Document ofThe World Bank

FOR OFFICIAL USE ONLY

REPORT No 21547

IMPLEMENTATION COMPLETION REPORT(IDA-26650; PPFI-P8540)

ONA

CREDIT

IN THE AMOUNT OF SDR 9 MILLION (US$13 MILLION EQUIVALENT)

TO THE

REPUBLIC OF GHANA

FOR A PRIVATE SECTOR DEVELOPMENT PROJECT

December 21, 2000

Private Sector GroupAfrica Region

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

(Exchange Rate Effective June 30, 2000)

Currency Unit = Ghanaian CedisiGHC 5188 = US$ 1US$ 0.192 = GHC 1000

FISCAL YEAR

ABBREVIATIONS AND ACRONYMS

B KR! Buildings and Roads Research InstituteCSIR Council for Scientific and industrial ResearchEOP End of ProjectFRI Food Research InstituteGSB Ghana Standard BoardGTFA Ghana Trade Fair AuthorityGDP Gross Domestic ProductICR Implementation Completion ReportIDA International Development AssociationIRI Industrial Research InstituteISSER The Institute of Statistical, Social & Economic ResearchIQNET International Quality NetworkMFEP Ministry of Finance & Economic PlanningMEST Ministry of Environment, Science & TechnologyMTI Ministry of Trade & IndustryMOJ Ministry of JusticeMOP Memorandum of the PresidentNGO Non-govermmental OrganizationNPV Net Present ValueODA Overseas Development AgencyPEPTA Public Enterprise Privatization Technical AssistancePSD Private Sector DevelopmentQAG Quality Assurance GroupSIC Scientific Instrumentation CenterSME Small & Medium-Term EnterpriseTEDF Technology and Enterprise Development FundTTL Task Team LeaderUNDP United Nations Development ProgrammeUSAID United States Agency for international DevelopmentUSD United States Dollar

Vice President: Callisto E. MadavoCountry Manager/Director: Peter C. Harrold

Sector Manager/Director: Demba BaTask Team Leader/Task Manager: Kofi Boateng-Agyen/Michael Wong

FOR OFFICIAL USE ONLY

CONTENTS

Page No.1. Project Data I2. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 45. Major Factors Affecting Implementation and Outcome 76. Sustainability 97. Bank and Borrower Performance 98. Lessons Learned 119. Partner Comments 1210. Additional Information 24Annex 1. Key Performance Indicators/Log Frame Matrix 25Annex 2. Project Costs and Financing 26Annex 3. Economic Costs and Benefits 28Annex 4. Bank Inputs 29Annex 5. Ratings for Achievement of Objectives/Outputs of Components 30Annex 6. Ratings of Bank and Borrower Performance 31Annex 7. List of Supporting Documents 32

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not be otherwise disclosed withoutWorld Bank authorization.

Project ID: P000960 Project Name: PRIV SECTOR DEVTeam Leader: Kofi-Boateng Agyen TL Unit: AFC1OICR Type: Core ICR Report Date: December 21, 2000

1. Project Data

Name: PRIV SECTOR DEV L/C/TFNumber: IDA-26650;PPFI-P8540

Country/Department: GHANA Region: Africa Regional OfficeSector/subsector: DB - Business Environment

KEY DATESOriginal Revised/Actual

PCD: 08/27/93 Effective: 05/11/95 07/12/95Appraisal: 01/28/94 MTR: 09/30/97 04/29/98Approval: 12/06/94 Closing: 06/30/2000 06/30/2000

Borrower/lImplementing Agency: GOVT OF GHANA/TBDOther Partners: Ministry of Justice/ Ministry of Trade and Industry/Ministry of Environment,

Science and Technology

STAFF Current At AppraisalVice President: Callisto E. Madavo Jaycox Edward V.K.Country Manager: Peter C. Harrold Edwin LimSector Manager: Demba Ba Mary Oakes SmithTeam Leader at ICR: Kofi-Boateng Agyen Patrick ConnollyICR Primary Author: Michael Wong; Agata

Pawlowska

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: U

Sustainability: UN

Institutional Development Impact: N

Bank Performance: U

Borrower Performance: U

QAG (if available) ICRQuality at Entry: U

Project at Risk at Any Time:

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The project objective was to foster the development of a competitive private sector by (a)assisting the Government in its efforts to restructure, reform and commercialize its technicalresearch and development institutions along competitive and demand-driven principles; (b)providing a broad segment of the private sector with the necessary financial and technicalassistance to support the development of commercially-bankable projects by improving theirfeasibility and quality; (c) supporting efforts by the export industry to improve their design and thepromotion of their products; and (d) assisting the Government in developing a program toupgrade the delivery of legal services to the commercial and manufacturing sectors, therebyaccelerating response time for commercial transactions and commercial contracts disputes.

The project objective was in line with the Country Assistance Strategy of the Bank for Ghanawhich called for increasing private sector-led growth. The project was not a stand-aloneoperation, but one of the instruments in the Bank program in support of private sectordevelopment. The project complemented other activities supported by the Bank and other donors.USAID had put in place a Trade & Investment Project (TIP) for US$80 million to removeconstraints to the development of the private sector in Ghana. In addition, the Bank wassupporting the private sector with the Private Enterprise & Export Development Credit (PEED,Cr. 2502 approved in 1993) which included a short-term credit line for exports, and the Small &Medium Enterprise Development Credit (SME, Cr. 1996 approved in 1989), which included amedium-term credit line. In addition to the credit lines, other projects supported the restructuringof the banking sector which was expected to contribute to easing the credit constraint to privatesector activity. The project under review originally included a line of credit of about US$20million, which was dropped during preparation since other institutions had indicated theirintention to provide this type of financing.

The project objective itself was general, as it was part of an overall Bank strategy for the supportof the private sector. At the time the project was prepared, it was believed that increasing theefficiency of certain public institutions involved in research and development (R&D), tradefacilitation, industrial design, etc., would improve the competitiveness of the economy. Thistranslated into the five components of the PSD Project. Learning from the experience of the pastyears and judging ex post, it is evident that, in fact, a key ingredient was missing; the demand forgood quality products and support services. In addition, the project attempted to replicate thesuccessful experience in other countries that supported their public institutions, which wasregarded as best practice at the time. This included the R&D institutions in South Africa (afterwhich this project was modeled), and the private-public partnership in Malaysia. Theimplementation arrangements relied heavily on government agencies and did not incorporateinstitutions which would benefit from the project during design or implementation.

3.2 Revised Objective:The revised overall strategy was to increase and deepen the private sector contribution toeconomic growth in Ghana, and the objective of the project in particular was to improve privatesector competitiveness in global markets. These statements are the result of a revision of theproject that occurred at the mid-term review in April 1998. The reformulation was not reported

-2 -

or approved by the Board since the original objective was very broad, and a revision of the loanagreement was not needed.

3.3 Original Components:3.3.1 The project consisted of the following five components:

(a) Training and technical assistance to the Secretariat of Ghana's Council for Scientific andIndustrial Research (CSIR) and four institutions (the Food Research Institute, FRI; the IndustrialResearch Institute, IRI; the Scientific Instrumentation Center, SIC; and the Buildings and RoadsResearch Institute, BRRI) to develop a commercialization strategy to serve the needs of theprivate sector, and capacity building to strengthen the role of the Ghana Standard Board (GSB) indeveloping metrology and quality testing standards and to disseminate its services throughout thecountry. The project envisaged changes in the legal framework and operating practices of theseinstitutions. The recommended changes were that 40 percent of CSIR's governing council and 40percent of the management boards of the four institutions above would be from the private sector,and that the director-general of CSIR be appointed by its governing council. It was alsorecommended that contract research be carried out to meet the needs of industry, and that no lessthan 70 percent of the income from such research go to the institute that carried out the research.An additional change envisioned was that the director of an institute would have moreresponsibility and freedom to take action than in the past.

