countries. 49. Togo’s IDA16 allocation is lower than its IDA15 (FY09-11) envelope prior to any reallocations (SDR 79 million) mainly because Togo started to receive MDRI debt relief from IDA in IDA16. After reaching the HIPC Completion Point in December 2010, in addition to HIPC debt relief, Togo also starts to benefit from MDRI debt relief from IDA at about US$41 million a year in FY12-14. The amount of MDRI relief is to be deducted from new IDA allocations up to 30% of the gross allocation,12 and thus the IDA16 allocation net of MDRI declines. Moreover, Togo is in the phase-out period of the enhanced re-engaging allocations and this also means gradual reduction of its allocation to the regular level as determined by the Performance-Based Allocation by FY15. Given the country’s urgent needs for IDA assistance, the Bank will work with the authorities to fully utilize the flexibility in IDA allocations and front-load by up to 30% of its annual allocations in FY12 and FY13. This would bring the total IDA resources available to Togo during the two years of the ISN period to SDR 54.7 million (about US$82.1 million). In the final year of IDA16, if Togo continues to show good performance as reflected in its CPIA and IDA portfolio rating, the Bank will work with the authorities to explore the possibility of additional regional reallocations as Togo received in FY11. 50. Regarding the terms of financing, the latest DSA for Togo performed in November 2010 assessed the country as facing a moderate risk of debt distress after it has benefited from HIPC and MDRI debt relief. As a result, in FY12 the country will receive 55 percent of its FY12 IDA allocation as credits and 45 percent as grants. The terms of IDA financing for FY13 and FY14 will be confirmed based on latest DSAs available at the time when the allocation exercise for these years is performed. 51. Investment Projects will have a key role as well as budget support. At the investment level, the Bank will continue the successful CDD and Urban Infrastructure operations which would allow the focus on developing a relatively narrow range of high quality programs delivering visible results and then ensuring sustained support. An FY13 Energy Project aims to provide Government with capacity strengthening, policy and institutional support, as well as investments in distribution of electricity. Yearly DPOs will be continued building on the FY11 Economic Recovery and Governance Grant. The next DPOS would be part of a series (5-7) and will continue to focus on the crucial area of state capacity and accountability by supporting Government's current reform efforts in the areas of improved budgetary expenditure and expenditure management, and in the key sectors of cotton, phosphates and energy. The next ERGG series plans to expand work on enhancing transparency (including work with CSOs/parliament) and improving the tax administration and to also include reforms in banking, telecom, logistics, port, EPZ, infrastructure, the business environment and skills development and training (including formal education). These DPOs will be firmly embedded within a broader effort by the international community, including the IMF's three-year ECF arrangement and budget support by other donors. 12 Data on MDRI debt relief from IDA to Togo refer to estimates as of May 2011. The deduction of MDRI relief from IDA allocation is to ensure equity of treatment between IDA countries whether they receive MDRI or not and to mitigate potential moral hazard; and it is capped at 30% of the gross allocation as per IDA16 agreement. - 22 - 52. Analytical underpinnings: ESW will be critical as there has been little analytical work done in the last ten years. An Energy study is planned for FY12 which would help Government with a sound basis for decision-making on the energy options for the country. A number of ESWs are planned in FY12/13 to support fiduciary systems: a PER, a CPAR, Use of Country Systems, TA for follow-up to the ROSC Accounting and Audit exercise undertaken in FY10, and an IDF to strengthen the Accounting Profession. Instead of conducting a Poverty Assessment, this will be replaced in FY12/13 by multi-year programmatic series of demand-driven analytic/policy notes on poverty, gender and inclusive growth. Finally, technical assistance in strategic areas requiring longer-term capacity support and advisory services, including phosphates, cotton, social protection and the free zone, will be continued. 53. The ISN will build upon the Existing Portfolio. As of November 30, 2011, the IDA/GEF portfolio consists of 6 operations totaling US$ 129.7 million in commitments and an undisbursed balance of US$64.3 million (Table 2). There is an additional commitment of US$ 45 million under 2 Regional projects (Abidjan Lagos Trade and Transport Facilitation and West Africa Agriculture Productivity). The commitments exclude budget support fully disbursed through the DPOs in FY09/10 ($20 million and $16.4 million, respectively). The portfolio is supplemented by six recipient-executed Trust Funds totaling US$55.5 million in commitments (US$38.5 million undisbursed). In addition, the Agriculture Sector Support Project is supplemented by parallel financing ($28 m.) from the Global Agriculture and Food Security Program and Food Price Crisis Response trust fund. With the satisfactory result observed from the pilot use of E-signature disbursement procedures, it is planned to extend this option in FY 12 to the entire portfolio in order to accelerate disbursements from the World Bank. Portfolio performance has generally been good with all projects rated as satisfactory in their Development Objectives and Implementation Progress as of end November 2011. The FM risk rating of most projects in the portfolio is moderate. The interim financial reports (IFR) are being submitted on time to the Bank with an acceptable quality. In the last three years, i.e. FY08 to FY10, Togo achieved 100% fiduciary compliance of audited reports submitted within the fiscal year. This performance is higher than the Africa target of 90 percent. The opinions of all of the last audit reports were unqualified. Table 2: Composition of Active IDA/Trust Fund Country Portfolio (as of 11/30/11) Sector Net commitments Undisbursed % ($ million) ($ million) Agriculture 17 37.00 37.00 Financial Sector 6 12.00 5.79 CDD 15 32.90 7.8 Urban Renewal/Energy 20 43.63 30.39 Education (EFA) 21 45.00 35.55 Private Sector 7 14.10 13.73 Economic Governance 13 28.62 0.52 Total 100.00 213.25 130.78 - 23 - 54. The Bank will continue to deepen collaborative and joint initiatives with the IFC and MIGA and promotion of regional integration. 55. IFC's strategy in Togo is to:  Actively develop projects in sectors such as agribusiness, infrastructure, and manufacturing.  Forge partnerships with local banks to foster joint ventures aimed at supporting these projects with local currency financing, as well as developing micro and SME finance products to support the microfinance and SME sectors in Togo.  Support investment climate improvement by suggesting reforms aimed at facilitating investment and assisting the authorities in the design and implementation of those reforms, together with donors and local stakeholders. 56. IFC's total committed portfolio as of November 30, 2011 was US$241.2 million equivalent. This includes an equity investment of US$14 million to Contour Global Togo, a loan of US$1.6 million equivalent to Transam, and US$114 million equivalent in support of the Euro 350 million greenfield transshipment container handling terminal / port being developed by Lomé Container Terminal (“LCT�), a company affiliated with Mediterranean Shipping Company (“MSC�). 57. In addition, in March 2010, IFC committed a US$110 million equity investment in Heidelberg Cement Africa (HCA) to modernize and increase the operational capacity of the company in seven African countries, including Togo. IFC, through its Capitalization Fund and African, Latin American & Caribbean Fund, also provided Ecobank Transnational Incorporated (ETI) in June 2010 with a comprehensive capitalization package of up to US$150.14 million, US$1.5 million of which has been disbursed to Ecobank Togo under the Global Trade Finance Program. 58. IFC’s pipeline in Togo consist of the mobilization of an additional Euro 170 million (US$228 million equivalent) in support of the LCT transshipment container handling terminal / port project. 59. The Multilateral Investment Guarantee Agency, MIGA, remains open for business in Togo, offering its political risk product for investors concerned about Transfer Restriction, Expropriation, Breach of Contract and War and Civil Disturbance risks. Over the ISN period, it hopes to also make the best use of its new products, the Non-Honoring of Sovereign Guarantees and its more flexible, Small Investment Product to best serve the needs of investors entering into the Togolese market. Currently, MIGA has one active contract in Togo covering a BOT (“build operate transfer�) investment in port inspection services in the Port of Lome. Historically, it has been involved in the agribusiness sector. Supporting investment into Togo would meet MIGA's strategic priority to focus on IDA countries, and in particular (though not exclusively), MIGA would look to investment projects which would support Togo's infrastructure needs. - 24 - 60. WBI: In 2011, Togo became a member of WAAPAC, the Parliamentary program supporting the West Africa Association of Parliamentary Public Accounts Committees, and participated in knowledge exchange dialogues with other WAAPAC members on how parliamentary finance committees can adopt international good practice in their budget oversight. With the support of the WBI and the African Capacity Building Foundation, the Bank will promote South-South knowledge sharing both within Africa and with other developing countries. Distance learning technologies, such as the Global Development Learning Network, will also be developed and used for just in-time knowledge sharing. 61. Regional Integration and Trade: Improvement of the road core networks has been one of the priorities of the Government in recent years, with amounts of over US$235 million committed from multilateral and bilateral donors. This is being supported by the regional Abidjan Lagos Trade and Transport Facilitation Project. In addition, this operation supports improvement of the Lomé port efficiency and competitiveness in the sub-region by establishing a single window for international trade and assisting with Customs trade facilitation reforms. In FY11, Togo benefitted from the Regional Agricultural Productivity Program, which, in coordination with the IDA and IFAD supported Agriculture Projects, would support the Government’s national agricultural investment program with the focus on research and technology development/dissemination activities for food crops and livestock (including capacity building of the relevant agencies). In FY13, Togo will participate in the West Africa Regional Communications Infrastructure Program, which is expected to contribute to increasing the geographical reach of broadband networks and reducing costs of communications services in Togo. VI. Objectives and Expected Results of the Proposed ISN Figure 1 presents a summary of the outcomes expected from each of the three ISN objectives. The relationship between Objectives and Outcomes is described in more detail in the ISN results framework in Annex 2. - 25 - Figure 1: Togo ISN FY12-13: Objectives and Outcomes ISN Objective 1:  Deepening  Economic Recovery and  ISN Objective 2:  Improving Economic  ISN  Objective 3: Addressing  Urgent Poverty  Promoting Sustainable  Governance  and State Capacity Reduction and Social Needs Development ISN   ISN Outcome  ISN  ISN  ISN  Outcome  ISN Outcome  ISN Outcome  3.1:  Outcome  ISN  ISN Outcome  Outcome  Outcome  ISNOutcome  2.1:  2.2:  2.3:  Improved  3.2:  Outcome  3.4 : Improved  1.1:  1.2:  1.3:   Strengthen  Improved  Enhanced  access of  Improved  3.3: Social  management  Improved  Increased  Improved  state  and  procurement  communities  quality of  protection  of  Business  agricultural  access to  capacity and  transparent  system and  to basic  and access  and  environmental  and  productivity  productive  governance  public  external  social and  to basic  inclusion  and natural  Investment   and crop  infastructure of key public  finance  budget  local  education  (including  disasters Climate output enterprises  management controls development  and health  gender) and Banks. services services A. ISN Objective I: Deepening the Economic Recovery Process and Promoting Sustainable Development. 