Tanzania - Agricultural Sector Management Project (ASMP)

Docwmt of The World Bank FOR OMCLAL USE ONLY Rep"t No. P-6047-T& MMORAM AND E1N O OF THE PRESIDENT OF THE INTERNATIONAL DEVLOPENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN AN AVOUT OF SDR 17.3 MILLION TO THE ITED REPUBLIC OF TANZANIA FOR AN AGICIJLTURAL SECTOR NANAGEM PROJECT JUNE 30, 1993 MICROFICHE COPY Report No.:P- 6047 TA Type: (PM) Title: AGRICULTURAL SECTOR MANAGEMENT Author: BYAMUGISHA, F. Ext.:34198 Room:J10067 Dept.:AF2AE 11i docimot has a resictd disuibutom ad may be u_d by relpicas only In te porfonau of te: offial dtes Its conten may not oterwis be disclosd wtho Word BRk au.iaon.  CURRNCY EQUIVALES Currency Unit - Tanzania Shilling (Sh) US$1.00 - TSh 350 SDR 1 - US$1.41686 (as of May 20, 1993) WEIGHTS AND MEASURES ha - hectare km - kilometer mt - metric tons .ABBREVUATIONS CBS Cental Bureau of Statistics GDP Gross Domestic Product JIDS Instiutional Development Strategy 1)OS Institnutional Development Objectives and Strategy PSRC Public Sector Reform Commission TA Technical Assistance TANAA Tanzania Agricultural Adjustment Program UNDP United Nations Development Programme Uel-IAPSO United Nations Inter-Agency Procurement Services Office FISCAL YEAR July I io June 30  FOR OMCIAL USE ONLY TANZANI AGRICULTURAL SECTOR MANAGEMENT PROJECT CREDrT AND PROJECT SUMMARY Borrower: The United Republic of Tanzania Amount: SDR 17.3 million (US$24.5 million equivalent) Terms: Standard IDA, with 40 years maturit Jlnaudng Pln: lS$ miflion IDA 24.5 Government of Tanzaia 'TOTAL Economic Rate of Return: Not applicable Staff Appraisal Report: No. 11769-TA, dated June 30, 1993 Map: IBRD No. 19829 Thir document has a tes.icted distribution and o iay be used by recwpients only in the performianctI of ther offcis duties Its conttnts may not otherwise be disclosed without World Bank authofiaon.  MEMORANDUM AND RECOMAMATION OF THE PRESIDENT OF TB INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE tE FE DIRECTORS ON A PROPOSED CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR AN AGRICULTURAL SECTOR MANAGEMENT PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed development credit to Tanzaia for SDR17.3 million (US$24.5 million equivalent) to help finance an Agriculturd Sector Management Project. Ile proposed credit would be on standard IDA terms with a maty of 40 years. 2. Country/Sector Badkground. From 1978 to 1985, Tanzaniaes agricultural sector grew at 2.6 percent per annum in ;nstant 1976 prices. Following the Economic Recovery Program launched In 1986 (succeeded by the Economic and Social Action Program in 1989), the agricultural sector grew on average by 4.9 percent per annum during the period 1986 to 1991. lbis recovery has been an importan boost to the economy since agriculture accounts for abort 60 percent of GDP, 80 percent of recorded export earnigs and 90 percent of employment. In addition to favorable macroeconomic policy reforms, agricultura growth has been triggered and sustained by sector reforms, partcularly the liberalization of marketing and pricing of food grains and non-traditional export. However, a greater pace of reform is required to sustain this growth, underpinned by a significant improvement in instutional capacity, which has been a constraint to increasing the depth and scope of refom. 3. Weak institutional capacity to formulate and implement agriculural policy reforms has been partially addressed in the past through technical assistance, either through festanding projects or components of projects. However, the results were unsatisfactory becase the Government did not follow through on policy change. The first IDA technical assistanmce project in the agricultural sector (Cr. 1206-TA) was apprcvred in 1982, and the second (Cr. 1524-TA) in 1984. Both projects were Iended to strengthen policy management, the monitoring of project implementation and the performance of parastatals under the Mnistry of Agriculture. Support for these actities was continued under the Tanzania Agibura Adjustment Program (rANAA, Cr. 2116-TA) approved in 1990. Although there have been some inutl improvements, policy management and planning capacities have not been effectively udlized to provide an enabling environment to the private sector because the country's economic policy framework continued to favor the promotion of the public sector. Ihis weak istiional capacity has been bolstered by considerable exterdal assistance. Recendy the Government has introduced a more liberal and progressive policy which will achieve widespread reforms in the public sector leading, inter alia, to parastatal restucturing and privatization resulting in elimnatig government involvement from most of the productive sectrs and services tiat the private sector can operate more efficiently. Assistance is needed to provide support to this next phase of reforms which is ewpected to be more institutionally demanding in terms of design, implementtion and evaluation. 