(b) A technology and enterprise development fund (TEDF) to assist private small- andmedium-size enterprises to develop value-added products and provide reliable services, todevelop their technical and financial plans to a level of bankable quality and feasibility, and tosupport their efforts to raise the necessary funds or investor support;

(c) for the Ghana Trade Fair Authority (GTFA), a study to determine the market demand, anarchitectural survey to assess the rehabilitation and redesign needs of the pavilions and establishthe investment parameters to be met;

d) for the Industrial Design Center, a feasibility study to determine the scope, financial viability,commercial demand and organizational structure of such a center; and

(e) in the legal sector, a study to design improvements in the delivery of legal services andassistance to strengthen the capacity of government to support the delivery of services.

3.3.2 Assessment of components

In general, the components did not relate sufficiently to the project objective because they weretoo public sector-focused, supply driven and did not fully address the constraints.

Public sector focus: The support institutions in R&D are owned and run by the Government anddirectly dependent on the Government's budget. The amendments of the legal framework andoperating practices of CSIR envisaged at appraisal were insufficient, even if adopted, to effect thedesired turnaround of the research institutions, as they left control of these institutions in thepublic sector.

-3-

Supply driven: Both intense competition and consumers themselves are the driving force ofinnovation and productivity in the private sector. By funding suppliers instead of directlyfunding/subsidizing research projects initiated by the private sector and implemented by a providerselected through competitive bidding, there was a disconnect between market demand and supply.

Address the root causes for constraints: Consultations with the private sector identified upgradingthe industrial infrastructure and commercial judicial system, and overhauling R&D institutions andmanpower development as areas for action. The underlying message was for government toassume the role of facilitator and allow private sector involvement in these sectors. This was notsufficiently acknowledged by the R&D component.

The provision of financial and technical assistance to develop commercially-bankable projects byimproving their feasibility and quality (TEDF) addressed a private sector concem. Greaterconsultation with the banking community would have ensured that the fund activities were indeedaddressing their requirements.

3.4 Revised Components:The project components were not revised, although in 1999, six months prior to the closing dateof the project, the Public Enterprise and Privatization Project (PEPTA, Cr. 2877 approved in1996) was amended to include support for the GSB and legal components of the PSD project,which were being implemented satisfactorily, but which would not be completed by the closingdate of the PSD project of June 30, 2000.

3.5 Quality at Entry:The project was never subjected to a Quality-at-entry review. As noted elsewhere in this report,although extensive work was done at preparation to identify constraints, the project design didnot fully take into account the preconditions for successful reform of the institutions involved inthe project and had a complex implementation arrangement, described below, which did not fullybring in the ultimate beneficiaries of the project-financed institutions.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:

The macroeconomic fundamentals of Ghana have been deteriorating since the credit wasapproved, and it is likely that this has resulted in changed perceptions and priorities and affectedproject outcome. The project helped create a greater consciousness of markets and commercialpractices among all participating institutions which is an important beginning in achieving theproject objective of restructuring, reforming and commercializing them. Also, while actualprogress in meeting project objectives was limited in some of the beneficiary institutions,significant progress was made in improving the performance of the GSB and in the modernizationof the legal infrastructure, and Bank support for these activities will be continued under anotherBank project. The second key project component, the TEDF, had limited impact. Its outcomewas adversely affected not only because of its design, but also by the adverse investrnent climatein the country. The project outcome is therefore rated unsatisfactory because of it had limitedachievements when measured against outcome indicators, as discussed in the section on

- 4 -

components below.

4.2 Outputs by components:a) Commercialization of Research and Development

1.1 Council for Scientific and Industrial Research

The central objective of this component was to support the reorganization and reorientation of thefour industrial-oriented CSIR institutes along commercially-based lines so as to provide moreeffectively the linkages between the delivery of skills and the development of information andstandards to industry. The institutions were expected to generate 30 percent of their revenuefrom the private sector, and to service at least 300 SMEs. The component is rated unsatisfactorymainly because it did not meet its objectives.

The Government did amend the CSIR charter in 1995, and but did not include provisions thatwould have allowed the institutes to retain 70 percent of their revenues as agreed in the legaldocuments with the Bank. The institutions have in fact not retained a significant portion of theirrevenue and are not able to meet running costs. The amendments also imposed the requirementthat CSIR institutes generate 30 percent of their budget. Revenues still only account for under 10percent of the institutes' costs. The institutes did reduce the staff and met the target of ratio ofresearch staff to support staff. In spite of the timid changes introduced in the legal andorganizational framework, the CSIR institutions have taken an increasingly commercial approachwith the establishment of marketing offices, and have started advertising their capabilities.Therefore, there is some evidence that the project has left a lasting imprint.

1.2 Ghana Standards Board

In addition to the commercialization of the GSB, key services were to be upgraded to theInternational Standards Organization (ISO) standards. The implementation of this component israted satisfactory because two important benchmarks were achieved: GSB obtained ISO 9000certification in May 2000, and has put in place a twinning arrangement with an external partner.The component is still being implemented under the PEPTA Project. Therefore, the targetedrevenue generation and companies to be certified may be achieved. At 10 percent, revenues arefar below the projected 30 percent, and the process of initiation of 20 companies in ISO 9000,ISO 14,000 and ISO/IEC has not be completed.

b) Technology and Enterprise Development Fund (TEDF)

The objective of the TEDF was to encourage and facilitate the ability of the small- andmedium-size enterprises (annual sales US$400,000) to access financing and improve theirproductive efficiency. The component is rated unsatisfactory mainly because projectimplementation was slow and costly, the program was ineffectively managed and had a limitedimpact.

Slow and costly implementation: Disbursements from the TEDF were slow in the first threeyears, while project management fees were disbursed as projected. While only 8 percent of the

- 5 -

TEDF was disbursed in 1997, 100 percent of the management fees were spent. Disbursement ofthe fund only improved after the mid-term review agreements that Empretec's management feesbe based on performance, and that the grant contribution of 50:50 be changed to 35:65, and otherdonor programs implemented with Empretec were completed. At closure of the project, 66percent of the TEDF and 91 percent of the management fee was disbursed.

Ineffective management: The fund managers decided to pay consultants up-front, instead ofreimbursing companies for consultant services which were carried out, as is the standard practice.This resulted in a significant number of clients not paying for services, paying late or paying alower than required amount; in fact, there are still disputes outstanding as a result of thismanagement failure according to the draft audit report. The actual payments ratio to clients or toconsultants is difficult to assess from the information provided by Empretec.

Limited impact: A detailed survey was not completed. However, the clients interviewed as part ofthis review confirmed that they did not receive credit from commercial banks on the basis of theconsultant services. In those cases where credits were made available, they were given on thebasis of a purchasing order or other form of collateral. However, this is not reflective only of thefund, but of the problems with the banking sector which have not been resolved. The access ofcredit to SMEs in general continues to be a problem. For those clients who were not focused onaccess to finance, services provided did contribute to improvement in the performance of theirbusiness. However, both firms and consultants believed that a payment arrangement where thebeneficiary enterprises paid half the costs of the consultant services (a ratio of 50:50) would notwork in Ghana, and were surprised to hear that the scheme is implemented successfully on a50:50 basis in other African countries. The use of the word "fund" in the title of the matchinggrant scheme could have also had a negative effect on users who generally associate funds withgrant funds.

c) Rehabilitation and Commercialization of the Ghana Trade Fair Authority

The objective of this component was to support a private sector-led development of a viableGTFA. The project financed the studies for the GTFA as planned. However, none of therehabilitation or construction work envisaged at appraisal was financed under the project.Experience with this component is rated unsatisfactory. After completing the study, the GTFAwas placed on the divestiture list, and the Ministry of Trade and Industry and the Ministry ofFinance (MOF) could not agree on the need for further investments. The privatization decisionwas independent of project activities, and it is likely that by the time a decision is reached ondivestiture of the GTFA, the studies financed under the project will be outdated.

