Document ofThe World Bank

Official Use Only

Report No: 24168

MEMORANDUM OF THE PRESIDENT

OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON AN

INTERIM COUNTRY ASSISTANCE STRATEGY

OF THE WORLD BANK GROUP

FOR

THE, REPUBLIC OF COTE D'IVOIRE

May 9, 2002

Country Department for C'8te d' IvoireAFC11Africa Region

This document has a restricted distribution and may be used by recipients only inthe performance of their official duties. Its contents may not otherwise be disclosedwithout 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

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

Currency Unit CFA Franc (CFAF)US$1.00 CFAF 731(April 02)

WEIGHTS AND MEASURES

Metric System

ABBREVIATIONS AND ACRONYMS

AfDB African Development BankAPEXCI Association pour la Promotion des Exportations en Cote d'IvoireCAA Caisse Autonome d'AmortissementCACI Cour d'Arbitrage de C6te d'IvoireCAISTAB Caisse de StabilisationCAS Country Assistance StrategyCECP Caisse d'Epargne et des Cheques PostauxCEPICI Centre de Promotion des Investissements en C8te d'IvoireCFAA Country Financial Accountability AssessmentCIDA Canadian International Development AgencyCPAR Country Procurement Assessment ReportCPPR Control Portfolio Performnance ReviewDSA Debt Sustainability AnalysisERC Economic Recovery CreditESAF Enhanced Structural Adjustment FacilityESW Economic and Sector WorkEU European UnionFSAP Financial Sector Assessment ProgramGDP Gross Domestic ProductHIPC Heavily Indebted Poor CountriesILO Intemational Labour OrganizationI-CAS Interim Country Assistance StrategyIMF Intemational Monetary FundI-PRSP Interim Poverty Reduction Strategy PaperJSA Joint Staff AssessmentMTEF Medium Term Expenditure FrameworkOHADA Organisation pour l'Harnmonisation en Afrique du Droit des AffairesPER Public Expenditure ReviewPHRED Policy and Human Resources Development FundPIP Portfolio Improvement PlanSIGFIP Systeme Informatique de Gestion des Finances PubliquesSMP Staff Monitored ProgramUNDP United Nations Development ProgrammeUNICEF United Nations Children's FundUNESCO United Nations Educational, Scientific and Cultural OrganizationWHO World Health Organization

Fiscal YearJanuary I - December 31

Vice President: Callisto E. MadavoCountry Director: Mamadou DiaCountry Program Coordinator: Peter N. Ngomba

FOR OFFICIAL USE ONLYREPUBLIC OF COTE D'IVOIRE

INTERIMI COUNTRY ASSISTANCE STRATEGY

Table of Contents

EXECUTIVE SUM[MARY ............................................... i

I. BACKGROUNI) AND INTRODUCTION ........................................... 1

II. COUNTRY BACKGROUND ............................................. 2A. Recent Socio-Political and Policy Developments ..................................... 2

B. Country Poverty Profile ................ ..................................... 3

C. Recent Economic Developments ..................................................... 5

D. Dealing with the HIV/AIDS Pandemic ..................................................... 8

III. GOVERNMENT'S POVERTY REDUCTION STRATEGY ......... 9

A. I-PRSP Objectives and Strategy 9....................................................9

B. Medium-Term Prospects and Financing Requirements ........................... 11

C. Policy Track Record And Future Challenges .......................................... 13

IV. INTERIM COUNTRY ASSISTANCE STRATEGY .. 15

A. Strengthenin,g Portfolio Management .................................... 16

B. Lending Pro,gram during the Interim CAS Period ................................... 21

C. Non-Lending Activities .................................... 22

D. Triggers for .Assistance and Performance Indicators ............................... 23

E. IFC and MIGA Programs .................................... 24

F. Donor Coorclination and Collaboration ....................................... 25

V. BENEFITS, RISKS AND RISK MITIGATION .............................. 25

VI. CONCLUSION .................................... 27

VIII. ANNEXES .28

Tables

Table 1: Cote d'Ivoire - Human Development Indicators ....................................... 4Table 2: Cote d'Ivoire - Poverty Indicators, 1985-1998 by Region .5Table 3: C6te d'Ivoire: Key Macroeconomic Indicators, 2000-03 .12Table 4: C6te d'Ivoire Government Financing Operations, 2001-04 .13

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

MEMORANDUM iND RECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE EXECUTIVE DIRECTORS ON AN INTERIMCOIJNTRY ASSISTANCE STRATEGY

FOR TIHE REPUBLIC OF COTE D'IVOOIRE

EXECUTIVE SUMMARY

i. Cote d'Ivoire's previous CAS was discussed by the Board in August 1997. ThisInterim CAS (I-CAS) presents the Bank Group's program for the next 12 to 18 months.The assistance strategy contained in this I-CAS supports the Government's InterimPoverty Reduction Strategy Paper (I-PRSP) endorsed by the Board on March 28, 2002.In their Joint Staff Assessment (JAS), IDA and IMF staff consider the I-PRSP asproviding a sound basis for developing a fully participatory PRSP and cite theGovernment's decision to adopt the Millennium Development Goals (MDGs) as a basisfor setting long-run targets. The next full CAS will be based on the full PRSP; this isexpected to be completed in about a year.

ii. C6te d'Ivoire has experienced over the last three years an unprecedented crisis. Thecrisis broke the momentum of trade and investment growth and shattered the image ofC6te d'Ivoire as a preferred regional location for foreign direct investment. Economicperformance declined, investment levels plummeted, private investors left the country insignificant numbers, and poverty levels worsened.

iii. However, recent encouraging developments have included peaceful communalelections and the successful conclusion of a National Reconciliation Forum. As a result,the major donor partners and the international community at large have decided toresume their assistance to Cote d'lvoire. Moreover, following successful implementationof a six-month Staff-Monitored Program (SMI), a three-year PRGF was approved by theIMF Board in March 2002. Notwithstanding the above encouraging developments, Coted'Ivoire's situation is still very fragile. Not only does the government need toconsolidate the gains of the reconciliation process and respond to the aspirations ofIvorians, but it also needs to fulfill hopes of a lasting economic turn-around.

iv. Supporting a return to growth and improved service delivery will be at the core of theBank's Interim CAS. This will be done through improved portfolio management, newlending, and non-lending assistance.

(a) More effective use of the ongoing portfolio. The Bank's portfolio currentlyincludes 12 projects, for a total commitment of $585 million ($248 million undisbursed).Portfolio performance has been mixed. On the eve of the suspension of World Bankdisbursements in October 2000, 58 percent of commitments were at risk. During the

ii

suspension, project implementation activities virtually ground to a halt leading to anerosion of portfolio quality. To ensure improvement in portfolio implementation, aCPPR will be conducted by July-August, 2002, and a Portfolio Improvement Plan agreedwith the Government. The objective is that, by the end of the I-CAS 18-month period,projects and commitments at risk are no higher than the Africa portfolio average and thedisbursement ratio of the Cote d'Ivoire portfolio has been restored to the FY00 level, i.e.at about 15 percent.

(b) New lending. As part of re-engagement under the I-CAS, the planned lendingprogram amounts to up to US$380 million covering the remaining quarter of FY02 andFY03. It includes one operation scheduled for Board presentation in FY02. This is theEconomic Recovery Credit (US$200 million), a highly focused emergency operationtargeting rural poverty. The planned FY03 lending program includes the HIV/AIDSMAP operation (US$50 million) to respond to Cote d'Ivoire's looming AIDS epidemic, aCapacity Building for Poverty Reduction APL operation (US$80 million) to strengthenthe ability and accountability of central and community-based agencies to ensure qualityservice delivery both in rural and urban areas, as well as an Urban Poverty Reduction andImproved Service Delivery Project (US$50 million).

(c) Planned non-lending assistance includes: (i) support for the preparation of the fullPRSP and a gender analysis to accompany the full PRSP; (ii) a Public ExpenditureReview (PER in early FY03) and a Medium Term Expenditure Framework (MTEF inFY03) for priority sectors (rural development, education and health) to assist Governmentin aligning public expenditures with poverty reduction priorities and in tracking the entireexpenditure process from budgetary formulation to the delivery and use of allocatedfunds; (iii) support toward a potential Cote d'lvoire enhanced HIPC initiative, incollaboration with IMF in FY03; (iv) a financial sector assessment (FSAP), with IMFparticipation in FY 03; (v) an Education Sector Country Status Report in FY03; (vi)Social Protection: Risk and Vulnerability Analysis in FY03; (vii) Competitiveness Studyin FY03/04; (viii) Country Economic Memorandum/Sources of Growth Study inFY03/04; (ix) a CPAR to be completed in FY04 and a CFAA in FY03, (x) preparation ofa new CAS in FY03, following completion of the full PRSP; and (xi) preparation of aConsultative Group (CG) meeting to strengthen the coordination of donor support to thePRSP in FY03.

v. In both its lending and non-lending activities, the Bank is working in close partnershipwith other donors, including the IMF, EU, AfDB, UNDP, other UN agencies and keybilateral donors, particularly France.

vi. The implementation of the I-CAS could face five major specific risks:

(a) The national reconciliation process may stall or be reversed, which may lead torenewed social unrest and a disruption of economic activities. However, the preparationof the full PRSP should provide a national forum for discussions on priority developmentissues, and allow for arbitration between conflicting objectives and interests. The ERC

iii

would be instrumental in diffusing social tensions by increasing access to economicopportunities and basic services to disenfranchised groups.

(b) The high expectations generated by the advent of the new government could give wayto frustrations as expected beenefits take time to materialize. The Bank and other externalpartners will have a role to play in supporting the government's reform efforts over thenext twelve to eighteen moinths through policy advice and technical assistance.

(c) The government may lack the critical financial andlor institutional capacity to sustainthe stabilization and structural reforms which underlie the recovery effort. This risk willbe mitigated by ensuring that the economic recovery program is fully funded and that on-going operations and ESW, in particular those funded by IDA, provide concreteimplementation support to the government's emergency recovery program.

(d) The government may limit or even reverse the on-going liberalization process in thecoffee/cocoa and cotton sectors, under pressure from private interests long protected bythe previous marketing arrangements. To help address this, the ERC will provide supportto sustain government's efforts to full liberalization while providing adequatesupport/safety nets for vulnerable groups.

(e) New external shocks in the form of export price declines, loss of government revenuesand lack of external concessional financing could interrupt the recovery process andpoverty alleviation programs. However, the possible availability of substantial debt relieflater in 2002 should partly alleviate these risks as should the commitment of majordonors, including IDA, to assisting CMte d'Ivoire during the transition phase andthereafter.

I. BACKGROUND AND INTRODUCTION

1. The last full Country Assistance Strategy (CAS) for Cote d'Ivoire (IDA/ReportNo.17007-IVC) was discussed by the Board in August 1997. Its main areas of focuswere: (a) macro-economic stability; (b) human resource development; (c) private andfinancial sector development; (d) equitable growth with poverty reduction; and (e)sustainable growth with focus on renewable natural resources and environmentalprotection. Implementation of the CAS was derailed by poor governance, lacklusterpolicy performance, and most of all by political and social instability and the militarycoup of December 1999 that led to suspension of donor programs. The Government hascompleted an Interim PRSP (I-PRSP) and expects to have its full PRSP ready in about ayear. The next World Bank CAS will be elaborated in FY03 on the basis of the prioritiesset in the PRSP.

2. The Interim Cowutry Assistance Strategy (I-CAS) presents the framework forBank assistance to C6te d']Ivoire, pending preparation of the next CAS. It is limited in itsaims and reflects C6te d'Ivoire's special circumstances as the country makes adetermined effort to change course and extricate itself from the recent crisis. The I-CASreviews developments since the 1997 CAS, analyses Cote d'Ivoire's political and socio-economic situation and performance track record, and presents the Bank Group's shortand medium term strategy for reengagement with and support to the country through itsexisting portfolio, lending and non-lending activities.

3. On January 30, 2002 Cote d'Ivoire cleared its arrears to the Bank leading torestoration of accrual status and resumption of disbursements on the existing Bankportfolio. Economic performance has improved and Cote d'Ivoire successfullycompleted a Fund SMP, which led to a PRGF approved by the Fund Board in March2002. Cote d'Ivoire's Interim PRSP, related Joint Staff Assessment, and HIPCdocuments were presented by the IMF and the Bank Board's in March 2002.

4. With a clear turnaround in C6te d'Ivoire's performance and the mobilization offinancing from the EMF, the EU and some bilateral donors (e.g. France), the Bank isexpected to assist covering part of the financing gap estimated at some US$626 millionover the next twelve months. To support the transition from the recent crisis in C6ted'Ivoire, the Bank has prepared a US$200 million Economic Recovery Credit (ERC),which is presented to the E,oard with this I-CAS.

2

II. COUNTRY BACKGROUND

A. RECENT SOCIO-POLITICAL AND POLICY DEVELOPMENTS

5. Long hailed as a haven of stability and prosperity, Cote d'Ivoire has experiencedover the last three years an unprecedented crisis analogous in both its extent andconsequences to the situation of a post-conflict country. Poor governance and corruptionduring former President Bedie's last years in office and failure to take timely remedialaction created a highly unfavorable climate for policy implementation and strainedrelations with donor partners. The overall governance environment and lack oftransparency also negatively impacted CMte d'Ivoire's reputation as a dynamic businesscenter. The prevailing high tolerance for corrupt practices was of particular concern tothe Bank and the donor community. Under its program with the IMF, the Government ofPresident Bedie made little progress in addressing key governance issues, such as theallocation of crop credits to a few well-connected coffee and cocoa exporters, tax fraud,and control over public spending, ultimately leading to the suspension of the program. InJune 1999, the European Union (EU) disclosed that an amount of about CFAF 18 billion(about US$30 million) under its budgetary support scheme to health and decentralizationhad been misappropriated, and subsequently interrupted its programs. On the socio-political front, coinage of the "concept" of Ivoirite had a divisive effect on socialcohesion in CMte d'Ivoire, and symbolized the ascendance of party rivalries overeconomic policy-making and the preservation of Ivorian nationhood.

6. The above crisis of leadership, poor governance, and policy performance, whichbred resentment and weakened political support, explained the popular support for themilitary coup that ousted President Konan Bedie and brought in the "national salvationgovernment" led by the military junta of General Guei. Although the December 1999coup was bloodless and greeted with relief by the population and political parties, it didnot live up to expectations.

7. The transition under the military government was marked by increasing violenceand human rights abuses. Institutions were dismantled and the constitution amended tofurther General Guei's political ambitions. Poor governance, coupled with human rightsviolations, became the keynote of the regime as the military ruler's political aspirations(beyond the military transition) became more manifest. Program implementation wasgiven low priority. Debt-service payments to bilateral and multilateral institutions werefrozen and in October 2000, the World Bank suspended all disbursements to CMted'Ivoire when the Government failed to service its debt beyond the 60-day grace period.Relations with the private sector came under increasing strain as faced with the economichardships resulting from lack of external financing and under pressure to finance hiselection campaign, General Guei resorted to strong-arm and extortion tactics againstbusinesses (and the central bank) to mobilize resources. Economic performancedeteriorated, with GDP growth rate dropping from 4.8 percent in 1998 to 1.6 percent in1999 and -2.3 percent in 2000 (although exogenous terms of trade shocks were alsoimportant contributory factors). As investment levels plummeted, poverty levels

3

worsened, particularly in the agriculture-dependent rural areas. Social fissures becamemore pronounced and society more polarized.

8. The transition from military rule to a civilian government following thepresidential elections in October 2000 triggered a spate of violence unprecedented in thecountry's recent history. Violence against foreigners from neighboring countries oftenspilled over into sporadic attacks and violent reprisals leading to a significant exodus ofmigrant workers. In rural areas agricultural productivity suffered considerably as a result.

9. When Laurent Gbagbo was sworn in as president at the end of October 2002, hisgovernment had to addlress difficult institutional, socio-political, and economicchallenges, with external financing suspended and very high expectations among thepopulation of a reversal in the rising tide of poverty and declining standards of living. Inaddition to the restoration of institutions and the traditions of democratic governance,Cote d'Ivoire's economic recovery would hinge largely on a major improvement in theeconomic climate that would reflect improvements in economic and financialgovernance, greater transparency in fiscal policy, the payment of arrears, and a moreequitable and effective utse of public expenditures. On the policy front, importantstructural and macro-economic reforms were necessary to set Cote d'Ivoire back on thepath to sustainable growlh, win back the confidence of the private sector, and mendrelations with external partners. At the social level, there was an urgent need to begin torepair the social fabric of society, address the challenge of rising poverty, and tackleoutstanding governance and human rights issues. In addition, the growing spread ofHIV/AIDS dangerously threatened Cote d'Ivoire's development prospects and itspopulation, and needed to be urgently addressed.

B. COUNTRY POVERTY PROFILE

10. Cote d'Ivoire has a young population profile, with an estimated 43 percent of thepopulation being less than 15 years old. The population of 16.3 million is still growingrapidly (2.3 percent per year) and is fast becoming urbanized (51 percent of totalpopulation), with Abidjan alone (3.5 million) accounting for about one fifth of thecountry's total population, Population density is moderate at 45 inhabitants/sq km (81 inGhana), although it can reach more than 100/sqkm in parts of the more fertile Southernregion where increasing land pressure has resulted in rapidly escalating clashes related toaccess to land. The 2000 UNDP Human Development Index ranked Cote d'Ivoire 154thamong 174 countries, well below the country's standing (130) in terms of income,pointing to a wide gap between economic and social development and growinginequalities.

