IMPLEMENTATION COMPLETION REPORT TRINIDAD AND TOBAGO ...

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Public Disclosure Authorized

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The World Bank FOR OFFICIAL USE ONLY

Report No. 20058

IMPLEMENTATION COMPLETION REPORT TRINIDAD AND TOBAGO

BUSINESSEXPANSIONAND INDUSTRIALRESTRUCTURING PROJECT

(LOAN 3432-TR)

March 31, 2000

Finance, Private Sector and Infrastructure Sector Management Unit Country Management Unit for the Caribbean Latin America and the Caribbean Region

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

Public Disclosure Authorized

CURRENCYEQUIVALENTS (Asof December30, 1999)

Currency Unit US$1.00

= TT Dollar = IT Dollar 6.299

FISCAL YEAR

January 1- December 31

ABBREVIATIONSANDACRONYMS

BEIRL CARICOM CARIRI CEIS DFC DFL EDC EIA

EIB EMA ETAF FIAS GDP GNP ICR IDB IMF ISO ISONET NEIS OED PE PFI RSU SAL SAR SOE TAL T&CPD THA TIDCO TM TT TTBS WTO

BusinessExpansionandIndustrialRestructuringLoan CaribbeanIntegrationCommonMarket CaribbeanIndustriaRl esearchInstitute ComputerizedEnvironmentaIlnformationSystem DevelopmenFt inanceCompany DevelopmenFt inanceLimited ExportDevelopmenCt orporation(nowdefunct) EnvironmentaIlmpactAssessment

ExternalInternationaBl orrowers EnvironmentaMl anagemenAt gency ExportTechnicalAssistanceFacility ForeignInvestmentAdvisoryService GrossDomesticProduct GrossNaturalProduct ImplementationCompletionReport Inter-AmericaDn evelopmenBt ank InternationaMl onetaryFund InternationaSl tandardOrganization InternationalStandardOrganizationNetwork NationalEnvironmentaIlnformationSystem OperationsEvaluationDepartment PublicEnterprise PrivateFinancialIntermediaries RestructuringSupportUnit, Ministryof Planning StructuraAl djustmenLt oan StaffAppraisalReport Statementof Expenses TechnicalAssistanceLoan

Townand CountryPlanningDepartmentM, inistryof Planning TobagoHouseof Assembly Tourismand IndustriaDl evelopmenCt orporation Task Manager TrinidadandTobago TrinidadandTobagoBureauof Standards WorldTradeOrganization

Vice President

Director,CountryManagemenUt nit Director,Finance,PrivateSector& InfrastructureUnit Task Manager

Davidde Ferranti OrsaliaKalantzopoulos DannyLeipziger SoniaPlaza(Consultant)

FOR OFFICIAL USE ONLY

IMPLEMENTATION COMPLETION REPORT TRINIDAD AND TOBAGO

BUSINESS EXPANSION AND INDUSTRIAL RESTRUCTURING PROJECT

(LOAN 3432-TR)

TABLE OF CONTENTS

Page No.

PREFACE...........................................................

i

EVALUATIONSUMMARY............................................................

ii

A. PROJECT OBJECTIVES ANDDESCRIPTION.................................................i.i..

B.IMPLEMENTATIONEXPERIENCEANDRESULTS...................... ...............i.i.i.

MajorFactorsAffectingthe Project............................................................

v

Bankand BorrowerPerformance...........................................................

vi

ProjectSustainabilit.y...........................................................

vii

OperationalPlan...........................................................

viii

C. KEY LESSONSLEARNED...........................................................

ix

PART I: PROJECT IMPLEMENTATIONASSESSMENT.................................................1...

A. INTRODUCTION...........................................................

1

B. BACKGROUND............................................................

I

C. PROJECT OBJECTIVES ANDDESCRIPTION...........................................................2.

D. ACHIEVEMENTOF PROJECT OBJECTIVES......................................................... 3

E. IMPLEMENTATIONRECORD ANDMAJOR FACTORSAFFECTING

THE PROJECT.............................................................

