Document of The World Bank Report No: 140282-JM IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-84700 and IBRD-87590) ON A PROGRAM OF DEVELOPMENT POLICY LOANS IN THE AMOUNT OF US$75 MILLION and US$70 Million (equivalent) TO JAMAICA FOR THE FIRST AND SECOND COMPETITIVENESS AND FISCAL MANAGEMENT PROGRAMMATIC DEVELOPMENT POLICY LOANS August 16, 2019 Macroeconomics, Trade and Investment Global Practice Caribbean Country Management Unit Latin America and the Caribbean Region The World Bank ICR (P151448 and P163586) FISCAL YEAR April 1 – March 31 Currency Equivalents (Exchange Rate Effective as of July 1, 2019) US$ 1 = J$ 136.08 ABBREVIATIONS AND ACRONYMS AMANDA Application Management and Data Authorization ASYCUDA Automated System for Customs Data BoJ Bank of Jamaica CPC Chief Parliamentary Council CPS Country Partnership Strategy DAP Development Approval Process DFID Department for International Development (UK) DPL Development Policy Loan EFF Extended Fund Facility FAA Financial Administration and Audit Act FY Fiscal Year GDP Gross Domestic Product GHG Green House Gas GLHI Global Logistics Hub Initiative GOJ Government of Jamaica IBRD International Bank for Reconstruction and Development ICR Implementation Completion Report ICRR Implementation Completion and Results Report IDB Inter-American Development Bank IFI International Financial Institution IMF International Monetary Fund INDC Intended Nationally Determined Contributions JCA Jamaica Customs Agency JLP Jamaica Labour Party JSEZA Jamaica Special Economic Zone Authority LPA Local Planning Authority MIIC Ministry of Industry, Investment and Commerce MLGCD Ministry of Local Government and Community Development MOFPS Ministry of Finance and the Public Service MTEF Medium-Term Expenditure Framework NEPA National Environment and Planning Agency ii The World Bank ICR (P151448 and P163586) NLTA Non-Lending Technical Assistance NMIA Norman Manley International airport NPL Non-Performing Loan PBG Policy-Based Guarantee PDMA Public Debt Management Act PFM Public Financial Management PIMS Public Investment Management System PPP Public-Private Partnership PSIP Public Sector Investment Program SBA Stand-By Agreement SEZ Special Economic Zone USD United States Dollars WB World Bank Vice President: Axel van Trotsenburg Country Director: Tahseen Sayed Khan Global Director: Marcello De Moura Estevão Filho Regional Director: Robert R. Taliercio Practice Manager: Jorge Thompson Araujo ICR Team Leader: David Cal MacWilliam iii The World Bank ICR (P151448 and P163586) TABLE OF CONTENTS PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN ................................................... 1 1.1 Context at Appraisal............................................................................................................... 2 1.2 Original Project Development Objectives (PDO) and Key Indicators .................................... 6 1.3 Original Policy Areas Supported by the Program .................................................................. 8 1.4 Revised PDO and Key Indicators, and Reasons/Justification ............................................... 13 1.5 Other Significant Changes .................................................................................................... 21 2. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES ................................................ 22 2.1 Program Performance.......................................................................................................... 22 2.2 Major Factors Affecting Implementation ............................................................................ 27 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Design ........... 27 2.4 Expected Next Phase/Follow-up Operation ........................................................................ 28 3. ASSESSMENT OF OUTCOMES ..................................................................................................... 28 3.1 Relevance of Objectives, Design and Implementation ........................................................ 28 3.2 Achievement of Program Development Objectives ............................................................ 30 3.3 Efficiency .............................................................................................................................. 34 3.4 Justification of Overall Outcome Rating .............................................................................. 34 3.5 Overarching Themes, Other Outcomes, and Impacts ......................................................... 35 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops ..................... 36 4. ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME ................................................................ 37 5. ASSESSMENT OF BANK AND BORROWER PERFORMANCE ........................................................ 37 5.1 Bank Performance ............................................................................................................ 37 5.2 Borrower Performance ..................................................................................................... 38 6. LESSONS LEARNED...................................................................................................................... 39 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ........................... 41 iv The World Bank ICR (P151448 and P163586) A. BASIC INFORMATION Program 1 First Competitiveness and Country Jamaica Program Name: Fiscal Management Programmatic DPL Program ID: P151448 L/C/TF Number(s) IBRD-84700 ICR Date: [06/15/2019] ICR Type: Core ICR Financing Instrument: DPL Borrower JAMAICA Original Total Commitment USD 75.00M Disbursed Amount USD 75.00M Implementing Agencies: Ministry of Finance and the Public Service Program 2 Second Competitiveness and Country Jamaica Program Name: Fiscal Management Programmatic DPL Program ID: P163586 L/C/TF Number(s) IBRD-87590 ICR Date: [06/15/2019] ICR Type: Core ICR Financing Instrument: DPL Borrower JAMAICA Original Total Commitment USD 70.00M Disbursed Amount USD 70.00M Implementing Agencies: Ministry of Finance B. KEY DATES First Competitiveness and Fiscal Management Programmatic DPL P151448 Process Date Process Original Date Revised / Actual Date(s) Concept Review: September 24, 2014 Effectiveness: March 12, 2015 Appraisal: January 16, 2015 Restructuring(s): Approval: March 3, 2015 Mid-term Review: Closing: December 31, 2015 December 31, 2015 Second Competitiveness and Fiscal Management Programmatic DPL P163586 Process Date Process Original Date Revised / Actual Date(s) Concept Review: January 13, 2016 Effectiveness: June 30, 2017 Appraisal: April 13, 2017 Restructuring(s): Approval: June 8, 2017 Mid-term Review: Closing: June 30, 2018 C. RATINGS SUMMARY C.1 Performance Rating by ICR Overall Program Rating Outcomes Moderately Satisfactory Risk to Development Outcome High, but diminishing Bank Performance Satisfactory v The World Bank ICR (P151448 and P163586) Borrower Performance Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory NA Agency/Agencies: Overall Borrower Overall Bank Performance Satisfactory Satisfactory Performance C.3 Quality at Entry and Implementation Performance Indicators First Competitiveness and Fiscal Management Programmatic DPL P151448 Implementation Indicators QAG Assessments (if any) Rating Performance Potential Problem Program No Quality at Entry (QEA) at any time (Yes/No): Problem Program at any Quality of Supervision No time (Yes/No): (QSA) DO rating before Moderately Satisfactory Closing/Inactive status Second Competitiveness and Fiscal Management Programmatic DPL P163586 Implementation Indicators QAG Assessments (if any) Rating Performance Potential Problem Program No Quality at Entry (QEA) at any time (Yes/No): Problem Program at any No Quality of Supervision (QSA) time (Yes/No): DO rating before NA Closing/Inactive status D. SECTOR AND THEME CODES First Competitiveness and Fiscal Management Programmatic DPL P151448 Original Actual Major Sector Central Government (Central Agencies) 57% Other Industry, Trade and Services 43% Major Themes Public Administration 22 Public Financial Management 29 Business Enabling Envrironment 14 Trade 29 Fiscal Policy 7 Jobs 100 vi The World Bank ICR (P151448 and P163586) Second Competitiveness and Fiscal Management Programmatic DPL P163586 Original Actual Major Sector Central Government (Central Agencies) 63% Trade 24% Energy Transmission and Distribution 13% Major Themes Energy 13 Climate Change 19 Disaster Risk Management 13 Public Administration 25 Public Finance Management 13 Enterprise Development 13 Trade 25 Fiscal Policy 25 Public Private Partnerships 13 E. BANK STAFF First Competitiveness and Fiscal Management Programmatic DPL P151448 Positions At ICR At Approval Vice President: Axel van Trotsenburg Jorge Familiar Country Director: Tahseen Sayed Sophie Sirtaine Practice Manager/Manager: Jorge Araujo Auguste Tano Kouame/Miria Pigato Task Team Leader: Philip Schuler Sona Varma/Edith Kona ICR Team Leader: Cal MacWilliam ICR Primary Author: Abdoulaye Ouedraogo/Cal MacWilliam Second Competitiveness and Fiscal Management Programmatic DPL P163586 Positions At ICR At Approval Vice President: Axel von Trotsenburg Jorge Familiar Country Director: Tahseen Sayed Tahseen Sayed Practice Manager/Manager: Jorge Araujo Miria Pigato Task Team Leader: Philp Schuler Philip Schuler ICR Team Leader: Cal MacWilliam ICR Primary Author: Abdoulaye Ouedraogo/Cal MacWilliam F. RESULTS FRAMEWORK ANALYSIS Program Development Objectives (from Program Document) The operation supports policies aimed at: (i) improving investment climate and competitiveness; and (ii) sustaining fiscal consolidation and enhancing public financial management. Revised Program Development Objectives (as approved by original approving authority) Development objectives were not revised. vii The World Bank ICR (P151448 and P163586) Indicator(s) First Competitiveness and Fiscal Management Programmatic DPL P151448 Original Target Values (from Formally Revised Actual Value Achieved at Indicator Baseline Value approval Target Values Completion or Target Years documents) Pillar 1: Improving the Investment Climate and Competitiveness Greater accountability in the Four LPAs All 14 LPAs and Indicator changed NA development approvals Commenting process as evidenced by 100 Agencies percent usage of the AMANDA system in LPAs and Commenting Agencies. Reduction in the energy 95 percent 75 percent Target met: The percent of sector’s dependence on electricity generated using petroleum as evidenced by petroleum in 2018 was the percent of electricity 66.0 percent. generation using petroleum. Improvement in the 2.88 (2014 LPI 3.0 Indicator was NA customs clearance times Customs Score) revised and costs as measured by improvement in the Logistic Performance Index (LPI) -- Customs Aspect. Pillar 2: Supporting Sustained Fiscal Consolidation and Public Financial Management Reduction in the public debt 141.6 percent of 125 percent of GDP New target Target met: As at March 2018 to GDP ratio. GDP established public debt to GDP was 101.1 during DPL2 of percent. 115 percent of GDP Number/value of virements US$1.9 billion 0 Target not met: Virements are on compensation and permitted on capital capital expenditure expenditures and are regularized in a subsequent Supplementary Estimates within the financial year. However, virements are no longer allowed in compensation of employees. Public pension is 1.8 percent 16.2 percent Indicator was Target not met, some progress administered through a revised being made: In FY2018/19 contributory employee contributions pension scheme as represented 2.4 percent of total evidenced by annual pension plan expenditures. As employee contribution to of April 2018, all public servants viii The World Bank ICR (P151448 and P163586) pension as a percent of began contributing 1.0 percent annual public sector of earnings to the pension plan pension payments. and will contribute an additional 1.0 percent each year until their contribution reaches 5.0 percent. Linkages between C B or better Indicator was NA investment budgets and revised forward expenditure estimates as measured by the PEFA indicator P1-12, dimension iv. Second Competitiveness and Fiscal Management Programmatic DPL P163586 Original Target Values (from Formally Revised Actual Value Achieved at Indicator Baseline Value approval Target Values Completion or Target Years documents) Pillar 1: Improving the Investment Climate and Competitiveness Original indicator reworded: 66 percent 66 percent New indicator Target met: 89.9 percent of Increase in the share of approved within approved within 90 building applications were building applications 90 days in 2014Q1 days in 2014Q1 approved within 90 days as of approved within 90 days. June 2018. Creation of new bodies to No bodies. At least two of the New indicator Target not met: As of end- implement the Building Act three bodies 2018 members of the and apply the new national specified in the Act respective Boards had been building code. (i.e., Building identified and advised and Practitioners Board, the Terms of References had Building Appeals been developed. However, Board, and Building Board complements and Advisory Council) appointments were are created and are completed on March 11, operational. 2019. Reduction in the energy 95 percent 75 percent No changes from Target met: The percent of sector’s dependence on DPL1 electricity generated using petroleum as evidenced by petroleum in 2018 was 66.0 the percent of electricity percent. generation using petroleum. Faster customs clearance as 32 percent 65 percent Indicator from DPL1 Target met: 69.2 percent of measured by the increase in was revised. the declarations/shipments the share of shipments were cleared within 24 hours. processed and cleared within 24 hours. ix The World Bank ICR (P151448 and P163586) Increase in the share of free 0 of 120 operators 40 percent of This indicator was Target not met: Since passage zone operators converted to need to be operators added for DPL2 of the SEZ regulations in Special Economic Zone (SEZ) converted converted September 2017, JSEZA has operators. completed the transition of 5 out of 109 companies (4.6 percent) from free zone to Special Zone Operators. Pillar 2: Supporting Sustained Fiscal Consolidation and Public Financial Management Reduction in the public debt 141.6 percent of 115 percent of GDP This was a new Target met: As of March to GDP ratio. GDP target established 2018, the public debt to GDP during DPL2 was 101.1 percent. Increased transparency of No data published At least 2 reports This indicator was Target met: Two (2) Reports information on exposure to published added for DPL2 on Contingent Liabilities were implicit and explicit published on the MOFPS contingent liabilities from Website. public bodies. Reduced use of virements on J$1.9 billion 0 This indicator was Target not met: Virements compensation and capital reworded from are permitted on capital expenditure. DPL1 expenditures and are regularized in a subsequent Supplementary Estimates within the financial year. However, virements are no longer allowed in compensation of employees. Increase in the percentage 0 percent 5 percent of bid This indicator was Target met: The total number of public requests for proposals at or added for DPL2 of bid proposals executed tenders published under an above the through the electronic electronic government prescribed limit government procurement procurement system. executed through system was 1,113, which the electronic represents 100 percent of bid government proposals. procurement system Increased ratio of annual 4 percent 12 percent This indicator was Target not met, some public service employee reworded from progress being made: In pension contributions to DPL1 2018/19 employee public service pension contributions represented payments. 2.4 percent of total pension plan expenditures, against a target of 12 percent. As of April 2018, all public servants began contributing 1.0 percent of earnings to the pension plan and will contribute an additional x The World Bank ICR (P151448 and P163586) 1.0 percent each year until their contributions reach 5.0 percent. Increased linkage between Only capital cost Both recurrent and This indicator was Substantively met: Capital investment budgets and projections are capital cost reworded from costs are clearly captured in forward expenditure presented. projections are DPL1. the Capital Budget. Recurrent estimates, as shown by presented for at costs are estimated at the presenting projections of least 50 percent of design and decision stage but the total cost of major projects. are not included in the PSIP. investment projects, As such, both capital and together with a year-by- recurrent costs are presented year breakdown of the for all capital projects being capital costs and estimates considered though not of the recurrent costs for necessarily together in the the next five years, in the PSIP. annual public sector investment program documents. G. RATINGS OF PROJECT PERFORMANCE IN ISRs ISR of January 4, 2016 Progress toward achievement of PDO – Moderately Satisfactory Overall Implementation Progress – Moderately Satisfactory Monitoring and evaluation – Moderately Satisfactory Overall Risk – High xi The World Bank ICR (P151448 and P163586) PROJECT CONTEXT, DEVELOPMENT OBJECTIVES AND DESIGN 1. This Implementation Completion and Results Report (ICRR) presents the results of the First and Second Competitiveness and Fiscal Management Development Policy Loans (DPL) for Jamaica. This was a programmatic series of two DPL operations. The first loan was approved by the Bank’s Board of Executive Directors on March 3, 2015 and disbursed upon effectiveness on March 12, 2015, in the amount of US$75 million. The second loan was approved by the Bank’s Board of Executive Directors on June 8, 2017 and disbursed upon effectiveness on June 30, 2017, in the amount of US$70 million. These operations, in the total amount of US$145 million, were part of a broader coordinated assistance package together with the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) launched in 2013 to support the Government’s macroeconomic stabilization policies and structural reforms. This series followed the Bank’s initial support of $130 million to the 2013 assistance package in the form of the Economic Stabilization and Foundations for Growth Development Policy Loan.1 2. The reforms launched in 2013 and supported by the IMF, World Bank (WB), and IDB placed Jamaica on a new trajectory. Over the previous 30 years, real per capita GDP had increased at an average of just 1.0 percent per annum. During this period, Jamaica faced major social and economic challenges as evidenced by low growth, high public debt, rising unemployment, coupled with the effects of natural disasters and adverse external shocks. Persistent fiscal deficits had pushed public debt well-above 100 percent of GDP. This macroeconomic instability and uncertainty, combined with high unemployment and crime rates, had diminished investor confidence and constrained private sector investment. As a result, Jamaica had been unable to lay the foundations for long-term economic growth and sustained reductions in poverty and inequality. 