4

Table 1: C8te d'Ivoire - Human Development Indicators

C6te d'Ivoire Ghana Nigeria BurkinaFaso

Human development Index 0.42 0.56 0.44 0.31Real GDP/head (US$ in PPP) 1,598 1,735 795 870Life expectancy (years) 54 61 51 45Adult literacy ( percent) 43 69 61 23Population without access to(percent)

- safe water 47 35 51 58- health services 40 75 33 30- sanitation 61 68 59 63

Combined 41 43 43 22primary/secondary/tertiaryschool gross enrollment rate(percent)

Source: UNDP Human Development, 2000 and CMte d'Ivoire Country at a Glance

11. All indicators of social welfare are low, with poor access to health care, highinfant mortality rates, widespread child malnutrition, low enrollment and literacy rates,and an average life expectancy of 54 years (and expected to decline further because of theimpact of the HIV/AIDS pandemic). The 1985, 1995 and 1998 household surveys showthat poverty is most prevalent in rural areas: about half of the rural population live belowthe poverty line and about three quarters of the poor are rural. The surveys highlightedthe negative impact of the economic recession of the 1980s and early 1990s (a strikinggeneral worsening of poverty, from 10 percent in 1985 to 37 percent in 1995 before aslight recovery to 33.6 percent in 1998), as well as the high and growing disparities inincome (in 1998 the income of the 10 percent richest households was 13 times that of the10 percent poorest). The 1994 devaluation and strong economic growth during the 1995-98 period boosted income per head. However, although there has not been a povertysurvey since 1998, most of these post-devaluation gains were lost during the recenteconomic reversal.

12. According to the 1998 survey, the highest proportion of poor rural householdswas found in the Savannah zone (55 percent), but poverty levels were also high in theforest zone (between 25 percent and 47 percent). Food crop farmers (58 percent) andagricultural laborers/share croppers were the poorest, but poverty was also high amongexport crop producers (43 percent).

5

Table 2: Cote dl'Ivoire - Poverty Indicators, 1985-1998 by Region

Poverty 1985 1995 1998 Contribution 1985 1995 1998Incidence to Poverty(percent) .(percent)Abidjan 0.7 20.2 11.1 Abidjan 3.3 13.2 6.8Other Towns 8.0 28.6 33.8 Other Towns 9.7 13.7 24.4East Forest 15.2 41.0 46.6 East Forest 10.6 27.0 24.9West Forest 1.6 50.1 24.5 West Forest 37.5 21.7 13.7Savannah 25.9 49.4 54.6 Savannah 38.9 24.4 30.2Total 10.0 36.8 33.6 Total 100.0 100.0 100.0

13. The recent dramalic fall in the price of CMte d'Ivoire's main export crops (40percent for cocoa, more than 50 percent for coffee and 25 percent for cotton) has had adevastating impact on agricultural incomes and rural poverty. Cocoa and coffeerepresent the bulk of cash income in the Forest Region, whereas in the Savannah Regioncotton is the dominant cash crop. These crops also provide a considerable part of farmemployment for wage laborers. Agricultural policies and prices are therefore keydeterminants of income and employment opportunities, and thus of poverty, in ruralareas. Finally, qualitative assessments showed that Ivorians placed great importance oneconomic as well as non-economic factors in evaluating their sense of well-being: inaddition to access to healthi and education services, the precariousness of income sources,exclusion from social networks and powerlessness were all identified as critical elementsof poverty. In addition to share-croppers, women and people living with AIDS wereidentified by the 1995 survey as being particularly vulnerable and marginalized. Thiswas a clear indication of the extent of the AIDS epidemic and the devastating impact itwas already having, and would continue to have in the future, on the country's economicand social development. Although some gains had been made during the post-devaluation period (96-98) through the implementation of the government's social sectorprogram ("Axes Prioritajres"), they were mostly lost during the last two years ofeconomic and social turmoil.

C. RECENT ECONOMIC DEVELOPMENTS

14. During the late 1980s and early 1990s, the Ivorian economy suffered fromeconomic decline, weak public finances and increasing impoverishment of thepopulation. The devaluation of the CFA Franc in 1994 started a reversal of that trend.Economic growth resumed in 1994, accelerating to 6.0 percent p.a. on average during the1995-97 period. Although the economy responded well to the devaluation andmacroeconomic stabilization policies, implementation of structural reforms and pro-poorpolicies fell short of expectations. Economic growth decelerated sharply after 1998 asreal GDP fell from 4.8 percent to 1.6 percent in 1999, due to growing political instability,a deterioration in the country's terms of trade, deep cuts in the public investmentprogram, and weakening private investor confidence. Public expenditures in favor ofpriority sectors dwindled amd structural reforms stalled when economic growth faltered,

6

extemal assistance dried up and political and social unrest escalated. The ConsumerPrice Index which rose by 2.0 percent in 1998 leveled off to under 2 percent in the period1999-2001. Merchandise exports as a percentage of GDP fell from 8 percent on averagein 1996-1998 to 7.6 percent in 1999-2001. In response to slippages in macroeconomicmanagement, governance issues and the stalling of structural reforms, the IMF suspendedits Enhanced Structural Adjustment Facility (ESAF) in early 1999. The situationdeteriorated further in 2000 with real GDP contracting by 2.3 percent. The governmentfailed to meet its debt service obligations. External and domestic arrears reached 14percent of GDP in 2000. Despite some signs of recovery in 2001, particularly inmanufacturing and services, real GDP declined further by 0.9 percent.

15. The consequences of the economic and financial crisis in 2000-01 have alreadyproven severe, and their effects may continue to be felt over a much longer period:

* Decline in investment,. In 2000, gross domestic investment dropped by 21percent in real terms. These declines are likely to be reflected in a slowdownof medium-term growth. Economic recovery will depend on a return ofconfidence, which will in turn necessitate improvements in economic andfinancial governance and transparency in fiscal policy.

* Drop in public expenditure. In 2000, public consumption expendituresdropped 9.6 percent. The Government's loss of ability to pay has alreadybeen felt in a short-term drop in the quantity and quality of essential publicservices. Public expenditures in favor of priority sectors dwindled andstructural reforms stalled when economic growth faltered, external assistancedried up and political and social unrest escalated. This has resulted in reducedschool enrollment, a deterioration in health services, and reduced road andother maintenance, all of which may have medium or even long-termconsequences.

* Drop in household consumption. Per capita consumption by households alsoexperienced a drop over the 1999-00 period. This undoubtedly aggravatedpoverty. Moreover, to the extent that the poor have been unable to gain accessto essential services, there is a risk that poverty will increase.

* Arrears. Internal arrears grew from CFAF 288 billion in late 1999 to 326billion by the end of 2000. This accumulation of arrears negatively impactedthe national economy by undermining the confidence of suppliers in theGovernment and the financial system. The stock of external arrears on non-reschedulable debt rose from 3.3 percent of GDP at end-December 2000 to 5.2percent of GDP at end-September 2001, mostly to Paris Club creditors, BradyBond holders, the World Bank, and the AfDB.

16. The combination of serious governance problems at the end of the 1990s and theDecember 1999 coup d'etat spelled a very difficult transitional period for the privatesector. The coup broke the momentum of trade and investment growth and shattered theimage of C6te d'Ivoire as a dynamic business center and preferred regional location forforeign direct investrnent and growth. The perceived close relationship of the sector withthe Bedie regime and the corruption that permeated Bedie's administration led to ageneral presumption that all contTacts negotiated with the previous administration had a

7

high probability of being firaudulent and led to excessive review of former contracts andto fiscal harassment.

17. While the new Government's drive to restore transparency and root out fraudulentand corrupt practices in both the public and the private sector was welcome andencouraged, the general concern persisted that the indiscriminate challenge of all existingcontractual obligations an,1 deals may ultimately have the perverse effect of drivingexisting businesses out of the country and discouraging potential new investors. A newcourse is being set aimed at improving the relationship and confidence betweengovernment, business, and labor, and improve the business environment and investmentclimate. The deterioration of the relationship between these sectors during the coup andsubsequent transitional period requires the new Government and the private sector tohave a new, open and healthier dialogue to develop a shared vision and restore mutualtrust, essential preconditions for economic recovery.

18. The economic situation is slowly improving and efforts to jump-start the economyare underway. In August 2001, after political and social disturbances had easedsignificantly, the IMF initiated a Staff Monitored Program (SMP) for the July-December2001 period aimed at macroeconomic stabilization. The Government's program alsoaims to advance, with BaInk support, critical structural reforms in the coffee/cocoa,energy, electricity and financial sectors. Performance under the SMP has beensatisfactory, with all quantitative macroeconomic benchmarks being met, fiscal receiptsexceeding targets and budgetary spending being lower due to tight control and slowerthan expected investment program implementation. Substantial progress was alsoachieved on structural reforms. In the cocoa sector, the new "Caisse de Stabilisation"(CAISTAB) was liquidated on September 30, 2001, after the new institutions in charge ofmanaging the sector in a liberalized environment had been established, and thegovernment launched a strengthened program to recover CAISTAB's claims ondefaulting exporters. In the electricity sector, the government took measures to eliminatea CFAF 50 billion sector dieficit (through a tariff increase and cost-reducing measuresshared by the government and energy suppliers). Agreement was reached on a strategy toliberalize the petroleum sector, reduce the CFAF 42 billion deficit of the national refinerycompany (SIR) and privatize it. In the financial sector, the Savings and Postal Agency(CECP) was split into tNvo separate agencies and agreement was reached on therestructuring of the "Caisse Autonome d'Amortissement" (CAA). Finally, thegovernment succeeded in preventing an increase in domestic and external arrears(priority was given to multilateral lenders, with bilateral and commercial debt to be dealtwith through debt rescheduling).

19. The satisfactory performance under the SMP significantly improved C6ted'Ivoire's prospects for a return to normalized relations with donors. On the financialfront, CMte d'Ivoire cleared its outstanding arrears toward the Bank on January 30, 2002leading to a resumption of ,disbursements on the existing portfolio, restoration of accrualstatus and the preparatiorL of new lending operations. Following the review andendorsement by both the Fund and Bank Boards of the I-PRSP and Preliminary HIPCdocuments, the Fund's Board approved a three-year PRGF for SDR 292.7 million on

8

March 27, 2002, with an immediate release of SDR 58.54 million. This program whichcovers the period 2002-04 focuses on: (i) restoring macroeconomic stability; (ii)improving public finance management; and (iii) normalizing relations with creditors byeliminating arrears on domestic and external debt. It will complement the proposedBank's ERC (to be presented to the Board with this I-CAS), which supports keystructural measures with macroeconomic relevance in the cocoa, electricity and financialsectors, ensuring a satisfactory level of spending in the health and education sectors, andsupporting measures aimed at strengthening public and corporate governance. Providedthe authorities maintain a good track record of policy implementation under the PRGF,C6te d'Ivoire could reach the decision point under the enhanced HIPC Initiative inSeptember 2002. Arrears with the AfDB and other multilateral agencies have also beencleared. Meanwhile, on April 10, 2002, the Paris Club creditors agreed to restructure atotal of US$2.26 billion under Lyon terms, with the immediate cancellation of aboutUS$911 million of external debt and the reduction of debt service due up to end-2004from US$2.26 billion to US$750 million.

D. DEALING WITH THE HIV/AIDS PANDEMIC

20. Past official denial and C6te d'Ivoire's geopolitical location within West Africa'strouble spots have provided fertile ground for the rapid spread of the HIV/AIDS virus.Every region and all segments of the population are affected, and HIV/AIDS is now theleading cause of mortality among adult males. Sero-prevalence rates currently varybetween 12-15 percent, close to I million adults (15-45 years old) are HIV positive, andthe cumulative death toll stands at 50,000 and is rising. The devastating effect ofHIV/AIDS in C6te d'Ivoire manifests itself in high morbidity and mortality amongteachers, health personnel, and employees in the modern industrial sector. Mortalityfrom HIV/AIDS is already the leading cause of death among adults and this has led to asharp increase in orphaned children. Communities are concerned about the risks ofabandoning centuries-old socialization processes and traditional skills passed down fromparents to offspring. Transport routes (coastal, middle-belt and northern, north to southlines and sea routes) facilitate HIV transmission among transporters, sailors and regulartraders facilitating the spread of HIV/AIDS in all regions.

21. Sero-prevalence rates are highest among pregnant women (14 percent), prostitutes(40 percent), migrants, military personnel, and transporters. There is growing concernabout the faster infection rates among women, the causes of which, though not fullyunderstood, underscore women's vulnerability in a male-dominated society. Suchvulnerability is at its most acute when a woman loses a husband or offspring to AIDS.HIV/AIDS-related mortality has raised the number of orphans by over 600,000, and ishaving a profound impact on major sectors of the economy. Life expectancy has fallenfrom 55 years in 1980 to 54 years in 2000. Increasing public understanding of linkagesbetween HIV/AIDS on the one hand and unemployment, declining income, and spread ofthe virus through rural-urban andi regional migration, on the other, is an important stagein initiating a better coordinated multi-sector response program.

9

II. GOVERNMENT'S POVERTY REDUCTION STRATEGY

22. Early in 2001, the new Government launched a national debate on the main linesof a priority medium-term program ("la Refondation") to address the aspirations of allsegments of the population. In May 2001, a national workshop, attended byrepresentatives from government, academia, civil society, the private sector anddevelopment partners, was organized to launch the preparation of a PRSP. The uWorkshopconcluded that the major constraints to growth and equitable development in C6ted'Ivoire were: (i) inadequate policies, excessive public intervention, a cumbersomeregulatory environment, and governance problems, including within the judicial system;(ii) an ineffective and overly centralized public sector, misguided public expenditureallocation and poor management and control of public finances; and (iii) the exclusion ofthe poor and vulnerable groups, particularly in rural areas, from income opportunities anddecision-making processes. A Working Group --including representatives from thepublic and private sectors and from civil society -- was established under the leadershipof the Prime Minister to prepare an I-PRSP/PRSP covering the 2002-2005 period. The I-PRSP was reviewed by the Fund and IDA Boards last March. It provides a strongevidence of the government's commitment to poverty alleviation and an adequatemacroeconomic framework for the period under consideration. It also describes thedetailed participatory process that will lead to the design of the full PRSP, and indicatesthe main outlines of the government's poverty alleviation strategy. This strategy focuseson promoting broad-based economic growth and employment creation, improving publicservice delivery, and improving governance and capacity building.

A. I-PRSP OBJECT1VES AND STRATEGY

23. Set in the longer-term framework of "Cote d'Ivoire 2025", the I-PRSP/PRSP'soverarching objective is to reduce the incidence of poverty from 33.6 percent in 1998(and probably higher in 2002 due to the recent crisis) to below 30 percent by 2005. Thisobjective is based on the following strategic priorities.

24. Promoting Broad-Based Economic Growth and Employment Creation.Government's objective is to achieve an average real GDP growth of 4.0 percent p.a.over the 2002-2005 period (rising from 3 percent in 2002 to 6 percent in 2005), whichwould translate into a per-capita income increase of about 1.7 percent p.a.. In addition torestoration of macroeconomic stability, this will require the implementation of keystructural reforms and the provision of facilitating public services and infrastructure, toincrease the profitability of private investment and competitiveness. Because of itscentral importance for Cote d'Ivoire's economy, one of the key challenges will be toachieve strong and sustained growth in the agricultural sector. This can be achievedthrough better access to markets (in particular through improved transport infrastructureand market information) and the promotion of sustained productivity increases byencouraging a competitive environment and facilitating access to improved technologies.

25. Improving Equitable Access to Essential Public Services. The I-PRSPemphasizes the critical importance of improving the access of populations, particularlythe poorest and most vulnerable groups, to essential public services. Government

10

strategy to do so involves: (i) aligning public expenditures with development prioritiesand focusing public intervention on the poorest regions and groups; (ii) improving publicsector management; (iii) reducing the cost of services; and (iv) promoting thedecentralization of government and greater participation of beneficiaries in servicedelivery.

26. The government has decided to use decentralization as one of the maininstruments for improved service delivery. Beneficiaries' participation in policy/programdesign, implementation, and monitoring will be systematically sought through, inter alia:(i) the empowerment of stakeholders in the education and the health sectors bytransferring funds for the operation and maintenance of basic infrastructure directly to thelocal school and health center management committees (COGES)I, which includebeneficiary representatives, and making these committees accountable for such resources;(ii) making agricultural services demand-driven and (partly) financed by beneficiariesthrough contractual arrangements; (iii) transferring some of the front-line responsibilitiesof technical ministries to the newly created communes; and (iv) fostering community-based rural development programs which empower local communities to identify theirpriority needs and mobilize/manage the services they require from public or privatesources.

27. Improving Governance and Capacity Building. The I-PRSP also emphasizes theimportance of good governance for (i) improving transparency and enhancing thecapacity of the public sector to deliver services and efficiently manage the economy; (ii)improving the pass-through of market prices to farmers; and (iii) promoting private sectorconfidence and investments through a predictable and reliable legal/regulatoryenvironment and judiciary system. On the governance front, reforms will be carried outto: (i) increase the transparency and accountability of the budget process: (ii) strengthenthe Financial Control Directorate (Direction du controle financier) and the GeneralInspection of the Ministry of Finance (Inspection Generale des Finances), the latter to bespecifically in charge of undertaking ex-post financial audits of public expenditureprograms; and (iii) restructure the existing National Accounts Chamber (Chambre desComptes), responsible for the ex-post audits of budget accounts into a fully autonomous"Cour des Comptes" under the Supreme Court. The government will also prepare twomajor pieces of legislation to be the core of its anti-corruption program: a FiscalResponsibility Act and an Anti-Corruption Practices Act. On the capacity building side,reforms will be carried out to increase the efficiency and client orientation of publicinstitutions. This will involve (i) restructuring/deconcentrating sectoral ministries toalign their organization, resources and management systems with government'sdecentralization policy; (ii) improving their capacity at each level in policy formulation,planning, budget management and human resources management; (iii) making them moreresponsive to clients' needs, by introducing a performance-based staff managementsystem; and (iv) strengthening their management information/impact monitoring systemto monitor and evaluate performance.

' COGES exist in 68 percent of all primary schools and 100 percent of secondary schools.

11

28. In their Joint Staff Assessment, IDA and Fund staff considered the I-PRSP asproviding a sound basis for developing a fully participatory PRSP, as well as an adequateframework for continued Fund and IDA assistance to C6te d'Ivoire. The JSA citesamong others, the following strengths of the I-PRSP: (i) a solid assessment of the existingpoverty data and diagnostics and a good indication of knowledge and data gaps; (ii) agood analysis of the government policies designed to ensure macro-economic stabilityand the impact of these policies on the government's poverty reduction objectives; and(iii) a strong involvemeni. of civil society and other major stakeholders in the preparatoryprocess. The I-PRSP prccess was fully owned and led by the Government and involvedconsultations with and participation and validation by a broad-based cross-section of thepopulation. During preparation of the full PRSP, it is planned to deepen the participatoryprocess, with heightened involvement of parliamentarians, NGOs, civil society, and theprivate sector. The Government also plans to undertake a comprehensive povertyanalysis to provide more up-to-date information to feed into the full PRSP, and to adoptthe international development goals and more specially the Millennium DevelopmentGoals (MDGs) as a basis for setting long-run targets.