d) Industrial Design Center

The original objective of this component was to establish the need, scope and nature of a designcenter. However, during the mid-term review, the objective was made more ambitious: toestablish a privately-operated and commercially-run Industrial Design Center. Experience withthe implementation was unsatisfactory as progress anticipated at appraisal and mid-term were notachieved. A study, completed under this component, identified a number of potential suppliers of

-6 -

industrial design services in the private sector and existing public institutions. However, noattempt was made to strengthen existing operators because most institutions in Ghana werecommitted to the construction of a new facility, which the World Bank Group could not support.After the study was completed, no further investments were made since the building of anindustrial design center was not feasible.

e) Legal assistance and Diagnostic Study

The objective of this component was to improve the operations of the court system and improvelegal information and research operations. Major activities such as the assessment of constraintsin the different legal institutions and providing necessary supplies such as books, computers andtraining were implemented. In addition, a legal sector strategy and investment plan wascompleted and presented to different donors who have expressed interest in supporting the legalsector. The implementation of the component is rated satisfactory since key stakeholders havebeen sensitized to existing constraints, other donors have expressed interest in supporting thelegal sector and major decisions by Ministry of Justice are being implemented to reduceprocessing time and improve service delivery.

4.3 Net Present Value/Economic rate of return:A NPV was not calculated for this project.

4.4 Financial rate of return:Not applicable.

4.5 Institutional development impact:As noted elsewhere in this report, despite progress in some institutions (GSB), the reorientationof key institutions supported by the project was not achieved.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:Several exogenous factors had some influence on the achievement of project objectives,particularly in 1998 and 1999. In 1998, aggregate production and earnings in Ghana werenegatively influenced by: (a) the financial crisis in Asia; (b) the recession in the Japaneseeconomy; (c) the off-loading of gold onto the world market by Eastern Europe, Russia and partsof Western Europe; and (d) the drought brought on by El Nino. In 1999, cocoa prices fell by 40percent between January and December; gold prices reached a low of US$235 per ounce, andcrude oil prices increased. These factors influenced private sector operators, making themrisk-averse and less willing to invest in innovations and new markets.

5.2 Factors generally subject to government control:The following two factors had a substantial impact on the effectiveness of the project: (a)insufficient private sector involvement in the design and implementation of the project; and (b) theuse of inappropriate incentives for project management.

Private sector involvement: The objective of the major components of the project was to makeselected institutions more market-focused and improve their service delivery to the private sector.However, neither the private sector nor their representative organizations were sufficiently

- 7 -

involved in monitoring overall progress or assessing outputs or impact. Feedback frombeneficiaries would only have been possible through surveys, which were not carried out.Therefore, when project activities fell short of expectations, no appropriate measures were takento respond in a timely manner to the poor performance.

Project management: The project was initially managed by MOF and later by a consultantcontracted by MOF. Frequent changes in the Project Implementation Unit staff made capacitybuilding difficult and contributed to implementation difficulties. For most of the implementationperiod, the TEDF component was managed through a non-performance-based contract withEmpretec, an NGO largely dependent on donor financing. The project management team in MOFhad its principal contacts with the various ministries and institutions involved in the project ratherthan with the private enterprises which were the ultimate beneficiaries. The fact that none of theproject activities fell within the direct mandate of MOF made relations more complex andweakened the project management unit. More ownership of the project or part-ownership ofinstitutions by the private sector would have strengthened project implementation. TheGovernment's evaluation report of the project notes that the lack of counterpart financing madeproject implementation difficult. Lack of counterpart financing is a problem in manyBank-financed projects in Ghana, and it is being addressed. However, the counterpartrequirements in this project were so small that the shortage could be reflective of changinggovernment priorities.

5.3 Factors generally subject to implementing agency control:

The implementation arrangements of the project, with MOF responsible for implementingactivities mostly under the mandate of other ministries, proved to be a difficult arrangement toachieve successful project implementation. This problem could have been addressed by involvingthe private sector in monitoring the project and by consulting the private sector on key issues.The project unit played the role of liaison between the World Bank Group and the differentgovernment agencies involved in the project, and was not proactive in addressing slow projectprogress and limited project impact. Actions by the project unit were thus dependent on theproposals from implementing institutions and responses from the World Bank Group.

5.4 Costs andfinancing:

The total cost of the project was US$8.63 million or 56 percent of appraisal estimates. Of theapproximately US$8.63 million disbursed, US$7.19 million was provided from the IDA credit andUS$1.44 million was provided from Government counterpart funds.

The low disbursement rate for the credit as a whole was due largely to the scaling down of someproject components and the delays in others due to difficulties in selecting consultants.

Changes in project scope. Consultant reports, in particular on GTFA and the Industrial DesignCenter, recommended that further investment in these institutions would only be feasible afterthese were divested. In the case of CSIR, a sequencing of investments based on performanceindicators was judged to be the feasible way forward. Since preconditions were not metsatisfactorily, civil works and capital investments under these components were lower thanexpected.

-8 -

Difficulty in selecting consultants: In two components, implefnenting institutions considered theconsultants' performance to be unsatisfactory. The need to select new consultants led to delays.In the case of TEDF, the consultant contract was not performance-based which contributed to theslow disbursement of the fund.

6. Sustainability

6.1 Rationale for sustainability rating:The project is unlikely to be sustainable because the institutional and regulatory environment hasnot changed sufficiently. Prior to the implementation of the project, institutions selected werefound to have legal limitations, including inadequate incentives, which contributed to their lack offocus on market demand. While changes were made, such as a 40 percent private sector inclusionin governing council and management boards, these proved insufficient to create a market focus;not more than 30 private sector operators could be listed as clients for the CSIR institutes. Theproject did not contribute significantly to a reduced dependency on either public sectormanagement or budget provisions from the Government. This dependency has not led to effectivedelivery of services in the past. For instance, one year prior to completion of the project, none ofthe institutions were connected to the Internet under the project as they were unable to pay theirsubscriptions.

For two components, the legal sector and TEDF, the comments above are not applicable. Thelegal sector component is still ongoing, and activities are not yet complete. For the TEDF, acompany survey was not completed therefore the sustainability of the investments at firm levelcannot be determined in the absence of concrete data.

6.2 Transition arrangement to regular operations:Two components of the project (the legal component and capacity building within GSB) havebeen included in the PEPTA project which was amended for this purpose in 1999. The GTFA isnow a limited liability company, no longer part of a Government of Ghana subvention and iseligible to be privatized. One of the CSIR institutes, IRI, has merged with SIC to form oneinstitute, and other institutional reforms are underway in the context of a public sector reformprogram, but there is no Government directive yet about the future of these institutions.

7. Bank and Borrower Performance

Bank7.1 Lending:The Bank's performance in the identification of the project was unsatisfactory. The project teamconsulted with the private sector and other relevant donors such as USAID, DFID (then ODA)and UNDP. As mentioned earlier, the project complemented other projects of the Bank and theUSAID. However, in hindsight, insufficient emphasis was placed on conditions necessary forsuccessful implementation of the components supporting public institutions, i.e., insufficientamendment to the CSIR act and divestiture of GTFA. Lastly, the implementation arrangementswere complex and the TEDF arrangements gave no incentive to the NGO in charge to effectivelyand efficiently implement the component.

7.2 Supervision:Although the project had a complex design and implementation structure and task managers

-9-

changed frequently (at least three times during the project period), supervision is ratedsatisfactory. This rating is based on adequate reporting, early identification of difficulties, andadvising the Government and project implementing agency adequately. Due to active supervision,resources were used efficiently: components that were not performing well were stopped, and thetwo performing project components, the legal sector and the GSB, were incorporated into arelated Bank project (PEPTA). The Government's evaluation report indicates that the Bankfrequently changed disbursement conditions. In fact, disbursement conditions were not changed.At mid-term review it was agreed that given the slow pace of implementation of somecomponents, it would be more appropriate to link certain expenditures to outputs to ensure thatthe expenditures actually met needs.

7.3 Overall Bank performance:The overall Bank performance is rated unsatisfactory on the basis of the project design,implementation structure and the lack of private sector involvement.

Borrower7.4 Preparation:The Government consulted extensively with the private sector during project identification.However, during preparation and appraisal, the private sector was not adequately consulted. Infact, the project design appears to have been driven in part by the public sector institutions whichwere being reformed. This contributed to a public sector-managed and supply-driven project. Theborrower's performance during preparation and appraisal are therefore rated as unsatisfactory.

7.5 Government implementation performance:Key changes in the legal framework for some institutions, notably the CSIR institutes, which wereconditions of the credit and critical to project success, were not implemented. Furthermore, theGovernment did not sufficiently consult with the private sector during implementation. As aresult, the Borrower's performance during implementation is rated unsatisfactory.

Amendment of the CSIR Act. Following the sector policy letter issued by the Ministry ofEnvironment, Science and Technology, the amendment of the CSIR Act would allow independentinstitutions to retain at least 70 percent of their earnings and in so doing, change the incentivestructure and create the basis for the commercialization of the four institutions. This modificationwas not included in the amendment of the Act, which left the incentive structure unchanged. Thisdid not encourage management of the institutions to take a more commercially-oriented attitude.

Private sector involvement. The board and management of CSIR were still largely dominated bythe public sector. Even if the 40 percent private sector participation had been appointed and wasactive, it was too small to influence the institutions to be more market-focused. In some areas ofdirect interest to the private sector, such as the divestiture of GTFA, the lack of consultation wascompounded by the slow decision-making process of government on fundamental matters such asdivestiture.

7.6 Implementing Agency:Given a general lack of commitment and inadequate legal environment, implementation wasmarginally satisfactory. Management was fairly efficient and progress reports, procurement andaudit reports delivered on time within the responsibility of the implementing agency.

-10-

7.7 Overall Borrower performance:The overall Borrower performance is rated unsatisfactory due to the apparent lack of commitmentby the government and the limited involvement of ultimate beneficiaries.

8. Lessons Learned

The following lessons may be of relevance for similar projects in the sector or in the country:

(a) Importance of private sector involvement in project design and implementation

Beneficiaries and their representative organizations were insufficiently involved in project design,identification of priorities, activities and implementation structure. Project approaches or methodsproposed should be more widely discussed with various groups in the private sector beforeimplementation; for example, if the 50 percent matching grant concept, which is widely acceptedthroughout Africa, had been discussed before its introduction, several problems could have beenavoided. In addition, the private sector was not consistently briefed on the status of the project,and project implementation was carried out without their involvement.

(b) Importance of defining appropriate roles for government and private sector

Partly as a result of the above, the private sector did not assume any real ownership of the project.In reality, all key decisions were taken by Government, which retained control of the project.This contributed to the development of a project which was supply-driven and failed to meet theneeds of the private sector in terms of the type, quality and timeliness of delivery of services. Thisimpacted negatively on the sustainability of the project. While private sector involvement isimportant, the balance between the role of Government and that of the private sector is critical forachieving positive results. The Government should be in close collaboration with the privatesector to establish an appropriate facilitative environment for private sector development.

(c) Importance of clarity of objectives

The project framework would have benefited from greater clarity in the link between the activitiessupported by the project and a more competitive private sector. The components under theproject (technological assistance, market research and financial assistance) are commonly foundamong competitive and successful exporting industries, and in fact, the project aimed to replicateexperience (e.g., South Africa) with the type of institutions supported under the project and withpublic-private partnerships (e.g., Malaysia). However, the process for selecting the partnerinstitutions does not appear to have been guided by clear criteria linked to the overall purpose ofthe project. The activities under the project, including government support, usually take place inthe context of existing domestic industries that are already functioning and often there isconsiderable local market demand for the product and services. Examples include the leathershoe industry in Italy or the hi-tech industry in the Silicon Valley. Because of the limited link withthe local market and existing industries, there is no assurance that the activities supported by theproject would lead to tangible and observable results.

- 1 1 -

(d) Importance of a comprehensive public sector reform:

In retrospect, it is clear that is difficult, if not impossible, to change the incentive structure ofselected public institutions without an overall government commitment to public sectorinstitutional reform. Experience has now shown that a comprehensive public sector reform, likethe one that is being implemented in Ghana now, is the most effective way to bring about neededchanges. Such an approach was not present in Ghana at the time this project was prepared.

(e) Importance of commitment to the project by all players

The project was hampered by the Government's failure to implement certain commitments such asthose indicated in the letter of sector policy; this is representative of a certain lack of commitmentto private sector-led development which inevitably will handicap any private sector developmentproject, particularly one in which the Government has such a significant role.

At the same time, the private sector must be willing to show commitment by contributing itsshare. For example, it should be willing to pay for 50 percent of consultant services, as is done inother African countries, instead of being over-reliant on Government.

9. Partner Comments

(a) Borrower/implementing agency:REPUBLIC OF GHANA

PRIVATE SECTOR DEVELOPMENT PROJECT

CREDIT AND PROJECT SUMMARY

Borrower : Republic of Ghana

Amount SDR 9 million (US$ 13 million equivalent)

Terms . Standard IDA with 40 years maturity

Beneficiaries Ministry of Environment, Science and TechnologyCouncil for Scientific and Industrial ResearchGhana Standards BoardMinistry of Trade and IndustryEmpretec Ghana Foundation (SMEs)Ghana Trade Fair AuthorityMinistry of Justice and Judicial ServicePrivate Sector Institution (PEF, ATAG, AGI etc.)

1.0 INTRODUCTION

The Private Sector Development Project (PSD), a US$13 million IDA facility became

- 12 -

effective in 1995. The Project is a culmination of the renewed commitment of the Government toaccelerate the pace of development of Ghana's private sector. The Project is also a direct resultof the Business Community's own assessment of lingering issues which impede growth of theprivate sector. These issues were confirmed and consolidated during a series of roundtablemeetings between the Private Sector and key members of Government and the Donor Communityin 1994.

The Project compliments and enhances the effectiveness of other private sectordevelopment initiatives, which were being promoted by the Government. The ongoing USAIDfunded Trade and Investment Project is one notable project, which was developed simultaneouslywith the PSDP and is providing export support services to the private sector. Other World BankProjects have already been implemented to improve private sector growth and delivery( eg.PEEP)

The Government also recognizes that one key stumbling block is that Ghana's industry onthe whole lacks technological capabilities, which it needs to develop. Technical, managerial, andinstitutional information and skills would allow productive enterprises to use equipment andtechnology more efficiently.

The Private Sector Development Programme (PSDP) was therefore initiated by theGovernment of Ghana and the International Development Association (IDA) to overcome themanufacturing and technological constraints facing the private sector and create a more dynamicnon-traditional sector alternative, to address the lack of connection, and bridge the gap, betweenthe state sponsored research and development institutes and a technologically deficient privatesector in an environment in which the necessary supports for such elements as trade developmentand competitive product designs are also lacking.

1.2 PROJECT MISSION

The mission of the PSD Project is to deepen and broaden the overall technological,productive and export capacity of the private sector within the general framework of otherprivate-sector projects geared towards achieving private sector-led economy for the country bythe year 2010.

1.3 PROJECT OBJECTIVES

The project aimed at fostering the development of a competitive private sector by doingthe following:

a. Assist the Government to build on its investment liberalization by restructuring, reforningand commercializing its technical research and development establishment along competitive anddemand driven principles. From this selective institutional strengthening, Ghana's private sectorwill be enabled to evaluate and develop appropriate technology, improve its knowledge of qualityand standards, deepen its technical capacity and improve upon its management informationsystems;

- 13 -

b. Provide to a broad segment of the private sector the necessary financial and technicalassistance to support the development of commercially bankable projects by improving theirfeasibility and quality;

c. Support efforts by the export industry to improve their design and the promotion of theirproducts; and

d. Assist the Government in developing a program to upgrade the delivery of legal servicesto the commercial and manufacturing sectors, thereby accelerating response time for commercialtransactions and commercial contract disputes.