5

F. MAJOR FACTORSAFFECTING THE PROJECT.....................................................1..1..

G. PROJECT SUSTAINABILITY............................................................

11

H. BANKPERFORMANCE...........................................................

12

I. BORROWERPERFORMANCE...........................................................

14

J. ASSESSMENTOF OUTCOME............................................................

15

K. FUTURE OPERATIONS............................................................

15

L. KEY LESSONSLEARNED............................................................

15

PART II: STATISTICALTABLES...........................................................

17

Table1: Summaryof Assessments...........................................................

18

Table2: RelatedBankLoans...........................................................

20

Table3: ProjectTimetable...........................................................

20

Table4: Loan/CreditDisbursementsC: umulativeEstimatedand Actual.....................2.1

Table5: KeyIndicatorsfor ProjectImplementatio.n..................................................2..1..

Table6: Key Indicatorsfor ProjectOperation...........................................................21

Table7: StudiesIncludedin Project...........................................................

22

Table8A: ProjectCosts...........................................................

23

This document has a restricted distributionand may be used by recipientsonly in the performanceof their officialduties. Its contentsmay not otherwisebe disclosedwithout World Bankauthorization.

Table 8B: Project Financing..................................................

23

Table 9: Economic Costs and Benefits..................................................

24

Table 10: Status of Legal Covenants..................................................

25

Table 11: Compliancewith OperationalManual Statements..........................................2. 7

Table 12: Bank Resources: Staff Imputes..................................................

27

Table 13: Bank Resources: Missions..................................................

28

Appendix 1: Mission's Aide Memoire ........................................................

30

Appendix 2: Borrower's Contributionto the ICR

........................................

34

Appendix 3: Firms Assisted under the Credit Line by PFIs .................................................

Appendix 4: Firms Assisted underthe Matching Grant Program (ETAF)..........................48

MAP

i

IMPLEMENTATIONCOMPLETIONREPORT

TRINIDADAND TOBAGO BUSINESS EXPANSIONAND INDUSTRIALRESTRUCTURINGPROJECT

(LOAN 3432-TR)

Preface

This is the ImplementationCompletion Report (ICR) for the Business Expansion and Industrial Restructuringin Trinidadand Tobago for which Loan 3432-TR in the amount of US$27 million equivalentwas approved on December 20, 1991,and made effective on March 30, 1993. The Project was closed on June 30, 1999. Final disbursementstook place on November 30, 1999,and a balance of US$ 4,794,869.23 was cancelled.

This ICR was prepared by SoniaPlaza (LCSFP, consultant) and Paul Meo (consultant). It was reviewedby Jyoti Shukla(Senior Economist,LCSFP), Susan Goldmark (Sector Manager, PPI/E), Max Pulgar-Vidal (Sector Leader, LCC4C), and Maria Victoria Lister (Quality Assurance Officer, LCSFP). Preparation of ICR began during the Bank's final completion mission, November 29 to December 3, 1999. The ICR is based on materials in the Bank's project files, interviews with Bank staff, includingtwo previous task managers (ChrisBarham and Anil Kapur), as well as interviews with and materials provided by, a wide variety of Trinidad and Tobago governmental and parastatal staff and managers as well as private sector representatives. The Government of Trinidad and Tobago also commented on the Bank's contribution to this ICR and has provided its own views on project implementationand results, which are reproduced in Annex 2.

ii

EVALUATION SUMMARY

TRINIDADAND TOBAGO BUSINESSEXPANSIONAND INDUSTRIALRESTRUCTURINGPROJECT

(Loan 3432 TR)

1. The Business Expansion and IndustrialRestructuringProject (BEIRL) was identified and approved in 1991to complementthe Government's stabilization and policy reform program supportedby the IMF and the World Bank. The BEIRL was designed to provide focused financingand institutionalsupport to private enterprises so as to re-energize growth and create a diversified and sustainable economic base.

A. PROJECTOBJECTIVEASNDDESCRIPTION

2. The main objectives of the Project were to' (i) assist in financing productive facilities and resources in the territory of the Borrower as will contribute to the economic and social development of such territory; (ii) support business expansion in industrial and service enterprisesin Trinidad and Tobago (exceptprimary producers of oil, gas and agriculturalor livestock products), in particular,by undertakingthe adjustmentsrequired by such enterprisesto become export orientedand internationallycompetitive; (iii) assist in strengtheningTCPD's capabilitiesto review environmentalimpact assessments for public and private sector development projects, as well as improving national environmentalpollution control standards;and (iv) strengthenthe regulatory framework of the Borrower's financial sector and insurance industry.