29. To further strenglhen the I-PRSP, the JSA made recommendations in a number ofspecific areas, including: taking better account of the sector strategies being pursued byline ministries; a more in-depth treatment of HTV/AIDS and gender issues; betterprioritization, sequencing and costing of activities; better expenditure management anduse of tracking systems and poverty monitoring indicators; better balancing of the focuson social infrastructure with attention to current inefficiencies in the allocation ofresources, service delivery and effective program implementation; the need for a deeperanalysis of the food security situation; need for a more explicit treatment of how tostrengthen personal an(d institutional accountability within government; ensuringimproved access to justice by the poor; greater clarity on the government's economicdiversification strategy; aid conducting a more in-depth analysis of the interdependenciesof poverty determinants. With regard to the proposed universal health insurance scheme,the Government was encouraged to explore less costly grassroots approaches built onlocal and private initiative,s, such as local health mutual insurance systems, which wouldbe more accommodating of capacity and resource constraints. The Government hasindicated its intentions to incorporate these suggestions and recommendations in the fullPRSP.

B. MEDIUM-TERM PROSPECTS AND FINANCING REQUIREMENTS

Medium Term Outlook

30. Government's objective is to achieve an average real GDP growth of 4.0 percentp.a. over the 2002-2005 period (6 percent in 2005), and to decrease the headcountpoverty index from 33.6 percent in 1998 to 30 percent in 2005. Achieving this objectivewill critically depend on continued political and social stability, sound macroeconomicpolicies, decisive progress on key structural reforms and an acceptable solution to theexternal debt problem. M:uch of the recovery in 2002 --GDP projected to increase by 3.0percent-- will be due to the resumption of external assistance and externally funded

12

public investments. Activities in the manufacturing and service sectors are expected topick up in 2003 when both consumer and government spending accelerate, privateinvestor confidence improves, trade and transport activities grow again as CMte d'Ivoireslowly regains its position as a regional transit hub, and new oil fields come intoproduction.

31. In 2001/02, cocoa production is expected to be similar or slightly lower than in2000/01 (1.2 milliontons), possibly IY ~ted¶reKeMrocnmincreasing to 1.4 200million tons in the 2

medium-term. The medium-term price GDP Growth (percent) -2.3 -0.9 3.0 4.5

outlook for cocoa has Gross lnvestmentlGDP (percent) 10.6 9.9 13.5 14.6

brightened, with Gross National Savings/GDP ( percent) 7.7 7.4 11.8 13.4CPI Inflation, period avg., ( percent) 2.5 4.4 3.0 3.0

average prices Overall Fiscal Deficit/GDP ( percent) (incl. -1.3 1.2 -0.5 0.2

expected to recover grants)

from an average of Current Account Deficit/GDP ( percent) -2.9 -2.5 -1.7 -1.2

US$1.10/kg in 2001(up from US$0.90/kg in 2000) to about US$1.20/kg in 2002 and US1.30/kg in 2003 asthe market will remain undersupplied. The 2001/02 coffee production is expected toremain close to its very low 2000/01 level without much scope for a strong recoverygiven the low potential of the country's aging orchards and the expected continued lowinternational prices which will encourage some producers to switch to more lucrativecrops. Only cotton production is expected to rise in 2002 despite low world prices,increasing from 290,000 tons in 2000/01 to about 370,000 tons in 2002 and possiblyhigher if there is a recovery in world prices.

Financing, Requirements

32. Government's financial operations over the 2002-04 period are projected to resultin overall deficits (on a cash basis but excluding HIPC transactions) averaging CFAF 113billion or less than 1.5 percent of GDP. The gap widens when external debt due is takeninto account. For 2002, total financing requirements are estimated at CFAF 1440 billion(US$ 2,060 million), or 18 percent of GDP. Debt relief from the Paris and London Clubsis expected to amount to CFAF 984 billion, leaving a residual financing gap of CFAF 456billion (US$ 626 million)2. This gap assumes repayment of some CFAF 95 billion indomestic arrears.

2 It is expected CMte d'Ivoire will become eligible for debt relief under the enhanced HIPC initiative with adecision point around September-2002.

13

33. The residual gap of CFAF456 billion for CY02 is expected to be financed by theIMF (CFAF 108 billion oi US$148 million), IDA (CFAF 118 billion or US$162 million),the African Development Bank (CFAF 42 billion or US$58 million), the European Union(CFAF 39 billion or US$53 million), France (CFAF 120 billion or US$164 million), andother bilateral donors (CFAF 29 billion or US$40 million).

34. Furthermnore, theprovision of the HIPC prfns20-4resources will ameliorate thefinancial situation. On 2 2 2003March 28, 2002, the Boardbmapproved the prelimirary ante PG coeld arr be -87: ilemented.documents for s u o te ofe balance IMFSaff 69 Por -S06 ind'Ivoire's eligibility uinder eloping e -R9 for 202-4 -28rlthe enhanced HIPC initiative. fA decision point is envisaged trplemenanin o0 -1e PRGF, t i e csby September 2002. C'6te Aalbe¶ncnd'lvoire had formally bt Relief wrol be anloa8equalified for assistance uinder notablthe HrPC Initiative, with acompletion point scheduiled Bfor March 2001, subjieci to E

continued strong policy ,ther ileral mi an. srcuaperformrance but the progaamwas interrupted in early )b999 when the PRGF could not be successfully implemented.With the successful completion of the 6-month IMF Staff Monitored Progam (SMP) inDecember 2001, progress in developing a PRGF for 2002-04, the encouraging results ofthe national reconciliation process, completion of the interim-PRSP, and the currentstatus of data reconciliation and the Debt Sustainability Analysis (DSA) which is wellunderway, the country could be considered eligible for an enhanced HIPC facility.Assuming six months of satisfactory implementation of the PRGF, the estimated decisionpoint for the enhanced HIJPC could be in the Fall of 2002. Debt relief would be allocatedtowards poverty-alleviation programns, notably in education, health, rural development,roads and water.

C. POLIcy TRACK REcoRD AND FUTURE CHALLENGES

35. Since 1994, the government has implemented macroeconomic and structuralreformn programs aimed at- achieving robust and balanced growth and financial viability.These programs were supported by the IMF with the Enhanced Structural AdjustmentFacility (ESAF) during ihe period 1994-97 and the Poverty Reduction and GrowthFacility (PRGF) during 1998-99. Bank Group assistance under the 1994-97 CASsupported the macro stabilization and reform program after the devaluation. Those effortsconsisted of, inter alia, an agricultural sector adjustment credit (ASAC; Cr. 2779-PVC for

3 (-) indicate payments of arrear-s or debt/bank credit.

14

US$150 million, fully disbursed on March 27, 1998), a Private Sector Credit (Cr. 2843-IVC, for US$180 million), and an Economic Recovery Credit (Cr. 2656-IVC for US$100million). IDA has also helped the privatization program with a Privatization SupportProject (Cr. 2363-IVC). Meanwhile, quick-disbursing support after the 1997 CASincluded the Transport Sector Adjustment and Investment Credit (TSAIC) approved in1998 for a total amount of US$238.8 million. Furthermore, under the original HIPCInitiative, a US$315 million Structural Adjustment Grant (SAG) was envisaged as theinstrument through which the Bank Group's debt relief to CBte d'Ivoire was to beprovided. With the crisis, the process was discontinued but with the reengagement, anew process has begun under the enhanced HIPC Initiative. The preliminary documentsfor this enhanced HIPC Initiative were approved by the Board in March 2002 and adecision point is envisaged by September 2002.

36. The results of the comprehensive adjustment strategy implemented during 1994-97 were encouraging. In particular, the recovery of the economy after the 1994devaluation, especially in the export sector, was sustained; rapid growth resumed; andinflation declined considerably to low single-digit levels. The implementation of prudentmacroeconomic policies and progress in structural reforms reduced financial imbalancesand alleviated structural rigidities. A number of measures were taken to improvegovernment revenue performance and expenditure was scaled back. Significant progresswas made on the structural front, including privatization, the liberalization of prices andtrade, and reform of the coffee and cocoa sectors. Even though much progress was made,C6te d'Ivoire's financial situation nevertheless was still vulnerable in 1997, with the needfor continuing a number of important structural and social policy reforms. The fiscalsituation continued to be marked by serious cash-flow difficulties, and furtherconsolidation was needed. Meanwhile, a second wave of structural reforms was neededto further enhance private sector confidence and encourage investment and growth on adurable basis. In this context, the Bank's CAS was presented to the Board in August1997 and agreement was reached with the IMF on a new three-year program in March1998 for the period 1998-2001 to address the unfinished reform agenda aimed at attaininga high rate of sustainable growth, reducing poverty, and achieving financial viability.

37. Serious difficulties emerged with the implementation of the 1998-01 PRGFprogram. Specifically, the fiscal situation remained very fragile, delays in theimplementation of some structural measures persisted, and little progress was made onoutstanding governance issues. The overall budget deficit for 1998 was larger thanprogrammed, as the adjustment measures that had been put in place had either not beensuccessful (on the revenue side) or had not been effectively implemented (on theexpenditure side). Agreement could not be reached on the second annual arrangementbecause of these policy slippages and insufficient progress in implementing correctivemeasures. In August 2001, the Government negotiated a Staff Monitored program withthe IMIF for the period July-December 2001. The program was successfully implementedand a new PRGF arrangement was negotiated and approved in March 2002.

38. Notwithstanding the above encouraging developments, Cote d'Ivoire's situation isstill very fragile. Following the past years of crisis, economic decline and missed

15

opportunities, the govermnent's promises and early successes have raised popularexpectations. Not only does the government need to fulfill hopes of a lasting economicturn-around, but it also needs to consolidate the gains of the reconciliation process andrespond to the aspirations of Ivorians. Demands for wage increases in the public sectorand for concrete actions on the government's generous social promises are poised to rise.Opposition to several key reforms, such as in the cocoa sector, will also be strong.

39. On the policy level, reforms launched, e.g. liberalization programs in theagriculture sector, the conmpletion of the privatization program, implementation of thedecentralization policy, have to be pursued to their successful conclusion such that theyimpact directly and equitably on the well-being of the people of Cote d'Ivoire. Theprivate sector, some of whose members are still cautiously watching the economiclandscape, needs full reassurance that Cote d'Ivoire is regaining its past reputation as adynamic business center before undertaking the magnitude of investments necessary foran economic take-off. In this regard, important governance reforms, including legal andjudicial, will be necessary pre-requisites.

40. To meet these challenges Cote d'Ivoire has prepared an Economic RecoveryProgram (ERP) for 2002-03, whose basic aim is to recover the ground lost to thecombined effects of the economic decline during 1998-2001 and the socio-politicalturmoil of 1999-2000, and set the stage for future progress. The specific objectives areto: (i) create the conditions for renewed growth, in particular, in rural and private sectordevelopment; (ii) improve the delivery of public services to the poor, using and buildinglocal capacity to manage these services; and (iii) improve efficiency and accountability inmanagement of budgetary resources4 . The ERP, that provides the underpinnings for thePRGF and ERC is a building bloc of the I-PRSP/PRSP. These Government. strategydocuments (ERP, I-PRSP/TPRSP) underlie the Bank's assistance strategy developed underthis I-CAS and the full CAS that will be completed after the full PRSP is finalized.

IV. INTERIM COUNTRY ASSISTANCE STRATEGY

41. Coming after three years of crisis and sharp economic decline, the events of thepast three years have taken a terrible toll on Cote d'Ivoire's economy and social fabric.The country is clearly in a difficult and fragile post-conflict situation, and quick andsubstantial support from donors, including IDA, will be critical to support government'seconomic recovery program and on-going efforts at mending the social fabric andrestoring conditions for sustainable growth. This I-CAS will support the Government ofGote d'Ivoire in consolidating its initial progress and addressing its pressing andimmediate challenges within the above fragile context. It builds on the satisfactoryimplementation of the SMP1 and the new PRGF, the Interim PRSP, and progress on the

4 Under the ERP, a reform program has been prepared, which deals with: (i) budget formulation, to align itwith priorities; (ii) budget execulion, including procurement, for efficiency and transparency; and (iii)intemal controls and audits to increase probity.

16

socio-political front with the successful reconciliation process (forum and subsequentmeeting between the four key political leaders). As an interim support strategy, the I-CAS's objectives and scope are highly selective and limited to high priority measuresincluded in the Government's Economic Recovery Program as set forth in theGovernment's Letter of Development Policy for the ERC, and which measures would becarried out within the transition period before a full CAS could be implemented. Longerterm development priorities would be supported under the next full CAS whosepreparation is scheduled for FY03, following completion of a full PRSP and provided themacro-policy programs supported by the IMF (PRGF) and the Bank (ERC) remain ontrack.

42. Supporting a return to the path of growth and improved service delivery will be atthe core of IDA's Interim CAS. The support strategy will capitalize on and maximize thesynergy between the on-going portfolio, new lending and non lending support to achievethe following objectives:

(i) jump starting economic recovery and growth through the consolidation ofliberalization of the agricultural sector and the restoration of the country'sreputation as a dynamic business center for the private sector;

(ii) improving the accessibility and efficient and inclusive delivery of basic social andagricultural services through decentralization and empowering communities (inboth rural and urban areas) with the aim of softening the transition from the crisison the poor and addressing the HlV/AIDS crisis;

(iii) improving and ensuring the maintenance of basic infrastructure, especially roadsin the rural area; and

(iv) enhancing governance and capacity in public institutions to, inter alia, improvedecentralized delivery of sector services, budget execution and portfoliomanagement (particularly procurement and financial management to acceleratedisbursement).

A. STRENGTHENING PORTFOLIO MANAGEMENT

43. The current portfolio in Gote d'Ivoire consists of twelve projects with a total netcommitment of about US$585 million and a total undisbursed balance of about US$248million, with projects and programs mainly in the infrastructure, education and training,health and agriculture sectors. On the eve of the suspension of World Bankdisbursements in October 2000, 58 percent of commitments were at risk and genericproblems relating to the overly centralized financial management system, SIGFEP5, andavailability of counterpart funds substantially hampered portfolio implementation. Under

S SIGFEP is a computerized financial management system introduced in 1998. The system is overlycentralized and has severely constrained implementation of public expenditure programs. Butimprovements have been introduced to make the system more flexible and compatible with decentralizedimplementation arrangements.

17

the suspension, project implementation activities virtually ground to a halt leadinginevitably to an erosion of portfolio quality. With the lifting of the suspension, theprimary challenge is to restore normal implementation pace for immediate impact on theground. Portfolio management in the present phase is being cast in a problem--solvingmode, with focus both on long-term generic and project-specific constraints. TheGovernment has established a Crisis Committee to proactively monitor the portfolio andhelp resolve issues. A detailed working document currently being prepared andscheduled for completion by end-May 2002, will form the basis of a CPPR and PortfolioImprovement Plan (PIP) with specific monitorable benchmarks to guide portfoliomanagement during the remainder of FY02 and beyond. This document will includetime-bound action plans, milestones and implementation performance benchmarks, asappropriate, for projects in the portfolio over the I-CAS period.

44. Under the period of the interim CAS, portfolio management will rest on threepillars: (i) a strategy for re-engagement; (ii) portfolio restructuring; and (iii) a strategy forensuring continued improvements in portfolio performance.

45. The re-engagemenl: strategy aims to help facilitate resumption of normalportfolio implementation pace. It includes the following elements:

(a) Active portfolio. Before the end of FY02, all operations that will remain in theFY03 portfolio will update their implementation plans for the 18 months of theInterim CAS period, detailing key activities, procurement and financing plans, anddisbursement projections.

(b) Problem projects. There will be a special focus on problem projects (42% ofprojects), which will all have initiated and/or been implementing pro-active actionplans before the end of FY02 (that may include upgrading, restructuring, and/orpartial credit cancellation, and when warranted suspension) with the objective toimprove their perform;nce status by the end of CY02. Extensions of closing datesfor problem projects that cannot be upgraded immediately (e.g. Education Project),may be granted exceptionally when justified, subject to Bank policies on closingdates and proactive actions being initiated.

(c) Steps will be taken to ensure that systemic problems affecting portfolioimplementation even prior to the suspension of disbursements have been addressed.Depending on need, special attention will be given to cope with possible bunchingof disbursement and procurement-related requests, thereby avoiding backlogs.

(d) Portfolio oversight. An encouraging initiative to give impetus to resumption ofportfolio implementation has been the creation by the Government of a CrisisCommittee to expedite disbursement of IDA resources and resolution ofoutstanding portfolio issues. In the same problem-solving spirit, some projects havescheduled mid-term reviews during the I-CAS period (e.g. the education and healthprojects) to identify in a timely fashion needed project adjustments to take accountof current realities.

46. The portfolio restructuring will take place in two stages:

18

(a) There will be the restructuring exercise falling within the period of the InterimCAS (18 months) to improve project performance and/or respond to immediateemerging challenges in the aftermath of the recent economic and socio-politicalcrises (e.g. a sharp deterioration in living standards, a growing HIV/AIDS threat,land disputes, etc.).

(b) Following finalization of the Government's PRSP and during the period of thenext full CAS, a more thorough and profound restructuring of the portfolio isplanned guided by the need to fully accompany Cote d'Ivoire's vision of povertyreduction through a decentralized community-driven development approach. Frompreliminary consultations with government counterparts the one option is togradually move from specific project-based approaches to cross-sectoral umbrella-type programs that make for improved resource management and are betterarticulated with the integrated development needs of our clients.