4. The process of formulatng these key reforms began in October/November 1992 with a joint Government-World Bank Agricultral Sector Review. The review focused on fonmulating agriculturai strategies and policies aimed at enhancing food security, rural incomes and agricultural export eanings in a sustainale environment. Ihe main policy rust is to curtai direct government lntervention in production and marketing, expand the reform program to include restruct of traditional export crop marketng, and reform the laws and regulations that hinder development of the private sector and restrict competition with parastatals and cooperatives. While work on these  2 policies and stratgies is under way and discussions witia Government are ongoing, there is song support within the Government for an Institutional Development Strateg (IDS) designed to transform the role of Government from direct intervention to facilitating the private sactor to generate agricultural growth. The proposed project would constitute the primary instrument to implement this sateg which has been formalized by the Government through a letter of institutional development objectives and strategy DOS). S. Project Objectives. 'Me overall objective of the project is to strengthen institutional capacity to formulate and implement the Government's agricultural development policies, strategies and programs. This objective would be achieved through support to toe following key elemen of the IDS in the agriculture sector: (a) phasing out the prcvlision 3f services better done by the private sector; (b) supporting the restructuring and privatization ot agricultural parastatals spearheaded by the Paratatal Sector Reform Commion (PSRC); (c) revising laws and regulations to provide an enabling environment for private sector investment in the agriculture sector; (dl developing the management systems and car city reqired to improve the allocation and utilization of budgetary and staffig resources; and (e) strengtening the agricultual information systems and services that are important to supporting a market-oriented economy. 6. Project Descrintion. The project would have three main cmponents: (a) rationalization and strgthening of the fimntions of the Mistry of Agricuture (MOA) (US$7.8 million); (b) srengthening of institutional capcity to formulate and implement policies (US$7.1 million); and (c) Improving the agricultural information systems and services (US$10.8 mBlion). Activities to be financed include technical assistance (TA), personnel service contracts and other in-house local consultants, 1raining, workshops, seminars, sudy tours, field allowances, vehicles and office equipment. For the funceonal ratlollalon component, the project would finance the actiies of MOA task forces, task groups and consultants engaged in phasing out about 48 MOA functions, developing cost sharing mecsmb with the private sector fob about 20 other fimctions, and restructming or preparing for privatization about 80 agriculta parastatals. Financial support would also be given to strengthening management systems and capacity related to planning and budgeting, management traini, personel management, a management information system, accountg and procurement. For the policy formulation and imple do component, fiancing would cover two sets of activities: Oi) policy analysis; and (ii) longer-term Instituional strengthening. The work program in the area of policy analysis would include preparation of sector policies and programs; improved policy coordination and feedback through support to the Policy Analysis and Advisory Committee; improved regulations and incentives to establish an enabling enviroment for private sector development; and food security policy. During 1993 and early 1994, policy formulation would focus on high priority reform aeas for possible inclusion in a proposed Structural Adjustment Credit for possible IDA financng. Support for longer term institutional strenghening would include a comprehensive training program, and improved work envioment and facilities. lTe agrIcultral informaton component would focus on strengthening, rationalizing and expanding the agricultural information base. Priority would be given to supporting the county's capacity to produce reliable tiformation on crop and livestock production and productivity, and marketing and trade, at the national, regiona and district levels. Emphasis would be on strengthening instutional capacity for mimely analysis and dissemination of agricultural information, and anticipating the marketing information requirements to support an efficient functoning of trading in traditonal export crops once thy are filly liberalized. Insdutional coordination and harmonizaton of effirts and outputs among data collecters would also be emphasized. Accordingly, the project would finance five categories of tasks: Q) carrying out an agricultural census (the last one was done in 1971/72); (ii) expanding  3 subsequent surveys to provide adequate data for planning and pollcy evaluation on an ammal basis; (ii) carrying out a pilot survey using less expensive and more timely subjective methods to establish low-cot sources of data collectio; (iv) improving the data collection and analysis capacity of the Crop Monitoring and Early Warning System; and (v) improving communicaton facilities for beter coilection and dissemination of marketing and trade lIfrmation. 