3. To avert an imminent debt crisis, the Government launched an ambitious, IMF-supported fiscal consolidation program backed by reforms to strengthen its macro-fiscal policy framework, overhaul the public sector, and improve the investment climate. Under Jamaica’s economic program with the IMF, the GOJ in 2013/14 achieved a primary budget surplus of 7.5 percent of GDP, and the program called for maintaining the primary balance in the 7.0-7.5 percent range over the medium term, a level rarely seen in other developing countries. While a second debt restructuring in 2013 supported a reduction of debt service payments, the high debt burden meant that about 30 percent of revenues still needed to be allocated to debt service. At the time, the GOJ needed to maintain tight fiscal control to avoid a renewed debt buildup, and to deal with large debt service payments over the medium-term. The introduction of a fiscal rule to entrench fiscal discipline by constraining the annual budgets was critical to achieving a reduction in public debt to 60 percent of GDP by FY2025/26. The reforms enjoyed broad support among political parties, the business community and the general public. 4. In support, the IMF, WB, and IDB approved a large package of financial support for Jamaica, committing almost US$2 billion in combined financing. The package was originally anchored by a four- year IMF Extended Fund Facility (EFF). However, the EFF was cancelled in 2016 and replaced with a three- year Precautionary Stand-By Arrangement (SBA). The SBA remains in effect until October 2019. Fiscal and monetary reforms—such as the Fiscal Responsibility Framework, closer management of fiscal risks 1 Economic Stabilization and Foundations for Growth Development Policy Loan (2013) was rated moderately satisfactory. Like the current series it was part of a broader package put together jointly with the IMF and the IDB in support of Government efforts to implement stabilization policies and structural reforms. 1 The World Bank ICR (P151448 and P163586) associated with contingent liabilities, and the Bank of Jamaica’s (BOJ) expanded monetary policy toolkit— improved the authorities’ capacity to respond effectively to adverse shocks. Context at Appraisal 5. As noted, at the time of the first DPL Jamaica had experienced low growth and high public debt for almost three decades. With real per capita GDP increasing at an average of 1 percent per annum and public debt at almost 150 percent of GDP, Jamaica was one of the slowest growing developing countries. In February 2013, the country had arrived at a tipping point. GDP had contracted for five consecutive quarters, the Jamaican dollar was rapidly depreciating, interest payments of about 8 percent of GDP (30 percent of total public expenditure) forced the Government to refinance maturing debt obligations, limiting fiscal space for productive expenditures, investor confidence had eroded, and international reserves were dwindling rapidly (Table 1). Jamaica also suffered from high unemployment and rising crime rates. 6. In this adverse economic environment, prospects for long-term economic growth and sustained reductions in poverty and inequality were limited. Poverty and inequality had increased over the years, reversing many of the social achievements of the previous two decades. Jamaica’s limited ability to deliver high growth had undermined its fiscal capacity to shelter the poor and vulnerable. In 2007, the Government estimated poverty at just under 10 percent and the official Gini coefficient was the lowest in the region at 0.38. However, the 2007/08 global economic and financial crisis, together with rising food and energy prices, resulted in a significant deterioration in poverty measures, especially in rural areas. The national poverty rate soared from 9.9 percent in 2007 to 17.6 percent in 2010 and to 24.6 percent in 2013 and mean household income, particularly of the bottom 40 percent, contracted. Inequality, although remaining rather low compared to the rest of the region, also increased, with a Gini coefficient of 0.39 in 2010 and 0.41 in 2013. 7. Where the original 2013 DPL aimed to help stabilize the macroeconomic framework, the 2015–17 series (the series currently being evaluated) aimed to sustain the gains from fiscal consolidation and begin laying the foundations for growth. At the time of appraisal of the first operation in the series, while the economy had stabilized, growth remained weak. After contracting in 2012, the economy grew by 0.5 percent in 2013 and 0.7 percent in 2014 and in early FY2015 was showing signs of increased momentum. Indicators of business and consumer confidence were also showing signs of improvement. Domestic demand nonetheless remained weak as fiscal consolidation measures constrained public spending, while still high unemployment and a nominal wage freeze in the public sector dampened private consumption. 8. At inception of the series in mid- to late-2014, job growth was rising, and unemployment was falling, although its level remained high. The unemployment rate had fallen gradually from its peak of 16.3 percent in April 2013 to 13.4 percent at end-2014. Youth and female unemployment remained high at 32.4 percent and 17.5 percent, respectively. Although improvement in the unemployment rate had been small, there had been sustained increases in employment levels and in labor force participation, especially for women. During 2016, the labor force further increased by 2.3 percent (4 percent for women), and total employment grew by 2.9 percent (5.2 percent for women). 2 The World Bank ICR (P151448 and P163586) 9. The current account deficit had declined to 7.9 percent of GDP in 2014 from 9.6 percent in 2013 and further improved to 3.0 percent in 2015—the smallest in several years. Declining oil prices made an important contribution. Tourism continued to grow and further supported improvement in the current account. Net remittances grew by 4.1 percent during 2014 over 2013. On the other hand, exports of bauxite—Jamaica’s largest merchandise export—and other goods declined by 21.7 percent in 2014. 10. The Government had made significant progress since 2013 in restraining spending and had reduced the debt/GDP ratio. Total public debt had been above 140 percent of GDP for several years prior to 2013 and reforms resulted in debt falling from 141.5 percent of GDP in 2013 to 139.8 percent in 2014 and further to 125.6 by end-2015. To reduce this large debt burden, the GOJ succeeded in generating a primary fiscal surplus of 7.1 percent of GDP in 2013 and 7.5 percent in 2014 during the first two years of the IMF EFF program, which contributed to a small overall public-sector deficit of -0.4 percent of GDP in 2014. 11. The Government had achieved some rebalancing of spending as part of its reform program. Debt reduction brought with it a sizeable reduction in the Government’s interest bill—to 7.6 percent of GDP in 2015 from 9.5 percent of GDP in 2012. The Government had also contained spending on wages and salaries. However, the public investment program bore a significant portion of the fiscal consolidation effort, as capital spending fell by half to 1.8 percent of GDP during the first two years of the reform program. 12. Inflation dropped to historically low levels—falling to a rate of 3.7 percent in 2015 from 9.4 percent in 2013 and 8.3 percent in 2014. This was mainly the result of weak domestic demand and tighter monetary policy. Nonetheless, the impact of drought on agricultural production and the pass- through of nominal deprecation to domestic prices kept inflation higher than it might have been otherwise. At the time of appraisal, inflation was expected to continue its downward trajectory as the BoJ was in the process of implementing an inflation targeting monetary regime. 13. Jamaica’s financial system was relatively resilient, well-capitalized and profitable. The primary source of financial vulnerability was the system’s high exposure to sovereign debt as the domestic financial system held 40 percent of Jamaica’s public debt. The share of non-performing loans (NPLs) for all lenders had declined to 5.1 percent from 5.8 percent over 2014, with almost full provisioning. Despite declining inflation and greater macroeconomic stability, interest rates on commercial loans had changed little over the previous several years, averaging between 12.6 and 12.9 percent. 14. The main pillars of the initial four-year economic adjustment program for FY2013/14 through FY2016/17 were: (i) structural reforms to boost growth and employment; (ii) actions to improve price and non-price competitiveness; (iii) upfront fiscal adjustment, supported by extensive fiscal reforms; (iv) debt reduction, including a debt exchange to place public debt on a sustainable path while protecting financial system stability; and (v) improved social protection programs. The reform agenda focused on actions to strengthen public financial management, introduce a fiscal rule, reform the tax system, improve the business climate, move towards inflation targeting, and reform the securities dealers’ sector. A central component of the program was promoting social coherence and included a floor on social spending, an improved social safety net and programs to increase employment. 15. Of import, macroeconomic reforms continued despite a change of party in power following the February 2016 elections (between approval of the first operation in the series and the second). The new 3 The World Bank ICR (P151448 and P163586) Jamaica Labour Party (JLP) Government began to pivot towards growth, without abandoning the commitment to fiscal sustainability, and the new Government replaced the EFF with a precautionary Stand-By Arrangement (SBA)—implying Jamaica no longer needed a disbursing IMF program. The SBA, starting in November 2016, aimed to sustain the macroeconomic stability gains, while boosting employment. The main pillars of the program were to: (i) better support growth, jobs, and social protection, including by improving public sector efficiency, rebalancing from direct to indirect taxes, strengthening the social safety net, and reallocating public resources to growth-enhancing capital spending; (ii) reduce public debt to 60 percent of GDP by 2025/26 by maintaining the primary surplus at 7 percent of GDP for the duration of the new Arrangement; (iii) modernize the monetary policy framework and build the foundation for an eventual move to inflation targeting, while maintaining exchange rate flexibility and continuing to build precautionary reserves; and (iv) bolster the resilience of the financial system. 16. Regarding business environment reforms, the GOJ committed publicly to be a Doing Business Top 10 performer by 2020-2021. It focused on several key business environment areas including: land reform; electronic titling; development approvals/construction permits; and reforms to trade facilitation, taxation, the judiciary and financial markets. In privatization and public-private partnerships (PPPs), the GOJ was in the process of amending its Privatization Policy and its PPP Policy in support of 23 active pipeline transactions. At the time, these transactions represented the largest investments in Jamaica and were largely in infrastructure, including transport (airport, ports, shipping), energy, water (generation, treatment), solid waste, health, education, agriculture, tourism, economic zones, and a bank. The WB supported the Government’s privatization and PPP agenda, including through IPFs and advisory services. 17. As noted, the DPL was part of a broader package of multilateral support to Jamaica. The Bank, IMF, and IDB had had a long record of partnership in Jamaica. In 2010, the three institutions supported the Government in addressing the adverse impact of the global financial crisis. The IMF-supported program focused on debt restructuring, fiscal consolidation and financial sector reforms. The IDB focused on tax reform. The Bank supported structural and institutional reforms to lay the foundations for growth, enhance competitiveness, social protection and resilience, and improve public sector management, which were critical to debt reduction and sustainable growth. The WB and IDB coordinated their assistance in the different sectoral areas to ensure complementarity and consistency. Given the difficult macroeconomic, fiscal and debt situation the Government was highly committed to the necessary reforms and this broad and coordinated international support contributed further to a strong expression of government ownership and commitment to the reform effort. 18. The DPL series also complemented other Bank programs and broader technical assistance (TA) such as: the automation and streamlining of procedures for approving building and development permits (Jamaica Foundations for Competitiveness and Growth Project); the Building Act (Jamaica Disaster Vulnerability Reduction Project and Jamaica Foundations for Competitiveness and Growth Project); the Electricity Act (Jamaica Energy Security and Efficiency Enhancement Project); Customs automation (Jamaica Foundations for Competitiveness and Growth Project); the Special Economic Zones Act (Jamaica Foundations for Competitiveness and Growth); the Public Debt Management Act Regulations; the Public Procurement Act (Jamaica Strategic Public Sector Transformation); the Public Sector Pension Act (Social Protection Project); the Public Investment Management System reforms (Jamaica Strategic Public Sector Transformation); and supported Department for International Development (DFID) TA on fiscal/debt management in 2010–14. Furthermore, the two pillars of the DPL series matched the strategic objectives 4 The World Bank ICR (P151448 and P163586) identified in the Country Partnership Strategy (CPS), and the reform program addressed several of the key sectors contributing to CPS targets. 19. By the time of preparation of the second DPL in the series (2016), Jamaica’s economy was showing further signs of a modest growth acceleration. The economy was estimated to have achieved GDP growth of 0.9 percent in 2015 and 1.4 percent in 2016. Agriculture had rebounded from the 2015 drought, with real output during the first three quarters of 2016 being 12 percent higher than the same period of 2015. Utilities, the hospitality sector, and tradable services also enjoyed strong growth in 2016, with growth in tourism and trade logistics supported by favorable external conditions. Real consumption resumed growth in 2016, after declining for several years, and spending on gross fixed capital formation rebounded in 2016 as well. Business and consumer confidence also improved in 2016, and growth in commercial bank loans and advances to the private sector reflected this confidence, rising 21 percent (year-over-year) in November 2016 from 10 percent at the end of 2015. Much of this improvement can be attributed to successful implementation of the reform program supported by the multilateral community to that point and the ongoing financial and technical support being provided, including through the operations currently being evaluated in this ICRR. It should be recognized that this coherent and coordinated support across the multilateral institutions was a key feature of project design. Table 1. Key Macroeconomic Indicators Avg. 2012 2013 2014 2015 2016 2017 2018 2003-12 GDP and Prices (annual percent change) Real GDP growth 0.5 -0.6 0.5 0.7 0.9 1.4 1.0 1.7 Private Consumption growth (annual %) 1.4 -1.0 -0.7 -0.8 -0.1 -0.4 1.1 1.8 Gross Investment (% of nominal GDP) 23.9 19.6 21.0 22.0 21.2 21.2 22.1 21.6 Gross Investment - Public (% of nominal GDP) 3.1 3.2 2.6 1.7 1.8 2.3 2.4 2.9 Net Export -21.1 -22.4 -22.4 -21.7 -15.9 -13.1 -16.5 -14.3 CPI (Period Average) 11.5 6.9 9.4 8.3 3.7 2.3 4.4 3.4 Unemployment rate 12.3 15.8 14.1 14.0 13.5 12.9 Government Operations (% of GDP) Revenue 26.5 25.8 26.8 26.5 26.8 27.8 28.8 28.8 Expenditure 32.3 30.5 27.7 26.8 27.1 28.0 28.5 28.5 Primary current spending 16.6 17.7 17.1 17.2 17.8 18.0 18.9 18.9 Capital spending 3.1 3.2 2.6 1.7 1.8 2.3 2.4 2.9 Interest payment 12.6 9.5 8.0 7.9 7.6 7.7 7.2 6.7 Overall fiscal balance -5.8 -4.7 -0.9 -0.4 -0.3 -0.2 0.3 0.3 Primary fiscal balance 4.9 7.1 7.5 7.2 7.5 7.5 7.0 Public debt (EFF)1 132.5 147.8 141.5 139.8 125.6 121.8 112.1 105.7 Public debt (FRL)2 113.6 101.1 98.7 Selected Monetary Accounts Base money annual growth 9.6 9.8 -6.7 22.3 125.6 6.4 2.9 -38.4 BOJ Policy rate (eop) 11.9 6.25 5.75 5.75 5.8 5.3 5.0 2.8 Non-performing loans/total loans (eop) 5.8 5.1 4.3 3.7 3.5 5 The World Bank ICR (P151448 and P163586) Table 1. Key Macroeconomic Indicators Avg. 2012 2013 2014 2015 2016 2017 2018 2003-12 External Sector Current-account balance (% of GDP) -10.9 -9.7 -9.6 -7.9 -3.0 -0.3 -2.7 -2.5 Export of Goods and Services (% of GDP) 35.8 30.2 30.6 31.3 29.9 31.3 34.1 35.4 Import of Goods and Services (% of GDP) 56.8 52.6 53.0 52.9 45.8 44.3 50.6 49.8 Foreign direct investment (% of GDP) 4.6 2.2 3.3 3.7 6.2 4.7 6.0 5.0 2998. Net international reserves (US$ millions) 1946.8 1971.1 1107.5 1198.8 2046.2 2385.1 2680.8 2 Gross reserves (weeks of GNFS imports) 24.5 26.8 17.4 18.4 26.3 32.9 37.7 36.6 Exchange rate (J$/US$ period average) 73.9 88.8 100.9 111.3 117.3 125.2 128.4 129.7 Sources: IMF, MOFPS, Statistical Institute of Jamaica and Bank of Jamaica, WDI and World Bank staff estimates. Notes: Fiscal years run from April 1 to March 31. Authorities' budgets presented according to IMF definitions. Data for FY2016/17 are the latest estimates (indicated with “e”), and those for FY2017/18 and later are forecasts (“f”). 1/ Debt statistics follow definition under the EFF program. Central government direct and guaranteed only, including PetroCaribe debt (net of its financing to the central government) and projected IFIs disbursements. 2/ Consolidated central government and public bodies’ debt, consistent with the Fiscal Responsibility Law. Original Project Development Objectives (PDO) and Key Indicators 20. The Competitiveness and Fiscal Management Programmatic Development Policy Series supported policies aimed at: (i) improving the investment climate and competitiveness; and (ii) sustaining fiscal consolidation and enhancing public financial management. The Prior Actions and Key Results Indicators of the Program are presented in Table 2. Table 2: Prior Actions and Results Indicators (as originally presented in DPL1) Prior Actions Triggers Results Indicators Pillar 1: Improving the Investment Climate and Competitiveness Supporting specific elements of the Government’s agenda that would improve competitiveness and facilitate growth. These include addressing the development approvals process, the high cost of electricity, supporting the Logistics Hub Initiative—identified by the Government as a key growth initiative—and the associated trade facilitation measures that would ensure its success. Development Approval Process (DAP) PA1: The GOJ, through its Cabinet, has Trigger 1: The GOJ begins implementation Full operationalization of (i) approved a policy that revises the of the revised development approvals AMANDA system as development approvals process for process for construction permits by fully indicated by 100 percent issuing construction permits by implementing all the short-term usage in Local Planning establishing joint teams within components of the revised policy on Authorities (LPA) or planning authorities to expedite development approvals including Commenting Agencies. processing as needed, standardizing (i) amending as needed the Local 2014 Baseline: Four LPAs timelines for processing of all Improvements Act and Town and Country 2017 Target: All 14 LPAs categories of buildings, and facilitating Planning Act; (ii) establishing a national and 6 Commenting the acceptance of certification from policy for collection of development Agencies. licensed professionals and (ii) started application fees and (iii) completing the the implementation of the AMANDA implementation of the AMANDA tracking tracking system in Local Planning system for construction permits across all Authorities (LPAs) or Parish Councils. LPAs. 6 The World Bank ICR (P151448 and P163586) Trigger 2: The GOJ makes effective a new building code as specified in a new Building Act. Electricity Trigger 3: The GOJ completes a Reduction in the energy comprehensive reform of the legislative sector’s dependence on framework underpinning Jamaica’s petroleum as evidenced energy sector with effectiveness of the by the percent of new Electricity Act. electricity generation using petroleum. 2014 Baseline: 95 percent 2017 Target: 75 percent Logistics and Trade Facilitation PA2: The GOJ, through the Jamaica Trigger 4: The GOJ implements its PPP Improvement in the Customs Agency (JCA) has approved policy by issuing a Request for Proposals Logistic Performance operational procedures to reduce the for Norman Manley International Airport. Index- Customs Aspect. time taken for clearance of goods at Trigger 5: JCA completes implementation Jamaican ports. of ASYCUDA World in Kingston port as a 2014 Baseline: 2.88 (LPI pilot site and begins implementation at Customs Score). PA3: The Ministry of Industry other ports. 2017 Target: 3.00. Investment and Commerce (MIIC) has approved a resolution to separate the Trigger 6: The GOJ strengthens the regulatory functions of the Bureau of regulatory framework governing the Standards from its facilitative operations of SEZs with effectiveness of a functions to enhance the Bureau's role new SEZ Act that does not generate a in trade facilitation. negative fiscal impact. Pillar 2: Supporting Sustained Fiscal Consolidation and Public Financial Management Supporting structural reforms for fiscal consolidation, increased transparency and efficiency of expenditures, and improved public investment management. The Government has made significant progress in these areas of reform since early 2013 (see Box 2). Going forward, there is a need to preserve the gains from reforms so far and begin work on additional reforms that would increase efficiency in the use of public monies. Fiscal Consolidation and Debt Management PA4: The GOJ has adopted a set of Trigger 7: GOJ improves fiscal Debt to GDP. fiscal rules to strengthen fiscal transparency by endorsing a Fiscal Risk FY13/14 Baseline: 141.6 transparency and set a target for debt Statement in the 2015/16 budget that percent of GDP. reduction by approving amendments covers all significant contingent liabilities 2017 Target: 125.5 to the Financial Administration and including those emanating from public percent of GDP. Audit Act and Public Bodies bodies and PPPs. Management and Accountability Act. Trigger 8: The GOJ strengthens the legal and regulatory framework underpinned by the 2012 Public Debt Management Act by making effective its supporting regulations which: (i) specify functions and responsibilities of the Ministry of Finance and Planning related to the management of public debt; and 7 The World Bank ICR (P151448 and P163586) (ii) establish guidelines for the management of contingent liabilities. Improving Efficiency of Public Expenditure Tightening Budget Processes and Execution PA5: The GOJ, through its Cabinet, has Trigger 9: The GOJ amends the Financial Number/value of approved a decision to limit virements Administration and Audit Regulation to (i) virements on in the Government budget effective strengthen the performance orientation compensation and capital April 1, 2015, to provide greater of the budget process in the medium-term expenditure predictability in budgetary and (ii) include the new virement policy in FY13/14 Baseline: US$1.9 expenditures. the regulation. billion. 2017 Target: 0. Enhancing Procurement Processes PA6: The GOJ has strengthened Trigger 10: The GOJ makes effective the Annual employee transparency of Government new Procurement Bill. contribution to pension as procurement and allowed the use of e- percent of annual public procurement by tabling a new Trigger 11: The GOJ submits to Parliament sector pension payments Procurement Bill in Parliament. the draft public sector pension reform FY13/14 legislation that helps contain the Baseline: 1.8 percent. budgetary cost of civil service pensions. 2017 Target: 16.2 percent Improving Public Sector Investment Planning and Implementation PA7: The GOJ has amended the Trigger 12: The GOJ, through its Ministry Linkages between Financial Administration and Audit Act of Finance and Planning, completes the investment budget and to establish a Public Investment building blocks for a functioning Public forward expenditure Management System which provides a Investment Management System estimate common framework for the including: (i) setting out the processes and FY13/14 Baseline: C (PEFA preparation, appraisal, approval and methodologies for the PIM system and ii) Indicator P1-12 d iv) management of public investments in establishing key PIM institutions: PIM 2017 Target: B or better Jamaica, irrespective of source of Committee and PIM Secretariat. funding or procurement and implementation modalities. Original Policy Areas Supported by the Program 24. The Programmatic DPL series supported policies aimed at: (i) improving the investment climate and competitiveness; and (ii) sustaining fiscal consolidation and enhancing public financial management. These policies were central elements of the Government’s ongoing reform program. The first pillar supported reforms in the areas of strengthening the investment climate, energy and trade facilitation. The second pillar addressed issues such as fiscal consolidation, pensions, debt management, budget processes and public investment management. (i) PILLAR I. Improving the Investment Climate and Competitiveness The development approval process and building codes 25. The series supported improving the Development Approval Process (DAP) by implementing reforms to expedite the process and make it more transparent and streamlined. Additionally, a key 8 The World Bank ICR (P151448 and P163586) fundamental element to improving the investment climate was the passing of the new Building Act, 2018, which repealed the Kinston and St. Andrew Building Act (1883) and the Parish Council Building Act (1908). 26. An outdated legal and institutional framework governing buildings, construction, and development projects was a key constraint to private investment, job creation and economic growth. Outdated codes had also increased Jamaica’s vulnerability to natural hazards. Many investment activities require obtaining a development or building permit, and the cumbersome process for approving permits deterred or delayed commercial projects that generate employment and economic growth. Approval of applications for commercial projects often took years, with several agencies involved in approving permit requests and each following their own procedures. The paper-based application system was difficult to monitor and manage and fees differed across jurisdictions. The building code and laws governing the built environment, including the 106-year old Parish Council Building Act, were outdated and did not promote energy efficiency, safety, or resilience to natural hazards. Most buildings in Jamaica were designed and built by untrained practitioners and were not aligned with modern construction standards, making the country vulnerable to seismic events and extreme weather, which was expected to become more likely due to climate change. To make matters worse, deficiencies in zoning codes enabled unplanned urban growth in environmentally-sensitive areas. 27. Modernizing the framework for building and development projects was thus an important element of Jamaica’s efforts to improve the investment climate. The private sector estimated that reducing the average time to approve a building or development application to between 2-6 months would significantly bolster economic activity. In response, the Government began to take steps to improve the application approval process. The December 2014 Cabinet Decision 43/14 intensified these efforts by directing ministries and agencies involved in the review process to accelerate the reform process. DPL1 supported the creation of a multi-agency joint technical team made up of planning authorities and National Environment and Planning Agency (NEPA), as well as the piloting of the Applications Management and Data Automation (AMANDA) system by local authorities. By the beginning of 2016, AMANDA was in use in all 14 parishes. In 2016, Cabinet approved measures to further strengthen the multi-agency application review process. The WB-financed Foundations for Competitiveness and Growth Project (P147665) also supported investments in AMANDA and provided technical support to implement these policy reforms. Electricity sector reform 28. In the electricity sector, Jamaican electricity prices were among the highest in the world, due to the dominance of oil-based power generation, small-scale and aging equipment, and high losses. Although reforms had contributed to a decline in electricity prices to approximately US$0.24/kWh by 2014, prices were still higher than global and Latin America and the Caribbean averages. High energy costs were undermining firm competitiveness, notably for Jamaican operators in the highly competitive global tourism industry, which is a main growth driver. Out-dated laws and regulations (some a century old) constrained Jamaica from making the structural shift out of heavy fuel oil and diesel and into more efficient sources that could limit or reduce Jamaica’s Greenhouse Gas (GHG) emissions. Reforming this regulatory framework was central to achieving the national energy policy’s objective of a “modern, efficient, diversified and environmentally sustainable energy sector.” 29. The new Electricity Act included a number of reforms intended to diversify electricity supply and improve efficiency, including: (i) establishing a “ring-fenced” system operator that would transparently 9 The World Bank ICR (P151448 and P163586) dispatch power based on a least-cost basis that would benefit low-cost producers, including renewable energy suppliers; (ii) introducing integrated resource planning for the power sector that would identify the least-cost expansion of generation, transmission, and distribution assets in the system; (iii) supporting the use of renewables to include distributed generation of electricity and net billing; (iv) establishing penalties for theft, which accounted for a large percentage of the country’s high electricity losses; (v) speeding up the process of obtaining electricity by reforming the certification system for electricity connections by outsourcing to private inspectors; and (vi) codifying for the first time the definition of energy efficiency and establishing programs to promote supply-side and demand-side efficiency measures. These measures, together with others outside of the purview of the DPL series, fundamentally reformed the power sector in reducing costs, increasing economic competitiveness and “greening” the economy. To diversify the country’s energy mix and to meet the target of reducing GHG emissions by 7.8 percent by 2030 as set out in Jamaica’s Intended Nationally Determined Contributions, the Government set a goal of increasing the share of renewable sources of energy in its primary energy mix to 20 percent by 2030. This would have been unachievable under the previous electricity policy and legislative framework. Logistics and trade facilitation 30. Jamaica’s proximity to the U.S. market and position astride global shipping lanes present ed economic opportunities that had gone largely unrealized due to weaknesses in the country’s business regulatory environment. Customs clearance times and international trade costs significantly exceeded regional and global averages. Over time, Jamaica’s regulatory framework for economic zones had grown outdated and inconsistent with World Trade Organization rules. Government agencies that should provide transparent and predictable services to facilitate trade, such as standards, had competing regulatory compliance mandates. Physical infrastructure investment requirements exceeded the Government’s available financial resources and over time Jamaican ports lost market share to regional competitors. Consequently, the vast majority of Jamaican firms were operating outside of global value chains. Furthermore, fundamental changes in the international economy had made the 1982 Jamaica Export Free Zones Act a barrier to international integration, due to its rigid requirements on eligible activities, mandatory export volume requirements, and restrictions on supplying the local market. 31. The Global Logistics Hub Initiative (GLHI) was created to attract foreign investment into the country and to help integrate Jamaican firms into global value chains. The GLHI sought to take advantage of the 2016 expansion of the Panama Canal to position Jamaica as a significant player in the global shipping and logistics industry given its central location to several key markets. However, even with the benefits of a good location and a large and deep harbor, Jamaica needed to improve its logistics infrastructure to make the country an attractive and successful hub. It sought to secure several billion U.S. dollars of private investment in logistics infrastructure, overhaul the economic zones regime to attract international businesses to Jamaica, modernize infrastructure quality standards, and improve trade facilitation services. The GLHI also embraced the broader regulatory reform agenda, as well as policies aimed at unlocking Jamaica’s growth potential. 32. Executing the GLHI entailed improvements in: (i) trade gateways; (ii) connectivity; (iii) competition and the associated regulatory framework; and (iv) a collaborative port and logistics community. It also required new or upgraded infrastructure, improvements in customs and the setting up of special economic zones (SEZ). Of these, two anchor investments for the GLHI were concessions for 10 The World Bank ICR (P151448 and P163586) the Kingston Container Terminal (KCT) and the Norman Manley International Airport (NMIA). A third critical anchor investment, the development of the Caymanas Special Economic Zone, was supported by the WB through the FCG Project. Associated legal and regulatory reforms were needed to establish new SEZs in order to link industrial development and logistics services and facilitate small and medium-sized enterprise participation in export industries. (ii) PILLAR 2: Supporting Sustained Fiscal Consolidation and Public Financial Management 33. Fiscal consolidation and debt sustainability were important objectives of this programmatic series. Sustaining a prudent fiscal stance into the future required adherence to fiscal rules, prudent debt management, vigilant monitoring of fiscal risks, and other efforts to contain growth in spending. Fiscal consolidation achieved since 2013 had placed public debt on a downward trajectory. Jamaica had experienced periods of fiscal consolidation and debt reduction in the past, but the authorities had always found it challenging to sustain progress. In addition, the assumption of contingent liabilities—from both public and private enterprises—contributed to the increase in the stock of debt. Fiscal consolidation to that point had been supported by a significant reduction in public expenditure. DPL1 focused on reforms to the budget process and civil service pensions and built on reforms supported in the previous DPL, namely: (i) measures to limit discretion in the reallocation of spending; (ii) measures to begin the adoption of a Medium-Term Expenditure Framework (MTEF); (iii) legislation to implement changes to procurement and civil service pensions; and (iv) the establishment of a public investment management system. Fiscal consolidation and debt management 34. More specifically, the first operation supported amending the Financial Administration and Audit Act to set an aggressive debt reduction target—60 percent of GDP by 2026 (a greater than 50 percent reduction). The amended Act required the GOJ to maintain fiscal balances consistent with meeting that target. The fiscal rule covered fiscal activities defined broadly to include central and local governments and public enterprises. It set limits on user-pay PPPs to reduce government exposure to fiscal risks from PPPs. In addition, the Public Debt Management Act (PDMA) established a ceiling on the stock of public bodies’ debt guaranteed by the Government. Tightening Budget Processes and Execution 35. At inception, Jamaica’s budget flexibility allowed Ministries, Departments and Agencies (MDAs) the autonomy to shift resources to between expenditure lines and areas. While some flexibility to adjust to unexpected developments and events is necessary, near unlimited capacity for MDAs to change the composition of their Parliamentary-approved budget allocations undermined the budget authority of Cabinet and Parliament. The Financial Management Regulation in effect at the time was very liberal in allowing considerable scope for MDAs to reallocate their approved budget appropriations across programmatic and budget lines. A Cabinet decision was effected in the first instance to limit virements and further supported amended legislation to permanently implement and effect this policy change. Human Resources Reform 36. Changes to the public pension system were needed to make it fiscally sustainable in the long term. In the absence of reforms, expenditure on public pensions would have doubled as a percentage of GDP 11 The World Bank ICR (P151448 and P163586) over 30 years, reaching more than 2.2 percent of GDP by 2042. The GOJ committed to implementing a new public sector pension program at the start of the FY2016/17 budget year. The White Paper on Pension Reform, approved in 2013 as part of the previous DPL, outlined several reforms, including increasing the retirement age to 65 (equating it to the National Insurance Scheme), introducing employee contributions, reducing accrual rates and moving away from using the final salary as a basis for calculating pensions in the benefit formula. Translating the White Paper into legislative reforms was underway at inception and a legislative package was expected to be presented for Parliamentary approval in 2015. Enhancing Procurement Processes 37. Enhancements to the public procurement process offered the potential to achieve budgetary savings while promoting transparency. Public procurement represented about J$50 billion, or around 3-4 percent of GDP. However, fragmented procurement processes across MDAs and the lack of a comprehensive law led to inefficiencies in public procurement and drawn out tendering processes. Limited staff capacity further exacerbated procurement difficulties. To address these deficiencies, the Procurement and Asset Policy Unit developed and tabled a comprehensive bill and attendant regulations to bind public entities to specific procurement practice standards. The Public Procurement Bill established the Public Procurement Commission to promote efficiency in public procurement proceedings, the implementation of procurement contracts, as well as to promote transparency and equity in the awarding of contracts. Improving Public Sector Investment Planning and Implementation 38. Jamaica’s systems for managing capital projects were fragmented, hindering the Government’s ability to leverage public investment for growth. Not only were levels of capital spending low, but public investment in Jamaica had made little contribution to growth. One explanation was that investment projects were managed differently according to their funding source. A second was the limited application of feasibility analysis prior to the decision to proceed with implementation. A third was limited implementation capacity. These factors undermined the effectiveness of public investment in supporting growth, as well as compromising accountability and transparency in the use of government resources. 39. Since 2013 in the lead up to this series, Jamaica had significantly strengthened the Public Investment Management System (PIMS). Under the new PIMS, all proposed public investment projects, regardless of funding source, were being screened, approved and managed through an integrated process. This extended across all public entities and sectors, included all types of public sector expenditures (actuals and contingencies), covered all steps and phases in a project’s productive life, ensured that all projects and the overall portfolio were aligned to a larger development purpose, and required that both future capital and recurrent spending associated with investment projects were provided for in budget forecasts. 40. The GOJ was clearly committed to improving the PIMS and had prioritized the strengthening of the Public Sector Investment Program (PSIP) as part of the Public Financial Management (PFM) Action Plan. With technical assistance from the Bank, through a DFID-supported Trust Fund and the Strategic Public Sector Transformation Project, the GOJ improved the PIMS by strengthening procedures, tools, institutions and governance mechanisms. The 2013 DPL supported the first step for a new PIMS by supporting Cabinet approval of the rollout of the new PIMS framework. This DPL series then supported 12 The World Bank ICR (P151448 and P163586) the legal, procedural and institutional amendments needed to fully establish the PIMS. Specifically, the series supported amendment of the Financial Administration and Audit Act (FAA) and the establishment of key institutions, including a PIM Secretariat. The DPL also supported greater harmonization between implementation of traditional public investment and PPP projects. Revised PDO and Key Indicators, and Reasons/Justification 41. The Second DPL maintained the same objectives and pillars, though dropped and modified several prior actions. Several Results Indicators were also reformulated, and some additional indicators added to reflect changes in the supported measures. Table 3 summarizes these changes and later sections explain the justification for these changes. 42. Adjustments to the DPL2 policy matrix from the above described original policy areas were made in response to new developments. Between the time of the first operation and inception of the second, parliamentary elections were held in February 2016, which led to a change of government and reorganization of economic ministries. Four original triggers were dropped to focus the policy matrix on those reforms deemed most essential and critical to realizing the stated development objectives. Table 3 summarizes these changes. 13 The World Bank ICR (P151448 and P163586) Table 3: Summary of Revised Prior Actions and Key Indicators Prior Actions in DPL1 Indicative Triggers in DPL1 Prior Actions for DPL2 Indicators in DPL1 Indicators in DPL2 Prior Action 1: The GOJ, through Trigger 1. The GOJ begins Dropped as a prior action Original Result Indicator: Original indicator its Cabinet, has (i) approved a implementation of the revised Greater accountability in the reworded: Increase in the policy that revises the development approvals process development approvals share of building development approvals process for construction permits by fully process as evidenced by applications approved for issuing construction permits implementing all the short-term 100 percent usage of the within 90 days. by establishing joint teams within components of the revised AMANDA system in LPAs and Baseline: 66 percent planning authorities to expedite policy on development Commenting Agencies. approved within 90 days in processing as needed, approvals including (i) amending Baseline: Four LPAs. 2014Q1. standardizing timelines for as needed the Local Target: All 14 LPAs and Target: 85 percent processing of all categories of Improvements Act and Town Commenting Agencies. approved within 90 days in buildings, and facilitating the and Country Planning Act; 2018Q1. acceptance of certification from (ii) establishing a national policy licensed professionals and for collection of development (ii) started the implementation of application fees and the AMANDA tracking system in (iii) completing the Local Planning Authorities (LPAs) implementation of the AMANDA or Parish Councils. tracking system for construction New Result indicator: permits across all LPAs. Creation of new bodies to implement the Building Act Trigger 2. The GOJ makes Revised as Prior Action 1. The and apply the new national effective a new building code as bill entitled the Building Act, building code. specified in a new Building Act. 2016, which aims to facilitate Baseline: No bodies. efficient application of Target: At least two of the internationally recognized three bodies specified in the building standards, has been Act (i.e., Building approved by Jamaica’s Practitioners Board, Cabinet and submitted to the Building Appeals Board, and Parliament for approval. Building Advisory Council) are created and are operational. 14 The World Bank ICR (P151448 and P163586) Table 3: Summary of Revised Prior Actions and Key Indicators Prior Actions in DPL1 Indicative Triggers in DPL1 Prior Actions for DPL2 Indicators in DPL1 Indicators in DPL2 Trigger 3. The GOJ completes a Kept as Prior Action 2 and Original Result Indicator: Retained as is: Reduction in comprehensive reform of the reworded to: The Electricity Reduction in the energy the energy sector’s legislative framework Act of 2015, which introduces sector’s dependence on dependence on petroleum underpinning Jamaica’s energy a new regulatory framework petroleum as evidenced by as evidenced by the percent sector with effectiveness of the that aims to promote new the percent of electricity of electricity generation new Electricity Act. investment and competition generation using petroleum. using petroleum. in the electricity industry, has Baseline: 94 percent. Baseline: 94 percent. been approved by Jamaica’s Target: 75 percent. Target: 75 percent. Parliament, published in the Jamaica Gazette, and is effective. Prior Action 2: Jamaica, through Trigger 4: The GOJ implements Dropped as a prior action Original Result Indicator: Revised Result Indicator: the Jamaica Customs Agency its PPP Policy by issuing a Improvement in the customs Faster customs clearance as (JCA) has adopted operational Request for proposals for clearance times and costs as measured by the increase in procedures to reduce the time Norman Manley International measured by improvement in the share of shipments taken for clearance of goods at Airport. the Logistic Performance processed and cleared Jamaican ports. Index-Customs Aspect. within 24 hours. Baseline: 2.88 (2014 LPI Baseline: 32 percent. Prior Action 3: The Ministry of Trigger 5: JCA completes Kept as Prior Action 3 with Customs Score). Target: 65 percent. Industry, Investment and implementation of ASYCUDA minor re-wording: The Target: 3.0 Commerce has approved a World in Kingston port as a pilot Automated System for resolution to separate the site and begins implementation Customs Data (ASYCUDA) for regulatory functions of the at other ports. customs clearance, aimed at Bureau of Standards from its facilitating faster clearance of facilitative functions to enhance import and export the Bureau's role in trade transactions, has been facilitation. installed and is operational at all major ports of entry of Jamaica. 15 The World Bank ICR (P151448 and P163586) Table 3: Summary of Revised Prior Actions and Key Indicators Prior Actions in DPL1 Indicative Triggers in DPL1 Prior Actions for DPL2 Indicators in DPL1 Indicators in DPL2 Trigger 6: The GOJ strengthens Revised as Prior Action 4: The New Result Indicator: the regulatory framework Special Economic Zones Act of Increase in the share of free governing the operations of SEZs 2016, aimed at modernization zone operators converted with effectiveness of a new SEZ of the regulatory framework to SEZ operators. Act that does not generate a for economic zones in Baseline: 0 of 120 operators negative fiscal impact. Jamaica, has been approved need to be converted by the Borrower’s Parliament, Target: 40 percent of published in the Official operators converted. Gazette, and is effective. Prior Action 4: The GOJ has Trigger 7: The GOJ improves Kept as Prior Action 5 though Original Result Indicator: Revised Result Indicator: adopted a set of fiscal rules to fiscal transparency by endorsing re-worded as: Jamaica’s Reduction in the public debt Reduction in the public debt strengthen fiscal transparency a Fiscal Risk Statement in the Ministry of Finance and the to GDP ratio. to GDP ratio. and set a target for debt 2015/16 budget that covers all Public Service has prepared Baseline: 141.6 percent of Baseline: 141.6 percent of reduction by approving significant contingent liabilities and published the FY2016/17 GDP. GDP. amendments to the Financial including those emanating from annual Fiscal Risk Statement Target: 125 percent of GDP. Target: 115 percent of GDP. Administration and Audit Act and public bodies and PPPs. to improve the transparency Public Bodies Management and of risks to fiscal operations, Accountability Act. including risks from natural hazards, economic shocks, and contingent liabilities emanating from public bodies and public-private partnerships. Trigger 8: The GOJ strengthens Kept as Prior Action 6 though New Result Indicator: the legal and regulatory re-worded as: A bill entitled Increased transparency of framework underpinned by the the Public Debt Management information on exposure to 2012 Public Debt Management (Amendment) Act, 2016, implicit and explicit Act by making effective its which specifies functions of contingent liabilities from supporting regulations which (i) Jamaica’s Ministry of Finance public bodies. specify functions and and the Public Service units Baseline: No data responsibilities of the Ministry related to debt management published. 16 The World Bank ICR (P151448 and P163586) Table 3: Summary of Revised Prior Actions and Key Indicators Prior Actions in DPL1 Indicative Triggers in DPL1 Prior Actions for DPL2 Indicators in DPL1 Indicators in DPL2 of Finance and Planning related and establishes guidelines for Target: At least 2 reports to the management of public managing contingent published. debt and (ii) establish guidelines liabilities, has been approved for the management of by Jamaica’s Cabinet and contingent liabilities. submitted to the Parliament for approval. Prior Action 5: The GOJ, through Trigger 9. The GOJ amends the Dropped as a prior action. Original Result Indicator: Original indicator revised its Cabinet, has approved a Financial Administration and Greater credibility of the to: Reduced use of decision to limit virements in the Audit Regulation to budgeting process as virements on compensation Government budget effective (i) strengthen the performance evidenced by the and capital expenditure. April 1, 2015 to provide greater orientation of the budget number/value of virements Baseline: J$1.9 billion. predictability in budgetary process in the medium-term; on compensation and capital Target: 0. expenditures. and (ii) include the new expenditures. virement policy into the Baseline: J$ 1.9 billion. New Result Indicator: regulation. Target: 0. Increase in the percentage of public requests for Prior Action 6: The GOJ has Trigger 10: The GOJ makes Dropped as a prior action. tenders published under an strengthened transparency of effective the new Procurement electronic government Government procurement and Bill. procurement system. allowed the use of eProcurement Baseline: 0 percent. by tabling a new Procurement Bill Target: 5 percent of bid in Parliament. proposals at or above the prescribed limit executed through the electronic government procurement system. Trigger 11. The GOJ submits to Kept as Prior Action 7 though Original Result Indicator: Revised Result Indicator: Parliament the draft public re-worded as: A bill entitled Public pension is administered Increased ratio of annual sector pension reform the Pensions (Public Service) through a contributory public service employee legislation that helps contain the Act, 2016, which establishes a pension scheme as evidenced pension contributions to contributory pension scheme by annual employee 17 The World Bank ICR (P151448 and P163586) Table 3: Summary of Revised Prior Actions and Key Indicators Prior Actions in DPL1 Indicative Triggers in DPL1 Prior Actions for DPL2 Indicators in DPL1 Indicators in DPL2 budgetary cost of civil service for public service workers, has contribution to pension as a public service pension pensions. been approved by Jamaica’s percent of annual public payments. Cabinet and submitted to the sector pension payments. Baseline: 4 percent. Parliament for approval. Baseline: 1.8 percent. Target: 12 percent. Target: 16.2 percent. Prior Action 7: The GOJ has Trigger 12. The GOJ, through its Slightly revised and kept as Original Result Indicator: Original indicator dropped. amended the Financial Ministry of Finance and the Prior Action 8. Jamaica has Linkages between investment Administration and Audit Act to Public Service, completes the made operational the Public budgets and forward New Result Indicator: establish a Public Investment building blocks for a functioning Investment Management expenditure estimates as Increased linkage between Management System which Public Investment Management System (PIMS) through measured by the PEFA investment budgets and provides a common framework System including: (i) setting out selection of the Public indicator P1-12, dimension iv. forward expenditure for the preparation, appraisal, the processes and Investment Management Baseline: C. estimates, as shown by approval and management of methodologies for the PIM Committee, appointment of Target: B or better. presenting projections of public investments in Jamaica, system; and (ii) establishing key the Executive director of the the total cost of major irrespective of source of funding PIM institutions: PIM PIM Secretariat, and approval investment projects, or procurement and Committee and PIM Secretariat. of the PIMS Operational together with a year-by- implementation modalities. Guidelines. year breakdown of the capital costs and estimates of the recurrent costs for the next five years, in the annual public sector investment program documents. Baseline: Only capital cost projections are presented. Target: Both recurrent and capital cost projections are presented for at least 50 percent of projects. 18 The World Bank ICR (P151448 and P163586) 43. Trigger 1 in DPL1 was dropped in response to new developments. Component (i) was dropped as the authorities determined that it was no longer needed. After reviewing MLGCD’s drafting instructions for amendment of the Local Improvements Act and the Town and Country Planning Act (to allow electronic submission of applications), the Chief Parliamentary Counsel determined that these laws did not need to be amended, as the Electronic Transactions Act already provided the necessary basis for electronic submission. The Office of the Prime Minister confirmed this finding. In terms of component (ii) the elections that occurred between the first and second operations and the resultant government reorganization introduced a pause in the preparation of the fee policy and led to new thinking about its content. While component (iii) was completed in December 2015 when all parishes began using AMANDA, this component alone did not represent a sufficiently critical policy reform in the absence of the other components. In order to expedite the multi-agency process for reviewing and approving applications (which was established as a prior action of DPL1), Cabinet revamped the technical review team in November 2016, and the Minister of Economic Growth and Job Creation approved new operational policies for the team. The accompanying result indicator was changed from measuring implementation (number of parishes using AMANDA) to an outcome-based indicator (increase in speed of approval), which seemed more appropriate and a better measure of success. These changes appear fully justifiable as two of the three components were no longer required, and the third was delayed following elections and a change in government. However, these developments could perhaps have been anticipated at inception, i.e., that the Local Improvements Act and the Town and Country Planning Act did not require amendment to facilitate electronic submission and that component (iii) was not critical. 44. Trigger 2 in DPL1 concerning Building Codes was modifed and became Prior Action 1 in DPL2, as the milestone changed from the more ambitious passage of the Act to submission in Parliament. This was necessary given the delay resulting from the change of government and the dissolution of Parliament, which necessitated revision of the bill, resubmission and subsequent review by the new parliament. The bill was revised to strengthen enforcement, thus increasing the likelihood that the legislation’s contribution towards an improved investment climate would be realized. The bill was tabled in Parliament on December 6, 2016. Passage of the Building Act was a disbursement condition of the Disaster Vulnerability Reduction Project. A result indicator related to this action was added as no indicator was specified in DPL1. Again, this minor change is considered justifiable owing to the change in government and the resultant delay. Nonetheless, the intention of the action was retained and while submission to Parliament can be considered a weaker action than approval by Parliament, the original intention was retained and the revised action demonstrated continued commitment to the action by the new Government. 45. Trigger 3 in DPL1 involving the Electricty Act was reworded as Prior Action 2 in DPL2 to improve clarity. The Act became operational in August 2015 and the GOJ promulgated grid codes in 2016. The result indicator remained as formulated in DPL1. The change in wording significantly strengthened the action as it moved it from a relatively vaguely worded “comprehensive reform of the legislative framework” to a more precise “The Electricity Act of 2015, which introduces a new regulatory framework that aims to promote new investment and competition in the electricity industry, has been approved by Jamaica’s Parliament, published in the Jamaica Gazette, and is effective.” 46. Trigger 4 in DPL1 on the PPP policy was dropped as a Prior Action in DPL2 to focus this part of the operation on trade facilitation policy reforms rather than on PPPs. In addition, in proceeding to the second operation the team decided that executing a single PPP transaction did not represent a critical policy reform. This was an appropriate decision as the issuance of a call for proposals for a specific public 19 The World Bank ICR (P151448 and P163586) investment does not constitute a policy change, despite the fact that such an investment could have far reaching implications. A call for proposals, which would eventually lead to a contractual arrangement, PPP or otherwise, is typically not considered appropriate for a DPL-type operation, and this should have been identified as problematic at inception and not included in the policy matrix. 47. Trigger 5 in DPL1 was retained as Prior Action 3 in DPL2. The supported measure was adjusted to reflect full operation of ASYCUDA at all major ports of entry. This action was achieved in April 2016 with JCA notification that ASYCUDA World was required for all import and export declarations. The related result indicator proposed in DPL1 (increase in the Logistics Performance Indicator score) was replaced with a measure of faster customs clearance, as this measure corresponds more closely with the action and is measured more frequently. 48. Trigger 6 in DPL1 was revised as Prior Action 4 in DPL2 by deleting reference to the fiscal effects of the SEZ Act (i.e., avoiding any negative fiscal effect) as the team determined that the fiscal impact of the reform would not be measurable for several years and therefore, was not contemporaneous with the taking of the action. The SEZ Act supported by this action was passed on February 15, 2016 and became effective August 1, 2016. A result indicator measuring the increase in the share of free zone operators converted to SEZ operators was added as none had been specified in DPL1. Rewording the action significantly increased clarity and the newly formulated action was more substantive than the origianlly identified trigger. Furthermore, adding a new result indicator strengthened the results framework. 49. Trigger 7 in DPL1 further strengthening the Fiscal Responsibility Framework was retained as Prior Action 5 in DPL2 with minor rewording to improve clarity. The MOFPS presented the 2016 Fiscal Risk Statement to Parliament in April 2017 as part of the FY2016/17 Fiscal Policy Paper. The 2016 statement presented a comprehensive picture of upside and downside risks to the sustainability of the fiscal stance embodied in the FY2016/17 budget. The result indicator was revised to increase the level of ambition on the debt to GDP ratio from a target of 125 percent to a more ambitious target of 115 percent. 50. Trigger 8 in DPL1 on public debt management was revised and retained as Prior Action 6 in DPL2. This action was reworded to reflect the change in instrument from regulations issued under the Act to an amendment of the Act itself and the milestone was changed from passage to submission. The bill amending the PDMA was tabled in Parliament in December 2016 and passage was expected by early 2017. In anticipation of its passage, MOFPS re-organized its Debt Management Unit into front-, middle- and back-offices, and developed a framework for compiling data on public bodies’ financial operations. A new indicator concerning the reporting of implicit and explicit contingent liabilities was included to capture the result associated with this measure. While changing the action to “submission” of amendments to the PDMA to Parliament appears to weaken the action, as submission does not guarantee approval or implementation, the original trigger was similarly weak in its formulation and somewhat vague. Given the commitment of the Government to reorganize its Debt Management Unit in anticipation of the proposed legislation, this action could be considered to have substantially achieved its objective as stated in the new indicator and represents a significant improvement in debt management capacity in Jamaica. 51. Trigger 9 in DPL1 was dropped from DPL2, although the trigger was achieved. Despite implementation, the reform was dropped as a prior action as the measure made a less fundamental change to how Jamaica conducts fiscal policy than other measures in the matrix and was not considered a critical policy reform. This should probably have been determined as non-critical at inception. Given that the operation already included eight prior actions, it was deemed that this measure could be dropped 20 The World Bank ICR (P151448 and P163586) with little impact on the effectivenes of the operation. Nonetheless, the virement policy was incorporated into Financial Management Regulations issued in 2015, and the budget process was revised as intended. The result indicator was retained with modest re-wording, as Prior Action 5 in DPL1 contributed to the achievement of this result. The advisability of dropping this action and considering it non-critical could be questioned, in hindsight. The prior action under the first operation limited virements for a single year and the trigger appeared intended to regularize this practice by introducing binding regulations to that effect. As of the writing of this ICRR, virements continue, though to a greatly reduced extent. The dropping or retention of triggers/actions should be premised on their criticality and not on the number of actions included under an operation. Whether the operation consisted of 8, 9 or 10 actions is of considerably less import than the content, coherence and cohesiveness of those actions supported. 52. Trigger 10 in DPL1 was dropped from DPL2. While the Procurement Act was passed by Parliament in September 2015 and signed in October 2015, which reflected the stated action in DPL1, it was not to become effective until the accompanying implementing regulations were approved, which were not expected until March 2018 and as such, the trigger worded as, “The GOJ makes effective the new Procurement Bill”, in addition to being imprecisely worded, would not have been achieved in time . Nonetheless, to follow through on the original action concerning passage of the Procurement Act and to ensure its effectiveness as originally envisioned by the trigger, the WB subsequently provided technical advice in drafting the regulations and the IDB financed work to roll out the eProcurement system, as well as providing capacity building for procurement officials. As such, the intention behind the original trigger was largely achieved through other means. A new result indicator was added to reflect e-procurement results emanating from the prior action on procurement included in DPL1, which did not have an associated result indicator in the original formulation. Inclusion of a new result indicator corrected this oversight. 53. Trigger 11 in DPL1 was retained as Prior Action 7 in DPL2, though reworded for clarity. The pension reform bill was resubmitted to Parliament in July 2016 and the Lower House passed the bill on April 5, 2017. Rewording of the action improved clarity and made the action more substantive. The result indicator was revised to reflect updated baseline information and a more realistic target, though this indicator in hindsight has proven to be problematic as explained further in the document. 54. Trigger 12 in DPL1 was retained as Prior Action 8 in DPL2, with minor rewording for clarity. The PIM Committee began operating in 2015. New members were appointed in May 2016. The PIMSEC Director was hired in 2015 and key staff positions were filled in 2016. Cabinet approved policies governing PIMS operations in December 2016. The original results indicator for this action was dropped and replaced by a new indicator. This was an appropriate revision to the result indicator as the original indicator reflecting PEFA scores was potentially problematic given: (i) the PEFA methodology changes, rendering comparison across PEFA scores inappropriate; and (ii) including PEFA scores as an indicator requires the completion of a PEFA, which happens only infrequently. These problems were recognized and the result indicator was changed to reflect the inclusion of both capital costs and their associated recurrent expenditure estimates in the budget, a more direct measure of the effectiveness of the PIMS. Other Significant Changes 55. The second operation in the series was initially submitted to the Board in January 2017 as a policy- based guarantee (PBG) of US$150 million to support commercial bank loans of up to US$300 million . The Bank and the MOFPS originally agreed to use a PBG financing instrument because it enabled Jamaica 21 The World Bank ICR (P151448 and P163586) to obtain a larger stock of budgetary financing using its IBRD resources than would have been possible through a DPL given IBRD’s credit allocation rules and the level of the country’s outstanding IBRD debt. An additional benefit included diversifying the sources of external debt away from Eurobonds (which had grown to over half of external public debt). However, prior to Board discussion in February 2017 the Government requested that the PBG be withdrawn from Board consideration and the operation converted into a DPL based on its assessment of market conditions. The Bank complied with this request and resubmitted the operation to the Board in May 2017 as a traditional DPL operation. The program documents for the PBG and DPL—including the policy matrix and Letter of Development Policy—were essentially the same, apart from the choice of financing instrument. 56. World Bank Treasury and Jamaican MOFPS officials took market soundings at several points during preparation of the operation. These indicated that an IBRD-guaranteed loan could be obtained at terms that were more attractive than the combination of an DPL and a Eurobond at interest rates that were prevailing in the market. However, the spread on Jamaican Eurobonds over LIBOR compressed at the end of 2016, which redcuced the advantages associated with a PBG. Although several banks made bids that would have provided IBRD-guaranteed loans to Jamaica at a lower cost than the combination of a DPL and Eurobond, the MOFPS did not find the savings sufficiently attractive to proceed with a PBG. KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOMES Program Performance 57. This programmatic series of two operations consisted of two single-tranche DPLs disbursed upon effectiveness, in a total amount of US$145 million. Table 4 provides key milestones for the DPL series. Table 4: Key Dates of the Programmatic DPL Operation Approval Effectiveness Disbursed Amount Closing Date DPL1 March 03, 2015 March 12, 2015 US$70 million December 31, 2015 DPL2 June 8, 2017 July 13, 2017 US$75 million June 30, 2018 58. Overall, program performance was satisfactory, with some shortcomings. Macroeconomic performance improved significantly over the operational period, as debt levels fell and fiscal performance improved markedly. Most indicators met their targets, albeit with some delay, and most reforms were implemented as planned (Table 5). Of the 11 updated and final indicators as approved under DPL2, 7 targets were achieved and 4 were not achieved. Table 5 presents the main elements of the Program, including the Prior Actions (PA), the baseline values, results indicator targets, the value achieved at completion, and the outcomes of the indicators. 22 The World Bank ICR (P151448 and P163586) Table 5: Mapping of Prior Action, Value achieved at Completion of Target Years and Current Status Actions across both operations Indicator Value achieved at Completion of Target Years/ Baseline Value/ End Targets Current Status Pillar 1- Improving Selected Investment Climate and Competitiveness- Related Conditions to facilitate Private Sector Investment PA1 DPL1: Jamaica, through its Cabinet, has Indicator: Increase in the share of Target met and exceeded: 89.9 percent of the building applications (i) approved a policy that revises the development building applications approved were approved within 90 days as at June 2018. approvals process for issuing construction permits within 90 days. by establishing joint teams within planning Baseline: 66.0 percent approved authorities to expedite processing as needed, within 90 days in 2014 Q1. standardizing timelines for processing of all Target: 85.0 percent approved within categories of buildings, and facilitating the 90 days in 2018 Q1. acceptance of certification from licensed professionals and (ii) started the implementation of the AMANDA tracking system in the Local Planning Authorities (LPAs) or Parish Councils. PA1 DPL2: The bill entitled the Building Act, 2016, Indicator: Creation of new bodies to Target was not met: Members of the respective Boards had been which aims to facilitate efficient application of implement the Building Act and apply identified and advised and the Terms of References had been internationally recognized building standards, has the new national building code. developed. However, all board complements and appointments were been approved by Jamaica’s Cabinet and submitted Baseline: No bodies. not completed until March 11, 2019. to the Parliament for approval. Target: At least two of the three bodies specified in the Act (i.e., Building Practitioners Board, Building Appeals Board and Building Advisory Council) are created and are operational. PA2 DPL2: The Electricity Act of 2015, which Indicator: Reduction in the energy Target met and exceeded: Electricity generated using petroleum in introduces a new regulatory framework that aim to sector’s dependence on petroleum 2018 was 66.0 percent. promote new investment and competition in the as evidenced by the percent of electricity industry, has been approved by Jamaica’s electricity generation using Parliament, published in the Jamaica Gazette and is petroleum. effective. Baseline: 94.0 percent. Target: 75.0 percent. 23 The World Bank ICR (P151448 and P163586) Table 5: Mapping of Prior Action, Value achieved at Completion of Target Years and Current Status Actions across both operations Indicator Value achieved at Completion of Target Years/ Baseline Value/ End Targets Current Status PA2 DPL1: Jamaica, through the Jamaica Customs Indicator: Faster customs clearance Target met and exceeded: 69.2 percent of the Agency (JCA) has adopted operational procedures as measured by the increase in the declarations/shipments were cleared within 24 hours on average (as to reduce the time taken for clearance of goods at share of shipments processed and measured over the period Jan – Oct 2018). Jamaican ports. cleared within 24 hours. Baseline: 32.0 percent. PA3 DPL2: The Automated System for the Customs Target: 65.0 percent. Data (ASYCUDA) for customs clearance, aimed at facilitating faster clearance of import and export transactions, has been installed and is operational at all major ports of entry of Jamaica. PA3 DPL1: The Ministry of Industry, Investment and Indicator: Increase in the share of Target was not met: Since passage of the Special Economic Zone Commerce has approved a resolution to separate free zone operators converted to SEZ regulations in September 2017, JSEZA has completed the transition of the regulatory functions of the Bureau of Standards operators. 5 out of 109 companies or 4.6 percent from free zone to Special Zone from its facilitative functions to enhance the Baseline: 0 of 120 operators need to Operators. A further 11 companies have begun the transition process Bureau's role in trade facilitation. be converted. by submitting the relevant documentation, which is currently being Target: 40.0 percent of operators reviewed by JSEZA. JSEZA is in the process of rolling out a Transition PA4 DPL2: The Special Economic Zones Act of 2016, converted. Plan that will see 109 companies, should they choose to do so, aimed at modernization of the regulatory transitioning to the SEZ regime. framework for economic zones in Jamaica, has been approved by Jamaica’s Parliament, published in the Note: The Special Economic Zone Act allows existing Free Zone Jamaica Gazette, and is effective. companies to retain their Free Zone fiscal benefits until December 31, 2019 and this may have limited conversion. Pillar 2- Supporting Sustained Fiscal Consolidation and Enhancing Public Financial Management PA4 DPL1: The GOJ has adopted a set of fiscal rules Indicator: Reduction in the public Target was met: As at March 2018 the public debt to GDP was to strengthen fiscal transparency and set a target debt to GDP ratio. 101.1 percent. for debt reduction by approving amendments to the Baseline: 141.0 percent. Financial Administration and Audit Act and Public Target: 115.0 percent. Bodies Management Act. PA6 DPL2: A bill entitled the Public Debt Management (Amendment) Act, 2016 which specifies functions of Jamaica’s Ministry of Finance 24 The World Bank ICR (P151448 and P163586) Table 5: Mapping of Prior Action, Value achieved at Completion of Target Years and Current Status Actions across both operations Indicator Value achieved at Completion of Target Years/ Baseline Value/ End Targets Current Status and the Public Service (MOFPS) units related to debt management and establishes guidelines for managing contingent liabilities, has been approved by Jamaica’s Cabinet and submitted to the Parliament for approval. PA5 DPL2: Jamaica’s Ministry of Finance and the Indicator: Increased transparency of Target was met: Two (2) Reports on Contingent Liabilities were Public Service has prepared and published the FY information on exposure to implicit published on the MOFPS Website. 2016/17 annual Fiscal Risk Statement to improve and explicit contingent liabilities http://www.mof.gov.jm/documents/documents- the transparency of risks to fiscal operations, and from public bodies. publications/document-centre/file/1705-goj-guaranteed-loans- contingent liabilities emanating from public bodies Baseline: No data published report-290318.html and public-private partnerships. Target: At least 2 reports published http://www.mof.gov.jm/documents/documents- publications/document-centre/file/1706-goj-guaranteed-loans- report-oct-dec-2017-290318.html PA5 DPL1: Jamaica’s Cabinet has approved a Indicator: Reduced use of virements Target was not met: Virements are permitted on capital expenditures decision to limit virements in the government on compensation and capital and are regularized in the subsequent Supplementary Estimates budget effective April 1, 2015 to provide greater expenditure. within the financial year. However, virements are no longer allowed predictability in budgetary expenditures. Baseline: J$1.9 billion. in compensation of employees. Target: 0. PA6 DPL1: The GOJ has strengthened transparency Indicator: Increase in the percentage Target met and exceeded: The total number of bid proposals of government procurement and allowed the use of of public requests for tenders executed through the electronic government procurement system in e-procurement by tabling a new Procurement Bill in published under an electronic 2018 was 1,113 which represents 100 percent of total bid proposals. Parliament. government procurement system. Baseline: 0. Target: 5.0 percent of bid proposals at or above the prescribed limit executed through the electronic government procurement system. 25 The World Bank ICR (P151448 and P163586) Table 5: Mapping of Prior Action, Value achieved at Completion of Target Years and Current Status Actions across both operations Indicator Value achieved at Completion of Target Years/ Baseline Value/ End Targets Current Status PA7 DPL2: A bill entitled the Pensions (Public Indicator: Increased ratio of annual Target was not met: At the time of program design, Pension Reform Service) Act, 2016 which establishes a contributory public service employee pension was expected in 2016. However, due to the elections and delayed pension scheme for public service workers, has contributions to public service passage of the Bill the reform was implemented in April 2018. It been approved by Jamaica’s Cabinet and submitted pension payments. stipulated that civil servants who were contributing 4.0 percent (a to the Parliament for approval. Baseline: 4.0 percent. small number of civil servants at the time) would begin contributing Target: 12.0 percent. 1.0 percent in 2018. All other public sector workers as part of the pension arrangement would also begin contributing 1.0 percent each year until their contribution reached 5.0 percent. In 2018/19 employee contributions represented 2.4 percent of total payments below the indicative target of 12 percent. However, as of April 2019 all civil servants were now contributing 2 percent of earnings to the pension plan, so this ratio is increasing. PA7 DPL1: The GOJ has amended the financial Indicator: Increased linkage between Substantively met: Capital costs are clearly captured in the Capital Administration and Audit Act to establish a Public investment budgets and forward Budget. However, recurrent costs are not included in the PSIP though Investment Management System which provides a expenditure estimates, as shown by planning is done for recurrent costs at the design stage. Also, a common framework for the preparation, appraisal, presenting projections of the total three-year estimate is undertaken for the Recurrent Budget. As such, approval and management of public investments in cost of major investment projects, both capital and recurrent costs are presented for all capital projects Jamaica, irrespective of source of funding or together with a year-by-year though not necessarily together in the PSIP. procurement or implementation modalities. breakdown of the capital costs and estimates of the recurrent costs for PA8 DPL2: Jamaica has made operational the Public the next five years, in the annual Investment Management System (PIMS) through public sector investment program selection of the Public Investment Management documents. Committee, appointment of the Executive director Baseline: Only capital cost of the PIM Secretariat, and approval of the PIMS projections are presented. Operational Guidelines. Target: Both recurrent and capital cost projections are presented for at least 50.0 percent of projects. 26 The World Bank ICR (P151448 and P163586) Major Factors Affecting Implementation 59. The Government had been implementing relatively robust policy reforms in-line with the IMF and broader donor supported program since 2013. This substantive reform momentum continued largely unabated throughout the period of this programmatic series. Adjustments to the DPL2 policy matrix were proposed and implemented not in response to changing reform priorities or changes in ambition, but rather in response to new developments in Jamaica, most notably the February 2016 parliamentary elections, the resultant change of government, and a reorganization of ministries. The continued commitment to meaningful reform through this rather extended period was a major factor affecting implementation and contributed substantively to the results achieved. 60. The Parliamentary elections and change of government, which occurred after approval of the first operation but before the second, temporarily slowed progress on all actions involving legislation. As is typical following a change in government, bills that had been tabled but not passed before the elections (prior actions 1 and 7 in DPL2) had to be resubmitted to the new Parliament. Despite the new Government maintaining reform ambition and commitment, the parliamentary transition and the reorganization of economic ministries slowed work on preparation of new legislation (prior action 6 in DPL2) and implementation of enacted legislation (prior action 4 in DPL1, as well as trigger 10). In response, measures involving Parliamentary approval were replaced with submission to Parliament—prior actions 1 and 6 in DPL2. Results from these prior actions were nonetheless realized. 61. Some supported measures benefited from complementary Bank investment and technical assistance operations, such as: passage of the Building Act, which was also a disbursement condition under the Disaster Vulnerability Reduction IPF; the Foundations of Competition and Growth IPF helped finance implementation of the SEZ Act (prior action 4 in DPL2); and MOFPS, benefiting from TA, made preparations to implement the new public employees’ pension scheme and the PDMA (prior actions 6 and 7 in DPL2) as soon as those laws were enacted. 62. In addition, the coordinated broader multilateral support and coherent multilateral policy dialogue effort contributed significantly to the achievement of results . In the past, Jamaica had experienced several start/stop reform efforts, particularly with IMF programs. The closely coordinated effort and support on the part of the IMF, WB and IDB assured commonality in messaging, substantive delivery of financial resources and enhanced incentives to maintain reform progress and momentum. While not necessarily reflected directly in established indicators, this coherent and consistent policy dialogue environment significantly enhanced program effectiveness and the achievement of results. Such consistency in messaging, substantive financing and coherence across programs, effectively supported the authorities in maintaining full commitment to the reform program based on previous experience. Monitoring and Evaluation (M&E) Design, Implementation and Utilization Design 63. MOFPS, which received the budgetary support, had responsibility for the coordination and monitoring to ensure completion of the prior actions under the DPL. Monitoring and evaluation was to be supported by various ministries. In addition, as mentioned above, the WB had an active lending program in Jamaica in several of the areas included in the DPL and the monitoring of DPL indicators was strengthened and effectively monitored through other WB projects, monitoring which should continue through other WB programs. 27 The World Bank ICR (P151448 and P163586) Expected Next Phase/Follow-up Operation 64. A new development policy operation, the Jamaica Greater Economic Resilience Development Policy Loan in the amount of US$70 Million is being prepared. This new operation builds on the recognized success of these previous operations and the substantive progress achieved by Jamaica. The new operation aims to: (i) support fiscal sustainability and inclusion; (ii) enhance fiscal and financial resilience against climate and natural disaster risks; and (iii) improve the investment climate necessary for sustainable growth. These three pillars closely complement one another and are aligned with both the Government’s program and several ongoing WB operations. Further, they will build on the pillars supported under the presently evaluated program of: (i) improving the investment climate and competitiveness; and (ii) sustaining fiscal consolidation and enhancing public financial management; while adding the strengthened resilience to climate and natural disasters element. More specifically, some of the reforms supported under the newly planned operation closely follow previously supported measures, such as; measures to further strengthen budget planning, passage of a new Customs bill, passage of a new Building Act and land titling reform—all of which were initiated under the series being evaluated in this ICRR. ASSESSMENT OF OUTCOMES Relevance of Objectives, Design and Implementation Overall Relevance Rating: High Objectives: High 65. The objectives of the Competitiveness and Fiscal Management DPL series were highly relevant when the operation was appraised, and they remained relevant throughout the period of the operation. The main challenges facing the Jamaican economy at the time were its weak economic growth and the dire fiscal situation, both of which fed into and were aggravated by the heavy debt service burden. Through the stated objectives of (i) improving the investment climate and competitiveness, and (ii) sustaining fiscal consolidation and enhancing public financial management, the DPL series directly supported government reforms, which sought to remove impediments to economic growth and fiscal sustainability and hence address the most critical constraints. The series supported the necessary fiscal consolidation and stronger fiscal management to effect debt reduction, as well as a reorientation of policies to stimulate private investment. All components of the DPL were consistent with the Government’s priorities and reform program and were also supported by the IMF and IDB. As such, the series focused on the most critical constraints facing the Jamaican economy at the time and directly supported government efforts in addressing those constraints, the most important being fiscal consolidation and debt reduction. 66. The proposed operation was also fully aligned with the FY2014/17 Country Partnership Strategy (CPS). The CPS for Jamaica (Report Number 85158), which was discussed by the Board in April 2014, focused on building conditions for broad based private sector-led growth, improving public sector efficiency and reducing vulnerability. The two pillars of the DPL matched the strategic objectives identified in the CPS, and the reform program addressed several of the key sectors contributing to CPS targets. Furthermore, the programmatic series was closely integrated with IPFs and NLTA activities. Several of 28 The World Bank ICR (P151448 and P163586) these supported the preparation of policy measures that were included as prior actions in the proposed operation and several supported effective implementation of such actions and policy reforms. This close collaboration across programming and coherence in objectives helped in the design of a strong DPL program and ensured achievement of proposed outcomes. Relevance of Design: Substantial 67. As noted, the design of the program addressed key development challenges and incorporated, built on and was supported by previous ESW work and extensive TA. At first impression, it could be argued that the series’ design was unduly broad, focusing on identified areas that included: development approval processes; electricity production; logistics and trade facilitation; fiscal consolidation and debt management; budget processes and execution; public procurement; and public sector investment planning and implementation. However, each of these areas included typically one action and/or trigger, occasionally two, and the supported actions were clearly focused on the key constraint in that area. As such, while appearing broad, the series in reality was tightly focused on the key constraints in each of the two pillars. The actions were further focused on issues and reforms where complementary Bank activities were already working, and substantive knowledge work had been undertaken. In this respect, the operation was also tightly focused on areas where the Bank had an operational comparative advantage that facilitated the effective design and implementation of supported reforms. 68. The design also ensured that the programmatic series consolidated and built on successful authorities’ efforts that had been previously initiated. As part of a substantive reform effort, given the depth of the existing growth, debt and fiscal crisis, the series focused on those reform measures that already had broad acceptance, significant government commitment, had been pursued or considered for some time, and which were integral to the ongoing reform effort. In this regard, the series was not an independent, or stand-alone, initial reform effort, but rather formed part of a coordinated and ongoing reform effort that was specifically designed to fill gaps and support an existing reform program in those areas where the Bank was considered best-placed. 69. Some weakness in design could be acknowledged in the design of the results framework . Significant changes in the indicators between operations, both in terms of the indicators themselves and how they were stated, as well as in the expected results, indicate that they could have been better identified and strengthened at the initial design stage; notwithstanding that the modifications were largely justified and clearly improved the results framework. 70. A final element of the design is that the series built on a coordinated and strongly supported international donor effort, both by bilateral and multilateral institutions. As noted, the IMF and IDB had similar large programs and the Bank’s design took into consideration the support, both financial and technical, being provided by the broader donor community. This helped ensure that all important areas were covered, that each institution brought to bear its respective comparative advantages, and that the broader comprehensive program was coherent, substantive and comprehensive. This was a key element in the success of the program as achieving high-level goals such as strengthening growth performance and reducing debt, are dependent on many factors and can rarely, if ever, be attributed to single interventions by an individual donor. The depth of the crisis, its complexity and the challenges involved required a substantive, comprehensive and coherent approach that could only be achieved through effective 29 The World Bank ICR (P151448 and P163586) collaboration and coordination. Furthermore, joint support of the program by all the major multi-lateral players supported and reinforced the Government’s commitment and ownership of the program. Relevance of Implementation: Substantial 71. Flexibility in implementing the program was an important factor, as the team successfully adjusted the program where needed to reflect changing circumstances. For example, despite the change in government that occurred during implementation of the series, the team responded to changing circumstances in a manner that effectively ensured the continued implementation of planned reforms and the achievement of objectives. 72. Supervision and implementation support missions were regularly scheduled. The team undertook at least five support missions following the approval of DPL1 and in advance of DPL2. These missions supported the supervision and ongoing implementation of DPL1 as well as the preparation of DPL2. These missions were well-documented and related aide memoires and back-to-office reports identified key achievements and areas and issues where ongoing follow-up was needed. Correspondence with the relevant authorities followed such missions in pursuit of ensuring the completion, implementation and effective application of supported reforms. Indicators were tracked and progress towards expected results were monitored and the included in BTORs and the ISR. The level, quality and depth of engagement, as well as the associated policy dialogue, was highly appreciated by the authorities as expressed in their feedback. Achievement of Program Development Objectives Efficacy Rating: Modest 73. The efficacy ratings for both PDOs “improving the investment climate and competitiveness” and “sustaining fiscal consolidation and enhancing public financial management” are rated modest. The efficacy rating of modest is based on the achievement of most of the stated objectives as measured by the results indicators. While the broader achievement in facilitating fiscal consolidation, reducing the debt burden, and improving macroeconomic stability and certainty was highly significant and impressive, the rating is tempered by the failure to meet 4 of 11 results indicators. Results were presented in Table 5 and summarized in Table 6. Most indicators were met by the target date, or in some cases slightly subsequent to the stated target date. In accordance with the Implementation Completion and Results Guidelines, this section discusses the achievements of each Development Objective and presents the Results Indicator targets and their status at the end of the Program. In the following paragraphs, the assessment of achievement of objectives is organized by PDOs. Of the 11 indicators approved under DPL2: • 7 targets were achieved (7/11); • 4 were not achieved (4/11). 30 The World Bank ICR (P151448 and P163586) Table 6: Summary of Targets Achieved/Not Achieved by PDO Not PDOs Achieved Total Achieved Pillar 1 3 2 5 Pillar 2 4 2 6 Total 7 4 11 Pillar 1: Results Achieved in Improving the Investment Climate and Competitiveness: 74. Achievement under Pillar 1 is considered substantial. Stronger growth and greater macroeconomic stability and certainty, in combination with the implementation of supported reforms have improved the investment climate and competitiveness. While Jamaica’s Doing Business ranking has fallen as other countries have made greater progress, Jamaica has improved specifically in the areas targeted by this operation. DB2016 specifically noted, “Dealing with Construction Permits: Jamaica made dealing with construction permits easier by implementing a new workflow for processing building permit applications.” DB2017 noted, “Trading Across Borders: Jamaica reduced the time for documentary compliance for importing by implementing a web-based customs data management platform.” Improvement in the overall macroeconomic environment has been a positive factor in strengthening the investment climate. 75. More specifically, of the five indicators for this PDO, three targets were achieved, while two were not achieved. Of those met, improvement has been made in increasing the share of building applications approved within 90 days, reducing the percentage of electricity generated using petroleum, and in the increase in the share of shipments processed and cleared within 24 hours. Of those not met: modest performance was observed in the creation of new bodies to implement the Building Act and in the application of the new national building code; and negligible progress was made in the share of free zone operators converted to special economic zone operators. 76. Significant progress has been made in the share of building applications approved within 90 days. This target was met and exceeded. With the revised policy areas in DPL2, the accompanying result indicator was changed from measuring implementation (number of parishes using AMANDA) to an outcome-based indicator (increase in speed of approval), which seemed more appropriate and a better measure of success. As at June 2018, 89.9 percent of building applications were approved within 90 days against a target of 85 percent. Construction permits are being well-tracked and process delays have been reduced. 77. The creation of new bodies to implement the Building Act and apply the new national building code target was not met as of June 2018. However, as of June 2018, significant progress had been made toward the creation of at least two of the three bodies specified in the Act. While members of the respective Boards had been identified and advised, and the Terms of References developed, the appointment of members did not occur until March 11, 2019. 78. The reduction in the percentage of electricity generated using petroleum was substantial and exceeded the targeted value. For 2018, electricity generated by petroleum had declined from 94 percent to 66 percent, 9 percentage points below the targeted value of 75 percent. This was achieved as a result of the introduction of LNG and the recent investment in renewable energy to include solar and additional 31 The World Bank ICR (P151448 and P163586) wind generation capacity. This achievement reflects an important step forward in strengthening the energy sector regulatory framework. The reduction of petroleum as a primary input in electricity generation should enable the replacement of outdated generation capacity, reduce electricity costs and tariffs by facilitating the use of alternative fuel sources and improve the reliability and financial strength of the power system. 79. Faster customs clearance, as measured by the increase in the share of shipments processed and cleared within 24 hours increased from a baseline of 32 percent to 69.2 percent in 2018 and met the target, achieving a value 4.2 percentage points above the target value of 65 percent. With respect to documentary review by Customs, i.e., checking of all documents prior to the Customs Broker approaching for physical examination, in 2018 79.36, 81.93, 83.38 and 86.28 percent were completed respectively within 6, 12, 18 and 24 hours of payment and registration. Currently (2019) 85 percent of goods declarations are processed within 24 hours from the point of lodgment to the point when all Control Results functions are executed. The original result indicator proposed in DFL1 (increase the Logistics Performance Indicator score) was replaced with a measure of faster customs clearance as this measure more closely corresponded with the action and is measured more frequently. 80. The increase in the share of free zone operators converted to special economic zone operators demonstrated negligible progress. Since the passage of the Special Economic Zone regulations in September 2017, the Jamaica Special Economic Zone Authority (JSEZA) has completed the transition of only five out of 109) companies or 4.6 percent of firms from free zone to Special Economic Zone Operators. A further 11 companies have begun the transition process by submitting the relevant documentation which is currently being reviewed by the JSEZA team. JSEZA is in the process of rolling out a Transition Plan that will see all 109 companies, should they choose to do so, transitioning to the SEZ regime. However, the Special Economic Zone Act allows existing Free Zone companies to retain their Free Zone fiscal benefits until December 31, 2019, which presently provides little incentive to transition. Therefore, companies cannot be lawfully compelled to transition to SEZ early. Pillar 2: Results for Sustaining Fiscal Consolidation and Enhancing Public Financial Management: 81. Achievement of objectives under Pillar 2 is considered substantial. As in Pillar 1, overall it is clear that substantive progress has been made in fiscal consolidation, as evidenced by the sustained maintenance of large primary fiscal surpluses and a continual reduction in public debt over the period. Improvement in PFM is perhaps less evident, but progress towards selected results indicators demonstrates progress in this area as well. 82. Of the six indicators for this PDO, four targets were achieved and two were not achieved. Substantial improvement has been made in reducing the public debt to GDP ratio, increasing the transparency of information on exposure to implicit and explicit contingent liabilities from public bodies, and in increasing the percentage of public requests for tenders published under an electronic government procurement system. Modest progress was made in reducing the use of virements on compensation and capital expenditure though it cannot be said that this objective was met at this time. Progress was made on pension reform as civil servants are increasing their mandatory contributions by 1 percent of salary per year until they reach 5 percent, but pension contributions as a percentage of pension payouts only totaled 2.4 percent against the target of 12 percent. Progress in terms of increasing the linkages between 32 The World Bank ICR (P151448 and P163586) investment budgets and forward expenditure estimates is evident but it is unclear as to whether the result has been fully achieved. 83. Reduction in the public debt to GDP ratio met the target and was highly significant and this represented one of, if not the most important constraints to growth, competitiveness and macroeconomic stability. As of March 2018, public debt had declined to 101.1 percent of GDP from a baseline of 141 percent in 2013—exceeding even the revised and more ambitious target. Growth in tax revenues for the first quarter of FY2018/19 exceeded increases in current expenditure, as the Government adhered to the primary surplus target of 7.0 percent of GDP. Public debt is estimated to fall further to 98.7 percent at end-2019 (IMF forecast). Sustained fiscal discipline has clearly placed public debt on a firm downward path. The Fiscal Responsibility Law (FRL) remains anchored to a public debt target of 60 percent of GDP by FY2025/26. The significance of this achievement should not be underestimated and its contribution to macroeconomic stability and investor confidence cannot be over stated. Few countries have ever experienced such a profound turnaround in public debt trajectory in the absence of debt forgiveness. 84. In the pursuit of increased transparency of information on exposure to implicit and explicit contingent liabilities, two reports on contingent liabilities were published on the MOFPS Website as of June 2018, in line with the target. Jamaica’s high debt levels require careful management of public debt to ensure that risks are well-monitored and controlled. Institutional capacity for debt management has been strengthened and the legal framework improved under the DPL series. 85. Increases in the ratio of annual public service employee pension contributions to public sector pension payments (the stated indicator) were negligible and the target was not met, though substantive progress is being made. The target of 12 percent, which was revised downward from 16.2 percent under the first operation, was not met. At the time of appraisal, pension reform was expected in 2016. However, meaningful reform began only in April 2018 following the elections and the need to reintroduce and pass the legislation. At the time, a small number of civil servants were contributing 4.0 percent of earnings, while others were contributing 1.7 percent (police as an example), though the majority were not contributing at all. The supported reform stipulated that all public servants would begin contributing 1.0 percent of earnings in 2018 and that contributions would rise by 1.0 percent annually until public servants were contributing 5.0 percent. In April 2018 all public servants began contributing 1.0 percent and in April 2019 this rose to 2.0 percent. However, the pension reform incentivized a number of civil servants to opt for early retirement before the reform took effect, thus increasing pension expenditures. Additionally, contributions fell in 2018 as those paying 4.0 and 1.7 percent decreased their contributions to 1 percent, which was not fully offset by the balance increasing from zero to 1.0 percent. Thus, in FY2018/19 employee contributions to the pension plan totaled $800.2 million while pension expenditures were $33,338 million. As such, contributions represented 2.4 percent of expenditures, well below the target of 12 percent and below the highest result achieved previously of 4 percent. This ratio will increase over time as pension contributions increase by 1.0 percent of earnings per year and and all public servants are now contributing to the pension plan. As of April 2019, public servants were now contributing 2.0 percent of earnings, which will essentially double the contributions of the previous year. The target of 12.0 percent was based on the expectation that the reform was to be implemented in 2016, not 2018, thus including an additional two years of contribution increases, and that those already contributing 4.0 and 1.7 percent would continue to do so and that their contributions would rise to 5 percent immediately. However, the eventual reform moved all contributors to the new base of 1.0 percent with 33 The World Bank ICR (P151448 and P163586) 1.0 percent annual increases, placing all public servants on the same basis and led to an initial decline in aggregate contributions. In sum, the public pension plan has undergone a major reform that will increasingly ensure its financial sustainability, despite the failure to meet the stated indicator. 86. There has been modest and partial progress achieved in eliminating the use of virements on compensation and capital expenditure. The target has not been completely met as virements have been eliminated only in the case of compensation. Virements continue to be permitted on capital expenditures, though they are now regularized in a subsequent Supplementary Estimates exercise within the financial year. As such, this result has been met in terms of compensation and some progress has been made on the capital expenditure side as there is a regularization process that results in some Parliamentary oversight and eventual inclusion of such spending activities in the budget. Prior to this reform, virements would occur completely outside of the budget process. 87. Essentially all public requests for tenders are now published under an electronic procurement system. In 2018, 1,113 eprocurement proposals were issued, which represents 100 percent of proposals above the relevant threshold being executed through the electronic government procurement system. This significantly exceeds the 5 percent target. 88. Substantive progress has been achieved in increasing linkages between investment budgets and forward recurrent expenditure estimates, and this result is considered met. Capital costs are captured in the Capital Budget and the PSIP. However, while planning and estimates are now done for recurrent costs at the design stage, recurrent costs are not included in the PSIP, as appears to be the original expressed intent. Three-year estimates are undertaken for the Recurrent Budget, which further helps in planning. Thus, both capital and recurrent costs are now presented for all capital projects, which is important in making investment decisions, though recurrent costs are not necessarily presented together with investment costs in the PSIP. It has been confirmed that recurrent costs are fully considered when approving and considering public investment plans so that informed decisions around capital project prioritization and choice can be made in considering total project costs, both in terms of initial investment costs and ongoing recurrent costs associated with the investment. Efficiency Not Applicable Justification of Overall Outcome Rating Rating: Moderately Satisfactory 89. The overall outcome of the program is rated moderately satisfactory. As mentioned above, the objectives of the DPL were very relevant when the operation was prepared, and they remain relevant to date. The over-riding objectives of fiscal consolidation, strengthening PFM management and improving the investment climate and competitiveness, in response to Jamaica’s serious macroeconomic, fiscal and debt crisis, have been largely met. The challenges facing Jamaica in this regard at inception of the series should not be under-estimated, nor should the accomplishments achieved in terms of attaining macroeconomic stability and public debt reduction. Reducing public debt from nearly 150 percent of GDP to just above 100 percent over a six-year period is a remarkable achievement. Maintaining a primary fiscal 34 The World Bank ICR (P151448 and P163586) balance of over 7.0 percent of GDP over six years is equally impressive. While there were moderate shortcomings in the operation’s achievement of its specifically-stated results indicators and some implementation delays, the results achieved in fiscal consolidation, debt reduction and macroeconomic stabilization were highly significant. While most performance indicator targets (7 of 11) were met, 4 of 11 were not met. Of these, nominating members of boards and limiting virements in capital spending are not insurmountable reforms and should not have been difficult for the authorities to implement. As such, despite the highly impressive results achieved at the overall outcome level, the failure to achieve 4 of 11 indicators justifies a rating of moderately satisfactory. Overarching Themes, Other Outcomes, and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 90. Jamaica has registered an important reduction in poverty and inequality in recent years. Between 2013 and 2016, national poverty decreased from 24.6 percent to 17.1 percent. Previously from 2007 to 2013, during the economic crisis leading up to the 2013 reforms, the national poverty rate had increased rapidly, from 10 percent to 25 percent. The current total and food poverty rates (17 and 5 percent, respectively) are relatively low compared to other countries in the LAC region. Inequality as measured by the Gini coefficient also decreased from 0.41 to 0.35 between 2013 and 2016, when it reached the lowest level of the last decade, maintaining Jamaica’s ranking as one of the least unequal countries in the LAC region. To the extent that the operation contributed to macroeconomic stability, an improved investment climate, increased growth and hence, increased income generation and employment opportunities, the operation has been successful in contributing to poverty reduction. 91. Poverty is concentrated among female-headed households and households with children. In 2016, female-headed households accounted for 52 percent of the poor while representing only 47 percent of the total number of households. The poverty rate was higher among female-headed households, at 19 percent versus 15 percent among male-headed households. Households with children ages 0-15 are also overrepresented among the poor, accounting for 46 percent of the total number of households, and 62 percent of the poor households. Due to data limitations and attribution issues, it is unclear whether the operation increased gender parity and further empowered female-headed households. It would be expected nonetheless, that the operation’s overall contribution to poverty reduction and employment creation would have benefited women in the aggregate, though perhaps not preferentially. (b) Institutional Change/Strengthening 92. This DPL series, in conjunction and coordination with other Bank operations and the activities of other multilateral and bilateral partners contributed significantly to institutional change and strengthening in several areas: • First, the series supported reforms that led to institutional changes in the development approvals process, including the issuance of construction permits, the establishment of units within planning authorities to facilitate the processing of permits and the acceptance of certification from licensed professionals. It also initiated the implementation of an effective tracking system in the local parishes. Furthermore, support was provided to the passage of the Building Act, which sought to facilitate efficient application of internationally recognized building standards. 35 The World Bank ICR (P151448 and P163586) • Second, support for the introduction of the Electricity Act introduced a new regulatory framework that promoted investment and competition in the electricity sector. This led to new entrants in the electricity market and to a significant reduction in the dependence on petroleum products in the generation of electricity; an outcome which exceeded expectations. • Third, institutional reforms to the external trade framework were also significant. This included the introduction of ASYCUDA, operational reforms in the customs administration to improve clearance times, the separation of regulatory functions within the Bureau of Standards from its role in trade facilitation, and the modernization of the regulatory framework governing economic zones. All of these reforms substantively contributed to a strengthened institutional environment in the trade arena. • Fourth, amendments to the Financial Administration and Audit Act and Public Bodies Management Act have enabled the adoption of fiscal rules and have strengthened fiscal transparency. Adherence to a debt target has led to a continued reduction in debt. Furthermore, amendment of the Public Debt Management Act outlines the functions of specific units within the MOFPS related to debt management and establishes guidelines for managing contingent liabilities. Another institutional change in this area is that the Public Service now prepares and publishes annual Fiscal Risk Statements to reduce risks and limit contingent liabilities potentially arising from public bodies and public-partnerships. Adoption of a new Procurement Act and Pensions Act also represent important fundamental changes to the existing fiscal and budgetary institutional environment. • Finally, reforms involving public investment planning fundamentally changed the PIM system, including new legislation and the establishment of new processes, institutions and committees. This strengthening of the PIM system built on reforms initiated under the previous DPL operation. (c) Other Unintended Outcomes and Impacts 93. This series had an important positive impact on the environment. While this series was conceived prior to the calculation of climate co-benefits, it could be considered to have contributed to climate change mitigation given the objective of reduced dependence on petroleum in electricity generation and the move toward renewables. A reduction from 94 percent of electricity being generated by petroleum to 75 percent currently is significant. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not Applicable 36 The World Bank ICR (P151448 and P163586) ASSESSMENT OF RISK TO DEVELOPMENT OUTCOME Rating: High, though diminishing 93. The overall risk rating of this operation at inception was high. The medium- to long-term results of the program supported by the DPL series were most exposed to political and governance, macroeconomic, institutional capacity, fiduciary, environmental and social risks. These risks continue at present and the realization of macroeconomic risks could in turn compound and aggravate other risks. As such, the overall risk rating remains “high.” 94. Governance and political risks to the ongoing achievement of the developmental objectives are substantial. Achieving Jamaica’s debt reduction target of 60 percent of GDP by 2026 depends critically on maintaining a tight fiscal stance through 2026. Fiscal consolidation by its nature has the potential to provoke political opposition due to the impact on households and firms. This is exacerbated by the prolonged period of fiscal restraint that is necessary to consolidate the fiscal situation and bring debt down to desired levels. Furthermore, political support for investment climate reforms, particularly those that disrupt the status quo, could dissipate if policy measures do not generate tangible results (e.g., in the form of jobs or income growth). 95. Macroeconomic risks are high. Although the economy has stabilized, the recovery remains fragile, vulnerable to a range of external shocks and the benefits of the substantive reform program have yet to fully achieve expected results. Job gains are being sustained despite slow growth, the number of persons employed has reached a historical high (1.21 million) and the unemployment rate has steadily declined. Nonetheless, growth has not accelerated as expected and some expectations remain unfulfilled. In such an environment, reform fatigue and constraints to implementation capacity pose risks to the Government’s economic program given that continued sluggish growth, high crime, and continued rural poverty all risk undermining public support for the Government’s policy efforts in the absence of stronger and improved results. Risks to institutional capacity for implementation and sustainability are substantial. The multi-faceted reform agenda that continues to be necessary raises the risk that government capacity and fiscal resources could be stretched thin, implementation could be delayed, and enforcement of new legislation could be weak. Fiduciary risks are also substantial, while environmental and social risks are moderate. ASSESSMENT OF BANK AND BORROWER PERFORMANCE Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 96. The Bank’s team prepared this programmatic series under considerable time pressure. While the scope of the DPL program was substantial, as suggested by the choice of reform areas and results indicators, this DPL series supported and set the stage for critical structural reforms in a slow growing and under-performing economy with a poor implementation record. The series was able to deliver urgently needed financial support, as part of a larger partner-supported package, during a time of crisis. 37 The World Bank ICR (P151448 and P163586) Government counterparts commented that the Bank’s team was very receptive to their concerns and that cooperation was strong throughout preparation and implementation of the program. 97. Furthermore, the Bank’s team built directly on the lessons learned from the immediately previous DPL operation. One such lesson was that “the timing of engagement is crucial.” Given the seriousness of the economic crisis facing Jamaica at the time, the Bank team implemented the series at a time when consensus, both locally in Jamaica and externally among the donor community had coalesced. The team coordinated closely and effectively with the IMF and IDB, which assured a very timely, closely coordinated, coherent and suitably financed support program that effectively addressed key constraints and bottlenecks to improved performance at the time. 98. The team also built on two other key lessons learned. First, that “using the programmatic approach to policy-based lending has advantages”, and second that related “technical assistance and capacity building” is key. These aspects have been noted previously. Incorporation of these aspects in the design of the series was key to its success. (b) Quality of Supervision Rating: Satisfactory 99. WB staff conducted two missions in 2015, following approval of the initial operation. These missions were recorded through aide-memoires and in an ISR. Three missions took place in 2016 that served as both supervision of DPL1 and preparation of DPL2. Supervision of the DPL program was further facilitated by close collaboration between the team involved in the DPL series and those designing and implementing several related Bank investment projects. Engagement and dialogue around investment lending operations supported the DPL series, as policy measures key to investment operations were followed up on and implementation support was provided through these independent operations. In addition, several result indicators were also tracked and supported by IPL activities. Finally, technical assistance and ASA activities contributed to the achievement of objectives and supervision as considerable overlap and sharing of objectives around supported reforms and outcomes were evident. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 100. Given that both ‘quality at entry’ and ‘quality of supervision’ have been rated satisfactory as explained above, overall Bank performance is similarly rated satisfactory. Borrower Performance (a) Government Performance Rating: Satisfactory 101. The Government demonstrated clear ownership of, and commitment to, the stabilization and reform objectives, as witnessed by the program remaining on track. Furthermore, there was strong 38 The World Bank ICR (P151448 and P163586) ownership of the reform agenda not only within the administration, but across political parties, which enabled continued progress and a lack of backtracking despite a change in government. The JLP was in power during the first DPL, but the opposition won the subsequent election prior to the second DPL and continued the reform program. The Ministry of Finance coordinated the implementation of the reform agenda across line ministries, often holding joint meetings to review progress towards meeting prior actions and partnering closely with the Bank through the preparation and supervision process. 102. As previously noted, reforms begun in 2013 were supported by a broader program to which the IMF, IDB, and WB contributed financing. This DPL series was a fundamental part of this reform package. The Government effectively managed the interests of the various donors, was responsive to the differing processes and demands of these multilateral institutions, and was able to accommodate, coordinate and reflect the advantages of each donor in their respective programs and the reforms supported by the various donors. 103. While some delays were encountered due to the election and change in government between the two Bank operations, commitment to the reform program remained strong and delays were not excessive. The delays experienced were essentially around procedural issues, such as having to reintroduce legislation that had lapsed at the end of a Parliamentary session. At no time were substantive reform changes contemplated nor did delays arise because of substantive reconsideration of the reform program. The need for reform was well-appreciated within the Government and society more broadly and the Government implemented the reform program in an effective manner though with some procedural constraints. (b) Implementing Agency or Agencies Performance Rating: Not applicable, as the program was implemented by the Government. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 104. As per the ICRR guidelines, the overall borrower performance is rated satisfactory in line with the explanations provided above. LESSONS LEARNED 105. The DPL program was designed at a time when Jamaica was facing a looming economic crisis and required a rapid response on the part of the Bank and other IFIs. After lengthy negotiations, the IMF led the way, followed by Bank and IDB programs. Several lessons emerge from that process. A. General 106. Effective coordination with other multilaterals/partners can enhance the impact of a Bank operation. This applies both in preparation and design of the operation, as well as to supervision. As each institution has distinct comparative advantages and given the depth of the crisis existing at the time and the broad reform effort that was required, the coordinated and coherent involvement of a broad range 39 The World Bank ICR (P151448 and P163586) of multilateral partners contributed significantly to a comprehensive reform program. This clearly allowed the Bank to focus on areas where it had particular expertise and areas where it was already involved through investment lending or TA operations. Coordination also avoided replicating reforms that were already included in other IFI programs and allowed coverage of support to a broader reform program as it avoided unnecessary duplication. 107. Furthermore, it should be recognized that being part of a broader multilateral effort, as in this case, can achieve higher level results that go significantly beyond the mere achievement of stated indicators. While this series was successful in meeting most of its results indicators, and achieving some progress in others, the significantly more important objective of placing Jamaica on a more sustainable fiscal and debt trajectory was achieved largely as a result of this operation in conjunction with the efforts and programs of other multilateral and partner institutions. This should not be down-played or go unrecognized. While this high-level objective cannot rightfully be fully or directly attributed to this operation, and as such cannot be included as an objectively verifiable indicator, this DPL series was nonetheless highly influential in contributing to the achievement of this broader and much more important objective. The level of policy dialogue, advisory support and TA provided to the authorities built immense client engagement and trust, along with the impetus to reform. It is unfortunate that operations, particularly DPLs, tend to be evaluated based simply on the achievement, or not, of the explicitly identified results indicators, while oftentimes the broader achievements, including the results of policy dialogue, go largely unrecognized as they cannot with certainty be directly attributed to the operation. 108. The provision of technical assistance and/or investment lending to bolster capacity and accompany implementation of a DPL can be essential for achieving development objectives. In the current case, the TA provided under the DFID trust fund on public sector management, as well as the Bank’s complementary investment projects and TA activities were instrumental in ensuring effective implementation of the DPL program. This also extended to the monitoring and follow up of results where ongoing operations facilitated the tracking of indicators and ongoing dialogue around the achievement of results. B. Specific 109. The WB’s long experience with DPLs in Jamaica indicated that a targeted operation, clearly focused on the critical constraints would have a greater likelihood of achieving results. The series focused on two key objectives: increasing competitiveness; and sustaining fiscal consolidation. As noted, these two objectives directly addressed the two fundamental issues underlying the existing crisis, low growth and high debt. As such, these reform priorities were owned by the Government and the public-at- large, and financially and technically supported by the donor community—all were on the same page in this regard. This clear focus and commitment were important to the necessary sustained reform effort, even across a change in government, and hence to the achievement of objectives. 110. The operation drew directly on previous lessons learned, including those articulated in the ICRR for the 2013 DPL. Reform programs, including with the IMF and the Bank, have had a long history in Jamaica—many of which had failed. In such an environment, it is paramount that past experience be factored into the design of any new reform program, particularly issues involving political economy factors, as past failures often arise because of political factors rather than technical issues. One such factor was the clear need to coordinate closely with other multilaterals in order to strengthen commitment to 40 The World Bank ICR (P151448 and P163586) the reform program. Another was to ensure coherence and complementarity with other WB instruments, DPLs, IPFs, and NLTA, as noted previously. In addition, prior actions in this programmatic series built on those begun under the 2013 DPL. For example, the 2013 DPL supported the start of a public investment reform effort, which was strengthened under this DPL series. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies 111. The GOJ has provided its impressions of the implementation and success of the series and its operations as described below: 112. The reforms supported by the World Bank’s First and Second Competitiveness and Fiscal Management Programmatic Development Policy Loan (DPL) were generally successfully implemented. The fiscal reforms which were enacted by the Government, key elements of which are captured in the DPL matrix, have contributed significantly to the improved macroeconomic stability of the country. A major achievement of the loan has been the reduction in the debt-to-GDP to an estimated 96.4 percent at end-March 2018 – almost 20.0 percentage points below the target of 115.0 percent set out in the DPL Matrix. 113. Moreover, the DPL did exceptionally well as it relates to the increase in the share of Free Zone operators converted to SEZ operators. This loan was used to support the drafting of the SEZ legislation and regulations as well as studies for the establishment of the Caymanas Special Economic Zone. 114. With regard to shipment processing and clearance, it was recorded that at the end of FY2018/19 76 percent of commercial shipments processed were cleared within 24 hours. This is a continued improvement to the target which was met as at June 2018. 115. With regard to strengthening transparency in public procurement and enabling the use of eprocurement, it is to be noted that the Government of Jamaica Electronic Procurement (GOJEP) System was launched on July 31, 2015. The launch commenced with the pilot phase with three Procuring Entities (PE’s). Full rollout to train over 200 PE’s and thousands of suppliers commenced January 2016 with a training team of two officers. The team was increased to three in 2016 and then to five in 2017. The rollout was done on a supplier industry basis, where training for the Works/Construction sector commenced in the latter part of 2016 to 2017. 116. As GOJ public procurement is decentralized, the Ministry is not now in a position to provide data on the number of procurements executed by all MDA’s via the manual procurement process over the review period. To address this matter, GOJEP will be used to manage and monitor public procurement plans once all MDA’s are on-board the system. GOJEP will ultimately be used via the Business Intelligent (BI) Reporting Module to produce the necessary data such as procurement, spend, methods, types, etc. The roll out to-date has been a success irrespective of the constraints in the early stage. We are now seeing more appreciation for the platform and an increase in the buy-in and uptake of GOJEP, both public and private sector-wide. This results from an extensive media campaign, one-on-one consultations, effective user support, and island-wide training interventions. 41 The World Bank ICR (P151448 and P163586) 117. In terms of operationalizing the Public Investment Management System, it is to be noted that recurrent cost projections are not included in the Public Sector Investment Programme (PSIP) documents. The PSIP only captures information relating to the Public Investment Projects. For projects that will have recurrent costs during and after completion, these are aggregated in the overall recurrent costs of the particular MDA involved. Recurrent costs that arise from infrastructure type projects are not determined at the design phase of the projects. These recurrent costs are done when the project is far advanced in the implementation process. At present the recurrent budget has three-year forward estimates which give some indication of what a particular MDA may require for the next three years. However, future recurrent costs that may arise out of infrastructure projects may not necessarily be included in these forward estimates because forward estimates are determined by figures coming out of the MOFPS and not the MDAs. 42