47. Before the end of FY02, all projects slated for restructuring would have beenidentified, the rationale for restructuring specified (whether related to orientation, design,or sector priorities), the content of restructuring spelled out, and a restructuring time-frame defined. In the case of problem projects that need to restructure urgently to placeproject implementation back on track, when possible, restructuring would have to becompleted by the end of FY02. For all other projects, the restructuring exercise under thefirst stage (I-CAS period) would be concluded before the end of CY02.

48. To ensure continued improvement in portfolio implementation, a CPPR willbe conducted by July-August, 2002, and a Portfolio Improvement Plan (PEP) agreed withthe Government of Ivory Coast. The PIP would focus, among others, on problems inareas critical to portfolio performance, e.g. SIGFIP, procurement, disbursements,financial management, and counterpart funds. Irnplementation of the PIP would beclosely monitored to ensure that agreed measures are being satisfactorily executed andthat portfolio indicators are improving, e.g. in terms of projects and commitments at risk,disbursement ratios, etc. To ensure sustainable satisfactory portfolio management andperformance, a pro-active approach to portfolio monitoring will be instituted. This willconsist in portfolio reviews of Bank projects every three months to identify problems sothat remedial action could be taken and monitored through subsequent reviews. ThePortfolio Crisis Committee set up as part of the re-engagement strategy would follow up,if need be, on issues or problems uncovered by these systematic reviews. The objectiveis that, at the end of the I-CAS 18-month period, the portfolio indicators would haveimproved substantially; specifically, projects and commitments at risk are expected to beno higher than the Africa portfolio average; and the disbursement ratio restored to theFY00 level of the Cote d'Ivoire portfolio, i.e. at about 15 percent (in FY01, the Coted'Ivoire disbursement ratio was 8.1 percent).

49. The overall portfolio restructuring and improvement exercise will focus on threemain areas:

* Rural development and infrastructure;* Improvement of business environment and public/private partnership;

19

Decentralized service delivery.

(i) Rural development and infrastructure: Regarding rural development andinfrastructure, the restructured portfolio will support the Government's poverty reductionstrategy through the following operations:

* The Second National Agricultural Services Program (PNASA 2 approved inFY99). which supports the development of efficient, demand-driven technologygeneration and dissemination systems, the strengthening of producer associationsand the development of information systems, as well as the operations of therecently created National Agricultural Development Fund, which will ensure thefinancial viability/sustainability of the entire agricultural services system.Restructuring has begun with an extension of this project.

* The Transport Sector Adjustment and Investment Program (CI-PAST approved inFY98) which supports the preparation of a national program for the rehabilitationof feeder roads, pilot operations for the decentralized planning andimplementation of feeder road maintenance operations, the establishment of asecond generation R%oad Fund to ensure maintenance of the national feeder roadsystem, and the redaction of illegal road blocks which substantially decrease thefinancial competitiveness of Ivorian agriculture. Restructuring has begun with aCredit amendment that was approved by the Board in December 2001.

* The Rural Land Mana-aement and Community Infrastructure DevelopmentProgram (PNGTE ? approved in FY97), which supports local communitydevelopment plans (including infrastructure - feeder roads maintenance, watersupply, and productive investments) and the pilot implementation of the new landlaw. Restructuring of this program is currently underway.

50. In the domain of environmental protection, it is proposed under the restructuredportfolio to mainstream activities aimed at safeguarding the environment and improvingmanagement of natural assets and infrastructure. The intention is to build on thesuccessful implementation of the pilot Community-based Natural Resources and WildlifeManagement Project (GEPRENAF), a GEF operation which piloted the Community-Driven Development (CDD) approach in C6te d'Ivoire and enabled important strides interms of community empowerment over natural and infrastructure assets.

51. (ii) Improving business environment and public/private partnership: Regardingimprovement of the environment for business and government relations with the privatesector, the restructured portfolio will provide support at three levels:

* Improvement of the dialogue between the Public and Private Sectors* Improvement of the Investment Climate* The Privatization Program

52. To support the first two of these actions, IDA will focus on the continuedimplementation of the P'rivate Sector Development Capacity Building Project(PDSP/ARC), which has as its main objective promoting investment growth and exportsby supporting the private sector. The deterioration of the relationship between the public

20

and private sectors during the coup and subsequent transitional period, requires theGovermnent as well as the private sector to conduct an extended dialogue in order todevelop a shared vision for the recovery of the private sector, the creation of newemployment, and the promotion of exports and new investment. Since April 2001, theBank has been engaged in a process to support the re-establishment of this dialogue. Theprocess includes the creation of a "Commission for Competitiveness, Growth and PrivateSector Development" comprising representatives from the private sector as well as frompublic administration. Its main mission is to evaluate the problems and major constraintsin these sectors and propose short and long-term measures to improve the businessenvironment and restore competitiveness to boost the economy. Early results areencouraging and a Government/Private Sector Dialogue Committee was created inAugust 2001 and is presently finalizing the implementation of its methods of operation aswell as its work program for 2002. Within the framework of PDSP/ARC, the Bankintends to support this Committee.

53. The PDSP/ARC will also be instrumental in improving the business environmentand investment climate through targeted support to the following:

(a) APEXCI - (Agency for the Promotion of Exports in CD; withparticular focus in 2002 on capacity building of Small and MediumEnterprises, like exporters of cocoa/coffee;

(b) CEPICI (Center for the Promotion of Investments in CI); withemphasis, in consultation with FIAS and MIGA, on the policy andstrategy of tracking, targeting and assisting investors;

(c) Technical Assistance for Small and Medium Enterprises; withstress in 2002 on capacity building in Small and MediumEnterprises, especially to facilitate their greater involvement in therehabilitation and maintenance of roads;

(d) OHADA - (Organisation pour l'Harmonisation en Afrique duDroit des Affaires), with focus on supporting commercial lawreform;CACI - (Cote d'Ivoire Arbitration Court) to promote greaterrecourse to arbitral sentences in preference to the sluggishtraditional courts; and the

(e) Fight against Corruption - with particular emphasis on theidentification and implementation of institutional guidelines andother corruption control measures.

54. With regard to the privatization program, IDA will support the finalization of theGovernment's privatization program as embodied in its "privatization policy letter", withthe privatization of SIR (the Ivorian Petroleum Refinery Company) being a key element.Greater private sector participation in the financing of infrastructure (PPD will besupported through a PHRD grant providing technical assistance for PPI.

55. (iii) Decentralized service delivery: Regarding decentralized service delivery, therestructured portfolio will provide support through the ongoing health and education

21

projects, the Rural Land Management and Community Infrastructure DevelopmentProgram (PNGTER), and the Municipal Support Project (PACOM). These fouroperations will provide the delivery of social and other priority services to the poor. Toaccelerate the pace of disbursement for project implementation, the following measuresare envisaged: (i) institution of advances (regies d'avance) for six months expenses foreach operation; and (ii) the assignment of the duties of "regisseurs" on the projectfinancial managers and accountants, to allow for efficient use of the advances. The fundsavailable under the system of advances will be used for all eligible project expenditures,including operating expenses.

B. LENDING PROGRAM DURING THE INTERIM CAS PERIOD

56. New lending is envisaged to further support the Government's policy reforms andcapacity building and wouldL aim at: (i) consolidating the liberalization of the rural sector;(ii) ensuring delivery of services to the poor in priority sectors; and (iii) assisting theGovernment's poverty reduction objectives, particularly in the rural areas. During thenext 12 to 18-month period, Bank re-engagement in Cote d'Ivoire will involve addressingtwo urgent emerging issues: the HIV/AIDS epidemic and the recovery needs arising fromthe recent economic decline and socio-political upheavals in C6te d'Ivoire. In the contextof the I-PRSP and the forthcoming HIPC initiative, Bank activities would also supportreforms to address poverty reduction issues more rapidly and effectively, with particularemphasis on governance, capacity building, fighting corruption and the social sectors.

57. Planned Bank lending program will amount to up to US$380 million covering theremaining quarter of FY02 and FY03. It includes one operation sctheduled for Boardpresentation with this I-CAS, the Economic Recovery Credit (US$200 million), a focusedemergency operation precisely targeting rural poverty. The FY03 lending programincludes an HIV/AIDS MAP operation (US$50 million) to respond to Cote d'Ivoire'slooming AIDS epidemic, a Capacity Building for Poverty Reduction APL operation(US$80 million) to strengthen the institutional and human capacity and accountability ofcentral and community-based agencies to ensure quality service delivery both in rural andurban areas, and an Urban Poverty Reduction and Improved Service Delivery Project(US$50 million) to address the urgent and growing poverty needs of the urban areas.This will complement the restructured PNGTER which focuses on poverty reduction andservice delivery in rural areas.

a. Economic Recovery Credit (FY02). The ERC would be the main instrument ofIDA's re-engagement strategy in C6te d'Ivoire. It would (i) provide quick disbursingemergency financial assistance to help stabilize the public finances and; (ii) supportGovernment's Interim Poverty Reduction Strategy (I-PRSP) aimed at implementing a setof priority reforms for improving rural productivity and service delivery (basic social andeconomic infrastructure and essential services). The ERC would particularly focus onrural areas where most of the poor live and the country's main broad-based growthpotential lies. No other fast-disbursing support operation will be provided prior tocompletion of the full PRSP and next full CAS.

22

b. HIVIAIDS MAP Operation (FY03) will be a multi-sector support operation toenergize the ongoing national campaign to control the spread of HIV/AEDS throughproviding resources to alleviate existing funding constraints and financing worthwhilenew initiatives. As such, it will essentially complement rather than replace existing in-country AIDS control initiatives (by both public and private sectors, NGOs, civil society,and external donor partners). The operation will include the following components:(i) prevention; (ii) care and treatment, with focus both on infected individuals and theirdependents and families; (iii) strengthening capacity and coordination; (iv) research andepidemiological surveillance; and (v) monitoring and evaluation. The program will belong-term (lasting 12-15 years) and implemented in phases, with the first phase, which issupported by the MAP operation, scheduled to last for three years. To be eligible for theproposed MAP funding, the Government: (a) is formulating a multi-sector AIDS controlstrategy and action plan; and (b) has agreed to using a variety of implementing agenciesand appropriate and efficient financing mechanisms, including direct financing of NGOs,community-based organizations and the private sector.

c. The Capacity Building for Poverty Reduction Program (FY03) will complementactions already ongoing in other parts of the Bank's program. Its main objective is totransform government into a supportive and accountable partner actively fosteringpoverty reducing activities at the local level and empowering communities and localgovernments within the political, fiscal and administrative spheres of decentralization.The program is expected to improve the effectiveness and increase the efficiency ofpublic service delivery by addressing the problems of funding constraints, weak humanand institutional capacity, ineffective communication between service providers andultimate beneficiaries, and inappropriate performance incentives.

d. The Urban Poverty Reduction and Improved Service Delivery project (FY03)will build on the results of the ongoing Municipal Operations Support Project (PACOM).Its main objectives will include increasing revenue levels in urban areas, improving thematerial living conditions of less well-off urban population groups, and increasing thecapacity of the state and local collectivities to ensure effective and sustainably-financedurban services. The new operation will be based on community-driven development(CDD) principles. To help improve urban service delivery, it will focus on building localmunicipal capacity to respond to the demand of urban communities for improvedservices, and on helping communities put in place management systems for improvedbasic urban services. Project activities will include investments, capacity building, anHIV/AIDS component, fiscal management, and Information, Education andCommunication (EEC) for communities.

C. NON-LENDING ACTIVITIES

58. The Bank will continue to provide technical assistance to the preparation of thePRSP. The PRSP, which is expected to be completed in a year, will incorporate lessonsdrawn from a gender analysis supported by the Bank and scheduled for completion bySeptember, 2002. The Bank will continue to maintain a sustained dialogue with

23

government authorities regarding its structural and economic reform program (covering,amnong others, liberalization in the agricultural sector, implementation of the privatizationprogram, reforming the computerized financial management system (SIGFIP) to facilitatedisbursements, implementing the new procurement code, strengthening the micro-financesector, and dealing with energy and environmental issues). A financial sector assessment(FSAP) will be undertaken by the Government by June 2003, with support from the Bankand IMF. Other non-lending activities planned for FY03 include: (i) a PublicExpenditure Review (PER in FY03) and a Medium Term Expenditure Framework(MTEF in FY03) to assist Government in aligning public expenditures with povertyreduction priorities and in tracking the entire expenditure process from budgetaryformulation to the delivery and use of allocated funds at the point of consumption; (ii)support toward a potential Cote d'Ivoire enhanced HIPC initiative, with IMFparticipation in FY03; (iii) an Education Sector Country Status Report in FY03; (iv)Social protection: Risk and Vulnerability Analysis in FY03; (v) Competitiveness Study(FY03/04) (vi) Country Economic Memorandum/Sources of Growth Study inFY03/FY04; (vii) a CPAR (FY04) and a CFAA in FY03; (viii) preparation of a new CASby the fourth quarter of FY03, following completion of the full PRSP; and (ix)preparation of a Consultat:ive Group meeting to better coordinate donor support to thePRSP (fourth quarter of FY03).

59. To a lesser extent, the suspension of IDA disbursements also adversely affectedthe WBI program. In particular, it hampered the development of the Abidjan DistanceLeaming Center's program, as the center was supported by the IDA LIL for its launch.In spite of that, the center accounted for more than half of the total number of Ivoirianparticipants in FY01, thereby proving that it is serving its intended purpose, namelyfacilitating capacity building, even in difficult country situations. The themes thatattracted the largest number of Ivoirian participants in FY01 were: gender and healthissues in the context of developing a poverty reduction strategy, financial markets fraudsand investigations, the E]uro and the Franc Zone, public-private partnership ininfrastructure, decentralization, and macroeconomic management. In the coming year,WBI will support the finalization of the PRSP, and its implementation and monitoring.

D. TRIGGERS FOR ASSISTANCE AND PERFORMANCE INDICATORS

60. IDA would continue to provide support under the program described in theinterim CAS if the following conditions continue to be fulfilled:

* Satisfactory macroeconomic perfornance;* Satisfactory progress in preparing the full PRSP;* Satisfactory progress in portfolio management as detailed in paragraph 48;

and* Satisfactory progress on key structural reforms, mainly the reforms in the

cocoa/coffee/cotton sectors and in the social sectors, as set forth in theGovernment's Letter of Development Policy for the ERC.

24

61. The impact of the implementation of the country's poverty reduction strategy willbe assessed through a comprehensive system of key human and economic developmentindicators specific to each of the policy domains. The development of such a full povertyimpact monitoring system (PIMS) has started with the preparation of the I-PRSP and it isexpected that it will be fully operational by the end of 2002. However, specific indicatorshave been developed to monitor the implementation of key reforms agreed upon underthe ERC. Annex Cl contains details on the policy actions contained in the ERC and theassociated performance indicators. Furthermore, the Government plans to makesubstantial improvements to its existing public expenditure management and trackingsystem to ensure that resources reach intended beneficiaries, especially in light of recentefforts to decentralize budget allocations to schools and health centers.

E. IFC AND MIGA PROGRAMS

62. IFC. With Cote d'Ivoire's prior track record on liberalization, PSD, and growth,the country had become one of the largest and most diverse portfolios for IFC in Africa.IFC has supported major private infrastructure projects, the development of the oil & gassector, agribusiness, the financial sector, and a range of SMEs. Following the December1999 coup, and the resulting political instability, new investment all but ceased and theeconomic and fiscal crisis has severely dampened private business prospects. IFC hasmade only one new investment, a small private medical clinic, in this period. Before that,it financed innovative projects in the energy sector which helped develop, at an earlystage, oil and gas resources and the country's private power production sector. Theseprojects depended on public/private partnerships and contracting arrangements whichhave increasingly come under strain and require action on the part of the government topreserve their viability. The government has been slow to act and still has not resolvedcritical issues impinging on the viability of private involvement in the energy sector. Thecommitted portfolio totals $118 million and remains IFC's fourth largest countryportfolio in Africa, despite essentially no new investments in the past two years. Thefocus for the immediate future will be on working with clients to deal with the difficulteconomic conditions prevailing in the country. With the return of stability and an end tothe current crisis, new projects may again be selectively considered. IFC's RegionalOffice for Western and Central Africa is located in Abidjan, and serves as a "hub" for thesub-region. The Abidjan office will be further strengthened if stability is maintained.

63. MIGA's outstanding portfolio in Cote d'Ivoire consists of one project, with twocontracts of guarantee for a project in the agribusiness sector with a total gross and netexposure of US US$13.18 million. The project involves the rehabilitation of three cocoaplantations to enable their product to be internationally competitive for chocolatemanufacture, and represents significant job creation-2000 employees during theconstruction phase, and 1,509 regular jobs once operations commence (estimated 2003).MIGA's Board approved the Marcory bridge project in Abidjan, but the project wassuspended after the events of December 1999. The total amount of foreign directinvestment facilitated to date by MIGA is US$8.32 million. MIGA has no activeapplications for C6te d'Ivoire. However, investors have expressed interest in coveragefor investments in the agribusiness and services sectors.

25

F. DONOR COORDINATION AND COLLABORATION

64. The Comprehensive Development Framework (CDF) (C6te d'Ivoire has been apilot country since inception of the CDF), and the medium-term (2002-05) I-PRSP/PRSPprovide the overall frameworks for donor partnership. There is a division of labor basedon the comparative advantage of each donor, with the Bank focusing on structural andsectoral issues, an emphasis on poverty reduction and the focus on achieving millenniumdevelopment goals. The 13ank's ERC operation has been designed to complement effortssupported by the IMF under the PGRF and by other donors. The PRGF will focus on astabilization program, notably on tightening fiscal policy and public expendituremanagement, including through better governance; reducing domestic and foreign debt.The investment/sectoral programs and the cross-cutting reforms supported by the ERCwould be closely coordinated with those supported by other donors like the AfDB and theEU.

65. The HIV/AIDS MAP operation will be predicated on close cooperation amongdonors on the ground so that synergies and comparative advantages could be capitalizedupon. The collaborative amd coordinated donor approach to supporting Cote d'Ivoire'sfight against AIDS is symbolized by membership of UNAIDS, which comprises UNDP,ILO, WHO, the World Bank, UNICEF, and UNESCO.