7. The total cost of the project i estimated at US$27.2 million, with a foreign exchange component of about 50 pecent. A breakdown of costs and the financing plan are showa in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule, are shown in Schedule B. A timetable of key project processing events and the stats of Bank Group operatiors in Tazania are given in Schedules C and D, repectively. The Staff Appraisai Report, No. 11769-TA dated June 30, 1993 is also attached. 8. Project Ie pleme-tation. Since the project covers the fil scope of MOA's responsibilities, implementaon would be carried out under MOA's existing organizational and manageaiet strucure. An Inter-ministerial Steering Committee, chaired by the Principal Secretary of MOA, would direct project implementtion. Its membeship would include the four commissioners and the Director of Pesonnel and Administration from MOA, as well as representatves from the Civil Service Depament, the PSRC, Central Bureau of Statiscs (CdS) and the Planning Commission. An MOA Advisory Techical Committee, chaired by the Commissioner of Planning and Marketng of MOA, and comprising the Assistant Commissioners of MOA and a repreentatve from CBS would provide technical guiance to project implementation. The two Committees would be serviced by a Project Secretart attached to the Office of the Commissioner for Planning and Marketng in MOA which would be staffed by a project coordinator assisted by a project accountant, a project trining officer, a prouement officer, an administrative officer and a manager responsible for the rationalization of the fctions of MOA. The Project Secretarit would be responsible for the day to day adminirion of the project including acouning, prcement, disbursement and project monitring. The project coordinator would serve as Secrtay of both Commitees. Implementation of the component in support of the rationalization of the MOA fnctions would be coordinated by the Project Preparation and Monitor Bureau; actual implementation would be done by relevant organiaional units in MOA directed by an MOA rationalization task force, with assistance from task groups and consutants. The components for policy fomnulation and implenton, and for agricultral information, would be implemented by the Sectwal Planing and Marketing Division of MOA, in collaboration with CBS. The CBS and MOA have signed a memorandum of understmding that orchestrates and formalizes their collaboration arrangements especially for the undertaking of the agricultural census and subsequent surveys. 9. Project S8sut bllty. The project would improve MOA's analytical base for policy formulation and management, and enable it to concentrate on providing only critical public goods and creaing an enabling evironment for the private sector. This would result in MOA becoming more cost-effective and efficient and better able to promote private sector development; both outcomes would enhance the sustnability of project benefits described below. 10 Iaom from Prevous IMA Involvmet. IDA has financed two technical aistance projects in the agricultural sector (Cr. 1206-TA and Cr. 1524-TA). Their project completion reports have highlighted two lessons: Qt) hat institution bulding requires long-term assistance and continuity in implement_tion, and (ii) that success of capacity building projects is enhanced if assistance is tageted at the strategic functions of the relevant instittions. These two lessons have also been highlighted by  4 a 1990 study by the Operatons Evaluation Department entitled Free-standing Technical Assistance fr nitudtional Development in Sub-Saharan Africa". Other Important lesons from this study include tho need for a clearly f ought out Institutuonal development strategy; a project desig that takes Into account the borrower's limited absorptive capacity; and adequate supervision, especially from Resident Misions. Additional lessons iclude those gained from institutional development expeience at global level: project success and sustanability are enhanced by direct involvement of key country stakeholders; and Institutional strengthening is enhanced if pnoject implementation is done through established nstitutioni structures. These lessons have guided the design of the proposed project and Its implementation plan in at lnt five ways. First, the ptoject has been designed to focus on supporting the implementation of key elements of an institutional development strategy. Second, the project i simple in design, limited to supporing only three inter-related project components, mainly in one ministry. Tbird, most of the project supervision would be done by the Resident Mission staff. Fourth, implementation would involve senior Tanzanian managers who are suikenolderin the institutions being addressed. Fifth, the project would be implemented through existing institutions. 