1.4 EXPECTED OUTPUTS

At the end of the Project in June 2000, it was expected that Ghana would have:* achieved revamped research institutions operating on more efficient commercial lines;* brought much awareness to private sector enterprises to source more research services to

improve upon their technological and entrepreneurial (management ) efficiency to operatemore profitably;

* assisted private sector enterprises to achieve better industrial design and aesthetic quality ofnon-traditional products that are competitive in the international market;

* achieved efficient and modernized commercial juridical system capable of speedily deliveringlegal services for the commercial and manufacturing sectors for their healthy operations; and

* Achieved market-driven demand for private sector goods and services both domestically andinternationally from a central commercially based trade promotion facility with private sectorinvolvement.

1.5 THE INSTITUTIONAL AND POLICY FRAMEWORK

Three primary areas of institutional and policy framework were considered under theproject, namely, Commercialization, Capacity Building and Legal Process:

(a) Commercialization

The premise under the provision of technical assistance in the project is the adoption byGovernment of the imperatives of commercialization in the reorganization and operationof the Council for Industrial Scientific Research (CSIR), the Ghana Standards Board(GSB) the Technology and Enterprise Development Fund (TEDF) along demand drivenprinciples, the restructuring of the Ghana Trade Fair Authority (GTFA) and a study for theestablishment of an Industrial Design Center.

(a) Capacity Building

The design and operation of the TEDF had as its primary focus:(i) the improvement of the capacity of private enterprises to meet the technical and financial

-14 -

requirements of their business; and(ii) the development of either indigenous Ghanaian consulting capacity or the activerecruitment of non-resident Ghanaian technical capacity, if possible, in pursuit of its objectives

(b) Legal Process

The inefficiency in the delivery of legal and judicial services has constrained theestablishment of a viable commercial climate especially with regard to the conclusion ofbusiness transactions and the enforcement of contracts. The PSDP has therefore beendesigned to strengthen the information and management systems to improve theorganization and institutional delivery of legal services and strengthen the Government'scapacity to support its broader private sector development initiatives.

1.6 PROJECT COST AND FINANCING PLAN

The IDA Credit of US$ 13 million was allocated as follows:

(IJS$MILLION)

COMPONENT Projected in ACTUAL/LATEST TOTALSARIPAD EST] E

IDA BENEFI IDA BENEFI PROJECTED ACTUALCIARY CIARY SARIPAD ESTIMATE

CSIR 4.18 0.45 2.00 0.23 4.63 2.23__~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~... .. . . ._. ... . . .

G.S.B. 2.18 0.25 0.98 0.19 2.38 1.17

EMPRETEC 2.50 1.47 1.78 0.74 3.97 2.52Desip n Center 0.75 0208 0.11 0.01 0.83 0.12Ghana Trade Fair 0.95 0.10 0.39 0.00 1.05 0.39Compay _______

Legal Services 1.38 0.14 1.26 0.04 1.52 1.30MFEP 0.01 0.00 0.01MEST 0.01 0.00 0.73 0.23 0.01 0.65MTI 0.01 0.00 0.00 0.01Unallocated 1.03 0.09 0.00 0.00 I1.12 0.00Total 12.95 2.58 10.63 4.95 15.53 8.69

Indicative total project costs, including duties and taxes, was estimated at US$15.53million. The Credit financed 100 percent of foreign costs (US$10.7 million equivalent) and 90percent of local costs (US$2.3 million equivalent). Total matching funds were estimated atapproximately US$2.5 million equivalent, of which US$1.4 million equivalent was to be providedfor directly by the Government and other beneficiaries, and a contribution of US$1.1 millionequivalent was anticipated under the TEDF from private sector companies.

-15-

The IDA supported preparatory work under the project with a PPF in the amount ofUS$0.4 million

2.0 Assessment of Development Objective and Design

2.1 Development objective

The Development Objective of the PSDP is to foster the development of a competitiveprivate sector by (a) supporting Government to restructure, reform and commercialize itstechnical research and development establishment along competitive and demand driven prnciples(b) providing the private sector with the necessary financial and technical assistance to support thedevelopment of commercially viable bankable projects (c) supporting export industry to improvetheir design and the promotion of their products; and (d) assisting to upgrade the delivery of legalservices to commercial and manufacturing sectors, thereby accelerating response time forcommercial transactions and commercial contracts disputes

2. 1.1 Original Objectives and Design of the Project

The project's original objectives are desirable (and rated highly satisfactory). Thedevelopment objectives set for the project (i.e. commercialization, capacity building andimprovement in the legal processes) were very pertinent. The attainment of these objectives willprovide necessary support for private sector development and promote competitiveness ofGhanaian goods and services.

We observed a total disconnection between the development objectives of the project and theactivities leading to the achievement of the stated objectives. Thus, the implementationactivities of the various components of the project were successful. However, due to someunforeseen difficulties, we could not achieve the development of the project

2.1.2 The design of the project failed however to address some major constraints of theprivate sector:

a) The design of the Legal Diagnostics studies was limited in scope. Certain vital areas suchas access and title to land were not considered in the design of Project. As a resultinstitutions such as the Land Commission and the Land Title Registry were left out of thelegal sector component.

(b) The need to re-furbish the Laboratories of the Ghana Standard Board (GSB),(c) The provision of vehicular support for GSB, which is necessary for the expansion ofservices to Regional Centers as well as extension, services to Industry.(d) The Cost- Ratio sharing of 50:50 and a five percent service charge in the initial design ofthe TEDF proved problematic. The inability of the project design to properly determine the abilityof the target group to raise the client contribution was a fundamental flaw in design. The financialstrength of the target group also meant that the average project size of US$ 9,000 was beyondtheir means.

-16 -

2.1.3 In the design of the project, time frames for the execution of some components wereunderestimated. The complexity of the project required a minimum of two years of studies anddiscussions (i.e. Consultations with the Private Sector Stakeholders) before commencement ofimplementation programs, which were estimated to require another three (3) to five (5) years.

2.1.4 Furthermore, we believe that better results would have been obtained if as part of theProject Preparatory activities, some training were provided to the group of 'ProjectCoordinators' from each of the beneficiary agencies. Such training would have provided a clearerunderstanding of the objectives and associated conditionalities and a unified focus for the entireproject.

3.0. Assessment of Project Outcome and degree of success relative to objective

A. The Ghana Standards Board (G SB)

* The Consultancy Studies (Client Survey Report) confirmed the need to create a strong publicrelation/marketing function. The Consultants therefore recommended that the GhanaStandards Board should create a "Corporate Business Division" to handle issues relating toPublic Relations and Marketing. The GSB has implemented this recommendation.

* The Ghana Standards Board drew plans for the Certification of each of its six divisions to therelevant ISO 9000 standard. As at May, 2000, only one division has been able to achieve thisobjective i.e. Certification of its Physical Laboratories to ISO 9002 by Lloyds of UK. Thereare plans to certify five other divisions by the year 2001.

* The GSB is currently in the process of establishing an ISO 9000 Certification Body toundertake System Certification of organizations in Ghana. Quality Assessors have beentrained and necessary documentation and procedures for the program are currently underdiscussion.

* Industry Sector Committees have been created to address the specific standards needs ofparticular Industry Sectors. Strategies were also reconmmended for this program. The GSB iscurrently implementing these recommendations through:

a) Formation of the new Industry Sector Committee (ISC)b) Reconstitution of Technical Committee (TCs) andc) Adoption of new Rules and Procedures for Operation of ISCs and TCs.