66. The planned Capacity Building program for Poverty Reduction is also beingprepared in close coordination with other donor partners. The UNDP, AfDB, EU, CIDA,and the French Cooperation are all interested in participating in it and, together with theGovernment, have put in place a joint Technical Coordination Committee, which hasbeen meeting regularly. This Committee would facilitate future collaboration andcoordination, especially with regard to a common implementation plan and reportingrequirements.

V. BENEFITS, RISKS AND RISK MITIGATION

67. The key benefit of Bank assistance would be to reinforce the stabilization of thesituation in Cote d'Ivoire ('with implication for the whole West Africa region), therebyhelping create conditions umder which Cote d'Ivoire could resume pro-poor social andeconomic development. Blank involvement would also play a catalytic role for otherdonors to resume assistance, and for the private sector to restart key economic activities.However, substantial risks exist. To begin with, the reconciliation process will certainlytake some time, and there remain significant risks of chronic political tensions and policyslippage. Risks on the social side are also important. Recent demonstrations by thepolice force and strike actions by magistrates and social workers, and the government'ssubsequent promises of salary increases illustrate the type of social tensions that arelikely to re-surface. The government's capability to resist such demands and stick to itsfiscal stance will surely be tested more than once in the coming year.

26

68. The Bank will continue to monitor the situation and work closely with otherpartners who are directly involved. Overall, the main risks facing an effectiveimplementation of the I-CAS could be subdivided into the following five major specificrisks, and wherever possible mitigation strategies are identified:

(i) The national reconciliation process may stall or be reversed, which may lead torenewed social unrest and a disruption of economic activities. However, the recentNational Reconciliation Forum (November 2001) has considerably eased social andpolitical tensions and strengthened the on-going mending process. The preparation of thefull PRSP should provide a national forum to discuss priority development issues andallow for arbitration between conflicting objectives and interests. By supportingincreased access to economic opportunities and basic services by disenfranchised groups,the ERC would help addressing some of the tensions that may continue in the medium-term during the transition to sustained and broad-based growth.

(ii) The high expectations generated by the advent of the Gbagbo regime, following therecent tumultuous socio-political crisis, could give way to frustrations as expectedbenefits take time to materialize. Thus far, the Government has managed to handle thesituation by providing assurances that by 2003, when the economic situation would havesufficiently improved, it would be possible to revisit and address the various grievances.Such success will however be short-lived if over the coming months there is a credibilitygap between government reassurances and its actual performance in turning round theeconomy. The Bank and other external partners will therefore have a key role to playthrough financial support, policy advice, technical assistance, and sustained dialogue withthe Government in supporting the government's reform efforts over the next twelve toeighteen months.

(iii) The government may lack the critical financial and/or institutional capacity tosustain the stabilization and structural reforms which underlie the recovery effort. Thiswould render largely ineffective any additional external financial resources, includingthrough the ERC, and curtail any further assistance from IDA. This risk will be mitigatedby ensuring that the economic recovery program is fully fimded, the donor programsupports the analysis and improvement of the country's public financial accountabilityarrangements, and on-going operations and ESW, in particular those funded by IDA suchas the Capacity Building for Poverty Reduction operation provide complementaryconcrete implementation support to government's emergency recovery program.

(iv) The government may limit or even reverse the on-going liberalization process in thecoffee/cocoa and cotton sector, under pressure from private interests long protected bythe previous marketing arrangements and who stand to lose from the establishment oftransparent competitive markets. The ERC will support government's commitment tofull liberalization while providing adequate support/safety nets for vulnerable groups.

(v) New external shocks in the form of export price declines, loss of governmentrevenues and lack of external concessional financing could interrupt the recovery processand poverty alleviation programs. However, the expected availability of substantial debt

27

relief later in 2002 should partly alleviate these risks as should the evident commitmentof major donors, including IDA to assisting C6te d'lvoire during the transition phase andthereafter.

VI. CONCLUSION

69. Long hailed as a haven of stability and prosperity, C6te d'Ivoire has experiencedover the last three years an unprecedented crisis analogous in both its extent andconsequences to the situation of a post-conflict country. In recent months, the situationimproved but daunting challenges remain on the road to economic recovery andinstitutional/social rebuildin.g. Economic recovery would hinge largely on a majorimprovement in the economnic climate and a return of confidence among economicoperators. A focus on poverty reduction will be crucial to ensure greater equity andinclusiveness. To achieve its poverty reduction objectives in the medium to long-term,the Government must remain committed to implementing a sound, well prioritizedprogram to tackle structural and institutional constraints. In the short term, it is crucialthat it intensify its efforts to prepare a participatory poverty reduction strategy consistentwith its implementation and financial capacities. Successful implementation of theEconomic Recovery Program would be key to meeting these challenges and creatingconditions for renewed growth in the private sector and rural areas, improved publicservice delivery, especially to the poor, and improved efficiency and accountability in themanagement of budgetary resources. To achieve these targets, substantial support by theBank and other donors would be critical.

James D. WolfensohnPresident

by Shengman Zhang

Washington, DCMay 9, 2002

28

Republic of C8te d'IvoireInterim Country Assistance Strategy

VIII. ANNEXES

CAS Annex A2 C6te d'Ivoire at a GlanceCAS Annex B2 Selected Indicators of Bank Portfolio Performance and

ManagementCAS Annex B3 Bank Group Program SummaryCAS Annex B3 Bank Group Fact Sheet - IFC and MIGA ProgramCAS Annex B4 Summary of Non-Lending ServicesCAS Annex B6 Key Economic IndicatorsCAS Annex B7 Key Exposure IndicatorsCAS Annex B8 Status of Bank Group Operations (Operations Portfolio)CAS Annex B8 Statement of IFC's Held and Disbursed PortfolioCAS Annex B9 CAS Matrix - Outcomes under the last CASCAS Annex C1 Cote d'Ivoire - Matrix of Policy Actions in ERC

Annex A2Page 1 of 2Cote cl'Ivoire at a glance Sr7/02

Sub-POVERTY and SOCIAL CWte Saharan Low-

dilvoire Africa Income Developrent diamond'2001Population, mid-year (millions) 16.3 659 2,459 Ute expectancyGNI per capita (Atlas method, USS) 630 480 420GNI (Atlas method, US$ billions) 10.4 313 1,030

Average annual growth, 1995-01

Population (%) 2.3 2.6 1.9 GN\Labor force (%) 3.2 2.6 2.4 GN y \ Gross

per | pnmaryMost recent estimate (latest year available, 1991i-01) capita J / enrollment

Poverty (% of population below national povefty line)Urban population (% of total population) 51 34 32Uife expectancy at birth (years) 54 47 59Infant mortality (per 1,000 live births) 88 92 77Child malnutrition (% of children under 5) 24 .. .. Access to improved water sourceAccess to an improved water source (% of pqpulat?on) 63 55 76Illiteracy (% of popuration age 15+) 57 38 38Gross primary enrollment (% of school-age poqpultion) 71 78 96 Cole d'lvoine

Male 82 85 102 Low-income groupFemale 61 71 86 L

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1981 1991 2000 2001 Economi rtios

GDP (USS billions) 84 13.6 10.6 10.4 1Gross domestic investment/GDP 25.9 61 10.6 9 9 |Exports of goods and services/GDP 35.2 23.2 39.6 39.4Gross domestic savings/GDP 18.8 8.5 17 3 16.9Gross national savings/GDP .. -3 8 7.2 7.7 TCurrent account balance/GDP .. -9.9 -3.4 -3.0 Domestic , iemn

Interest payments/GDP 8.2 3.6 5.5 5A savings - ' InvestmentTotal debt/GDP 96.5 137 4 93.5 88.3Total debt service/exports 51.2 40.4 19.2 20.4Present value of debt/GDP .. .. 55.6 57.1Present value of debt/exports .. .. 138.5 143.9

Indebtedness1981-91 1991-01 2000 2001 2001-05

(average annual growth)GDP 1.2 7.6 -2.3 -0 9 4.5 Cole divoireGDP per capita -2.5 4 7 -4.2 -2.8 4.2 Low-income groupExports of goods and services 2.0 4.1 -6.7 -1.2 45 1

STRUCTURE of the ECONOMY

1981 1991 2000 2001 Growth of Investment and GOP (%)(% of GOP) 2Agnculture 26.5 25.7 24.2 24.3 2T

industry 18.6 19.0 22.2 21.6 1 0Manufacturing 11.8 17.3 19.1 18.8 o 97" i or

Services 54.9 55.2 53.7 54.1 20

Pnvate consumption 63.6 78.9 73.9 74.0 -30

General govemment consumption 17.6 12.7 8.8 9.1 GDI e- GDPImports of goodJs and services 42.3 20.9 33.1 32.3 _

1981-91 1991-01 2000 2001 Growth of exports and Imports (%)(average annual growth)Agriculture 2.2 3.2 12.9 -1.6 40Industry 6.3 5.1 -9.5 -2.4 30

Manutacturing 5.4 4.4 -7.2 -1.7 20Services -2.1 13.3 -5.8 0.1 Io

Private consumpbon 1.0 8.4 4.3 1.3 oGeneral government consumption -1.2 2.4 -11.8 2.3 -10 IW o? 99

Gross domestic investment -7 2 11.2 -21.0 -22.5 -E xpors e l1wr1ns

Imports of goods and services -2.1 1.5 -1.4 -4 0

Note 2001 data are preliminary estimates.

The diamonds show tour key indicators in the cotntry (in bold) compared with its income-group average. It data are missing, the diamond willbe incomplete

Annex AZPage 2 of 2

Cote d'lvoire

PRICES and GOVERNMENT FINANCE1981 1991 2000 2001 Inflation (%)

Domestic prices(% change)Consumer pnces 8.7 1.6 3.6 3.1 ,sImplicit GPdePiator 1.1 -'1° -0.1 2.1 5

Government finance o __ _ _

(% of GOP, includes current grants) 9fs 97 ;8 99 00 01Current revenue *- 15.1 16.8 17 2 .Current budget balance .. -8.1 1.6 2.3 GDP c a:or -O- CPIOverall surplus/deficit . -10.4 -1.2 -0.9

TRADE

1981 1991 2000 2001 Export and Import levels (USS mill.)(USS millions)Total eXoDrts (fob) 2,435 2,810 3,788 3,668 s.o

Cocoa 739 783 839 4 1fiFuel .. 1 14 134Manufactures .. 988 1.299 1.277 3000O

Total imports (cif) 2,445 2.103 2,821 2,722 z,oo " I'l lFoo ad eeg 457 490 433 444 1.000 l 1 [ 1

Fuel and eneTgY 530 530 838 720 10 0~ 1 1Caoital qoods 677 404 447 439 o

EXDOnt price index (1995 ,100) 45 42 93 94Import Dprce index (1995=100) 41 52 123 121 * Exoc-s -.mDcnSTermsoftrade t995=100) 112 82 76 77 .

BALANCE of PAYMENTS1981 1991 2000 2001 Current account balance to GOP (6)

(USS mrluons)Exons of goods and sermces 2,966 3,149 4,226 4,100Imports of goods and services 3,566 2,832 3,514 3,364 1Resource balance -600 317 711 736 .

Net income -522 -1,371 -767 -629 2

Net current transfers -488 -293 -282 -337 43

Current account balance N/A -1,347 -363 -311

Financing items (net) .. 1,397 175 192Changes in net reserves N/A -50 188 119

Memo:Reserves including gold (USS millions) 37 29 663 729Conversion rate (DEC, locaWLUSS) 271.7 282.1 710.0 732 5

EXTERNAL DEBT and RESOURCE FLOWS1981 1991 2000 2001 Compostuon of 2001 zebt USS mil.>

(USS millions)Total debt outstanding and disbursed 8,141 18,843 9,935 9.198 A, 491

IBRO 341 1,986 599 491 G 7 a 1,362IDA 8 38 1,366 1,362 c aI3

Total debt service 1533 1,279 820 8981ERD 40 324 158 97IDA 0 0 18 19 F 7043

Composition of net resource flowsOfficial grants 11 312 118 .\ 4.S50Official creditors 74 393 -202 -278Private creditors 659 -4 -4 287Foreign direct investment 33 16 134 138Portfolio equity 0 0 81 87 3

World Bank programCommitments 317 452 0 0 A - IBRO E- BiiaiersiDisbursements 48 219 191 115 8-IDA D -Other -rL,lateral F- PnratePrincipal repayrnents 14 154 109 55 C -IMF G lsnolste,ThNet flows 35 64 82 60Interest Dayments 26 169 67 61Net transfers 9 -105 15 -1

Development Economics 517/02

Annex B2Page 1 of 1

CAS Annex B2 -Cote d'lvoireSelected Indicatoirs* of Bank Portfolio Performance and Management

As Of Date 04/05/2002

Indicator 1999 2000 2001 2002Portfolio AssessmentNumber of Projects Unde r Implementation a 16 18 16 12Average Implementation Period (years) b 3.4 3.6 4.1 4.9

Percent of Problem Projects by Number a, c 20 12.5 50 41.7Percent of Problem Projects by Amount a, c 14.8 9.6 82 68.5

Percent of Projects at Risk by Number ^ d 33.3 12.5 50 50

Percent of Projects at Risk by Amount a d 17.9 9.6 82 69.5

Disbursement Ratio (%) " 9.4 14.7 8.1 4.6Portfolio ManagementCPPR during the year (yes/no) No No No NoSupervision Resources (Iotal US$000) 1,661 1,467 896 1,188Average Supervision (U'$000/project) 104 81 56 74,3

Memorandum Item Since FY 80 Last Five FYsProj Eval by OED by Nurnber 57 5Proj Eval by OED by Amt (US$ millions) 3474 536.1% of OED Projects Rated U or HU by Number 36.8 0% of OED Projects Rated U or HU by Amt 0 0

a. As shown in the Annual Report on Portfolio Perfonmance (except for current FY).b. Average age of proje(ts in the Bank's country portfolio.c. Percent of projects rat.ed U or HU on development objectives (DO) and/or implementation progress (IP).d. As defined under the Portfolio Improvement Program.e. Ratio of disbursemenits 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.

Annex B3Page 1 of 2

CAS Annex B3 - IBRD/IDA Program Summary Cote d'lvoire

As Of Date 0412212002

Proposed IBRD/IDA Base-Case Lending Program a

Fiscal year Proj ID US$(M) Strategic Rewards b Implementation b(HIMIL) Risks (H/MIL)

2002 Economic Recovery Credit 200.0 H L

Result 200.0

2003 HIV/AIDS Multi-Sector Response Project 50.0 H M

Capacity Building for Poverty Reduction 80.0 H M

Urban Poverty Reduction 50.0 H L

Result 180.0

Overall result Result 380.0

Annex B3Page 2 of 2

CAS Annex B3 (IFC & MIGA) for Cote d'IvoireCote d'Ivoire - IFC andl MIGA Program, FY 1999-2002

1999 2000 2001 2002

IFC approvals (US$m) 4.20 3.30

Sector (%)AGRICULTURE & FORESTRY 44FINANCE & INSURANCE 32FOOD & BEVERAGES 67HEALTH CARE 33UTILITIES 23Total 99 100 0 0

Investment instrument(%)Loans 100 64Equity 36Quasi-EquityOther 0

Total 0 36 0 0

MIGA guarantees (US$mn) 16.26 14.7 12.9 12.9

Annex B4Page 1 of 1

CAS Annex B4 - Summary of Non-lending Services - Cote d'Ivoire

Product Completiorn FY Cost Audience0 Objective"- ~~~~~~~~~(Tissooo)

Underway

Public Expenditure Review (PER) FY03 100 Govt/Bk/Don KG, PSPRSP FY03 150 Govt/Bk KG, PD, PSGender Analysis FY03 80 Govt/Bk/Don KG, PD, PS

Planned

Full CAS FY03 140 Govt/Bk/Don KG, PSFinancial Sector Review FY03 200 Govt/Bk/Don KG, PSCFAA FY03 75 Govt/Bk/Don KG, PD, PSSoc. Protection: Risk & Vulnerability FY03 80 Govt/Bk/Don KG, PD, PSAssessmentEducation Sector Country Status Report FY03 80 Govt/Bk/Don KG, PD, PSConsultative Group (CG) FY03 80 Govt/Bk/Don KG, PD, PSCompetitiveness Study FY03/FY04 80 Govt/Bk/Don KG, PSCEM/Sources of Grovtli Study FY03/FY04 80 Govt/Bk/Don KG, PSCPAR FY04 80 Govt/Bk/Don KG, PD, PS

a Govemment donor, Bank, public dissemination.b. Knowledge generation, public debate, problemn-solving.

Annex B6Page 1 of 3

CAS Anne) B6 - Cote d'Ivoire - Key Economic Indicators

Actual Est. - Proj.Indicaior 1995 1996 1997 1998 1999 2000 20u1 2002 2003 2004

National accounts(as % GDP at currentmarket prices)

Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Agriculture" 24.7 24.6 23.3 24.1 22.0 24.2 24.3 24.1 23.9 23.4Industry' 20.8 20.4 23.7 23.0 24.2 22.2 21.6 21.8 22.0 22.9

Services' 54.5 55.0 53.0 52.9 53.8 53.7 54.1 54.1 54.1 53.7

Total Consumption 77.1 80.2 77.2 80.3 78.7 82.7 83.1 80.0 78.4 77.7Grossdomesticfixed 13.7 14.8 14.5 16.0 14.4 11.0 9.0 13.1 14.1 14.3investment

Government 5.1 4.9 5.4 6.0 4.2 2.8 1.2 4.0 4.3 4.3invest.nent

Private investment 10.5 7.2 9.0 7.3 8.9 7.8 8.6 9.5 10.3 10.7(includes increase instocks)

Exports (GNFS)b 41.8 41.1 41.4 39.4 40.3 39.8 39.4 38.6 38.8 38.9Imports (GNFS) 24.4 32.4 33.1 33.0 32.2 33.1 32.3 32.1 31.9 31.6

Gross domestic savings 22.9 19.8 22.8 19.7 21.3 17.3 16.9 20.0 21.6 22.3

Memorandum itemsGrossdoinesticproduct 10999 12138 11722 12806 12576 10622 10418 11023 11831 12745(US$ million at currentprices)Gross national product per 670.0 670.0 730.0 720.0 710.0 680.0 640.0 650.0 670.0 690.0capita (US$. Atlas metlhod)

Real arunual growvtlrates(%, calculated from1987prices)

Gross domestic product at 7.7% 5.7% 4.8% 1.6% -2.3% -0.9% '3.0% 4.7% 4.9%market pricesGross Domestic Incomne 8.2% 5.1% 5.5% 1.8% -1.4% -1.1% 3.2% 4.6% 4.9%

Real annual per capitagrowth rates (O/o, calculatedfrom 1987 prices)

Gross domestic product at 4.5% 2.9% 2.3% -0.4% -4.2% -2.8% 0.9% 2.6% 2.9%market pricesTotal consumption 3.2% 4.3% 2.4% 5.8% -1.5% 0.5% -0.6% -0.6% 1.3% 2.7%Private consunption 2.2% 5.2% 2.6% 7.7% -2.5% 2.3% -0.7% -0.6% 1.0% 3.0%

(continued)

Annex B6Page 2 of 3

CAS Annex B6 - Cote d'Ivoire - Key Economic Indicators

AcludI ESL ProJ.Indicator 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Balance of Payments(USSm)

Exports (GNFS)b 5077.6 4988.9 4855.1 5047.3 5073.2 4225.7 4099.8 4253.7 4596.0 4958.7Merchandise FOB 4303.7 4256.4 4275.5 4431.7 4486.1 3788.1 3668.0 3797.2 4105.9 4430.7

Imports (GNFS)b 3806.8 4187.9 4053.7 4232.2 4046.6 3514.2 3364.1 3539.5 3772.9 4021.0Merchandise FOB 2473.8 2762.7 2712.5 2759.9 2642.9 2321.3 2240.1 2300.1 2484.3 2677.7

Resource balance 1270.8 801.0 801.3 815.1 1026.6 711.4 735.7 714.2 823.1 937.7Net current transfers -466.3 -342.4 -380.4 -394.3 -387.1 -282.0 -337.2 -353.0 -376.0 -454.0(including official

currenttransfers)Current account -112.9 -378.2 -321.3 -303.0 -107.2 -363.7 -311.0 -192.9 -194.3 -175.3

balance(after official capital grants)

Net private foreign 234.4 222.8 313.9 246.5 195.7 134.0 138.0 190.1 200.8 217.9direct

investmentLong-term loans (net) .. .. .. .. .. .. ..

Official 189.9 -45.2 70.0 7.8 -110.6 -202.1 -278.4 -299.5 -325.1 -280.5Private 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Otther capital (net, 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0including

errors and omissions)Clhangeinreservesd -221.6 -38.5 -82.1 1.5 116.9 187.5 119.1 20.0 -9.6 -48.3

Meemorandum itemsResource balance (% of 11.6% 6.6% 6.8% 6.4% 8.2% 6.7% 7.1% 6.5% 7.0% 7.4%GDP at current marketprices)Real annual growthrates(YR87 prices)Mercliandise exports 4.7% 22.5% 10.3% 0.6% 2.4% -5.8% -1.3% 1.0% 5.5% 5.4%(FOB)

Primary 9.0% 30.9% 1.6% -9.1% 8.5% 6.3% 1.5% 1.6% 1.6% 1.3%Manufactures 1.2% 11.5% 2.0% 6.0% 7.1% 7.1% 3.6% 4.6% 4.9% 5.4%

Merclhandise imports 25.0% -2.6% 10.6% 5.2% -1.5% -0.5% -3.3% 0.5% 5.6% 5.5%(CIF)

Public finance(as % of GDP atcurrentmarket prices)'Current revenues 20.7 20.5 20.1 19.1 17.0 16.8 17.2 18.2 18.2 17.6Current expenditures 24.5 22.5 22.1 21.2 19.8 18.1 16.6 18.8 18.2 18.0

(Continued)

Annex B6Page 3 of 3

CAS Annex B6 - Cote d'Ivoire - Key Economic Indicators

Actual Est. Proj.Indicator 1995 1996 1997 1998 1999 2000 2001 2002 20N3 2004

Current account -0.9 -5.3 -4.2 -1.8 -2.7 -2.8 -2.5 -1.7 -1.2 -0.8surplus (+)

or deficit (-)Capital expenditure 5.1 4.9 5.4 6.0 4.2 2.8 3.2 3.9 3.8 4.0Foreign financing 4.4 3.3 1.5 1.3 0.7 4.7 4.9 -5.6 0.2 -0.2

MonetaryindicatorsM2IGDP(atcurrent 24.4 22.3 22.7 21.9 21.5 21.8 22.1 22.5 22.6 23.0

marketprices)Gro%%th of M2 (%) 1.6 7.2 6.1 -3.1 0.4 -0.1 2.7 2.7 3.3 3.4Private sector credit growth/ 2.2 14.8 3.8 -8.4 3.2 6.2 7.8 8.9 8.9total credit growth 0.7 10.2 7.5 5.1 -2.2 -5.5 3.4 3.8 2.1

(%)

Price indices( YR87=100)

Merchandise export 128.1 103.9 99.9 101.8 95.7 74.8 69.1 68.8 70.5 72.1price

indexMerchandise import 132..' 128.7 124.6 129.5 119.1 101.0 92.7 90.7 92.6 94.7

priceindexMerchandise terns of 75.A 77.7 80.3 77.2 83.9 77.4 107.8 108.0 108.5 108.7

tradeindexReal exchange rate 70.7 70.7 69.5 74.1 72.7 69.4 70.0 70.6 70.9 71.2(US$/LCUI)Real interest ratesConsumer price 7.70/6 3.5% 5.2% 2.0% 0.7% 3.6% 3.1% 3.0% 3.0% 2.7%

index(% growth rate)GDP deflator 11.00/6 5.0% 4.2% 5.2% 0.9% -0.1% 2.1% 2.3% 2.0% 2.2%(% growthi rate)

a. If GDP components are estimated :t factor cost, a footnote indicating "Data-YR" fact should be added.b. "GNFS" denotes "goods and nonfactor services."c. Includes net unrequitted transfers excluding official capital grants.d. Includes use of IMF resourcese. Should indicate the level of the government to which the data refer.f "LCLr' denotes "local currency units." An increase in USSILCUI denotes appreciation.

Annex B7Page 1 of 1

CAS Annex B7 - Key Exposure Indicators Cote d'Ivoire

Aotual * &iaePro'ectedlndizaIkr 1998 19W 200n5 2001 2002 2003 20W4 200S 26.

Total debt outstanding and

disbursed (TDO) (USSm)' 11171.0 10592.0 9935.5 9198.0 8567.3 7933.3 7337.3 6862.9 6443.9

Total debt service (TDS) 1287 1286 820 898 887 864 802 668 608

(USSm)'

Estimate TDS with Paris Club agreement 1287.0 1285.7 820.0 897.5 878.6 594.2 595.0 686.4 626.3

Debt and debt service indicators

(%/0)

TDO,XGSb 227% 213% 235% 223% 1990/% 171% 147% 128% 113%

TDO/GDP 162% 147% 94% 88% 77% 66% 57% 49% 42%

TDS/XGS 26% 26% 190% 20% 21% 19% 16% 12% 11%

Concessional/TDO

IBRD exposure indicators (°)

IBRDDS/publicDS 11% 9% 12% 11% 11% 11% 12% 13% 12%

PrefcrredcreditorDS/public 19% 18% 28% 39% 38% 39% 42% 43% 39%

DS (%)'

IBRD DS/XGS 3% 2% 2% 2% 2% 2% 2% 2% 1%

IBRD TDO (USSm)d 942 708 599 491 424 356 286 219 158

Of which present value of

guarantees (IJSSm) na na na na na na na na na

Share of BRD portfolio (%)

IDATDO(USSm)d 1337 1360 1366 1362 1351 1340 1326 1310 1287

IFC (USSm)

Loans .. 4.2 2.1 .. .. ..

Equity and quasi-equity /c .. .. 1.8 .. .. ..

MIGA

MIGA guarantees (VSSm) . 16 15 13 13 ..

a. Includes public and publicly guaranteed debt, private nonguaranteed. use of IND credits and net short-

term capital.

b. "XGS" denotes exports of goods and services, including workers' renmittances.

c. Preferred creditors are defined as IBRD. IDA, the regional multilateral development banks, the IMF, and the

Bank for International Settlesrsessts.

d. Includes present value of guarantees.

e. Includes equity and quasi-cquity types of both loan and equity instruments.

Cote d IvoireOperations Portfolio (IBRDI[DA and Grants)

As Of Date 0410212002Closed Projects 74

IBRDIIDA -Total Distursed (Active) 277.90

d which has been 0.00repaidTotal Disbursed (Closed) 3.681.00

ot which has been 2.323.80repaidTotal Disbursed (Active + 3,958.90Closed)

of wtich has been 2.323.80

Total Undisbursed (ActIve) 248.32Total Undisbursed (Closed) 0.00Total Undisbursed (Active + 248.32Closed)

Active Prolects DifterenceBetween

Last PSR Expected andActual

Supervision Rating Orilinal Arnount In US$ Millions DlsbumneentsProject ID ProJect Name Develontnent Imolementatl FIscal Year IBRD IDA GRANT Cancel. Undksb. Orig. Frm

Oblecdlves on Prouresa RevdP055073 ADULT LITERACY S S 2000 5 4 3 3.2

(LIL)P037588 AGRIC. SCS. II U U 1999 50 392 42.4P001184 Cl PRIVATE S S 1995 79.7 12.2 23.4 11.1

ELECTRICITYP066353 DISTANCE LEARNING S S 2000 2 1.9 1.6

-LILP035655 EDUC. &TRG U U 1998 53.3 46.7 41.8

SUPPORTP037581 EXPORT S S 1995 58 2.1 3 3.1

PROMOTION ANDP001214 INTEG HLTH SERV S S 1996 40 92 13.5 26.7 2

DEVPPoo1186 LABOR FORCE S S 1994 17 1.9 2.6 2.6

TRAININGP037575 MUNICIPAL U U 1995 40 14.6 18.9

SUPPORTP043736 PSD TA U U 1998 12 9.4 9 8P001194 RURALLAND S S 1997 41 26 3 16 3 >

(PNGTER) CMP0011?7 TRANSPSECTOR U U 1998 238.8 76.2 26.3 3.6ADJ

Overall result Result 584 6 9.2 248 3 216 22.3

NOt;

Annex B8Page 2 of 2

CAS Annex B8 (IFC) for Cote d'Ivoire

Cote d'IvoireStatement of IFC's

Held and Disbursed Portfolio

As of 1/31/2002

(In US Dollars Millions)

Held Disbursed

FY Approval Companv Loan Equity Quasi Partic Loan Equity Quasi Panic1998 AEF Drop-Ivoire 0.99 0 0 0 0.99 0 0 01999 AEF SAB 0 0.04 0 0 0 0.04 0 02000 AEF SIMMEQ 1.1 0 0 0 1.1 0 0 01998 Azito 28.55 0 7.45 25.27 28.55 0 7.45 25.27

1994/96/99 BACI 3.45 0 0 0 3.45 0 0 01996 Bereby Finances 0 3.05 0 0 0 3.05 0 0

1993/95/97/98 Block CI-I1 0 5 0 0 0 2.71 0 01996 BoA-CI 0 0.21 0 0 0 0.21 0 01995 CIPREL 5.48 0.96 0 0 5.48 0.96 0 0

1987/93/96 COSMIVOIRE 0 0 2.18 0 0 0 2.18 01995 FTG 0.25 0 0 0 0.25 0 0 0

1977/86 Gonfreville 0 0.2 0 0 0 0.2 0 01988 IPS (IVC) 0 0.83 0 0 0 0.83 0 0

1994/96 Multi-Produits 0 0.4 0 0 0 0.35 0 01996/99 Petro Ivoire C0 0 0 0 0 0 0 0

1997 SHL 1.54 0.41 0 0 0 0 0 01999 SOGB 6 0 0 0 2 0 0 01996 Sodiro 0 0 0 0 0 0 0 01995 Texicodi 0.21 0 0 0 0.21 0 0 01997 Tropical Rubber 2.38 0 0 0 2.38 0 0 0

Total Portfolio: 49.95 11.1 9.63 25.27 44.41 8.35 9.63 25.27

Approvals Pending CommitmentLoan Eqtuity Quasi Partic

Annex B9Page I of 10

CAS Program Matrix - Outcomes Under the Last CAS

D)evelopment )iagnois G overmnient Strategy Perfornaice lcicite hnakis Ianik Group Status of Progress Emergtng lssues &Objectives sinstruments Proposed Actions

Poverty Income at end-95 was High growth rates supported by a Annual growth rates of 5-6°o Poverty level fell to 33.6% Povertyv Reorientation of theReduction approx. US$725 per capita, stable macroeconomic environment, growth. in 1998 but recent crisis led senice delivery to the poorthrough Rapid or 22% less than 85-89 driven bv increased private to a fall in economic growth in the Health and EducationGrronth average. Between 1985 and investment and sn export led (-2.3% in 2000) and an sectors through the ERC.

1998 .poverty tas tripled, to cconiomv and based on equiitable increase in the povertythe level of 33.8% of growth. nvith participation of all level. The Gov't haspopulation, segments of socicty. completed an l-PRSP wvith

a target of reducing thepoverty level to 30% by2005.

1. MIacro- Inadequate domestic savings; Implement measures to rationalize - Reduce and transparently Econ. NIggmt Support (olg) 3 vears of crisis have Public finance: Creation of aEconomdc income at end-95 was S690 the tax ssstem, broaden the tax base, implement tax anid custonms Filth Dimension worsened use public finance "ceiiuie oi'pubiicGrowth per capita; need to maintain and strengthen the efficiency oftax exemptions. PSD-TA (o'g, 98) situation. Prospects are expenditure to review and1. Improve Gov't revenue at least 21% and customs administration. Reduce butane gas subsidy ESW: Sources of Growsth better with the resumption set up the work program ofRevente GDP. -Overhaul forestrv taxation (98) of donor support. this yIear.

PER (o/g)Econ. higmt Support (o/g)

2. Improve Pulblic spending decreased to -Contain current expenditure, while -Contain Gov't wage bill of the SAC (98)EFpendifrtre: 26.5% in 96 and composition freeing resources for basic social central Gov't. at -6.5% of GDP bv ESW: Capacitv Bldg (98)

improved modestly Further services (health'education) and 2000.progress needed in PIP since maintenance of essential - Report annually budgetaryinvestment level is still infrastructure. execution of human rcsourceinadequate to sustain groith. development.

-Implement recommendation of

CGRAE study.

3. Reduce Pasments to serice of -Reduce public debt senice to a - Eliminate all existing domestic Comimercial Debt (97) Debt: Bank Board Debt management:Debt Debt external public debt exceed sustainable level. and non-reschedule externa I IPC (97) approved preliminary I IIPC Strengthening of debtSell-ice 40% Gov't revenue. Allevi- - Iiipicimliet adequate policies withins arrears. S. C (98) document in Miarch 2002: management capacities

ation measuires arc being thc framewvork of its discengngemcnt - Redice debt service t°rotlgi I.SWV Delbl Nlgiit (99) Decisioni point under the (human capacities, training.sought undcr thc IIII'C and frotl thc productive sectors. London Club enhaniced IIIPC Initiative softwares).London and Paris Clubs. -Restrictiure l'aris Clutb dcbt, could be reached as eariv asLondon and Paris Clubs. -~~~~~~~~~Set up and improve nmomitorintg of' Septeniber- 2002.

private debt. Debt relief agreement %vith

Paris Club creditors reachedin A'pril 2002, providingrescheduling of somcUS$2.26 billion underLyons tenn. Arrears

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ tow(to w srds orl B aB ank naACDB cleared in early 02.

Caisse Generale de Retraite des Agents de l'Etat

Annex B9Page 2 of 10

Development Diagnosis Government St rategy Perfonrmance Benchniarks Bank Group Status of Progress Enmerging Issues hObjectiv es _ nstrunments Proposed Actions

4. Libei-aleze Suabstatitial reductioti in -Increase llexilbility of prices for - Liberalize pi ices of ASA C2 ( /g) Rice iniports libcralized; Coffee/cocoa: Need toTrad .S Pi-ice NTl Ik hac oc curred.-and g od(s Dlltd scr%ices anld cil;cietit goo)ds.'services %uidject to NTl'lI. cotSe sector liberalized inl Consolidate a comzpetitive

prices ofa large nunmber of resource allocation fiiializc eliiliiiationi of NTI3ls l coi ligniit Support (o/g) 1998 and cocoa sector enviroiimient

products decotitrolled wvithi -Liberalize ordinarvl ri'ce hntiporls ESW\: Reg' I hategration (o/g) liberalized in 1999. Cottoni

the elhiiniiation oftlhe price -Elisiiiiate e.xport taxes oi goods, I.I)(X sector parliallv privatized Cotten: Finalize theequalization fiund. with reductiol] on cocoa to -'20°o S-x (98) but not liberafized privatization of CIDT and

97 CIF price and -I 8°o. i 98 (9S)\ nutalSrtg establish a competitive* 1111plenlxent pliice *tieiixdadilg . I il .iali/e cocoa niill tlMe (98nhstitultional cliviroiiiiciit inihistnmnictitsIbr producer profits lilires bv 1999 & 2000, thte cotton sector

respecliv iel-Followv privatization ofcottoti. Other sectors: Criticalpahn oil, rubber filieres (effective stapport nicasures necessarv1999-00) to ciisure clficielot atid pro:

-Implement commnon extemnal tariff -Adopt 3 rates 1iot exceedihig 25 poor dcvclopmcnt of tdie oilIstructure in WAEMIU countries °o. palni and nmbber sectors

-Effectivelv establislh tNCTAD-sponisored trade infomiationmanagenment sy.stein.

5. honprove -Ensure a moderate strengthening of ASAC (o/g) .ASAC not negotiated and.Alonetory dlie external position ofthe banking SAC (98) droppedM\anagemlent s!stem and maintain lowv levels of FS D (99)

inflation.EcnNgnSupr og-Emphasize economic infrastructure ES\on Extcmal Shpocks (99/)and competitiveness of agriculturalsector.