11. Rationa for IDA Involvmnit. The principal goal of the Bank's country asstance sey for Tanzna, which was discused at te Board in June 1993, is to assist the Governnt in reducing povety through acceleration in the pace of structural reform, improvements in the incentive framework facing the private sector, and the provision of infrastructure and sucial cervices. IDA's support to reforming and strengthening Isittional capacity in Tanzania's agricultural sectr, through this project, is a critical element of this program in the following ways. First, continued caacity building is urgently needed to support the nt round of structural reforms in agrcjture. AR noted in the recent Country Economic Report (World Bank, 1991), because of the limied institutional capacity for policy formulation and imple ion, the reforms supported under TANAA were deliberately simple in design, requiring mainly uncements of policy changes to stimulate private activities. The nen phae of reforms is instionally demanding, shifting the role of the Ministry from its "command and control" aproach to inect economic management and requiring deaed design and intensive monioring. This phase therare needs to be preceded by institutional strengthening in policy fomulation and Impl emntaton. Second, MOA bas been spreading Itself too thinly in the contxt of the resources avaiable to it; there is therefore a need to rationalize its funcdons and phase out those best suited for the private sector. Third, there is a need to improve the collection, management and disseminiation of agricultural information which is critical to effctive public and private sector management in a market-based economy. 12. The project objectives are consistent with the Government's broader policy goals for reform of the public sector through programs of privaization of parstatas, civil service reform, and the new approach to planming and budgeting rough ihe Rolling Pln and Forward Budget, all of which are being supported under the forthcoming Public Sector Adjustment Credit. The proposed project would provide a key link at the sectoral level to these initatives. Given IDA's lederhip in mobilizing developmet aistace and suorting policy ad institonrA reforms in Tanzaia, IODA is best placed to support instifutional strngthening in the agriculural sector. It would do so working closely with the UNDP, which is the lead donor agency in technical assistance in Tanzania. 13. Agreed Actions. The following actions have already been undertaken by the Government in order to expedite project start-up and implementtion: (a) submission of a draft letter of IDOS. which uiderpins the proJect; (b) submission of draft action plans for 1993/94 for: O) iniating the disposal of at least 10of the 48 MOA functions identified for elimination, and operating joindy with the .1  private sector S out of the 20 functions identified for joint participation; and (U) policy formation, outlining key studies, tasks, reports to be produced and thek deadlines, and personnel and resource allocation; (c) submission of a signed memorandum of undetanding eween MOA and CBS outlining areas of collaboaion; (d) submission of procurement-related doceion, including a dra general procurement notice, standard contacts for hiring of consultants, standard letter of invitation, and draft tms of reference for technical assistance and studies; and (e) appointment of a proect coordinator who participated in the project negotiations. 14. During negotations, the following assurances were obtained: (a) to promote institutional refrms and development in the agrlcultural sector, the Government would implement the program contined in the draft letter of IDOS; and (b) to ensure effective project implemeion, the Goveent would: (i) establish and maintin the project's Inter-minterial Steering and Advisory Technical Committees as well as the MOA rationalization task force, with membership and trms of reference satsfactory to IDA; Qi) provide to IDA for review and approval by March 31 ef each year an annual work program that would include comprehensive training, rationalization of MOA fimctions and policy analyses; and (iii) consult wih IDA before making changes to the organizational stucture of MOA. In addition, approval of the related arnual work program would be a ondition of disbursement for actvities financed by a Fund that supports the rationalzation of MOA fuwctons and for the trning program. A rview of on-the-job training and personnel service contracts would be carred out by March 31, 1995, and a mid-term review by June 30, 1996. 