3. To achieve these objectives,the Project includedtwo main components:

(a) A credit line of US$20 million to help private enterprises finance plant and equipment, incrementalworkingcapital, and technical services related to productiveactivities;

(b) A technical assistancecomponent (US$7.2 million) to finance: (i) the establishmentof an Export Technical AssistanceFacility (ETAF)to assist private businesses firms enter new markets through matching grants for technical assistance (US$ 1.5 million); (ii) the creation of institutional capacity and technology infrastructure in metrology, standards and quality assurance (US$ 3.4 million); (iii) the development of improved environmentalpollution controlstandards (US$0.79million); (iv) studies

1 As defined in the Loan Agreement. Intererstingly,the objectives as defined in the Staff Appraisal Report were somewhat different. The primaryobjective was to promote the developmentand/or restructuring of private manufacturing or service firms (excludingprimary producersof oil, gas, agriculturalor livestock products) so that they could compete in export markets. Ancillary objectivesincluded: (a) strengthening the supervisionof financial intermediariesand the safety and soundness of the financialsystem; (b) improvingthe technical standards used to assess the environmental impactof public and private sector projects; and (c) strengthening the capacity of the Town and Country Planning Division (T&CPD) to review EnvironmentalImpact Assessments (ElAs).

iii

on the role of private investmentin the steel and petrochemical industries, the adequacyof the foreign investment regime, and the developmentof a new foreign investment promotion strategy (US$ 0.85 million); and (v) strengtheningthe regulatory framework for the insuranceIndustry (US$ 0.25 million).

4. The first two Project objectiveswere justified in the context of economic stagnation, high unemploymentand weak performanceof the private sector at the time of Project identification. In an era of windfall oil revenues, the public sector had dominated the economy, stiflingprivate enterprises. Weaknessesin the financial sector and an inadequatebusiness environmentand institutionalsupport mechanisms required some actions on part of the Government to help jump-start private sector exports and to enhance the competitivenessof Trinidadianfirms. To achieve these objectives, the Project incorporated what were deemedto be appropriatecomponents at the time of appraisal- line of credit, technical assistancein accessingexport markets and technical supportto obtain certificationof quality standards.The Project also included an objective of improvingtechnical standards and monitoring capacityof environmentalimpacts, the justification for whose inclusion is not clear as it was only tangentially relevant to the other main objectives of the Project. These additional components also made the Project cumbersome and later overlapped with on-going dialogue in the environmental sector. The final objectiveof strengtheningthe soundnessof the financial sector was justified, though actual Project activities to achieve this objective were limited to technical assistanceto improveregulation of the insurance industry,which could have had only a limited contribution to overallfinancial sector reform.

B. IMPLEMENTATION EXPERIENCE ANDRESULTS

5. The Project was approvedon December20, 1991,but became effective fifteen months later. Even after effectiveness,the implementationof the loan was delayed on most components,with only the technologysub-componentproceedingwell. It was not until 1995-96that most of the sub-componentsand expendituresbegan. Towards the end of the Project, implementationlagged again as the institutional capacityof the Restructuring Support Unit (RSU),the coordinatingunit for the Project, deteriorated due to high staff turnover and many staff vacancies. Several issues also emergedrelated to lack of adequate project accounts and internal control procedures. In the presence of these outstanding issues on project accounts and reconciliation of the Special Account withdrawals, and the failure on the part of the Borrower to submit an action plan to completethe remaining Project activities,the Loan was closed on June 30, 1999 in spite of a request by the Borrower to extend project implementation as no agreement was reached on a workplan for the extendedperiod. After final disbursements, an amount of $4,794,869.23 was cancelled.

6. Overall performance of this Project is rated Unsatisfactory because of the mixed implementation record of the project components, and their marginal contributions to the achievement of Project objectives. On the first two objectives of the Project- to finance productive enterprises and to support business expansion in industrial and service

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