11. Private - PrivXate sector iniformned of -React ivate existing consultat ive - Regu lar imectilgs, e% idenceed by Ps DEPS D TA (o/g; 98) Consultativ e coninitete lhas Partnership in polic\ mak ingSector Gov't policy. but does not group to discuss important polic\ miillutcs PS Strategv ("A FC) been reinstated. HSowever, it lhas still to be strenigthenled.

De%elopment participate in policy niakinig measures and their iniplernentattolla - No complaints thiat nministries is not Net fully operational.

1. lImprove process/implementation liave taken unilateral actions Fiscal pressure/harasment

public private significanitlv without prior on the priv ate sector is a

sector preseiitation to Comlitei critical issue that needs to be

consilfiation addressed ihunediatelv

2. Provide a - Imiporta ice ofgood jtdicial -Adopt effective anti-cornuptioii - hercrasc lio. ofcoti-uptioll cases PsdrD/PSDT (olg; 98) No nmajor progres in the Set up an operational system

secuarejtidicial systern is rccogtfized, but nicastires satictioiied aiid ptiblislicd in I'S Strnteg@ (%vAF1C) judicial systern I lowcvs r, to fighit corruption

environmyent anti-corrupt and budget -Create separate specialized 1997198. I:conl. Itignit TA (o/,g) arbitratioti nicclhaiiistits (regulationis atid ihlstitutions)allocations do tiot folio%%; contmercial jurisdictions in the cotin Rcecmii 150 ol'iiagistrates I.SW, Exicnial Slbocks (99) have been instittited. Anti- in the context of governancecorruptioii is ranmpart; system. anntially in 1997-98 (50 per !eir) fratud conmnfissioni has ilot improvemlent.

inadequate busincss lawv - Emplhasize ppeciafized training of - blcrease 1]o vrcolintrooliis in opcrated satisfactorily Strettgthieii capaeily oftlictraining and appropriate judges and appropriate posting 1 997-98 Judiciarv systam refonml to judiciarv system to liandle

placement of specialized decisions. -Crcate separatejurisdicnions. be re-launched. business-related matters.

judges; inadequate - Recruit new judges and -Rcorgaifize clerk-of-court officescourlroomns /comuniercial deconscctitratc jurisdictiotis, - hcrcasc 1lio ol'cascs cefictivcevchambers. No especially in Abidjan, by opeafing arbitratcd in the Arbitrationl Couilmediation/arbitration process. new courtrooms. at Chanmber of Commerce

2 Agriculturatl Sector Adjustment Credit

Annex B9Page 3 of 10

Development Diagnosis Government Strategy Performance Benchmarks BankGroup Status of Progress Emerging Issues &Objectives Instruments Proposed Actions

3. Esaoblish a - Regulatonr framework has -Reduce traisport costs by -Renio c reiainiing regulatory PSD.'PS D-1TA (o/g. 98) Regulatorv framework and Need for improvedmore improved, partiLularly with deregulating domestic,initenatioial oblstaces in road tranisport; I -SAC (98) regtilatory bodics in key regulatory firamewvork for

coamiperifive refomis in maritime, air, and transport and disengaging public rationalize road controls Railways (98) infrastructure sctors private participation in

firamiework, road transport, howvecr sector from services; nmonitor -Transfer ofithe execution of ESw -Iifonnationi (telecom, power, and roads) infrastructure and ror

especially Gov't unsupportive to effective policy insplementation mainitenance work to private sector Assessment (99) are in place. In the port increased capacity of thetransport, regulatonr supervision issues. -Liberalize cosspletelv maritinsc -Rehabilitate railwvay network I'S N I Refomn (00) sector, the container regulators bodies.rinlithes and transport - Similplify port tranisit procedures ESW: tidustrial Strategy tenminal is being privatized.telecom. - Increase competition in porn -Adjusl overstafling at port anid (98) A country frarssemork report

services bmicase dialoglu with users of I.SWV: Scrvices Devclop. onl P'PI was prepared inport. (99) 1999.-Strengthen admin. capacity of ESW: Info. Assesment (00)

Govenunent has privatized - Broaden domestic coverage for telecom regulatorv unit.telecom & power companies. telecom network; strengtihen) -hicrcase tiumiber of tclelihonic

intenmat'l netwvorks. lines, deve- loping rural telephione;-..4nVk;t ..egl!rend b a .1 nr Ats ,v is tbeing

removed in 2000 but created to monitor thereappeared until they were number of illegal roadremoved again by the barriers. Authority has beenGovernmnent in Miarch given to a committee to2001. remove the barriers.The law gov'eming road 3. Ililegal road blocks havepassenger and freight multiplied over the last twotransport activities and the years and are inposing adecrees simplif\ing access large cost on theto the profession of competitiveness of thetranporter were signed on economny, in particular onFebruarv 2000. The bill of that ofthe agricultural/ruraliading used for road fl-eight economnytransport w'as restricted to adocument (contract betweenthe transporter and theshipper).Maritime transport fullyderegulated in December1996. Abidjan PortCommunity established(Sept. t995) and PortCompetitivenessConnission created (March1996).

4. Rationalze Corporate taxation is Broaden the tax base anid ebluiniate Carn- out study on Ivorian ESW: Reg'l Integration T'ax proceduires manual -as Collection proccdures are

Taxation complex and favors large distortions (excessive tax breaks to taxation -esp S NIEs -while (o/g) prepared. Work on esven more burdensome forcompanies through special large cosnpanics, double taxation on comparing Ivorian taxation sub- PSD/PSD-TA (o/g, 98) contingent liabilities vas companies than tax ratestax breaks. SMEs) regionaily and intemationally ES\V: Industrial Strategy carried out, but no work on

Revicw taxation on stock re\ enue (98) marginal tax rates.to mobilize savings and developnew financial instruments

5. limiprove Sector hampered by overall - Improve financial infrastnicture at Mionitor proactive participation in ESW: Reg'l Integration (o/g) Overall, little progress has Need to restructure or

efficiency and lack in depth and breadth of regional level by enhancinig: regional refomis. Rural Savings (o/g) been made due to lack of lkquidate CAA

aul treoch of system; weak implemcntation payment system, bank super-ision, -Adopt regulatoryloperationial ASAC (o/g) macro framework, vhich Insolvency of the postala_______________ - of legal and regulatory regulator_ firames\ork and reg'l Efranimc\oik for newv regional Ag. Ser-ices 1,11 (o/g,98) iipeded ptiltinig ani savinigs system

Annex B9Page 4 of 10

Development Diagnosis Government Strategy Performance Benchmarks Bank Group Status of Progress Emerging Issues &Objectives Instruments Proposed Actions

financial frame-work; lack of securities exchange. finianicial market Privatization (o/g) adjustmenit program in Financial weaknesses in thesysteni. institutional diversitN. - Establish regulatorv franicv,ork PSD (olg) place. macro finance cooperatives.

-At national level, improve for NBFI ESW: SNIE Develop. (98) A regulatory/operational Lackofaccess to fiancingilicentive stnictire; - Sibject CA.A to banking ESW Services Develop (99) framework (Bourse des for small and new

legislation FSD (99) Valeurs) adopted (96). enterprises.-Disengage State from financial - Rigorously apply prudential Postal savings system has Lack of access to financials!stcmi. nonuis not becn restructured due to services for losv incomc

- Restiuctuire postal snvinigs systcin lack of budget support households.- Reduce GoCI oniershlip in all operation. All these issues will beinstitutions to <20°o Prudential norms have not examined in the ongoing

- Promote adeqtiate institit'l -Establish niationial strategy onl been rigorously applied. FSAP. Actions addressingframework to suipport iilcro-linianice niicrofinance Mlany banks do not comply these issues will be decideddevelopment to include bettcr access -Establish competent Ullit to with capital adequacy and based on the conclisionis ofto rural credit. suapervise MIFI risk exposure nomis. the FSAP.

-15,000 having access to CR El'- GoCI ownership in BIAO99 reduced but not in CAA.- 12,000 having access to CoMEC - Partial progress made in2002. tenns of establishing unit to

supervise NIFI. However,unit's capacity not properlydeveloped.

6. Facilitate Level increased by more than -Adopt non-discriminatony and - Follow-up on progress made ESW: Reg'l Integration (o'g) COOPEC have 350 000 COOPECs' financialPrivate 50% from 94-96, averaging transparent regional investment regionally. PSD'PSD-TA (o!g, 98) members and 30 billion in discipline and situation hasInvestment 8.5So; howcver bias exists framework [ Suipport provided to the deposits; and have extended deteriorated and needs

against small investors. -Facilitate investment procedures CEPICI and APEX-CIu significant amount of credit. immediate attentioii.ESW: SMIE Develop (98) Institutional reforms,ESW: Services Develop (99) Ag. Services Program has capacity-building and tight

established an efficient and supervision fonm regulatory

7. Suipport Weak profess'l organizations, -Reinforce agriculture professional -20% of income from cooperati'e Ruiral Savings (otg) sustaitiable institutional agencies necessaryProfessional esp. farmers' associations. organizations (esp. for mktg exports) market'g to have direct access to Export Promotion (o/g) environment for providingOrganizations Gov't considers financing to intemational market PS D/PSD-TA (otg ,98) sers ices to ag. producers.

stein from private sector itself -Suipport economic actis ities of ISmipport provided to The prograni should hewomen by imiproviig acc-ss to - 50°. ofproduicers (350o arc expomlers throuighi APEX-CII TIhe ag. promotion project strengthened bv ciipliasizingagricultuaral services womms.sn) to have access to ASAC (o/g) has suiccessfully supported the demand-driven'cost- 'rovide export developimietit ANADER ser ices by 2000. A.g Services 1,11 (o/g,98) the developiiment of non- sharing approach,serices - Provide training in ES\t': SMIE Develop. (98) traditiotial ag. exports developing the infomiationmanagement, export techciiqutes amid EISW: Services Develop (99) systmn and addressinigteclumicaUvocational areas Ishc ag. export promotion pressiing issues in the-Ensure access to professional project and the ag. services eucation/training system.services (e.g. management programs have beenconsulting, accounting) effective in strengthening Ag Promotion Credit is to

the capacities of close (Dec 02); an extensionprofessional /producem will be requested, but needassociations to further develop public

imarkcetmig iiifrastrtscture aiidservices (technical andfinancial) to support ag.

8. Increase Labor Code has been revised Efrective implementation of new - Verify impementation and PSD/PSD-TA (otg. 98) production and exportsLabor Market to ease restrictive lay-offand labor code. publication of decree.Flexibilhot hiring practices.

Annex B9Page 5 of 10

Development Diagnosis Government StrategY Performanice Benchimarks Bank Group Status of Progress Emerging Issues &Objecti%es Instrujients Proposed Actions

9. Increase Govemnment unaware of -Improve procedures of public sale - Establisih industrial pai ks antd Urban Land Mlgrnt (98) The objective of promoting AGEF still needs to be fiullyLandAccess magnitude of problents and offers to iicrease the numilber of pcmlit individual proper! the developmeint of a market operationial.Industrial: bottlenecks in adminiistration. potential investors. rigits/leases. for the provision of serviced Dialog to be pursued bv

land and housing was Government and localachieved in part with; administrations with the*(i) the creation in 1997 of private sector (landAGEF and the adoption in developers and bankers).Septemnber 1997 of lawenabling concessions for Government was providedland management (Loi sur with tools for landla Concession development and housingd'Aminagement); (ii) its finance shich are availablemanual of implementationi to build upon in tht ruture.was drafted and reviewed To obtain concrete resultsat a siakenoJier 1iu-ii .,i I. i Govc. c .mcm :Miarch 2000, involving commitment would beprivate land developers, requiredbankers, central and localadministrations.

Rural:

Continue measures to ensure for Rural Land (97) A newv land law adopted The Law is globallyland security, increasing access for ESW: Gender Strategy (00) (Dec. 98) but its satisfactory and offers goodrural women. implementation has not yet potential for establishing an

started, efficient land market and

help manage conflictsHowever,need for carefulpiloting and monitoring toensure that the rights ofvulnerable groups areprcserved. This wvill besupported under thePNGTER.

10. Fusrther Substantial pri-atization in -Broaden initial privatization and - Adopt & inIpIClIci1t aiTiCrs Prikatization Progranm (o/g) About 60 enterprises Residuial program still to bePrivatzation 37 companies, include improve perfoniance of public reductioni plani for cross debts Econ. Nlgint (o.'g) privatized carried out.

telecons, poi%cr. agro- eniterprises SA-C (98)industrv sectors, generating - p'rivatize Residuial Portfolio$360 million total proceeds.

I1. Deepen Gov't has disengaged from - Achieve self-sufficiencv and sub- - Improve legal and regulator! PS-Energy/IFC (98) GESTOCI, SIR, PETROCIPrivate Interest power, oil and gas, and regional export potential in power franincuoik PSD/PSI)-TA (olg, 98) privatization still issucs to

in Energy and mining sectors. Negotiations and refined hydro-carbon products, - Promote blocks for oil Privatization (ofg) be addressed

Aiming Secto-s are on-going for the while promoting competition withis exploration ESW Natural Gas fordevelopment of a power the industries. - Establisbi safety nonns atid Household Useproject. -Reinforce Gov't as regulatory standards

body. - Privatize GDCI, SODENII anid-Increase production, storage, and GESTOCI; reduce Gov't shares ii

distribution ofpetroleumn products. SIR

Annex B9Page 6 of 10

Development Diagnosis Government Strategv Perfornance Benchmarks Bankt Croup Status of Progress Emerging Issues &

O h cctlves ________________________________ Inst ruments _______________________Is n tProposed Actions

- Promote gas utilizationi for - istablisih economiiic priciighouseholds, commerce and industry-Promote reserves for mining - Promote national artisanalindustry mining.-Develop the mining sector for

_______________ private sector.

Ill. P,ublic Siginificanit regional, socio- -Prepare speciric and sceoral - Cany out siutal IouIshCIolId PiE-'R (olg) Necd to better align public PERs are cuirrentiy on their

Expenditures econoqsic and gender programs which target better public studies oni thc Ics cl and conditions. Capacity Bldg. TA (98) expenlditures '.ith wav and ItlTEFs to begin

t promo te disparities in utili7ation of cxpendittires miid improve the -Ainually pillil Illtese indicatoris. I'SNI Refonn (99) development priorities, aid soon. Priority vill be given

liroad liased services -duc to direct and efliciencv and utldity. ESW: Gender Strategy (99) to increase thie elliciincv of to die social, rural anid

Inclusive opportuitity costs orpoorer - Elaborate an indicators table. -Caly nlit stiudiec in itie cofllee ASAC (o g) ptiblic expenditulre infrastructure sectors.

Grotih housellolds. -Follow-up socio-econoimic impacLt cocoa and rice secnors ( 1 998-99) Ag Services I & 11 (o/g, 98) programts.

indicators of.ASAC. Socio-economic impact Need to carn' out a

monitoring has been comprehensive policvregularly carried out by analysis of the rice and foodBNEDT secors

nImplementation of a rural

radio componentPreparation of coffee/cocoaand HIV/.AIDS programs

1. Improve -Probable regressive -Increase net enrollntent rate front - MIainitain recurrcirt expenditures IIRD Nlgnit (o/g) -Reliable statistics on -The restructuring of the

primary distribution ofexpenditure, 5l%to 55eO in 2000. in education sector at 27o and that PSNI Reform (99) education still not available. portfolio is ongoing, in

ediucation, certainly in health, education ofbasic education at 45o.. PER Converging information particular that of basic

emphasizing and social funds. - Coltruct sclhools in poorest ES\W: Gender Strategy (99) point to lack ofprogress due education, one ofthie ERC's

girls 'edication areas and with weakest basic to deterioration of economic priorities. The target actions

and zones *nrh education levels (1000 basic situation, in particular in are: textbooks, Parents and

u eak levels Improve children's education, education classes per year) already deprived zones. Teachers Associations,especially girls, notably in areas with - Recruit primarv sciool teachers Despite that situation. School kits and school

weakest priinary levels; the (2000 teachies at basic level per textbooks are being cantines.

percentage ofgirls increasing froiti Near) delivered to most regions, Need to insure minimum421o to 440% in 2000. -Reduce eduication costs of the schtool canitines progress is level of allocation of

poorest effective. This contributes to expenditure to the sector.- limplemnent plaii to increase girl s encouraging school Sectoral public expenditureaccess to basic edticationi attendance, reviev will be launched.

Thec Government hasctinbarked in tlte preparationofra status report oneducation. haltich willprovide a sound basis forthe developiltent of asectoral strategy.

2. Increase Current literacy rate is only litcrease adult literacy rate to 55% in - lhitcitsify literacy programs for Ag Services I & 11 (o/g, 9 8 ) TIte National Scrvices Pilot program shouild be

literacy rate 43% 2000 rural wotittci and cliildreit, uibait Ceittrc Nord/IFAD (o/g) IProgram is supporting a expanded, atid literacychildren in iotltent regionts with B3asic Education (98) pilot experiment (Centres programs given greater

weak educationt Literacy Program (99) des nmetiers ruraux) on post- priority. Primary education

-Nationial expansioni of niral primary technical training, curriculum should betraining cetiters includinig literacy with good results. rqv iewved to increase its

- install decentralized structures for relevance to the nceds of the

literacy within basic eduication rural area .

Annex B9Page 7 of 10

Development Diagnosis Goveriunent Strategv Performance Benchmarks Banrk Group Status of Progress Emerging Issues &

Objectives Instruments Proposed Actions

units (IOOxIG regionis)l Install rural coiunmunitv radios

-to 44% by tde year 2000.

3. limprove Attention is needed on -Improve access and quality of Increase total recurrent health Pop, Health, Nutrttion-PllN Previous CAS diagnosis are hIealth care system:

Health titilization of available health services and tiedicincs, excpenidittires a from 8 90o to 10% (0/6) inadequjate and do not focus Support reforms,

Sjstemn services and iifrastnicturc; especially in rural and poorer urban (2000), anid those for primary PER oni the ss stennic problems. particularly:

district health areas. health fronti 3300 to 400. (2000). I'SNI Reforn (99) lhe crisis reinforces -Strengtheniing the

plaruing/execsntion capacity - Iicrease access to healtil centcrs urban/niral disparities. efficiencv and perfom2ance

needs strengtiening; funher in rural and poorer areas, improve Little progress made toward of M Olt and the health

cost analyses is required quality care and develop prec entive the procurement and system through the

- Continlue to pronbote generic drugs care. distribtitioni of generic introduction of performance-

for public and private distribiltion -Complete cotuparatixc study ott drugs. based maniagenient

West African medicine price -Gear such s-sten to the

.. c... ... .-evie- Low contracentive monitoring, evaluation,

in Cl. prevalence rate and achievement of lI.DGs

-Extension of vaccination program PHN (olg) persistent high fertility - Accord greater managerial

- Increase infant vaccination rate and financial autonomv to

from 60% to 80% , in 2000. Inequitable allocation of the health districts (with ex-

Insufficient awareness of - Intettsify the figlt against AIDS -Carrn out preventive programs recurrent budgets to the post control)

AIDS among elite; wveak against STDs anid HIV (education periphery in support of -Strengthen partnerships

management of programs. and prophy-lactic distribution) basic health care delivery betnveen NIOH and civil

targeting the poorest population, Delays in launching societvesp. wonen aitd yvoung adults. improvements to quality -Operational

and access of basic health research.'finetuning of healthicare in four districts financing options that wouldtargeted for pilot under support greater equity in

4. Strengthen \Veak management of family -Reduce fertility rate front 5 6 to 4.5 -Carry out reproductive health PIIN (o/g) PDSSI. access and affordabilitv and

Famnily planning prograrns. in 2015. services' programs in all health ESW: Gender Strategy (99) Persistently low and achievement of uttiversal

Planning -Increase modem contraceptive use facilities and regions. inequitable levels of health coverage.

from 4% to I oe 0(2000) - Generalize family planning co% erage and utilization -Carrv out economic

programs and distribute rates of basic health care analysis of second tranche of

contraceptives services 1 0-vear plan to achieveNon-functionality of most enhanced cost-effectivenesshealth districts. of health care deliverv

system.I ligh prevalence rate ofIllV/AIDS and inadequate IIIVIAIDS: Clarification ofresponse to date, including institutional mandate.both prevention and care. Raise kno~lvedge to initiate

behtavior chiange.Lack of adherence to ICB Rapid increase in number ofprocedures for the purchase orphans di mandsof drugs and medical comprehensive multisectorsupplies and responise.underutilization of generics, rsother to cildresulting in higher cost of transmission: need for urgentdrugs to the population. action to reverse this.-Progress in extension of Increased householdsreproductive health services poverty and malnutrition.to 60+ health centers and Need for multisectorthrough the NGO sector solutions: Family planning,(AIBEF) education, and services.

Annex B9

Page 8 oflODeOblopment Diagnosis Co% ernment Strategv Perfoniiance Benchimiarks Bank Group Status of Progress Emerging Issues &

Oblectl' es ._. .... Instnuments _________________Is eProposed Actions

I,torove Basic 'Ii,sical iiifrastnicture is -hIncrease access rate of rural lsater - Ihilpiectn ivestilvenit program Water Resource ?Ignmt (00) Access rates achieved but Develop policies for

Lnfrastructuige: amoig the best in sub-region, stupply fro"i, 50% to 65% in 2000 Ibr %n ater snpprl! Kfulnicipal Support (o'g) sustainabilitv or RWS sustainable management and

S 1 Voter Suipply but poor comimiunitjics untdr- and urbani suppul fromit 75°o to 85% -Eniact law onl \;tcr resource facilities stili questionable. maintenanice of RWS

served by swater, sanitation, iianageilcitt facilities

roads. Neglect in extensive -Design decentralized developmenitroad netwvork duiring the last strategy %kith comimuniitydecadc participation oii level of: wr\ ice

6. Rural Roads - Improve access to nural zones by - ainishtaitn ictwvoik of 35,000 kill TS. C (98) The degradation of rural There is an urgent need to (i)

maintaining rural roads of rural roads per ! car infrastructure has re\ iew the instititional aiidaccelerated. An increasing policy framenvork of niralpars of the rural road road miaintenance and niral

network is not functional water supply, and (ii) launchpart of the year, more than massive programs in these40% of existing rural water areas.points are not operational

7. Suistainable -Attain a coverage rate from 23°o to -Accclerate rural electrification Private Electricitv (o'g)

Ruiral 33%o in 2000 program (250 rural localities per

Electrification year)

-Implement investment program toimprove production of electricalenergy.- Review annually fitamicialcapacity of po\%er sector

S. Iniprove Inadequate access to housing Improve living conditions ofpoorer -Adapt staidards to affordabilitv Urban Land ligmnt (98) -Creation of AGEF (see SRH and CGH were not

Living and land tenure population in housing, health, to targeted households supra) created althotgh there is

Conditions education -Bring in private sector for -Adoption of Lasv on land interest in both tools.

housing development and to management (see supra) Govermnent was provided

-Iliobilize long temi finianicing -Studies caffied out for the with tools for landcreation ofSRH (market development and housingoriented housing finance finance which are availablesvstem) to build upon in the future.-Studies canied out for the To obtain concrete resultscreation of CGH (guarantee furtier govemnmentsystem), assessing the tYpe conumitmqnt Wvould beof guarantees possible for required.giving lower incomehouseholds better access tohousing finance.

Urban Slitis Gov't intenids to rclocate ilhe Evaluate impact of social fulnds in -Inventory area befoic resettlemincit Municipal Support Program

existing lower income the fight against poverty -Equip die new area with water

population, and develop the and sewerage, before resettlement

land for residential use. date and establish land laos-Define and execute plait for poorpopulation before resettleiment,including social, education, atidliv'gicne. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Annex B9Page 9 of 10

Development Diagnosis Goverunment Strategv Performance Benchmarks Bank Group Status of Progress Emerging Issues &

Objectives Instruments Proposed Actions- hiplemieient preventive measuresto avoid resettlement at risky sites.

9. Social Funds established following Evaluate impact of social funds in - Prepare and ihpleaentFuinds devaluation are pooriy the fight against poverty niechatnisns ensuring an.

targetVd and nmanaged. improvement of itanageeit.it oftargeting the impact oflthc funlds.

IN'. Public Gov't vision on capacity Strategy focuses on 3 axes: - lainistream capacit! bhilding ASAC (oig) P'rogrcss is miixed. Issues are: (i) strengtheningSector building and PSNI reforms strengthening institutl'i capacity issuies In specific operations I lRD) Nignlit (o'g) I lo" e% er, strong hIiian and institnitional1N lanageneint and in its development building hulitian resource capacity. - Increase ins ol cinubt ol P' IN (omg) coltiimle,nit to: (i) sbi lilg capacity. (ii) rationializingaiid Capacity agenida to beconie regional and deceintralization bcieficiares tax pa. ers I'SNI ESWVPSNI Reform tite ci' iI sers ace front its the budgetary allocationBuilding economic center and reduce (98i00) current "controlled" expenditure nianagemnexit

poverty is not clearly spelled Basic Education (98) management mode to a and procuremctnt processesout. Need for clarity on -Desigy and launch a -Fialize civil setvice cetstis PSD-TA (98) decentralized service in support of the

I. Reforn priority areas and comprehensive and ssstemic -Freeze size of civil 5ser\ ice, reduce TSAC (98) delivery focused niode; (ii) decentralization; (iii)

Institutional interventions consistent with reflection on PSNI reforms and no. of ci\ il servaits, eirsorce Ag. Services 11, III (98, 99) establishitig a legal and impro\ ing communication

Capacity rinancial and human resource service management. retiremenit, focis oni new ihiriiig in SAC (98) regulatory framework for between sensice providersconstraiits, as wvell as with -Slift civil service delivery from luealtli anid edicatuomu. I gliber Education (99) the decentralization decision and the beneficiaries; (iv)

equity objectives in liuman administratixe purposes towards -Establish iiutegrated cotitptiterized miiaking process through a establishing a perfomiancecapital development. economiiic and social development s! stei for civil sen ice anid pa! roll botton-up approach; (iii) based incenti\ c system. Ail

requiremenits. iualiageineint. strengthening both formal the above issues %\ill be- Lstablisit data bank oni and informal consultative addressed throughi thequalificatiotis and feedback mechanisms emerging capacity building* Establish producti\ itn liniked between various service for poverty reductionremiuneration schlimee. delivery partners; (iv) operation (FY03).-Finalize Govenmient pa! improv ing the efficiencvrelativity. and effectiveness ofpublic

service delivery bvaddressing the cotutent ofinappropriate performance

2. Strengthen Linited eftortlAill to create -Identify existinlg capacity, incentives.Hunan proper environment! accounting for the N oung astdResource ituceitives for utilization of recent graduiatesCapacity national capacity .when -Designi new traimiiug strategy and

readily available. sufitable evaluation inechanisisn forcivil servalmits

-lincrease capacit otiamiimgopportunitics for NGiOs.conitnunities, professioiial

associations

3. Facilitate Miunicipalities far too -Strengthen role of municipalitics -Develop decentralized PSNI ESW/PSNt Reform (98-Decentralization dependent on central Gov't - Improve overall mobilization of matiagenilenit s) steims 00)

resource allocation for small fiscal resources - Ratioiialize revtenue distributionlocal investment and between local etities and cetitralrecurrent costs. govt.

- Delegate planining anid executionof investment to municipalities

Annex B9Page 10 of 10

De, elopment Diagnosis Government StrategY lierfonnance Benchmarks Bank Group Status of Progress Emerging Issues &Objectives Instruments Proposed Actions

Knowledge/sensitivity is loNv Protect Environment While -h implemncit niatioiial ES\': NEAP (o! g) NEAP completed since Resume dialog withinIEn% Irolulleiitiil otn environimental managc- iiproving thle standard offi% ifig oi cenvironniental aid fohrestr% action P1' NE: ( 1) 1997. PAGN E preparation Counrtrv cam on the rationalIy Sustainible niicit. Research necded. individu.ils aod cinteiprises plan IS\V' I'ailic Nlgiiit ol '1 lPltD was niot mitobilized, ofa specciic instrunlciet forDevelopment notablv on the deselopment - Implemilent code to protect the PCGAP (02 (NatIl Parks Preparation is stalled. Environment capacity

of"win-win" activities. environitent (O"g)) Building.- Establish a national environment Rtural l and (97) A new Forestry Policy wasagency Ag Services 1, It, III (97-00) adopted in 2000. %s%lch An institutional/ and- Set lip \iater treatircrit centert LSW, Watcr Sector Rte\icxv emphasizes operational audit svill be- 'romiole replantig and (9X) decentralization, latinched in 2002 to supportiniairageient of nationial parks b\ Forestrv 11(99) empowerment of rural the preparation of a prioritvtIre private sector. GEPRENAF (SPN) communities and forestry management

partnership with the private program operationalizingsector for the sustainable the new Foreast Policy,use and consenration ofremaining resources.

(JEPREN.-F (GEE) PCGAP 3apasli

continues to pilot local seudo appraisal isdevelopment & biodiversity seduled for apr2l,

conserationat comonit negociations for Mlav 2002,

level. Board for July 2002.GEPRENAF is becomingdte vehicle of transition to

I PCGAP implementation.

3 Programme Cadre de Gestion des Aires Protegees (National Protected Area Management Project)

Annex ClPage 1 of 5

Cote d'IvoireMatrix of Policy Actions in ERC

Objectives Actions Through June 2002 I . T T,anche IndicatorsA) CREATINGCONDITIONS FORRENEWED BROAD-BASED GQROWTH

1. Agriculture Sector

Coffee/Cocoa SectorEnsuring effective CAISTAB liquidated Adoption of a new regulatoryCompetition in the (December 2001) framewvork for cocoa andC^fee/Cecoa S'er rnffee trAde, hngeid nn

competition and excludingany administrative restriction

Introduction of an Efficient Launching of a study of the Implementation of the Adoption by BCC, FRC andRegulatory Framework regulatory framework to recommendations of the audit FDPCC of levels of non-tax

ensure real competition at all of the activities, procedures levies on the 2002-03 crop onstages of the cocoa chain and and financial statements of the basis of comprehensiveavoid abuse of dominant ARCC, BCC, and FDPCC; discussions of the studv'spositions; as wvell as to define and approval by their recommendations, andthe marketing mechanism to governing bodies of the adoption and implementationbe put in place by July 2002 annual programs of the of the study on the taxationfor the 2002-03 harvest ARCC, BCC, FRC, and svstem in the cocoa and

FDPCC for 2002 coffee sector

Establishment of an Efficient Launch of audit of activitiesExport Mechanism. Ensuring and financial operations ofRepresentativeness, ARCC, BCC, and FDPCCEfficiency, and through March 2002; andAccountability of the New preparation of operationalInstitutions (BCC, FRC, program and budget forFDPCC) 2002/03

Cotton SectorPursuit of Conditions to Privatization (point of sale) ofEnhance Competition lthe "CIDT-Nouvelle"Adoption of an Efficient Adoption by the government Clearer operational

Annex ClPage 2 of 5

C6te d'IvoireMatrix of Policy Actions in ERC

PbjZtiv A¢Iions Throu June 2002e ThirtITranch Wc_r Regulatory Framework and industiy group of guiding environment for agents in the

principles of an institutional cotton sector;and regulatory framework to Greater role of producers inensure competition at all sector managementlevels of the cotton chain,based on contractual relationsbetween operators; clarifyingthe conditions of entry bynew operators; and including,in particular, the transfer ofthe management of adviceand input supplv fuinctions toproducers' organizations as ofthe 2002-03 crop year

2. Private SectorDevelopment

Relaunch of Privatization Declaration of new policystance on privatization in aPrivatization PolicvStatement

Pursuit of rehabilitation of Reduction of the Greater private sectorFinancial Sector govermnent's involvement in ownership of and say in the

the CAA to 20 percent or less operation of the CAAof the outstanding shares

Re-establishment of Inauguration of ncw state- Adoption, publication, and Greater private scctorConfidence with the Private private sector partnership and implementation of the revised confidence through betterSector launching joint revision of Fiscal Procedures Mantal balance in relation between

the manual on the public's tax collectors and taxpayersrelation with tax authorities(Fiscal Procedures Manual)

B) EXPANDING ACCESSTO AND IMPROVINGDELIVERY OF BASIC .

Annex ClPage 3 of 5

Cote d'lvoireMatrix of Policy Actions in ERC

es _ -.Actions Through Jun 002 IndicatorsPUBLIC SERVICES(EDUCATION ANDHEALTH)

1. Education and Health

Strengthening Local Publication of legal texts Greater responsibility ofCommunity Participation in (decree and arrete) parents in the management ofSenice Delivery through reorganizing the COGES in education senricesCOGES the education sector; enabling

the!M to m,narge rSes'.urneS

transferred to them from thebudget or directly collectedbv them, with a reinforcedrole and responsibility forparents; and the adoption of aguiding manual of procedures

Expansion of access to Increase in the allocation for Completion of a study for Increased access to educationeducation and health services primary schools within the procuring and distributing (via delivery of basic inputsby increasing resource approved 2002 budget of the essential drugs for the public free-of-charge at the lowestallocation to critical input Ministrv of National sector and the adoption and level; and higher volume ofareas, with some targeting to Education by CFAF 6.8 implementation of an action resources to break bottlenecksthe very poor billion; with CFAF 2.5 billion plan for improving its to schooling) by the very poor.

for textbooks; CFAF 2.2 efficiencv and girls;billion for school kits; CFAF1.8 billion to transfer toCOGES; and CFAF 0.3billion for canteens

Increase the 2002 budget Signature of agreements Incrcased access to primaryallocation of the Ministry of between the Ministries of healtlh services (via allocationHealth by CFAF 680 million Education and Health, on the of resources to subsidize thefor subsidizing essential one hand, and the selected cost) by the very poor in fourdrugs in the poorest health education and healtlh COGES, poorest districtsdistricts: Tiassale, Grand- on the other; the opening ofLahou, Guiglo, and Duekoue bank accounts in appropriate

Annex ClPage 4 of 5

C8te d'IvoireMatrix of Policy Actions in ERC

.: Aeiqn Thr"Jg ae 2002. a- E . ch . Tird che Indicatoinstitutions and the deposit ofat least 75% of the budget inthose accounts

Reduction of the Cost of Effective opening toSchool Textbooks by Freeing competition of the textbookthe Market publishing and sector;

adoption of a new legal andregulatory framework forcompetitive distribution ofpre-primary education books;and completion of thedistribution of free textbooksin the targeted districts

C) PUBLICEXPENDITUREMANAGEMENT

1. Budget Formulation Agreement with the World Diagnostics of publicBank and EU on Concept expenditure allocation andPaper for the 2002 PER management processes as a

basis for reinforcing the EU-supported program

2. Budget Execution

Improving Efficiency of Introduction of an integrated Accelerated implementationBudget Execution publicfinancial management of programs and projects in

system (SIGFIP) and launch the public developmentof a review of procurement programprocedures (1999-2000).Modification of SIGFIprocesses by institution ofadvances for fundingproject/program operation,supported by regular audits

The assignment of the duties

Annex ClPage 5 of 5

Cote d'lvoireMatrix of Policy Actions in ERC

Actions Through June 2002 Secojid Tranche Third Tranche Indi atorOof "regisseur" to projectfinancial managers andaccountants, to allow forefficient use of the advances

Improving Procurement Preparation of new draft Budget execution via clearerProcurement Code (2001) procurement processes,

penirtting savings andprobity in the use of publicrPCnh,rCPC

3. Budget Reporting and Transmission to the National Transmission to the National Transmission to the National Disclosure of outcomes in theGov-ernance: Internal Assembly of the report by the Assembly of the new Assemblv of the report by the use of budgetary resources inControls, Auditing and Chambre des Coniptes on the Procurement Code and Cour chanibre des Coniptes 1999-2001 to electedExternal Oversight audits (Lois de Reglemient) of establislunent of the Couir des on the 2001 budget representatives, wvith scope

the 1999 and 2000 budgets Coniptes (Lois de Reglenrent) for sanctions/corrective(May 2002) action.

IMAGING

Report No.: 24168 IVCType: CAS