15. The following would be condltions of credit effectivenes: (a) appointment of the project ttaining officer, the project accountant and the MOA rationalization task manager, and Ob) submission for IDA review of technical assistanc proposals with letters of invitation packages (consistng of tums of reference and short lists). 16. Environmental Aspec. 'Me project Is essentially a technical assistance and training tiative and therefore has no direct impact on the evironment. It has been classified as a 'C' category project- 17. Program Objective Categories. The project's support for improved sector and policy management promotes the achievement of the Bank's program objectives of privae sector development and improved public sector management. 18. Project Benefits. The projec benefits would accrue from four sets of activities: Frst, the role of MOA would be refocused to the provision of public goods and an enabling environment for the private sector. Second, successful implementation of this project would set up MOA as a pioneer participant in the forthcoming civil service reforms which are geared to enhancing the orgaizational structure, morale, peformance, productivity and salary strucur of government employees. Third, MOA's policy formulation and implemeion capacity would be srengthened, enabling the acceeration of agricultural reforms. Fourth, the agricultural information systems and services would be strengthened, faciliting improved public sector management, and the planning and management by the private sector. All these activities would contribute to the process of achieving a higher sustained agricultural growth, reducing poverty and improving food security and foreign exchange earnings. 19. Risks. The main risk relates to Govement commitment to Ilement the nstiution development stag and to effectively utilize technical assistance to strengthen instittional capacity.  6 Govermment commitment was tested during Goverment-IDA Joint preparation of the institonal development strategy, during preprton of the project by Govment and local consultants, and during appraisal; It was found strong at tecical and management levels. The strnt of Government commitment was further demonstrated by the Government's letter of institutional development objectives and strategy addressed to IDA. 20. RecommendatIon. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve it. Lewis T. Preston President Attachments Washington, D. C. June 30, 1993  7 Schedule A TANZANIA AGRICURAL SECtR MANAGEMENT PROJECT ESTlMATED COSTS AND FINANCING PLAN Estmated Project Costs (USS Million) Componen Loa,a Foreign TOt Rationalization of MOA Functions 4.2 3.6 7.8 Policy Fornulation and 2.1 5.0 7.1 . m plem entton __ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ Aricultural Ifomaton System 6.1 4.7 10.8 Total Baseline Costs 12.4 13.3 25.7 Contingencies 0.8 0.7 1.5 Total Ptoject Costs 13.2 14.0 27.2 (of which Taxes and Duties) 0.4 _ 0.4 Xlaning Plan (US$ Million) Local Foreign Total IDA 10.5 14.0 24.5 GOT 2.7 2.7 Total 13.2 14.0 27.2  it~~~~~~~o t -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-  S&hedule B 9 Page 2 of 2 Major Disbursement Categories Ca_, Amo.n of % of Expdtar Credit to b Fiwaed ALbeated (all excluding taxes and duties) I _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ (US$ m i o) 1. Vehcl and Equipai_t 4.0 100% of foreign ____.,.______________ 90% of loca 2. Wotaops and Semna 14 100% 3. Tecbnical Asance and Sbudies 4.7 100% 4. Tain 3.4 100% S. MOA Ra alibati FPund 2.0 100% 6. _ tneaa Opeating costs 6.0 100% of fozgn 100% of loal during Yomas I and 2 ____ ____ ___ ____ _ _ _ __ 60% Of local theoafte 7. Rdefnd of PPF Advance 0.7 Amourt due S. UnaLocated 2.3 Totdal 24.5 Estimated Dsbuwsements from IDA Credit (US$ Million) Amura 5.5 4.4 4.5 5.0 2F1 2.6 ,ualuative 5.5 9.9 14.4 19.4 21.9 24.5  10 Schedule C TANZANIA AGRICULTURAL SECTOR MANAGEMENT PROJECT TIMEIABLE OF KEY PROJECT PROCESSING EVENTS (a) Time taken to prepare 2 months (b) Prepared by GOT/Local Consultants (c) First IDA Mission November 1992 (d) AppraiW Mission Departure March 2, 1993 1/ (e) Negotiations May 1993 (t) Planned Date of Effectiveness September 1993 (g) Relevant PCR Third Technical Assistance Projedt (Cr. 1206-TA), PCR dated December 27, 1989; and Fourth Technical Assistance Project (Cr. 1524-TA), PCR dated April 23, 1991. 1/ Key staff involved were as follows: F. Byamugisha (mission leader and task manager), J. Coates (AF2AE, policy component), R. