Assessment of the private sector competitiveness enhancement project (PSCEP)

The project began in September 2008, and will end in December 2010, ten months earlier than originally anticipated. USAID/Azerbaijan has commissioned this assessment both as way of judging the effectiveness and impacts of the project, and also to provide guidance to USAID"s successor project (Azerbaijan Competitiveness and Trade (ACT) project) which is starting in late 2010. Although there were some design and implementation problems that will be described below, and a difficult business environment overall, PSCEP did achieve at least two major successes: improvements in the dairy sector that have brought about substantial income gains for thousands of farmers, and re-establishment of the aquaculture industry in Azerbaijan after it had declined by 90% over the past twenty years. In most respects, PSCEP follows a fairly conventional competitiveness/value chain methodology. However, three aspects of the design and/or implementation stand out as being different from similar projects in other countries, and it does appear that these differences have contributed to short-falls in overall project effectiveness: (1) an unnecessarily complex analytical process used in sector selection; (2) too much emphasis on investment as a primary project objective; and (3) an unrealistic timeline for achieving indicators, As a result, after fifteen months of the three-year project, 62% of the budget had been consumed. Once the sector-specific technical assistance began, it does appear that much of it was effective. There were particularly beneficial results in the dairy sector, and aquaculture. Other firm-specific successes were noted with green-house farming and high-value agriculture (strawberries), but because often a small number of individuals benefitted, the cost-benefit of this assistance is questionable. It should be noted that private sector economic growth is difficult in Azerbaijan, mainly because of monopolization of key sectors in the economy and a general lack of transparency. Even a well-designed and well-run project will have difficulty achieving significant results in Azerbaijan. In addition, the project design contained certain mandated activities and targets that affected the implementation in negative ways. That said, it is also clear that the project fell short of achieving some of its benchmarks and targets and that the work of the implementer was not always cost-effective. Among the key lessons that can be taken from this project are: (1) the necessity of having targets and benchmarks that are appropriate for the project goals and design; (2) to realize that proper timing and sequencing of actions is essential to sound project management; and (3) to manage the use of project resources so that they are applied in the most cost-effective manner relative to project goals. (Author abstract, modified)