Approximately 65 - 70% of expected work has been done.* The Consultancy Studies provided a "Strategic Business Plan" for the GSB. The strategic

business plan was divided into three (3) phases:Short-term i.e. tasks to accomplish within 1 - 2 years (1999 being the base year).

Medium-Term: i.e. tasks to accomplish within 2 - 3 years

long-term: i.e. tasks to accomplish within 5 - 8 years

- 17 -

Though not all the activities recommended for the plan period were undertaken, a numberof short-term activities have been commenced (about 70 - 80%). A fair amount of work on theMedium Term activities has also started. Generally, due to the late take off of implementation andrelated problems, it was not possible to achieve all the stated objectives.

Discussions are far advance to establish a twinning relationship with the StandardsInstitution of Israel. Draft agreements have been exchanged and these are being studied. OtherStandards Organizations with which discussions have been initiated are:

a. National Institute of Standards and Technology of the United States of America;b. Standards and Productivity Institute of Singapore.c. South African Bureau of Standards

B. THE TECHNOLOGY AND ENTERPRISE DEVELOPMENT FUND

The project document required that 245 assignments be awarded to consultants by the endof the project life. It also required that half of the number of contracts assigned each year shouldbe completed by the end of the year. In addition to the numbers to be achieved, it also madeprojections with regard to the amount of money that had to be disbursed from the Fund each year.This was arrived at on the basis of the estimated average cost of project of US$9,000.

Following the mid-term review of the Fund, in which the cost-sharing ratio was changedfrom 50: 50 to 70:30 plus a five (5% percent service fee, Empretec was required to achieve 150assignments with 75 completed by the end of the project in June 2000. Results show thatEmpretec managed to sign 496 contracts and 300 of these assignments have been completed todate. The full impact of the fund on the private sector will be assessed latter.

C. LEGAL SECTOR

* Short-term library, training and office equipment needs were identified for the legal sector.Basic office equipment was supplied to the Judicial Service and government legal Institutionslike the A-G's Dept., the Registrar-General's Dept., Legal Aid Board, and The Ghana Schoolof Law.

* In order to improve both the operations of the court systems and inject efficiency into legaland judicial service delivery, the Government conducted six diagnostic studies. The studieswere structured to unravel the major issues militating against speedier delivery of legalservices as well as those that affect transparent administration of justice. The major issueconfirmed by the studies is the lack of capacity of the sector to deliver efficient and effectivelegal services to civil society in general and the private sector in particular. There are alsoproblems associated with poor docket and record management, ineffectual organizationalstructures and general lack of office infrastructure.

* The Findings of the Studies and their accompanying recommendations, which were discussedat Stakeholders' Workshop, held at Elmina in October, 1999 revolved around the capacity ofthe sector to provide legal services that will be responsive to the needs of the private sectorand support the development process currently underway. At the institutional level, the

- 18 -

reforms sought to enhance the skills of all categories of staff; reduce the massive backlog ofcases in the courts; improve access to legal information; provide alternatives to litigation andimprove the internal management of the judiciary among others.

* The recommendations also aimed at eliminating the duplication in the processes leading toland acquisition and transfers.

* The studies recommended a program to be implemented carried out over five years, dividedinto three distinct but related components as follow:

a. institutional strengthening and support of the Judiciary, MOJ and other Government LegalOffices;b. human resource development and technical assistance; andc. legal service delivery and application of technology.* Three strategic areas namely capacity building, legal service delivery and technology form the

building blocks of the strategic plan of the reform program. The Strategic Plan has beendeveloped with programs for the short-term and strategic options for the long term.

* Following from the studies, a draft bill on Alternative Dispute Resolution (ADR) wasdiscussed and accepted by a cross-section of Stakeholders.

D. GHANA TRADE FAIR COMPANY

* The objectives of the Commercialization and Reorganization studies undertaken by SorcaManagement Consultants were achieved. The study underscored the commercial viability andthe need for the establishment of a regional trade promotion facility in Ghana. However, as aresult of budgetary constraints, the international market demand, which formed a criticalportion of the study, was not undertaken. This placed a serious limitation on the overallconclusion reached by the Sorca Consultants regarding the commercial sustainability and theinternational demand for the Trade Fair Center.

* The study recommended that the Ghana Trade Fair Center should be transformed into aRegional Trade Fair Facility. Government of Ghana has accepted the recommendation and hasprovided funds for the rehabilitation of some structures recommended by the consultants.

* The Ghana Trade Fair Company has adopted the report and has rehabilitated substantialportions of the facility. This include the ultra-modern conference center and collapsiblepavilions

E. COUNCIL FOR SCIENTIFIC AND INDUSTRIAL RESEARCH* Two domes at Building and Roads Research Institute were converted into laboratories and offices.

This has to a great extent solved the problem of inadequate office space for scientific research.* Various scientific books and journals were procured for the three Institutes namely Institute of

Industrial Research (IIR), Food Research Institute (FRI), Building Road Research Institute(BRRI) and the Secretariat. This has improved the libraries of the Institutes and theSecretariat.

* Some equipment was procured for the three of CSIR Institutes. These include variouslaboratory equipment, Total Workstation modern computerized survey equipment) and aPercussive Drilling Rig. The Total Workstation and the Drilling Rig are very importantequipment and will greatly assist Building and Roads Research Institute in itscomnmercialization drive.

* Staff training under the project was organized in the form of local training, external training

- 19 -

and study tours for individuals as well as groups of staff. Short training courses in marketing,change management, costing and study tours were organized for staff and management.

* Seminars, Workshops and other forms of interactions organized by the project consultantsgingered the CSIR into action to begin developing its new management structures andprocedures. A document on the restructuring of the CSIR Secretariat has been preparedindicating the main Centers, Sectors, Divisions, Sections and Units in the Secretariat as well asthe current and projected staffing situation and job descriptions. Council has approved thisdocument.

* Consultancy reports with implementable recommendations are available at the CSIR as veryimportant reference documents. Very significant among these are the consultancy reports on

i. Marketing Plans and Strategiesii. Costing and Budgetingiii. Forecasting External Revenuesiv. Management Information Systemsv. Staff Rationalization (indicating skill mix required at the Secretariat for successfulcommercialization)vi. Schedule of Training (indicating recommended Management training, Training schedulesfor commercialization and Management Career Development Training Plan).vii. Commercialization Planning Guide and Project Management Manual.

* The consultants also provided the CSIR with an Implementation Plan (indicating time frameand responsibilities) and a list of equipment for the actualization of recommendations for thesuccessful take- off of the commercialization process.

* CSIR Secretariat and the three Institutes received six (6) Internet ready computers. Inaddition, the CSIR received thirteen (13) vehicles, which were distributed among theSecretariat and the three Institutes. The vehicles have greatly facilitated movements of staff.

i Finally, it should be stated that the CSIR Secretariat and participating Institutes all achievedthe following project goals to varying degrees;

Greater awareness for commercialization.Restructuring of institutes with accompanying staff rationalization plan.Increased interaction with private sector agenciesIncreased revenue generation.A common CSIR Vision and Mission statements were formulated.

A new CSIR logo for adoption by all Institutes was developed to give the CSIR a newCorporate look.

The project required that CSIR should generate 30 per cent of its total budgetaryrequirement by the end of the project. It has not been possible for CSIR to achieve the indicatedtarget because of the late conduct of the commercialization studies. However, the necessarystructures have been put in place to enable CSIR achieve the indicated level of revenue generationin the near future. Critically, CSIR would require the full compliment of equipment recommendedby the consultant to achieve the agreed target of 30%.

F. INDUSTRIAL DESIGN CENTER (IDC)

-20-

* The Consultants submitted a final Report on the establishment of an Industrial Design Centeron 30th September 1999. Government and the IDA have accepted the report forimplementation.

* The Consultants indicated that there is an urgent need to establish an Industrial Design Center(IDC) in Ghana and that the IDC is commercially viable.

* The consultant's strongest recommendation for the name of the center is the National DesignCenter, Ghana. The name will communicate the national commitment to industrial design thatGhana has embraced. It is believed that reaching the international community bycommunicating the national aspiration for industrial advancement is essential to theestablishment of Ghana's position on the international playing field.

The Consultants however, indicated that the commercial viability of the Center woulddepend on several factors.

* The viability of the Center would depend on the provision of equipment, facilities and servicesto the tune of One million US Dollars. This would raise the rate of utilization of the Center toabout 50% within three years.

* The availability of trained and skilled Industrial Designers. Professional Industrial Designersnormally take five years to complete their courses.

* With regards to funding, the Report explained that while there is sufficient justification forboth public and private sector funding for the proposed project Center, the capacity of theprivate sector to contribute substantially to the project initially could not be guaranteed.There is therefore the need for long-term government commitment in the provision of fundsand in seeking donor support. The private sector is not in the position now to support afacility of this financial magnitude. The Report therefore recommended that Governmentshould lead the way and promote the services of the Center to the private sector.

* Finally the report concluded that Governments all over the world, as an industrialdevelopment policy, support the establishment of Industrial Design Centers. The Governmentof Ghana should therefore support the establishment of the Industrial Design Center in itsformative years (1-3 years).

4.0 MAJOR FACTORS AFFECTING IMPLEMENTATION AND OUTCOME

(i) Factors outside government control* The procurement of Consultants for GSB, CSIR and GTFC took a considerable time i.e.

longer than planned for in the Implementation Document;* Non-performance of some consultants procured for the project resulted in delays in the

implementation of the project. For instance, as a result of the non-performance of the SouthAfrican (CSIR) Consultant, CSIR (Ghana) was unable to obtain approval for the procurementof important equipment on the master list. The difficulty encountered in reviving the projectafter the abrogation of the first contract, resulted in significant time loss.

* Some of the Consultants were also late in the delivery of their final report.* There were occasional delays in obtaining 'no objections' for programs and activities. The

Bank also introduced other conditions, which were initially not included in the DCA. Twoexamples of this "new" conditionalities were:

- 21 -

a. The request for the Legal Opinion of the Attorney General as regards whether or not theGSB had met all conditions for the disbursement of the line of credit for equipment procurement.b. The insistence that the GSB obtained ISO 9000 Certification before disbursement of theequipment votes instead of the presentation of "Ian for the attainment of ISO 9000.

(ii) Factors subject to government control

* Mainstreaming of the project in the Ministry of Finance did not work in the case of the PrivateSector Development Project. On the contrary, available evidence indicates that contracting ofthe project out to a project management team led to significant improvements in projectimplementation.

* The project started in October 1995 even though the agreement was signed in January 1995.This delay greatly affected the performance of certain components of the project. In the caseof the CSIR, it took almost two years for the law establishing CSIR to be amended toaccommodate commercialization in its mandate. This was critical since the amendment of thelaw was a condition for project effectiveness.

(iii) Factors subject to Implementation Agency

* No clear-cut indications of the role of the private sector participants on the oversight bodieswere provided. Considerable amount of time was spent to debate this issue and whichoccasionally frustrated the implementation of the project's program.

* The project was implemented by staff of beneficiaries who additionally performed their normalduties. The implementation of the project's programs and Consultant's recommendationscould have been better and more effectively supervised if project management staff had beensolely assigned to the project.

3 Beneficiary agencies were not exempted from payment of various taxes on importation ofequipment and other items under the project. It was expected that the beneficiaries wouldutilize their respective GOG matching funds to pay taxes. However the release of matchingfunds to beneficiaries has proved problematic. The feeling is that it is now time for the Bankand Government of Ghana to take a second look at the issue of matching funds which istending to slow down project implementation. Our recommendation is that, the Bank shouldconsider 100 per cent financing of similar projects.

5.0 BANK AND GOVERNMENT'S PERFORMANCE

5.1. Bank Performance

Project design was rather complex and its scheduling was inappropriate. A considerableproportion of the project was made dependent on the results of consultancy studies. Thisrequirement meant that without the consultancy reports (including business plans) no furtheractivity could be undertaken. It was only after the acceptance of the reports of the studies thatexpenditures for equipment that represented over 75% of the total financial support could beutilized.

- 22 -

In some cases, the Bank changed conditions for disbursement midstream withoutdiscussion with the Government of Ghana. For instance in the case of the Ghana Standards Board,the bank changed its position from(a) the development of a strategic plan for ISO 9000 " to (b) the provision of an ISO 9000Certificate by GSB, before disbursement on Equipment.In the case of the Industrial Design Center, the Bank changed the original position of procuringbasic equipment for the center without consulting government.

Furthermore, the Project's Task Team leader was changed several times during the projectperiod. All the above omissions and commnissions on the part of the Bank contributed in no smallway to the poor disbursement of PSDP funds.

5.2 Government's Performance

Matching fund was not provided regularly to the project; this affected the performance ofthe various components. The unavailability of GOG matching fund made the day to day runningof the project very difficult. Workshops and seminars for effective linkages with the private sectorand other promotional activities could not be organized. For the same reason staff members whospent extra duty hours on the project could not be given any compensation. There is also the needto expedite action on policy decisions on which implementation of the project is dependent.

6.0 SUSTAINABILITY

* The gains of the Project can be sustained. The project components were all designed toenhance and increase the capacity to provide contractually delivered technical services andtechnical capacity along commercially sustainable lines.

* The provision of consultancy service on a fee- for- service basis increased EMPRETEC'spotential for self-sufficiency.

* The studies carried out on the commercial capacity of the GTFA and an Industrial DesignCenter have all focused on building a sustainable commercial framework through privatesector support for the services offered.

* The sustainability of commercialization gains made by the CSIR and GSB will howevergreatly depend upon the performance of the entire economy of Ghana. Most manufacturingindustries in Ghana (these form the main client base) are Micro and Small Scale ones. Theseindustries may not be able to afford the commercialized services of the CSIR & GSB. Theefforts of the GSB and CSIR may not be successful if these micro and small-scale industriesdo not develop the ability to pay for these services.

* CSIR Institutes and the Secretariat would require specific items of equipment recommendedby consultants with justification to enable them work efficiently and effectively and generateincome. The probability of obtaining these equipment under the present project does notappear feasible.

* The 2-year extension given by the World Bank to the Ghana Standards Board and the LegalSector components ensures sustainability because under PEPTA, the Strategic Plans wouldbegin to be implemented.

-23 -

7.0 LESSONS LEARNED

* Agreed time-bound programs should not be varied. A Project Monitoring Team should befirm and take corrective measures as soon as irregularities are detected. One should nothesitate to even abrogate a contract when attempts to solve problems amicably do notsucceed. This however should be done after the necessary consultations.

* It was well noted that much as a client should cooperate with any consulting team, theconsultants on the other hand should not come in with negative pre conceived ideas about aclient. There must always be mutual trust and respect.

* A flaw in the design of the TEDF led to initial poor performance of the fund. The flaw in theproject design, which failed to properly determine the ability of the target group to raise theclient contribution, which was pegged at 50% of the project cost. When the flaw was detectedand the cost ratio corrected to 70:30 in April 1999, the performance of the Fund was greatlyenhanced.

* The project suffered greatly from lack of full time management at the initial stages sincefull-time officers were not handling it. This made it difficult for the officers to follow-up onpending actions either from the World Bank or from the Implementing Agencies. The positionimproved considerably when a full time Project Coordinator was appointed to handle theproject. We therefore recommend that full-time Project Coordinators be appointed at theinception of future projects.

* We firther recommend that special workshops should be organized for officers from thevarious implementing agencies to make them abreast with the World Bank procurementprocedures, contract award procedures etc.

* That the release of the matching fund should be made a requirement for projects like thePSDP to realize their development objectives;

* That there should be clear cut roles for oversight bodies such the LSCC of the legalcomponent of the Project; We further recommend that such oversight Committees should beinvolved in only policy issues rather than administrative ones;

* All future projects should have a well structured incentive packages built in project design toensure commitment.

(b) Cofinanciers:

(c) Other partners (NGOs/private sector):

10. Additional Information

- 24 -

Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicatom:L___________ IkOj -- IntPR ,___L______ ___

Private Sector contribution to GDP increased 1996: 14.2% 1997:14.80; 1999:14.6%

by 40% by eopGrowth in manufacturing sector increased by 1996: 3.0%; 1997: 5.4%; 1999: 4.8%10% by eop

Growth in Services Sector increased by 12% 1996: 6.7%; 1999:17.7%by eop

Output Indicators:-_____-____._______ Prq#gC is WPIE late

CSIR is market oriented and partiallycommercialized

a. At least 300 SMEs adopt and or adapt at unlikelyleast six CSIR developed technologies by2000

b. 30% revenue target achieved by 2000 BRRI: 1.9; FIR: 3.2; IIR 13.1Key services of GSB upgraded to ISOstandards and commercialized

a. GSB accepted as member of the ongoingIntemational Quality Network (IQNET) by2000

b. At least 30% of GSB budgetary unlikelyresources are originated by the provision ofservices to private firms by eop

c. At least 20 companies initiated into ISO unlikely9000, ISO 14, 000 and ISO/IEC Guide byeopTechnological productive and service deliverycapacities of Small, micro and medium sizeenterprises strengthened

a. At least 100 TEDF assignments initiated 1996:12, 1997:74, 1998:77,1999:344annually

b. 20 companies assisted to develop value nla (U)added products each year

c. 5 Companies assisted each year in the n/a (U)developing of export products

d. 20% of companies accessing TEDF n/a (U)assisted to source financeCommercial, private operated, Industrial unlikelyDesign Center Established and operationalGTFCs developed into a viable CommercialoperationOperational Capacity of legal institutionimproved

a. 30% increase in the disposal of n/acommercial and industrial cases by 2000

b. Staff training program operational by achieved1999

c. Searching time at Registrar General's n/aDept. reduced by 50% by 1999

d. Processing time for docs at Attomey n/aGeneral's Dept reduced by 20%, by 2000

End of project

-25 -

Annex 2. Project Costs and Financing

Proect Cost by Component (in US$ million uivalent)

CSIR 4.63 2.23 48Ghana Standards Board 2.38 1.17 49TED Fund 3.97 2.46 63Design Center 0.83 0.12 14Ghana Trade Fair Company 1.05 0.39 37Legal Services Studies 1.52 1.30 86MFEP, MEST, MTI 0.03 0.96 3200Unallocated 1.09 0.00 0

Total Baseline Cost 15.50 8.63

Total Project Costs 15.50 8.63Total Financing Required 15.50 8.63

Project Costs by Procurement Arrangements (Appraisal Estimate) US$ million e uivalent)

1. Works 1.70 0.30 0.00 0.20 2.20I_____________________ I (1.00) (0.00) (0.00) (0.00) (1.00)2. Goods 3.50 0.00 1.10 0.50 5.10

(3.50) (0.00) (1.10) (0.00) (4.60)3. Services 0.00 0.00 4.60 1.70 6.30

(0.00) (0.00) (4.60) (0.00) (4.60)4. Miscellaneous .0.00 0.00 1.80 0.10 1.90

(0.00) (0.00) (1.80) (0.00) (1.80)Total 5.20 0.30 7.50 2.50 15.50

(4.50) (0.00) (7.50) (0.00) (12.00)--The amounts for IDA's share are estimates as specific expenditure categories were not specified in theSAR.

-26 -

Project Costs by Procurment Arrangements (ActuaULatest Estimate) (US$ million equivalent)

6*fld-- . t- .- 0 1GB NiB8.F. Total Cost

1. Works 0.00 0.03 0.07 0.00 0.10

(0.00) (0.00) (0.00) (0.00) (0.00)2. Goods 1.34 0.00 1.48 0.00 2.82

(1.34) (0.00) (1.48) (0.00) (2.82)3. Services 0.00 0.00 4.84 0.75 5.59

(0.00) (0.00) (4.19) (0.00) (4.19)4. Miscellaneous 0.00 0.00 0.18 0.00 0.18

(0.00) (0.00) (0.18) (0.00) (0.18)

Total 1.34 0.03 6.57 0.75 8.69

_ (1.34) (0.00) (5.85) (0.00) (7.19)These figures are estimates based on information provided from the Borrower.

"Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.2'Includes civil works and goods to be procured through national shopping, consulting services, services of contracted

staff of the project management office, training, technical assistance services, and incremental operating costs related to(i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in USS million equivalent)

CSIR 4.18 0.45 2.00 0.23 47.8 51.1G.S.B 2.13 0.25 0.98 0.19 46.0 76.0TED Fund 2.50 1.47 1.78 0.74 71.2 50.3Design Center 0.75 0.08 0.11 0.01 14.7 12.5Ghana Trade Fair Auth. 0.95 0.10 0.39 0.00 41.1 28.6Legal Services Studies 1.38 0.14 1.26 0.04 91.3 28.6MFEP, MEST, MTI 0.03 0.00 0.73 0.23 2433.3 0.0Unallocated 1.03 0.09 0.00 0.00 0.0 0.0

-27-

Annex 3: Economic Costs and Benefits

Not applicable.

- 28 -

Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle No. of Persons and Specialty Performance Rating

(e.g. 2 Economists, I FMS, etc.) Implementation Development.Month/Year Count Specialty Pgress Objective

Identification/PreparationSr. Financial EconomistSr. Financial Economist

Appraisal/Negotiation

Supervision6/1995 1 Operations Officer S S10/1995 2 Operations Officer, TTL S S6/1996 3 Operations Officer, Project S S

Officer, TTL2/1997 3 TTL, 2 PSD specialists S S12/1997 3 TTL, Operations Officer, PSD U U

specialist4/1998 2 TTL, Operations Officer U U1/1999 1 TTL U U6/1999 4 TTL, Financial management, U U

Legal, Procurement10/1999 4 TTL, Legal, Operations Officer, U U

PSD specialist4/2000 1 TTL S U

ICR10/2000 3 ICR author, TTL, Financial S U

management

(b) Staff:

Stage of Project Cycle Actual/Latest Estimate_________________ No. Staff weeks USS 0400

Identification/Preparation 69 311Appraisal/Negotiation 56 275Supervision 94 334ICR 7 35Total 226 955

-29 -

Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)Rating

O Macro policies O H OSUOM O N * NAEl Sector Policies O H OSUOM O N * NA

El Physical O H OSUOM O N * NAEL Financial O H OSUOM O N * NAO Institutional Development 0 H O SU O M 0 N 0 NAEl Environmental O H OSUOM O N * NA

SocialO Poverty Reduction O H OSUOM O N * NA

Oi Gender OH OSUOM ON *NAO Other (Please specify) O H OSUOM ON * NA

L Private sector development 0 H O SU O M * N 0 NAEl Public sector management 0 H O SU O M * N 0 NAEl Other (Please specify) O H OSUOM O N * NA

-30-

Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

O Lending OHS OS *U OIHUOI Supervision OHS OS OU OHUEl Overall OHS OS *U O HU

6.2 Borrowerperformance Rating

O Preparation OHS OS * u O HUO Government implementation performance O HS O S * U 0 HUO Implementation agency performance OHS OS OU O HUOI Overall OHS OS * u O HU

- 31 -

Annex 7. List of Supporting Documents

* Aide-Memoire and Back-to-Office Reports* Technical Annex and Memorandum of the President reports* Credit Agreement* Borrower's Evaluation Report

- 32 -