62. The Bank will continue to provide support to deepen and accelerate the economic recovery process and promote sustainable development. This is in line with the Government’s vision of transforming Togo into a commercial, financial and services hub and its commitment to address the structural weaknesses that constrain its growth potential and competitiveness. The Government places a high priority on investing in new infrastructure, while rehabilitating and maintaining existing infrastructure and reducing costs. It also recognizes the need to provide a more hospitable business climate and the central role of deeper financial sector development in fostering sustained growth. Finally, increasing agriculture productivity and diversification is vital for export income, food security, employment creation and equitable distribution of the fruits of growth. There are currently ongoing Bank projects in Financial Sector, private sector development, agriculture/food security and infrastructure rehabilitation. The Bank’s FY12/13 program will continue the focus in this area, through additional financing for infrastructure rehabilitation and regional programs in agriculture, telecom and power. IFC will continue its support to investment climate reforms and the transport, manufacturing and energy sectors. The Government will work with the IMF, the Bank and other development partners on a financial sector development strategy. ISN Outcome 1.1: Improved Business and Investment Climate 63. Analytical and Advisory Services. A Country Economic Memorandum/Diagnostic Trade Integration Study and Investment Climate Policy Note completed in FY10 provided a crucial diagnostic of the business environment. These studies showed that aside from the risks associated with political uncertainty, the overall business climate appears to be the most - 26 - important constraint to manufacturing and service sectors in Togo. Together with IDA, IFC's Doing Business Reform Advisory Unit will assist the Government of Togo in implementing recommended short-term reforms in starting a business and develop a broader investment climate program for the medium term. 64. As a result of the action plan derived from the recent ROSC Accounting & Audit assessment completed in 2010, the Government requested an IDF grant (approved in FY12) to strengthen the accounting profession and enhancing accounting and auditing practices. This will help align accounting and auditing with international standards and will contribute to promote financial transparency, accountability, and good governance in the private and public sectors. 65. IDA financed Operations. Aside from work on Doing Business, the Private Sector Development Operation (FY11, US$13 million) supports investment climate reforms, development of a new Free Zone, and provides targeted business training to micro and small enterprises that are the primary source of job creation. It is expected that 3,000 companies will be trained by the project. A Private Sector Revitalization Trust Fund (FY10, US$1.1 million) has supported the establishment of a one-stop shop for enterprise creation and is being restructured to include a youth employment pilot to support transition from school to work through internships and training. The Bank will continue its support for restructuring the Financial Sector through the ongoing Financial Sector Reform and Governance Project (FY09). 66. IFC will increase investments and advisory services support to SMEs and strengthen the financial sector and increase access to finance. IFC will be looking to address the SME needs through the roll out of its trademark SME capacity development solutions tools such as SME Toolkit and Business Edge programs.13 IFC has allocated to Ecobank Togo a total of up to US$8.0 million in the form of: (i) a convertible subordinated loan with Tier 2 characteristics of up to US$4.0 million; and (ii) a non-convertible subordinated loan with Tier 2 characteristics of up to US$4.0 million. IFC will continue to explore this avenue for selected financial intermediaries in the country. In addition, under the umbrella of FIAS Investment Climate Advisory Services Program, the WBG has been supporting OHADA member countries since 2007 in modernizing the OHADA laws ("Uniform Acts") and developing registries for companies and secured transactions. This will continue under the ISN. 67. Partnership and Leverage. The key donors involved in this area include the AfDB, the European Union and France. The Fund plays a very active role in the dialogue in restructuring the financial sector and ensuring a favorable environment for the private sector. ISN Outcome 1.2: Increased agricultural productivity and crop output 68. Analytical Underpinnings. This sector benefited from reviews led by the FAO since the early 2000s plus background work done as part of the preparation of the recent CEM/DTIS. In the agriculture sector, Togo is a success story as it was able to leverage a small amount of IDA resources ($13 million) from the investment and regional operations to attract other donors. This 13 Business Edge is IFC's widely acclaimed signature range of management training products and services, specially designed for owners and managers of SMEs. It includes 44 different management topics/modules. SME Toolkit is the premier online and offline capacity development resource for small and medium businesses in emerging markets. It currently operates a network of 32 sites in 16 languages, and attracts more than 4 million visits per year. - 27 - has led to $112.5 million in external funding for Togo’s national agriculture investment and food security plan (called PNIASA). 69. IDA-Financed Operations. The main investment operation supported by the Bank is a multi-donor Agriculture Sector Support Project (FY11, US$9 million)14 and a Regional Agricultural Productivity Project (FY11, US$4 million Togo contribution). The two operations focus, in partnership with other donors, on supporting the first five years of the Government's national agriculture investment program with the aim of improving agricultural productivity and diversification, including the export crop sector. The Regional operation is expected to generate and accelerate the adoption of improved technologies in Togo and participating countries. 70. Partnerships and Leverage. Government asked the World Bank to co-chair an Agriculture Sector Donor Working Group set up in 2010. The Bank therefore played a key role in supporting Togo which became one of the first countries to submit a program for financing by GAFSP under the AU/NEPAD CAADP (comprehensive Africa Agriculture Development Program). Besides IDA, co-financiers of the national agriculture investment program so far include IFAD (US$13.5 million plus an additional $20 million GAFSP grant), the ECOWAS Bank for Investment and Development ($15 million) and BOAD, the West Africa Development Bank ($15 million). Other partners are expected to join in the coming years as the project advances. The project includes an important capacity building component for staff of the Ministry of Agriculture, as well as programs to strengthen capacity of farmers and other professional organizations. FAO and UNDP have been providing considerable technical assistance to the Ministry of Agriculture in the preparation of the different documents leading to the preparation of the PNIASA as well as the CAADP framework. A Bank executed Trust Fund also assisted the Ministry of Agriculture undertake an analysis of public expenditure in the sector15. ISN Outcome 1.3: Improved access to and quality of productive infrastructure 71. Analytical Underpinnings. Given the considerable under-investment in infrastructure over the last two decades, the Bank has undertaken a number of analytical studies: Urban Sector Review (FY08), ICT Strategy Review, (FY11), Energy Sector Review underway (FY12). These studies examine institutional issues, including public-private partnerships, and capacity needs in the different sub-sectors. 72. IDA-financed Operations. Togo’s rural and urban infrastructure is highly degraded after many years of neglect. The Bank will continue its support for rehabilitating critical infrastructure for urban roads and facilities through additional financing of the successful ongoing Emergency Infrastructure Rehabilitation and Energy Project (FY09, $22.82 million; FY11, $15 million Additional Financing). This project is helping to rehabilitate critical infrastructure in and around Lomé including roads, drainage and water supply. Under the GEF component of the project, electricity transformer stations have been rehabilitated and the 14 The total project cost is $53.9 million. IDA contribution includes the $9 million above plus a GAFSP grant of $19 million and a GFRP grant of $9 million both to be administered by the Bank. The West Africa Agriculture Productivity Project (WAAPP) is a $12 million combination of IDA national ($4 million) and regional funding ($8 million). A third project financed by IFAD, BOAD and BIDC ($43.5 million) also finances Togo’s PNIASA. 15 Ag-PER : Public Expenditure Review in the Agriculture Sector. - 28 - electricity network to Lomé is being extended. An FY12 Additional Financing ($14 million) is under preparation. 73. Regional Operations. The Bank-financed Abidjan-Lagos Trade and Transport Facilitation Project (FY10, US$8 million IDA contribution) is a critical piece of infrastructure for Togo to facilitate intra-regional trade and transit activities using the Lomé deep water sea port. The West Africa Regional Communications Infrastructure Program (FY13, US$10 million Togo contribution) will focus on ensuring non discriminatory and open access to international and regional communications infrastructure through establishment of a neutral carrier hotel / national and regional IXP (internet exchange point) where a market and a national /regional hub for capacity could be established in order to have alternative access to Togo Telecom to improve terms and lower cost of access to international capacity. 74. IFC. Working closely with the Bank, it will explore opportunities for exceptional financing from development partners for public-private partnerships (PPPs) in infrastructure, and pursue innovative project development for infrastructure PPPs in addition to the important financing it has provided for Energy and the Lomé Container Terminal. 75. Partnerships and Leverage. The Bank is currently playing a lead role in the energy sector especially on regional matters, and a very important role in urban rehabilitation as well as in telecommunications strategy development. The Bank has maintained close collaboration with other donors and as a result has been trying to leverage additional programs for ongoing and planned projects. The main partners in infrastructure include the European Union (transport, urban); AfDB (roads, urban), BOAD (road, port, energy), BIDC (roads), China (roads, port), French Cooperation (transport), and German Cooperation (Energy and Urban). B. ISN Objective 2: Improving Economic Governance and State Capacity 76. This objective supports Government-owned reforms to improve governance, transparency and efficiency in public financial management as well as advance structural reforms aimed at strengthening key sectors of the economy (phosphates, cotton and energy). In this context, the Bank will support selective interventions in close collaboration with the Fund and in the context of strong donor coordination. Moreover, in response to the Government’s request for a program to build state capacity, the Bank is working with Government to develop a medium to long-term strategy for capacity development which would be further developed in the next Country Partnership Strategy. ISN Outcome 2.1: Strengthen State Capacity and Management/Restructuring of key public enterprises and Banks 77. Analytical Underpinnings. Analytical work in the two critical sectors of cotton and phosphate has been carried out between 2006 and 2010. This included financial and strategic audits of both the cotton company and the phosphate company. The studies pointed to the need for a number of reforms that Government has started implementing. These reforms include institutional restructuring of the companies, capacity building and eventually attracting strategic investors. In the cotton sector, the studies resulted in Government creating a new cotton company, 60 percent Government-owned and 40 percent farmer-owned (the New Cotton Society - 29 - of Togo – NSCT) in 2009. For the phosphate sector, the strategic and financial audit commissioned by the Government indicates several options, including partial-to-full privatization, restructuring and spinning off non-core operations. Work on the banking system since 2006 has pointed the way to banking sector restructuring. 78. IDA-Financed Operations. Support for measures to improve management of the cotton and phosphate sectors and the public sector institutions that manage them will be channeled primarily through the Development Policy operations. Their focus will be in improving the regulatory frameworks for the institutions, internal controls and corporate governance, and encouraging Government to search for strategic investors to provide necessary financial, technical and managerial support. The multi-donor Agriculture Sector Support Project (FY11) will provide technical and capacity building support to accompany the reforms in the cotton sector. The phosphate sector reforms will also be supported by direct assistance from the Bank and a Trust Fund for implementing EITI. The Financial Sector and Governance Project (FY09) is leading the way in preparing the process of divestiture of the state-owned banks. 79. Trust Funds. Togo achieved EITI candidate status in October 2010 and expects to achieve validation by October 2012. A Bank hosted MDTF grant is helping Togo with implementation of EITI. The Bank is providing TA (FY12-13) to continue to support the design, deepening, and implementation of Government's Phosphate Sector Strategy. The LICUS Trust Fund grant for Economic Recovery and International Reengagement (FY08, US$1.5 million) closed in May 2011 and has produced reports on the coffee/cocoa sector, the energy sector and the port. 80. Instruments to Support Capacity Building during the period of the ISN: An IDF to support the Accountancy profession in Togo was approved in 2011. The Bank has also initiated the preparation of an IDF grant proposal to help strengthen M&E capacity and practice in the public sector in Togo. It proposes to have three main components, namely: (i) development of an integrated monitoring and evaluation policy; (ii) M&E capacity development and training; and (iii) establishment of a National M&E Office. Equally, the Bank will support Togo with a Trust Fund for Statistical capacity building. A Use of Country Systems study is planned for FY12. 81. Partnerships and Leverage. The Bank and the Fund collaborate closely on banking sector restructuring and structural reforms in the key sectors. Other donors interested in reforms in the cotton sector include the French, the European Union and the AfDB through their budget support operations. In addition, funding from the multi-donor (Bank, GAFSP) financed Agriculture Project will support capacity development in farmer organizations and incremental studies to allow private investors in the cotton sector. The Islamic Development Bank has provided a loan for the leasing of new mining equipment for the phosphates company. ISN Outcome 2.2: Improved and transparent public financial management 82. Analytical Underpinnings. The last public expenditure review was conducted in 2008/2009 as part of the PEMFAR. The analysis covered the period 2004-2007 and was based on preliminary data. A PER will be undertaken in FY 13 with the objective of: (i) examining revenue and expenditure trends and whether public spending levels and composition are sustainable and consistent with the implementation of the PRSP and growth agenda; - 30 - (ii) assessing progress made in improving procedures and practices of the public financial management system based on the PEMFAR recommendations, and (iii) assessing implementation capacity barriers for public investment. The latter is of particular importance as allocations to public investment have improved significantly over the last years but implementation capacity still deters its execution. 83. Scaling up the use of the country system: An assessment has been undertaken by the Bank during 2010 and the main conclusions have been shared with the Government. The objective of this assignment was to assess the fiduciary risk associated to Togo’s PFM system and determine with proposed mitigating measures if and how it could be used in part or whole for the FM aspects of investment lending projects. The arrangements for scaling up the use of the national systems are: (a) to support the Government to implement the PFM action plan and consider a gradual approach for Bank-financed investment lending, (b) to improve FM harmonization and coordination through the PFM Donor Group to achieve aid effectiveness. 84. Public Financial Management and Budget support. The series of budget support operations starting with the Fourth Economic Recovery & Governance Grant will continue to support the adoption and implementation of critical PFM measures. Specifically, the operations would focus on continuing and deepening policy reforms to improve public financial management including pursuing and intensifying anti-corruption measures based on accountability, transparency, and assignment of responsibility. This would involve: (i) enhancing the quality of the budget and its preparation, (ii) ensuring a better monitoring of the public entities other than the state; (iii) better aligning the composition of expenditures with approved budgets and with priorities of the country's PRSP; (iv) improving the dissemination of information on the budget and its execution; (vi) strengthening the capacity of the Court of Accounts; and (vii) strengthening the internal audit and inspection unit. Other reform measures would aim at aligning the Togolese PFM system with new regulations issued by WAEMU Commission which set ambitious objectives such as performance budgeting, significant changes of internal and external control methodologies, modernization of expenditures management, implementation of accrual accounting and new budget classification aligned with international standards. The program would ensure that timely information is provided to spending units on ceilings on expenditure commitments and pay particular attention also to improving the financial situation of some of the public enterprises especially the Electricity Company, CEET, following its organizational audit. 85. Trust Funds. In order to improve expenditure management in the rural sector, there is an ongoing Public Expenditure Review of the Agricultural Sector (FY12) with support from the Gates' Foundation BETF. 86. Partnerships and Leverage. Improved public finance management has been a key objective of the IMF in its Togo program. Follow up on the implementation of PFM reforms will be done in close collaboration with the IMF. The European Union will focus its efforts on the provision of technical assistance to improve public finance management. Other donors supporting PFM include the French and the AfDB. - 31 - ISN Outcome 2.3: Enhanced procurement system and external budget controls 87. Analytical Underpinnings. The 2009 PEMFAR identified a number of weaknesses with the public procurement system including: a legal and regulatory framework that did not permit strict observance of fundamental principles of transparency, equitable treatment, and economy; an ineffective institutional framework; and non-existent or ineffective audits, internal and external controls, and anticorruption system. Since then, Government has taken steps to address the most urgent issues but a number of challenges identified by the PEMFAR still remain. During the ISN period, the Bank would do analytical work on the review, design and the use of country systems (FY11), and a CPAR would be conducted in FY13. 88. IDA-financed Operations. Efforts to further strengthen the public procurement system will continue to be supported under the Development Policy Operations, the ERGGs. The effective implementation of the procurement code would be supported. The key measures would base the procurement reform on a medium- and long-term vision to improve transparency and efficiency of the system in line with the WAEMU Procurement Guidelines and international good practices. The program would also focus on institutional strengthening by the establishment of Public Procurement Control Committees in the ministries and the region, a feasibility study on the introduction of an integrated procurement system (SIGMAP) and the development of strategy to enhance the capacity of stakeholders in the procurement. The program will also continue to reinforce the capacity of the Court of Accounts to enable to play its role of audit of Treasury accounts and drafts of the Budget Execution Laws (Lois de Règlement). The Government of Togo has made concrete progress towards implementing the procurement reforms set out in the new legal framework. Recently the Government moved forward to selecting consultants for (i) preparation of procurement audits for 2010 and 2011; (ii) preparation of national standard procurement bidding documents; and (iii) adoption of thresholds for the control and the procurement commissions. The regulatory institution for procurement (who also will handle procurement complaints) was installed on November 15, 2011. For the Bank portfolio of projects, there generally is a lack of experience with World Bank procurement procedures. As this is an FCS country, we are planning during FY12, to take special efforts to work closely with projects through a combination of staff time and a short-term procurement specialist to improve Client procurement staff capacities. 89. Partnerships and Leverage. All the Development Partners have supported the dialogue in this area. The key partners providing budget support such as the French, the EU and AfDB have also been involved in supporting procurement reform. C. ISN Objective 3: Addressing Urgent Poverty Reduction and Social Needs 90. The theme selected for PRSP-2 is inclusive growth reflecting the Government’s concern to distribute the fruits from higher growth more widely. Under this objective, the Bank will support the PRSP process through TA and a number of policy notes on poverty, growth and gender. In addition, it will provide TA towards the development of a national strategy for social protection to be adopted by Government in 2012. A new CDD/Safety Net project in FY12 will benefit from the experience on safety nets system under the ongoing project and pilot a cash transfer program. Under this ISN objective, youth employment programs will also be piloted - 32 - through restructuring of the Private Sector Revitalization Trust Fund to provide the Government with knowledge and recommendations for scaling up in the future. Finally, in response to the 2010 floods, a Post Disaster Needs Assessment has led to the preparation of an Integrated Disaster and Land Management Project (FY12). ISN Outcome 3.1: Improved access of communities to basic social and local development services (including youth employment) 91. IDA-financed Operations. Basic social infrastructure and revenue enhancing activities are being supported under the ongoing Community Development Project (FY08, $17.2 million) which benefited from additional financing from the Food Price Crisis Response trust fund (FY09, $7 million) and the Crisis Response Window (FY10, $8.7 million). A second phase Community-Driven Development/Safety Net Project (FY12, US$14 million) will continue most of the activities of the ongoing project (closing in June 2013) and focus on youth employment. In parallel, a restructuring of the Private Sector Revitalization Trust Fund (FY09) will reallocate resources to a pilot program to promote employment, skills development and school to work transition of young graduates in Togo. An impact evaluation will be conducted (PSIA TF, FY12) to provide recommendations on changes to the youth employment pilot prior to requesting a scaling up. 92. Partnerships and Leverage. The United Nations agencies are quite active in the area of community development and youth employment, especially the UNDP. French cooperation has also been involved in funding decentralized and local development programs that complement the CDP. WFP is planning to launch its own school feeding program. ISN Outcome 3.2: Improved quality of and access to basic education and health services 93. Analytical Underpinnings and Trust Funds: An Education Sector TA (FY10) helped Government prepare its education sector plan to address policy, capacity, data, and funding gaps for the education sector. This led to an Education for All FTI program (FY11, $45 million) financed by a multi-donor trust fund being administered by the Bank. For the health sector, a Health Sector Country Status Report (FY 11) will provide the Government with adequate information for better targeting its investments in the health sector, contribute to donor harmonization, and facilitate the identification of further investments from donors, including a potential Bank lending operation. As the latest health sector assessment in Togo was done in 2003, the CSR will also guide the country team as regards HNP issues. 94. Partnerships and Leverage. The Education for All/Fast Track Initiative involves several Development Partners including the Bank, French Cooperation and the United Nations Agencies, especially UNICEF. Partners active and/or interested in the education sector include the AfDB, French Cooperation and UNICEF. Togo has joined the International Health Partnership, which is a mechanism for strengthening donor coordination and harmonization through preparation of implementation of evidence-based health plans (called Compact). The country has started the preparation of its Compact, with strong support from donors. - 33 - ISN Outcome 3.3: Improved social protection and inclusion (including gender) 95. Analytical Underpinnings. Social Protection: The Bank is providing support by i) financing and evaluating Social Safety Net (SSN) interventions and ii) conducting analytical work in support of the preparation of the national social protection strategy in collaboration with other donors (UNICEF, ILO and UNDP). Different analytical activities have been programmed by these UN agencies including: i) causes of vulnerabilities and existing risk management strategies, ii) child focused protection, and iii) contributive social protection mechanisms (pensions, insurance schemes). A joint report on social protection summarizing all findings of the studies will be prepared (FY12). A number of other analytical pieces have been programmed. These include: an evaluation of the Community Based School Feeding Program (FY 11) as part of a broader study of SSN in fragile states, and an impact evaluation (FY12) of the labor intensive public works pilot underway in the CDP. 96. PRSP Support and Poverty Notes: The Bank is supporting the PRSP process by offering technical assistance to the preparation of poverty estimates, a poverty profile and poverty maps. At Government request, the Bank will prepare policy notes on poverty, growth and gender demonstrating the link between inclusive growth and real sector reforms. A first note will consider the link between inclusive growth, inequality, income generation and the business environment. Two others will deal with two of the sectors that are going through a process of reform and which are potentially of great importance to the poor (cotton and telecom). The last one will be a gender policy note. 97. Gender Policy Note: Gender analytical work in Togo is limited due to the restricted availability of sufficiently disaggregated data. The Bank will be providing TA to the National Institute of Statistics to ensure that the poverty profiles are prepared taking gender dimensions into consideration. This will help inform the coming PRSP. In addition, the Bank committed to a note on the integration of women in the economy. Work for this activity started with a qualitative background study (FY11) on household welfare, gender roles and economic decision-making. This background study will feed into a policy note on women’s access to land in Togo. The lack of access to property was identified as a major constraint to women’s economic empowerment in the qualitative work conducted, as well as by the Ministry of Gender and civil society. The note will have a strong legal and rights-based background to provide support to the current reform process in Togo. A short brief on gender roles as represented in primary school books will also be prepared. The latter brief will inform the education for all program which is in the process of reviewing the pre-primary and primary school curriculum. 98. IDA-financed Operations. Based on the findings of the analytical work on safety nets (FY11), the project evaluations and the policy dialogue on social protection, the second phase Community-Driven Development/Safety Nets Project (FY12, US$14 million) will focus on the provision of basic community infrastructure using a CDD approach and will continue to support the labor-intensive public works program underway, paying particular attention to youth employment. A cash transfer program would also be piloted which would provide regular cash support to households, thus making them capable of increasing their resilience and investing in the wellbeing of their children. - 34 - 99. Partnerships and Leverage. The UN Agencies (UNDP, UNICEF, ILO, WFP) have been very active in the social protection field and are collaborating with the Bank in helping Government develop a social protection strategy. In particular, UNICEF will co-finance some aspects of the pilot cash transfer program implemented under the Community Development/Safety Nets project, including overall supervision at the community level, as well as preparation and implementation of training modules (linked to soft conditionalities) on health, hygiene and nutrition for beneficiary households. ISN Outcome 3.4: Improved management of the environment and natural disasters 100. Analytical Underpinnings. A full environmental analysis was carried out in 2010, including a review of the impact of the agriculture (cotton) and electricity sectors. In response to the 2010 floods, a Post Disaster Needs Assessment (FY11) was completed with financing from the Global Facility for Disaster Reduction and Recovery (GFDRR), the World Bank and UNDP, and resulted in the identification of an Integrated Disaster and Land Management Project (FY12). The country had developed a national strategy for risk and disaster reduction for which further assistance would be provided for its effective implementation. 101. IDA-financed Operations. In response to the 2010 floods, additional IDA resources were provided to scale up in 2011 the fourth Economic Recovery and Governance Grant and the Emergency Infrastructure Rehabilitation project. This support helped the Government deal with the immediate needs in the recovery period and supported mitigation measures to avoid negative impacts of future recurrence. A major achievement of the Emergency Urban Project was the expansion of drainage activities in flood-affected areas which visibly contributed to reduce the levels of flooding during this year’s rainy season. The construction of a center for natural disaster victims has also been completed. 102. Trust Funds. An Integrated Disaster and Land Management Project (FY12, US$16.95 million) funded by GFDRR, GEF/LDCF and TerrAfrica is currently under preparation and this project aims to reduce the risk of flooding and land degradation in targeted rural and urban areas, through: (a) institutional strengthening and awareness raising, (b) piloting community-based activities for adaptation and sustainable land management and (c) strengthening early warning, monitoring and knowledge systems. The project is a first step to addressing ecosystem service restoration and contributes to mitigating natural disasters, particularly flooding and drought. The proposed project responds to the National Action Program for Adaptation to Climate Change (NAPA) and is also aligned to the National Investment Program for Environment and Natural Resources (PNIERN). 103. Partnerships and Leverage. The West African Development Bank and the Ecowas Investment Bank finance activities especially on drainage to try to minimize the impact of floods in Lomé and other urban areas. The European Union is directly involved in funding disaster and environmental management while ILO has collaborated with the Bank in supporting labor intensive activities that deal with reforestation and watershed management activities. - 35 - D. Results Monitoring 104. To ensure effective portfolio monitoring and performance, the Bank will maintain a full country office with a Country Manager based in Togo. It should be noted that during the previous ISN, the Bank Country Manager covered Togo from Benin. Equally, the number of decentralized sector staff has been increased with senior fiduciary staff (procurement and safeguards) based in the Togo country office. Active financial management support is provided as well by the Benin office. 105. This ISN is fully aligned with the first three Pillars of the Government's PRSP. Therefore, monitoring and evaluation of the ISN will be done in coordination with the PRSP whilst taking into consideration the spirit of the Paris Declaration, resulting in greater coordination with other donors. The measures adopted would be kept simple and would seek to avoid cross conditionality and multiple reporting requirements. The ISN performance targets are designed to capture a selected number of key, monitorable results or outcomes of the Government's policy efforts and Bank assistance under the ISN. In sum, performance outcomes will be measured using data collected through the PRSP. There will also be regular portfolio monitoring of the ongoing projects and other planned operations. VII. MAIN RISKS AND MITIGATION MEASURES 106. The following risks and risk mitigation strategies have been identified: a) Political Risk. The peaceful outturn of the 2010 presidential election has clearly improved the socio-political outlook. The main opposition party is represented in the Government which is expected to promote the broad acceptance of critical reforms. In 2011, the defection of some members of the main opposition party (UFC) to a new political party (ANC) led to their exclusion from parliament and created some political tensions. However, this is unlikely to unduly affect the political process. Meanwhile, the public hearings at the National Truth, Justice and Reconciliation Commission on past political violence, and the resumption of political dialogue on institutional and constitutional reforms, are expected to reduce the potential for instability. The ISN will support government’s efforts to better communicate its development programs. b) Vested interests risks: Reform efforts aimed at implementing structural reforms and enhancing governance in the public sector could still face resistance. More transparent and accountable practices in the phosphate sector will reduce the scope for vested interests to undermine reform effort in this critical sector. Reforms in the cotton sector which rely on attracting private external capital may be delayed if vested interests resist the enhanced transparency required to attract foreign investors. In the telecommunications sector, reforms involving further liberalization of the sector and open and non-discriminatory access to connectivity infrastructure could be resisted by Togo telecom currently enjoying a dominant market position in the sector. A new focus on transparency (EITI++), intensive dialogue with the Bank and other donors, and renewed - 36 - efforts enhancing transparency and openness will help ensure that the Government continues with its determination to implement the reforms in these sectors. c) Macroeconomic risks could stem from the vulnerability of the Togolese economy to exogenous shocks and/or from a slower than expected rebound from the global economic recovery. While Government has been prudent in its fiscal policies, making these policies sustainable will require discipline and a targeted public communication effort. There is also the risk that ongoing revenue mobilization reforms will not generate the expected increase in revenues and that investments in infrastructure will be pursued with excessive domestic financing, thus driving up borrowing costs and crowding out private investment. Other potential risks include poorer than expected results from the banking sector reform, potential impact from the appreciation of the Euro, and floods and other factors affecting Togo's role as a regional hub. To mitigate the macroeconomic risks, the IMF and IDA will continue to closely monitor Togo's macroeconomic performance, including providing ongoing assistance to the financial sector reform program. d) Fiduciary Risk. Despite recent reforms, fiduciary risk remains from possible corruption or Government’s failure to make effective and efficient use of the fiscal space made available by budget support and debt relief. Continued implementation and effective monitoring of PFM reforms with IMF and World Bank support will mitigate fiduciary risks. To ensure effective implementation of the portfolio, CPPRs would be conducted regularly starting in mid-FY12 and workshops would be held to build local capacity in areas of fiduciary management. e) Implementation Capacity risk arises from the lack of sufficient professional staff and weak institutional capacity and coordination in the wake of long recent history of socio- political instability and suspended foreign assistance. Capacity required for taking budget execution and planning to the next level is still scarce and needs to be reinforced. In the domain of governance, strengthening the capacity of staff in charge of internal controls and of the entities entrusted with external controls will require additional training and financial resources for equipment and day-to-day operations. Specialized technical skills are also lacking in certain strategic sectors. The capacity risks have been mitigated through the provision of technical assistance under IDA projects and TF grants (Financial Sector and Governance Project, Private Sector Trust Fund, IDF for strengthening M&E). The IMF continues to provide assistance in public financial management and to key financial administrations through its West AFRITAC based in Bamako. Other donors (AfDB, EC and France) are supporting, or plan to support, capacity building efforts in various sectors. - 37 - Annex 1: Togo Active Portfolio and Proposed Bank Group ISN Assistance Program FY12- FY13 Active Portfolio FY12 FY13 Key Objectives and Outcomes Project AAA Project AAA Project AAA Deepening Economic Recovery and promoting sustainable development Private Sector IDA: PSD WB: Sources of Growth IFC: Introduction of SME IFC: Support to IFC: Promotion IFC: Support to Development (FY11, $13 m) (CEM) (FY10) Tool Kit and Business Edge Implementation of SME Tool Kit Implementation Advisory Services Products. of Framework to and Business of Framework to IDA: Private WB: Investment promote PPP in Edge Advisory promote PPP in Sector Climate Policy Notes Improved business strategic sectors Services strategic sectors Revitalization (FY10) and investment Products. TF (FY10, $1.1 IFC: Doing IFC: Doing climate m) Business Business program: program: IFC: LCT- business and business and US$ 114.25 property property million Senior registration, registration, Loan construction construction IFC: Contour permits and permits and Global Togo – licensing regime licensing regime US$5.0 million WB: focus: WB: focus: Equity and revamping free revamping free US$8.86 zone, business zone, business million Quasi and property and property Equity registration to registration to IFC: follow up on the follow up on the Heidelberg IFC work IFC work Cement US$ IFC: Ohada IFC: Ohada 110 Equity Reform Program Refom Program IFC: Transam - IFC: Investment IFC: Investment US$1.6 million Climate staff Climate staff Senior Loan assigned to assigned to IFC: Ecobank Lome to build Lome to build Togo – US$1.5 momentum for momentum for million reforms reforms - 38 - Active Portfolio FY12 FY13 Key Objectives and Outcomes Project AAA Project AAA Project AAA Increased IDA/TFs: WB Agriculture Sector PER agricultural Agriculture productivity and Sector Support crop output (FY11, $9 m, IDA, $28 m, MDTFs: GAFSP + GFRP) IDA: Reg. Agriculture Productivity Program (FY11, $4 m national IDA) Improved access to IDA: WB:ICT Strategy IDA: Emergency WB: Energy IDA: Energy and quality of Emergency Development (FY11) Infrastructure Rehabilitation Sector Review Project (FY13, productive Infrastructure Additional Financing (FY12, $20 m) PPIAF TF grant (FY11, infrastructure Rehabilitation $14 m) $130,000) for strategic IDA: WA Reg. (FY09 $, 26.82 advice/implementation IFC: LCT – US$ 221 B Communications m, FY11 $15 m support to improve Loan Mobilization Infrastructure Additional competition and (FY13, $10 m, Financing) connectivity in telecom national IDA) sector - 39 - Active Portfolio FY12 FY13 Key Objectives and Outcomes Project AAA Project AAA Project AAA Improving Economic governance Improved IDA: ERGG-4 IDA: DPO ($14 m) WB:Phosphate IDA: DPO ($10 WB:Phosphate Management and (FY11, $28 m) Sector/EITI TA m) Sector/EITI TA restructuring of key public enterprises and banks IDA: LICUS TF Economic Recovery and Reengagement (FY08, $1.5 m, closed May 2011) IDA: Financial Sector and Governance IDA: IDF Grant Project (FY09, (FY12, Improved M&E $12 m) $498,266) to system strengthen M&E capacity and practice in the public sector Improved and IDA: WB:Public transparent PFM Strengthening Expenditure Capacity of the Review Accountancy WB:ROSC Profession IDF Follow-up TA ($0.35m) Enhanced WB:Use of WB:CPAR procurements Country Systems systems and external budget controls - 40 - Active Portfolio FY12 FY13 Key Objectives and Outcomes Project AAA Project AAA Project AAA Addressing Urgent Poverty Reduction and Social Needs Improved access of IDA: CDD IDA: Community communities to (FY08, $17.2 Development/Safety Nets basic social and m, FY10 Project ($7 m for CDD local development Additional component) services Financing $8.7 m) IDA: CDD AF Food Price Crisis TF (FY09, $7 m) Improved quality of MDTF: WB: Health CSR and access to basic Education for (FY11) education and health All (FY11, $45 services m) Improved social WB: Cash for Work TA IDA: Community WB: protection/inclusion (FY11) Development/Safety Nets Poverty/Gender services Project ($4.4 m for safety Notes nets) WB: Social Protection TA Improved WB/GFDRR:Post GFDRR/GEF/TerrAfrica: management of the Disaster Needs Integrated Disaster and Land environment and Assessment (FY11) Management Project ($16.95 natural disasters m) WB:Country Environmental Analysis (FY11) - 41 - Annex 2: Interim Strategy Results Framework – FY12-13 Proposed Bank/Other Development Strategic Area Issues and Challenges Expected ISN Outcomes Milestones Partner Instruments Pillar 1: Deepening Economic Recovery and Promoting Sustainable Development Improved Business Poor governance in matters related Indicator: Number of procedures to Procedures to register a CEM (FY10) and Investment to private sector investment, start a business business reviewed and Private Sector Development Operation climate resulting in inadequate protection for Baseline (2011, 7) streamlined (FY11, US$13 million) investors, low investment flows, Target (2013, 5) Private Sector Revitalization Trust Fund high production costs and reduced (FY10, $1.1 million) competiveness IFC FIAS Investment Climate services IFC Financial intermediation Improving agricultural Structural constraints combined with Increased crop output Farmers provided with Agriculture Sector Support Project (FY productivity and crop weak policies and lack of incentives Indicator: Volume of crop output improved technologies, 11, US$ 9 million)16 output have led to low productivity in the (tons) advisory services, and Regional Agricultural Productivity agricultural sector Baseline (2010; Coffee 13,000 access to better quality Program (FY 11, US$12 million) tons, Cocoa, 6,000 tons) agricultural inputs PER of Agriculture Sector (FY12, BTEF Target (2013, Coffee, 15,000 tons TF) Cocoa, 7,000 tons) Baseline (2010, husked rice, 0 warranted corn, 0) Targets (2013, husked rice 3,000 tons; warranted corn, 800 tons) Improved Access to Under investment in infrastructure Rehabilitation of Emergency Infrastructure Rehabilitation productive over a long period of time, notably Improved access to electricity transformer stations and Energy Project (FY09, $26.82 Infrastructure transport and energy has further Indicator: Number of transformer completed million) + undermined economic growth stations rehabilitated Additional Financing (FY11, $15 Baseline (2010, 0) million) + Additional Financing (FY 12, Target (20 13, 20) US$14 million) Extension of electricity Extension of electricity supply supply network by 30 Regional Abidjan Lagos Trade and network kilometers completed Transport Facilitation (FY10, $33 Baseline (2010, 0) million) Target: (2013, 30 kilometers) IFC equity investment (FY10, $14 million) in Contour Global Drainage systems IFC support for development of Drainage rehabilitation cleaned. transshipment container handling Indicator: Km of drains cleaned terminal at Lome port Baseline (2010; 0) Target (2013, 80 km of drains 16 The total project amount is US$37 million, of which US$9 million from IDA, US$19 million from GAFSP and US$9million from GFRP - 42 - Proposed Bank/Other Development Strategic Area Issues and Challenges Expected ISN Outcomes Milestones Partner Instruments cleaned) Energy Project (FY13, $20 million) Indicators: Km of drainage WA Regional Communications network rehabilitated Infrastructure (FY13, $30 million) Baseline (2010, 0) Target (2013, 7 kilometers) AAA/TA: Energy Sector Review (FY12) ICT Strategy (FY11) PPIAF Trust Fund (FY11, $130,000) to support telecom sector Pillar 2: Improving Economic Governance and State Capacity Improving economic Poor governance, lack of Management of NSCT is enhanced Adopt the terms of Fourth Economic Recovery and governance transparency and accountability has Indicator: Reduction in NSCT’s reference of the Governance Grant ERGG-4 (FY11, undermined the productivity and costs consultant and initiate US$28 million) Improved management efficiency of the four sectors leading Target: (2011-12 season) the study on private DPOs (US$14million (FY 12) and and restructuring of to huge losses 5 % reduction in the unit cost per sector participation in US$10 million (FY 13) key public enterprises ton compared to the 2010-11 the NSCT season AAA/TA: Improved transparency and An IT system for the PER (FY13) accountability in the phosphate management of the Phosphate Sector Strategy TA (FY 11- sector stocks and spare parts of 12) SNPT is created and Support for EITI Implementation Indicator: Togo submitting its functional (FY11-12) Validation Report towards becoming an EITI compliant The existing Mining country Code is updated and Baseline: (2011) Not yet submitted to Parliament compliant for approval Target: (2013) Togo has achieved validation or granted compliant The strategic plan for (ce) status Phase 2 and 3, which includes the search for private partner investors is completed Improved performance of BTCI, The financial and UTB and BAI. institutional Indicator: The three targeted restructuring of BTCI, banks (BTCI, UTB and BIA) have UTB and BIA entered into partnerships (which completed involve the sale of a majority of - 43 - Proposed Bank/Other Development Strategic Area Issues and Challenges Expected ISN Outcomes Milestones Partner Instruments shares) with strategic banking investors Baseline (2011, 0) Target: 2 banks by 2012, and third bank by 2013 Improved and Weak public financial management Enhanced financial situation of Recommendations of Financial Sector Reform and transparent PFM systems resulting in expenditure over CEET the organizational audit Governance Project ( FY09, $12 runs, leakages and poor budget Indicator: Increase in the turnover of CEET are million) Enhanced procurement execution generally of CEET (excluding Contour Global implemented IDF for Strengthening capacity of the systems and external charges Accountancy Profession (FY11, budget controls Target (2011, 7 % increase) $335,500) TA: Use of Country System (FY12) Timely information to spending 2011 state accounts are ROSC Follow-up (FY12) units on ceilings for expenditure closed using the SGFIP CPAR (FY 13) commitments functions Indicator: Number of months in advance the spending units receive The cash management ceilings on expenditure planning system through commitments the preparation of Baseline (2010, 0) monthly tables with Target (2011, 2) estimation of revenues and expenditures are operationalized Enhanced procurement controls 2010 Procurement Indicator: % of procurement contracts audited notices and contracts awards reviewed by the General Implementation decrees Procurement Department publicly that define the mandate available of the General Baseline (2010,0) Procurement Target (2011,100) Department and determines the threshold for procurement are adopted A system to follow-up on the auditors’ recommendations is implemented IGF and IGE staff on - 44 - Proposed Bank/Other Development Strategic Area Issues and Challenges Expected ISN Outcomes Milestones Partner Instruments risk and performance audit approaches are trained Limited and ineffective Improved external controls Court of Accounts has implementation of budget controls submitted the report on the execution of the 2007 accounts to the Parliament Weak performance and monitoring Improved capacity to monitor the Proposed IDF Grant (FY12) to systems PRSP outcomes and deliver results strengthen monitoring and evaluation capacity and practice in the public sector ($498,266) Pillar 3: Addressing Urgent Poverty Reduction and Social Needs Improving quality of Poor educational infrastructure, Improved quality of primary Textbooks of the EFA- Education for all Fast Track Initiative and access to basic weak curriculum, weak access and education FTI project purchased (EFA-FTI) Catalytic Fund ( FY11, US$ education and health retention of students leading to poor Indicator: Primary completion rate 45 million services educational outcomes (%) Baseline (2010: 63.20 %) Health CSR (FY11) Target: (2013: 66 % ) Note that the end of project target to be reached by April 2014 is 74 % Improving access to Inadequate social services Improved access to social protection Existing social Community Development Project social infrastructure exacerbate rural and urban poverty Indicator: Number of community protection policies (FY08/09, $32.9 million IDA/TF) /protection mobilization schemes reviewed and Community Development and Safety Baseline: (2011: 600) streamlined Net (FY 12, US$ 14 million) Target : (2013: 900) Cash for Work/Social Protection TA (FY11/12) Indicator: Number of people Poverty/Gender Assessment (FY 12) covered by Social Safety Nets Baseline: (2011: 36,000) Target: (2013: 70,000 estimated) Improved management Frequent flooding causing damage to Flood reduction especially in Lome An early warning Emergency Infrastructure Rehabilitation of the environment property and displacing a large township and its environs system installed and Energy Project (FY09, $26.82 and natural disasters number of people Indicator: Number of kilometers of million)+ Additional Financing rehabilitated drainage network (FY11, $15 million) Baseline (2010: 0) Urban Infrastructure Additional Target (2013: 30 kilometers) Financing Project (FY 12, US$14 million - 45 - Proposed Bank/Other Development Strategic Area Issues and Challenges Expected ISN Outcomes Milestones Partner Instruments Integrated Disaster and Land Management Project (FY 12, US$ 16.95 million funded by GFDRR, GEF, Terr Africa, LDCF and SFM) AAA/TA: Post Disaster Need Assessment (FY 11); Environment and Social Background Review (FY 11) - 46 - Annex 3: Donor Coordination and Partnerships 1. Even though the Bank Group is a relatively important donor in Togo in terms of financing, given the huge needs for donor assistance in Togo, the Bank needs to coordinate its efforts closely with other development partners to improve its impact. Since the donor reengagement starting in 2007, donor assistance has gradually increased and several donors have expanded their activities in diverse sectors in the country. This trend can be seen particularly in infrastructure, transport and private sector development. The donors’ effort for the FY11-13 period is focused on improving public finance management and governance, capacity building in both the central administration and public enterprises, supporting agriculture, investing in infrastructure, fostering community development, private sector development and rehabilitating the financial sector. Most aid is on concessional terms. Currently, the most active development partners in Togo include the European Commission (EC), the African Development Bank (AfDB), the IMF, France, the West African Development Banks, BOAD and BIDC, China, and German Cooperation. UN agencies are very active in the social and agriculture sectors. The Bank Group is active in several sectors including areas of economic governance, structural reform, private sector development, infrastructure, agriculture and social development. 2. The International Monetary Fund provides support on the macroeconomic framework, as well as in capacity building assistance in public finance management. The Fund’s ECF- supported program which aims to revive economic growth and improve living conditions within a stable macroeconomic environment, is expected to end in August 2011. The Government is discussing with the IMF the development of a new program which would take effect from September 2011. 3. African Development Bank (AfDB) re-engaged in Togo within its Framework for Bank intervention in fragile states. AfDB’s interventions include: (i) education, (ii) governance / transparency and capacity building of the administration; and (iii) rehabilitation of basic infrastructure. In addition to an arrears clearance grant and accompanying budget support (US$30 million) in the period between 2011 and 2013, the AfDB will provide resources for water and drainage, road infrastructure and state-owned enterprises. A small pool of additional resources, specifically targeting capacity building and knowledge management, will also be available. AfDB will also assist in the revival of productive activities, including support of sub- regional integration projects. 4. The European Commission (EC) resumed full cooperation with Togo in November 2007, with the provision of Euro 123 million for the 10th EDF covering the period 2008-2013. The EC sectors of intervention under the 10th EDF will be mainly economic and political governance, institutional and economic reforms, and infrastructure and urban development. In addition, the EU will provide budget support to the government over the period of 2011-2014 (7.5 million Euros per year) mainly for technical assistance to improve public finance management and the capacity of the statistical services. The EU also supports peace and justice programs, and support to non-governmental organizations. 5. The interventions of the French cooperation are directed to public finance management, transport infrastructure, capacity building, water, health, education through the EFA/FTI and - 47 - higher education for 0.5 million euros. In 2011, France intends to provide budget support of 2 million euros to support internal debt alleviation. 6. The United Nations agencies operate mainly in the sectors of health, social and regional development, social protection and human capacity strengthening. Amongst the specialized agencies, the GEF provides support in environmental management, FAO on agriculture, whereas UNDP focuses on the water sector, decentralization, youth employment, natural resources/environment and disaster risk management and administrative reforms. UNICEF has been active on safety nets and child protection, and it is expected to sign an MOU for collaboration on a pilot conditional cash transfer financed by the Community Development and Safety Nets Project. 7. Paris 21 (Partnership in Statistics for Development in the 21st century) has been involved with the EC and UNDP in supporting statistical capacity building (development of a national strategy for the development of statistics: 2009-2013). 8. China has been investing in infrastructure, health and agriculture development. China will also provide support to private sector through the investment in Lomé sea port. 9. The West African Development Bank (BOAD) supports mainly road infrastructure, sea port, rural development, private sector and energy. In 2011, The BOAD support agriculture for FCFA 8 million. 10. ECOWAS’s investment bank (BIDC) finances road infrastructure, transport, agriculture and health projects. 11. German cooperation is gradually reengaging and has provided some support for infrastructure and energy. 12. Loans from the Islamic Development Bank aim at supporting rural water supply, road transport, education, agriculture and the leasing of new mining equipment for the phosphates company (for CFAF 18 billion). A non-concessional loan of Euro 45 million to the SNPT (not guaranteed by the Government) is structured as a lease agreement relating to the purchase of new equipment necessary for the company’s production to recover and will be carried out with the assistance of a strategic partner. - 48 - Annex 4: Donors’ Engagement – (FY11-13) Sectors Donors involved Lead Political, institutional and EU, UNDP, ILO, France, AfDB, (China), UNHCR, UNDP/EU OHCHR GIZ, WB administrative governance Economic governance WB, EU, UNDP, France, WAEMU, AfDB, BID, WB/EU ECOWAS, WADB Agriculture and Food WB, FAO, WFP, IFAD, UNDP, WAEMU, AfDB, WB BOAD, BIDC , EU, WHO Security Private sector and WB, ECOWAS, UNIDO, UNCTAD, UNESCO, WB WTO, WIPO, OIF, AFD, AIPO, UNDP, ISESCO, competitiveness WAEMU, EU Infrastructure to support AfDB, WB, UN Habitat, ECOWAS, BOAD, WB/ AfDB WAEMU, BOD, BADEA, BIDC, EU, China, growth Germany Water, sanitation, AFD, EU, UN Habitat, UNICEF, IDB, WHO, FDA/EU/WB FAO, CREPA, GEF, UNDP, WAEMU, WB, environment/disaster risk China, Red Cross Togo, Red Cross Germany, US management and lifestyle Embassy Education UNICEF, UNESCO, FDA, IMOA, France, AfDB, UNICEF WB, WHO, UNAIDS Health and HIV-AIDS WHO, UNICEF, UNFPA, AFD, BID, BIDC, GF, WHO UNAIDS, OAS, GAVI, WB, EU USA, Plan Togo, Germany, GIZ Promotion of social UNICEF, UNDP, ILO, UNFPA, WB, Plan Togo, UNICEF WHO, AFD, UNAIDS, WFP, GIZ protection - 49 - CAS Annex A2: Country At A Glance Togo at a glance 2/25/11 Sub- Ke y D e v e lo pm e nt Indic a t o rs Saharan Lo w To go A frica inco me Age distribution, 2009 (2009) Male Female P o pulatio n, mid-year (millio ns) 6.6 81 9 828 75-79 Surface area (tho usand sq. km) 57 24,242 17,838 60-64 P o pulatio n gro wth (%) 2.5 2.5 2.2 Urban po pulatio n (% o f to tal po pulatio n) 43 36 28 45-49 30-34 GNI (A tlas metho d, US$ billio ns) 2.9 897 389 15-19 GNI per capita (A tlas metho d, US$ ) 440 1,095 470 GNI per capita (P P P , internatio nal $ ) 850 1 ,981 ,1 1 31 0-4 10 5 0 5 10 GDP gro wth (%) 2.5 5.2 6.2 percent of total population GDP per capita gro wth (%) 0.0 2.7 3.9 ( m o s t re c e nt e s t im a t e , 2 0 0 3 – 2 0 0 8 ) .25 P o verty headco unt ratio at $ 1 a day (P P P , %) 39 51 .. Under-5 mortality rate (per 1,000) P o verty headco unt ratio at $ 2.00 a day (P P P , %) 69 73 .. Life expectancy at birth (years) 63 52 57 200 Infant mo rtality (per 1,000 live births) 64 83 77 Child malnutritio n (% o f children under 5) 22 25 28 150 5 A dult literacy, male (% o f ages 1 and o lder) 77 72 73 100 5 A dult literacy, female (% o f ages 1 and o lder) 54 54 59 Gro ss primary enro llment, male (% o f age gro up) 1 13 105 107 Gro ss primary enro llment, female (% o f age gro up) 97 95 100 50 0 A ccess to an impro ved water so urce (% o f po pulatio n) 60 60 64 1990 1995 2000 2008 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 12 31 35 Togo Sub-Saharan Africa N e t A id F lo ws 19 8 0 19 9 0 2000 2009 a (US$ millio ns) Net ODA and o fficial aid 90 258 70 330 Growth of GDP and GDP per capita (%) To p 3 do no rs (in 2007): France 22 91 29 128 20 Euro pean Co mmissio n 8 40 3 39 Netherlands 0 1 0 13 10 A id (% o f GNI) 8.2 16.2 5.4 1 .4 1 0 A id per capita (US$ ) 32 66 13 51 -10 Lo ng- T e rm E c o no m ic T re nds -20 95 05 Co nsumer prices (annual % change) .. 0.3 1.9 2.9 GDP implicit deflato r (annual % change) 10.5 3.0 -1.7 1.3 GDP GDP per capita Exchange rate (annual average, lo cal per US$ ) 1 21 .3 272.3 712.0 472.2 Terms o f trade index (2000 = 100) .. 126 1 00 96 19 8 0 – 9 0 19 9 0 – 2 0 0 0 2 0 0 0 – 0 9 (average annual gro wth %) P o pulatio n, mid-year (millio ns) 2.8 3.9 5.2 6.6 3.4 2.9 2.6 GDP (US$ millio ns) ,1 1 36 1,628 1,329 2,855 1.7 3.5 2.5 (% o f GDP ) A griculture 27.5 33.8 34.2 43.7 5.6 4.0 2.8 Industry 24.8 22.5 17.8 24.0 1.1 1.8 8.1 M anufacturing 7.8 9.9 8.4 10.1 1.7 1.8 7.5 Services 47.7 43.7 47.9 32.4 -0.3 3.9 -0.7 Ho useho ld final co nsumptio n expenditure 54.5 71.1 92.0 87.0 4.7 5.2 0.1 General go v't final co nsumptio n expenditure 22.4 14.2 10.2 9.3 -1.2 0.0 1.3 Gro ss capital fo rmatio n 28.4 26.6 17.8 18.4 2.7 -0.1 5.9 Expo rts o f go o ds and services 51.1 33.5 30.7 41 .9 0.1 1.2 6.0 Impo rts o f go o ds and services 56.4 45.3 50.7 62.5 2.8 1 .1 3.1 Gro ss savings 27.2 20.4 0.3 6.9 No te: Figures in italics are fo r years o ther than tho se specified. 2009 data are preliminary. .. indicates data are no t available. a. A id data are fo r 2008. Develo pment Eco no mics, Develo pment Data Gro up (DECDG). - 50 - Togo B a la nc e o f P a ym e nt s a nd T ra de 2000 2009 Governance indicators, 2000 and 2009 (US$ millio ns) To tal merchandise expo rts (fo b) 327 631 To tal merchandise impo rts (cif) 646 1,077 Voice and accountability Net trade in go o ds and services -193 -513 Political stability Current acco unt balance -160 -160 as a % o f GDP -12.0 -6.4 Regulatory quality Rule of law Wo rkers' remittances and co mpensatio n o f emplo yees (receipts) 34 307 Control of corruption Reserves, including go ld .. .. 0 25 50 75 100 2009 Country's percentile rank (0-100) C e nt ra l G o v e rnm e nt F ina nc e higher values imply better ratings 2000 (% o f GDP ) Current revenue (including grants) 12.8 21 .2 Source: Kaufmann-Kraay-Mastruzzi, World Bank Tax revenue 1 1 .0 14.2 Current expenditure 15.0 16.2 T e c hno lo gy a nd Inf ra s t ruc t ure 2000 2008 Overall surplus/deficit -4.9 -2.5 P aved ro ads (% o f to tal) 31.6 .. Highest marginal tax rate (%) Fixed line and mo bile pho ne Individual .. .. 00 subscribers (per 1 peo ple) 2 26 Co rpo rate .. .. High techno lo gy expo rts (% o f manufactured expo rts) 0.6 0.1 E xt e rna l D e bt a nd R e s o urc e F lo ws E nv iro nm e nt (US$ millio ns) To tal debt o utstanding and disbursed 1,430 1,640 A gricultural land (% o f land area) 67 67 To tal debt service 30 55 Fo rest area (% o f land area) 8.9 6.4 Debt relief (HIP C, M DRI) 270 .. Terrestrial pro tected areas (% o f surface area) .. 1 1 .1 To tal debt (% o f GDP ) 107.6 57.4 Freshwater reso urces per capita (cu. meters) 2,071 1,781 To tal debt service (% o f expo rts) 6.1 2.3 Freshwater withdrawal (billio n cubic meters) 0.2 .. Fo reign direct investment (net inflo ws) 42 50 CO2 emissio ns per capita (mt) 0.26 0.21 P o rtfo lio equity (net inflo ws) 6 0 GDP per unit o f energy use (2005 P P P $ per kg o f o il equivalent) 2.0 2.0 Composition of total external debt, 2009 Energy use per capita (kg o f o il equivalent) 402 390 Short-term, 47 IBRD, 0 Private, 0 Wo rld B a nk G ro up po rt f o lio 2000 2009 IDA, 586 (US$ millio ns) Bilateral, 665 IB RD To tal debt o utstanding and disbursed 0 0 Disbursements 0 0 IMF, 91 P rincipal repayments 0 0 Interest payments 0 0 Other multi- lateral, 251 US$ millions IDA To tal debt o utstanding and disbursed 604 586 Disbursements 15 0 P riv a t e S e c t o r D e v e lo pm e nt 2000 2009 To tal debt service 8 27 Time required to start a business (days) – 75 IFC (fiscal year) Co st to start a business (% o f GNI per capita) – 205.0 To tal disbursed and o utstanding po rtfo lio 0 6 Time required to register pro perty (days) – 295 o f which IFC o wn acco unt 0 6 Disbursements fo r IFC o wn acco unt 0 1 Ranked as a majo r co nstraint to business 2000 2009 P o rtfo lio sales, prepayments and (% o f managers surveyed who agreed) repayments fo r IFC o wn acco unt 0 0 n.a. .. .. n.a. .. .. M IGA Gro ss expo sure 0 0 Sto ck market capitalizatio n (% o f GDP ) .. .. New guarantees 0 0 B ank capital to asset ratio (%) .. .. No te: Figures in italics are fo r years o ther than tho se specified. 2009 data are preliminary. 2/25/11 .. indicates data are no t available. – indicates o bservatio n is no t applicable. Develo pment Eco no mics, Develo pment Data Gro up (DECDG). - 51 - Millennium Development Goals Togo With selected targets to achieve b etween 1990 and 2015 (estimate clo sest to date sho wn, +/- 2 years) T o go G o a l 1: ha lv e t he ra t e s f o r e xt re m e po v e rt y a nd m a lnut rit io n 19 9 0 19 9 5 2000 2008 .25 P o verty headco unt ratio at $ 1 a day (P P P , % o f po pulatio n) .. .. .. 38.7 P o verty headco unt ratio at natio nal po verty line (% o f po pulatio n) 32.3 .. .. .. Share o f inco me o r co nsumptio n to the po o rest qunitile (%) .. .. .. 5.4 P revalence o f malnutritio n (% o f children under 5) 21.2 .. 23.2 22.3 G o a l 2 : e ns ure t ha t c hildre n a re a ble t o c o m ple t e prim a ry s c ho o ling P rimary scho o l enro llment (net, %) 62 71 80 83 P rimary co mpletio n rate (% o f relevant age gro up) 35 40 63 61 Seco ndary scho o l enro llment (gro ss, %) 21 21 31 41 Yo uth literacy rate (% o f peo ple ages 15-24) .. .. 74 84 G o a l 3 : e lim ina t e ge nde r dis pa rit y in e duc a t io n a nd e m po we r wo m e n Ratio o f girls to bo ys in primary and seco ndary educatio n (%) 58 61 69 75 Wo men emplo yed in the no nagricultural secto r (% o f no nagricultural emplo yment) 41 .. .. .. P ro po rtio n o f seats held by wo men in natio nal parliament (%) 5 1 5 11 G o a l 4 : re duc e unde r- 5 m o rt a lit y by t wo - t hirds Under-5 mo rtality rate (per 1 ,000) 150 142 124 100 Infant mo rtality rate (per 1,000 live births) 89 86 78 66 M easles immunizatio n (pro po rtio n o f o ne-year o lds immunized, %) 73 53 58 77 G o a l 5 : re duc e m a t e rna l m o rt a lit y by t hre e - f o urt hs M aternal mo rtality ratio (mo deled estimate, per 1 00,000 live births) 650 550 450 350 B irths attended by skilled health staff (% o f to tal) 31 .. 49 62 Co ntraceptive prevalence (% o f wo men ages 1 5-49) 34 .. 26 17 G o a l 6 : ha lt a nd be gin t o re v e rs e t he s pre a d o f H IV / A ID S a nd o t he r m a jo r dis e a s e s P revalence o f HIV (% o f po pulatio n ages 1 5-49) 0.7 3.0 3.6 3.3 Incidence o f tuberculo sis (per 100,000 peo ple) 31 0 340 370 440 Tuberculo sis case detectio n rate (%, all fo rms) 11 10 7 10 G o a l 7 : ha lv e t he pro po rt io n o f pe o ple wit ho ut s us t a ina ble a c c e s s t o ba s ic ne e ds A ccess to an impro ved water so urce (% o f po pulatio n) 49 52 55 60 A ccess to impro ved sanitatio n facilities (% o f po pulatio n) 13 13 12 12 Fo rest area (% o f to tal land area) 12.6 10.8 8.9 6.4 Terrestrial pro tected areas (% o f surface area) .. .. .. 1 1 .1 CO2 emissio ns (metric to ns per capita) 0.2 0.2 0.3 0.2 GDP per unit o f energy use (co nstant 2005 P P P $ per kg o f o il equivalent) 2.7 2.1 2.0 2.0 G o a l 8 : de v e lo p a glo ba l pa rt ne rs hip f o r de v e lo pm e nt 00 Telepho ne mainlines (per 1 peo ple) 0.3 0.5 0.8 2.2 00 M o bile pho ne subscribers (per 1 peo ple) 0.0 0.0 1.0 24.0 00 Internet users (per 1 peo ple) 0.0 0.0 1.9 5.4 00 P erso nal co mputers (per 1 peo ple) .. 0.3 1.9 3.1 Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 100 100 30 75 75 20 50 50 25 10 25 0 2000 2002 2004 2006 2008 0 0 1990 1995 2000 2008 2000 2002 2004 2006 2008 Primary net enrollment ratio Fixed + mobile subscribers Ratio of girls to boys in primary & secondary Togo Sub-Saharan Africa education Internet users No te: Figures in italics are fo r years o ther than tho se specified. .. indicates data are no t available. 2/25/11 Develo pment Eco no mics, Develo pment Data Gro up (DECDG). - 52 - CAS Annex B2: Selected Indicators* of Bank Portfolio Performance and Management As of 12/07/2011 Indicator 2009 2010 2011 2012 Portfolio Assessment Number of Projects Under Implementation a 4 4 6 6 Average Implementation Period (years) b 0.4 1.4 1.7 2.1 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 25.0 0.0 16.7 16.7 Percent of Projects at Risk by Amount a, d 22.6 0.0 20.0 20.0 Disbursement Ratio (%) e 11.5 24.2 29.3 8.6 Portfolio Management CPPR during the year (yes/no) No No No Yes Supervision Resources (total US$) Average Supervision (US$/project) $39/4 $70/5 $48/7 Since FY Last Five Memorandum Item 80 FYs Proj Eval by OED by Number 42 2 Proj Eval by OED by Amt (US$ millions) 846.5 164.4 % of OED Projects Rated U or HU by Number 52.4 0.0 % of OED Projects Rated U or HU by Amt 43.2 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. - 53 - CAS Annex B3: IBRD/IDA Program Summary As of 12/07/2011 Proposed IBRD/IDA Base-Case Lending Program a Fiscal Proj ID US$(M) year 2012 Community Development and Safety Net 14.0 Economic Recovery & Gov. Grant 5 14.0 Emergency Infrast Rehab Add Financing 14.0 Result 42.0 2013 Development Policy Operation 10.0 Energy Project 20.0 WA Reg Communications Infrastructure 10.0 Result 40.0 Overall Result 82.0 - 54 - CAS Annex B3: IBRD/IDA Program Summary As of 12/07/2011 Product Completion FY Cost (US$000) Recent completions PEMFAR 2009 319 Sources of Growth/CEM 2010 524 ROSC 2010 Education Sector Program (TA) 2010 147 ICT Policy Dialogue (TA) 2010 50 Health CSR 2011 120 Country Environmental Analysis 2011 ICT Strategy Development (TA) 2011 50 Post Disaster Needs Assessment (TA) 2011 60 Cash for Work Program (TA) 2011 60 Underway Use of Country Systems 2012 60 Poverty/Gender Notes 2012 140 Energy Study 2012 95 Phosphate Strategy (TA)/ 2012 50 EITI Implementation Social Protection (TA) 2012 40 Planned CPAR 2013 80 PER 2013 100 ROSC Follow-up (TA) 2013 25 Phosphate /EITI Implementation Support (TA) 2013 20 - 55 - CAS Annex B5: Social Indicators Togo Social Indicators Latest single year Same region/income group Sub- Saharan Low - 1980-85 1990-95 2003-09 Africa incom e POPULATION Total population, mid-year (millions) 3.3 4.4 6.6 839.6 846.1 Grow th rate (% annual average for period) 3.7 2.4 2.5 2.5 2.2 Urban population (% of population) 27.2 33.2 42.7 36.9 28.7 Total fertility rate (births per w oman) 6.9 5.7 4.2 5.0 4.2 POVERTY (% of population) National headcount index .. .. 61.7 .. .. Urban headcount index .. .. 36.8 .. .. Rural headcount index .. .. 74.3 .. .. INCOME GNI per capita (US$) 220 290 440 1,125 509 Consumer price index (2000=100) 44 75 114 135 141 Food price index (2000=100) 59 86 95 .. .. INCOME/CONSUMPTION DISTRIBUTION Gini index .. .. 34.4 .. .. Low est quintile (% of income or consumption) .. .. 5.4 .. .. Highest quintile (% of income or consumption) .. .. 47.1 .. .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. 1.5 1.7 2.9 2.2 Education (% of GDP) 4.6 .. 4.6 3.8 3.5 Net prim ary school enrollm ent rate (% of age group) Total 57 71 94 75 80 Male 68 82 98 77 82 Female 45 60 89 73 78 Access to an im proved w ater source (% of population) Total .. 52 60 60 64 Urban .. 81 87 82 85 Rural .. 37 41 47 56 Im m unization rate (% of children ages 12-23 months) Measles 27 53 84 68 78 DPT 24 58 89 70 80 Child malnutrition (% under 5 years) .. .. 22 25 28 Life expectancy at birth (years) Total 57 59 63 53 57 Male 55 57 61 51 56 Female 59 61 65 54 59 Mortality Infant (per 1,000 live births) 92 86 64 81 76 Under 5 (per 1,000) 160 142 98 130 118 Adult (15-59) Male (per 1,000 population) 457 389 238 390 312 Female (per 1,000 population) 375 321 197 358 275 Maternal (modeled, per 100,000 live births) .. 550 350 650 580 Births attended by skilled health staff (%) .. .. 62 44 41 Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one year of age or at any time before the survey. World Development Indicators database, World Bank - 15 April 2011. - 56 - CAS Annex 6: Key Economic Indicators As of 10/31/2011 Actual Estimate Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 National accounts (as % GDP at current market prices) Gross domestic product annual change 1.2 4.1 2.3 2.4 3.4 4.0 4.1 4.5 4.7 Primary -2.2 4.4 3.5 4.2 8.2 2.5 3.9 3.6 3.1 Secondary 5.1 7.9 -5.7 5.6 0.4 6.4 4.8 6.8 8.1 Tertiary 2.0 -2.0 2.2 0.2 1.2 4.9 2.7 4.8 5.4 Total Consumption 102.3 101.1 101.9 99.1 97.6 97.7 98.3 96.8 96.2 Gross domestic fixed investment Government investment 2.8 3.4 2.0 3.2 5.5 7.6 9.7 11.5 12.6 Private investment 13.5 13.3 12.7 14.2 12.5 11.0 10.2 9.5 10.1 (includes increase in stocks) Exports (GNFS)b 39.0 34.5 36.0 33.8 36.8 37.3 37.4 37.1 37.2 Imports (GNFS) -56.9 -52.6 -55.2 -48.2 -52.3 -53.8 -55.1 -55.8 -56.0 Gross domestic savings 12.4 14.7 12.2 16.2 18.0 18.9 20.3 22.0 23.6 Gross national savings c 7.0 8.2 5.6 10.9 11.1 9.9 11.0 12.6 14.0 Memorandum items Gross domestic product 2,117 2,205 2,527 3,177 3,166 3,183 3,689 3,961 4,196 (US$ million at current prices) Gross national product per capita (US$, Atlas method) 310 340 330 380 420 440 Real annual growth rates 1.18 4.05 2.29 2.38 3.2 3.7 3.6 4.4 4.7 (%, calculated from 2000) prices) Gross domestic product at market prices FCFA 1115.7 1151.8 1209.4 1416.6 1490.0 1573.0 1696.0 1821.0 1952.0 Gross Domestic Income Real annual per capita -1.400 1.500 -0.200 -0.100 0.7 1.1 1.3 1.9 2.2 growth rates (%, calculated from prices 2000) Gross domestic product at 1115.7 1151.8 1209.4 1416.6 1490.0 1573.0 1696.0 1821.0 1952.0 market prices Total consumption bio CFAF 1,142 1,165 1,233 1,404 1,455 1,536 1,667 1,763 1,877 Private consumption bio CFAF 1,001 1,024 1,112 1,273 1,288 1,394 1,495 1,583 1,677 (Continued) - 57 - Togo – Key Economic Indicators (Continued) Actual Estimate Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 Balance of Payments (US$m) Exports (GNFS)b 847.9 842.3 958.4 1127.7 1165.9 1187.6 1379.9 1470.7 1559.8 Merchandise FOB 637.3 697.6 702.4 852.5 905.6 888.7 1022.6 1090.9 1157.9 Imports (GNFS)b 1242.0 1237.4 1377.2 1650.2 1661.1 1712.8 2032.5 2208.5 2351.8 Merchandise FOB 957.5 1029.1 1051.6 1298.3 1319.5 1324.1 1556.2 1694.7 1812.4 Resource balance -394.1 -395.1 -418.8 -522.4 -495.2 -525.2 -652.5 -737.9 -792.0 Net current transfers 220.7 247.0 287.5 320.1 303.8 323.9 404.1 454.1 482.2 (including official current transfers) Current account balance -208.6 -185.9 -161.7 -217.4 -210.5 -228.0 -282.1 -319.6 -349.8 (after official capital grants) Direct 92.0 91.8 49.9 39.9 11.2 20.6 36.9 39.6 50.4 investment Long-term loans (net) -18.03 -19.322 -37.4 -38.578 -16.785 59.8924 49.4983 77.0157 113.834 Projects Loans Non projects loans Other capital (net, including 102.2 227.1 188.5 .. .. .. .. .. .. errors and omissions) Change in reservesd 32.45 -113.72 -39.432 .. .. .. .. .. .. Memorandum items Resource balance (% of -18.6 -17.9 -16.6 -16.4 -15.6 -16.5 -17.7 -18.6 -18.9 GDP at current market prices bio US$) Real annual growth rates (2000 prices) Merchandise exports 1.5 -11.4 17.6 6.1 0.1 -3.8 12.0 3.7 3.4 (FOB) Primary 2.1 -13.6 20.0 7.2 -3.2 -4.4 12.8 3.6 3.3 Manufactures -4.1 7.5 1.7 -2.5 28.8 0.5 6.6 4.5 3.5 Merchandise imports %GDP 1.7 -2.0 8.1 8.0 -2.5 -0.04 15.8 4.9 3.2 (CIF) Public finance (as % of GDP at current market prices)e Current revenues 14.5 13.0 12.3 15.1 16.9 18.9 18.9 18.4 18.5 Current expenditures 10.8 10.8 11.3 13.1 17.4 16.7 20.4 19.5 20.2 (Continued) - 58 - Togo – Key Economic Indicators (Continued) 235 230.8 274.6 278.6 305.8 Actual Estimate Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 Current account surplus (+) bio CFAF -91.3 -89.6 -102.6 -90.3 -99.1 -112.7 -129.7 -146.9 -162.7 or deficit (-)(Millions of US$) Capital expenditure billions CFAF 30.7 39.6 24.1 44.9 82.3 123.6 150.7 209.4 245.9 Foreign financing billion CFAF 3.6 2.8 29.2 22.8 35.4 53 Monetary indicators M2/GDP (at current market 0.28 0.33 0.38 0.37 0.4 0.5 0.5 0.5 0.5 prices) Growth of M2 (%) 2.30 22.7 19.7 15.6 16.2 16.3 11.6 10.3 9.2 Private sector credit growth / 0.4 15.3 9.7 9.7 10.3 8.5 6.8 6.4 total credit growth (%) 20.3 19.6 11.2 11.3 Price indices( 1995 =100) Price exports in CFA index, 1995 = 100 96.6 99.9 103.1 118.7 110.3 122.7 120.5 119.4 121.0 Price Imports in CFA index, 1995 = 100 175.4 169.8 193.1 177.8 169.2 182.1 186.3 190.2 191.1 Terms of trade 55.1 58.8 53.4 66.8 65.2 67.4 64.7 62.8 63.3 index Real exchange rate (average) 526.9 522.4 478.5 445.8 470.7 494.2 459.8 459.7 465.2 (LCU/US$) Real interest rates Consumer price index 1.5 3.4 10.3 1.9 1.4 3.7 2.4 3.5 (% growth rate) GDP deflator 7.7525 -0.8 2.6 14.4 2.1 1.8 3.3 2.2 2.6 (% growth rate) a. If GDP components are estimated at factor cost, a footnoote indicating this fact should be added. b. “GNFS� denotes “goods and nonfactor services.� c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Should indicate the level of the government to which the data refer. f. “LCU� denotes “local currency units.� An increase in US$/LCU denotes appreciation. - 59 - Togo – Selected Indicators Table Base-case (most lik ely) projection Actual Estimate Projected 2005 2006 2007 2008 2009 2010 2011 2012 2013 Part A: Main Macro Aggregates Annual growth rates, calculated from constant 2000 price data GDP (mp) per capita -1.40 1.48 -0.23 -0.15 0.68 1.15 1.34 1.90 2.15 Total consumption per capita GDP at market prices (LCU) 9.02 3.24 5.00 17.13 5.20 5.56 7.82 7.34 7.21 Total consumption 2.05 5.82 13.90 3.60 5.59 8.55 5.73 6.48 Private consumption 2.29 8.58 14.43 1.23 8.19 7.26 5.86 5.93 Gross domestic investment (GDI) 22.38 6.30 -8.35 38.56 9.47 10.42 10.87 20.70 11.63 Gross dom. Fixed investment (GDFI) Exports (GNFS) LCU % 5.75 -1.42 -3.56 9.57 3.05 7.83 5.93 7.16 of which Goods Imports (GNFS) LCU % 7.52 2.47 3.06 1.92 9.05 5.38 8.85 8.86 8.52 of which Goods Savings-investment balances, as percentage of GDP Gross Domestic investment 16.29 16.77 14.64 17.32 18.02 18.85 20.33 21.80 22.70 of which Government investment 2.77 3.44 1.99 3.17 5.52 7.85 9.83 11.50 12.60 Foreign savings Gross national savings 8.11 8.99 6.16 10.95 11.37 11.69 12.67 13.70 14.33 Government savings 2.70 6.24 5.89 7.36 7.05 Non government savings 8.67 5.45 6.77 6.34 7.29 Gross domestic savings Other GDP inflation Annual average exchange rate (LCU/US$) 526.9 522.37 478.52 445.85 470.661 494.219 459.805 459.68 465.177 Index real average exchange rate ( =100) Terms of trade 51.974 54.184 55.329 60.921 60.8556 60.0811 59.8562 60.893 60.2595 Incremental capital-output ratio (GDI based) Import elasticity with respect to GDP Money growth Part B: Government Finance Indicators Percentage of GDP Total revenues, of which 14.46 12.54 12.28 15.58 16.94 18.86 18.90 18.40 18.50 Tax revenues 13.40 11.47 11.83 14.91 15.40 15.70 15.80 16.50 16.60 Total expenditures, of which 17.78 15.63 14.88 17.88 21.30 22.51 26.10 26.84 28.30 Consumption Deficit(-)/Surplus(+) -0.77 -0.55 -1.15 0.88 -2.82 -1.61 -3.94 -4.14 -5.60 - 60 - Togo - Selected Indicators Table (continued). Actual Estimate Projected 2005 2006 2007 2008 2009 2010 2011 2012 2013 Financing: 1.87 3.31 1.97 1.95 1.20 1.20 2.00 2.00 3.60 Foreign 1.84 1.55 1.23 2.84 0.20 1.90 1.30 1.90 2.70 Monetary sector -0.31 -1.30 0.35 3.23 1.00 0.30 2.00 0.60 0.80 Other domestic 0.34 3.05 0.39 -4.12 0.00 -1.00 -1.30 -0.50 0.10 Other Total Debt/GDPmp 67.80 32.30 27.43 27.12 27.82 Total interest payments bio CFAF/Tax revenues 13.90 15.10 14.00 15.20 15.50 Part C: Debt & Liquidity Indicators Total DOD and TDS DOD (US$ millions) 1,678 1,787 1,967 1,638 1,640 1,612 1,617 1,603 1,571 DOD / GDPmp ratio 79.3 81.0 77.8 51.6 51.8 50.7 43.8 40.5 37.4 TDS (US$ millions) 20.8 26.1 15.0 196.3 55.3 35.1 83.683 85.756 90.409 TDS / exports (XGS) ratio 2.5 3.1 1.6 17.4 4.7 3.0 6.1 5.8 5.8 Total gross reserves (months’ imports G& 2.0 3.7 3.5 4.9 5.2 6.50 6.10 4.6 4.8 Part D: External Financing Plan (US$, millions) Official capital grants 56.72 58.95 99.38 374.47 #N/A #N/A #N/A #N/A #N/A Private capital flows, total (BoP, current 94.3 154.4 69.1 52.0 .. .. 0.0 0.0 0.0 Net Long term borrowing excl IMF 1.5 -4.4 0.3 16.7 0.0 .. 0.0 0.0 0.0 Adjustments to scheduled debt service All other capital flows Financing Requirements (incl IMF) of which current account deficit - 61 - CAS Annex B7: Key Exposure Indicators As of 10/31/2011 Actual Estimate Projected Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total debt outstanding and 1,678 1,787 1,967 1,638 1,640 1,612 1,617 1,603 1,571 disbursed (TDO) (US$m)a Net disbursements (US$m)a 9.9 48.3 3.1000 51.6 75.9 127.6 61.042 44.256 31.922 Total debt service (TDS) 20.8 26.1 15.0 196.3 55.3 35.1 83.7 85.8 90.4 (US$m)a Debt and debt service indicators (%) TDO/XGSb (PV of PPG external deb 197.94 212.13 205.25 145.3 140.66 135.76 117.2 109.01 100.75 TDO/GDP (PV of PPG extern 79.263 81.034 77.83 51.56 51.792 50.655 43.844 40.476 37.45 TDS/XGS 2.5 3.1 1.6 17.4 4.7 3.0 6.1 5.8 5.8 Concessional/TDO 66.631 67.17 64.457 77.61 79.157 80.099 80.494 80.673 80.832 IBRD exposure indicators (%) IBRD DS/public DS .. .. .. .. .. .. .. .. .. Preferred creditor DS/public .. .. .. .. .. .. .. .. .. DS (%)c IBRD DS/XGS .. .. .. .. .. .. .. .. .. IBRD TDO (US$m)d .. .. .. .. .. .. .. .. .. Of which present value of guarantees (US$m) Share of IBRD portfolio (%) .. .. .. .. .. .. .. .. .. IDA TDO (US$m)d 667.3 696.4 723.2 604.2 586.1 554.3 540.5 516.5 492.4 IFC (US$m) Loans Equity and quasi-equity / c MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short- term capital. b. “XGS� denotes exports of goods and services, including workers’ remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. - 62 - CAS Annex 8: Operations Portfolio (IBRD/IDA and Grants) As of 12/07/2011 Closed Projects 45 IBRD/IDA * Total Disbursed (Active) 64.06 of w hich has been repaid 0.00 Total Disbursed (Closed) 200.30 of w hich has been repaid 155.31 Total Disbursed (Active + Closed) 264.36 of w hich has been repaid 155.31 Total Undisbursed (Active) 64.66 Total Undisbursed (Closed) 0.00 Total Undisbursed (Active + Closed) 64.66 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Development Implementation Project ID Project Name Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd Objectives Progress P110943 TG-Community Dev. Project ERL (FY08) S S 2008 25.90 7.33 -1.45 P113415 TG:Emergency Infra.Rehab. & Energy Proj. S S 2009 40.00 28.18 -1.20 P111064 TG:Financial Sector and Governance Proj S S 2009 12.00 6.29 -1.53 P115066 Togo Efficient Lighting Program S S 2009 1.82 P122806 TG-Economic Recovery & Gov. Grant 4 # # 2011 28.00 0.14 P122326 TG-Priv Sec Development Support S S 2011 13.00 13.39 0.25 P118045 TG:Agricultural Sector Support Project S S 2011 9.00 9.32 0.00 Overall Result 127.90 1.82 64.66 -32.50 a/. Intended disbursements to date minus actual disbursements to date as projected at appraisal. - 63 - CAS Annex B8: Statement of IFC’s Held and Disbursed Portfolio Committed and Disbursed Outstanding Investment Portfolio As of 11/30/2011 (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 2011 LCT 114.25 0 0 0 0 0 0 0 0 0 2010 CT Togo 0 5 8.86 0 0 0 4.74 8.86 0 0 2010 Heidelberg 0 110 0 0 0 0 37 0 0 0 2010 Ecobank Tg 1.5 0 0 0 0 1.5 0 0 0 0 2007 Transam 1.6 0 0 0 0 1.07 0 0 0 0 Total Portfolio: 117.35 115 8.86 0 0 2.57 41.74 8.86 0 0 * Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types. FY12 Pipeline: (as of November 30, 2011) Project (Name ) Industry (Sector) Exposure ($M) Lomè Container Terminal Infrastructure B Loan - 221.0 SME Took Kit Promotion Advisory Services Launch of Investment Climate initiatives Advisory Services C3P Work Programs Advisory Services Grand Total 221.0 - 64 - IBRD 33497 o To Ouagadougou 1°E BURKINA FASO Diapaga TO GO o To SELECTED CITIES AND TOWNS 11°N 11°N To o PREFECTURE CAPITALS Navrongo Mandouri Dapaong TÔNE REGION CAPITALS Too Natitingou NATIONAL CAPITAL Oti RIVERS AV S AVA N N A MAIN ROADS OTI Mango RAILROADS Ko PREFECTURE BOUNDARIES u m ongou REGION BOUNDARIES KEREN INTERNATIONAL BOUNDARIES 10°N Kanté Kanté DOUFELGOU Kpagouda o To Niamtougou BINAH This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Yendi endi Guérin Gué Guérin KARA To o Kokoro shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any Ka Kouka ra Kara KOZAH endorsement or acceptance of such boundaries. To o BASSAR Tamale amale ASSOLI Bafilo To o Parakou GHANA Bassar TCHAOUDJO Tchamba Tchamba o To 9°N Parakou 9°N Sokondé Sokondé . Fazao Mts o n BENIN Mo CENTRAL Sotouboua YA N YA L A SOTOUBOUA Blitta o To NIGERIA Bimbila A ni e OGOU 8°N Elavagnon 8°N o To Savé Sav Anjé Anjé WAWA AMOU WAWA Badou Atakpamé Atakpamé Amlamé Amlamé Lake Amou PLATEAU Volta o To endi Yendi Apéyémé Apé Apéyémé o To tou Kétou KLOTO HAHO 7°N 7°N Mont Agou Notsé Notsé Kpalime (986 m) Agou Si o To o YOTO Accra ZIO Tabligbo Tabligbo MARITIME L C L C LAC TOGO Kéve Kéve VO o To Lagos vié Tsévié Tsévié Vogan Vogan S Aného 0 20 40 60 Kilometers LOMÉ 6°N GOLFE 0 10 20 30 40 50 Miles To o Accra Bight of Benin 0° 1°E 2°E 3°E NOVEMBER 2004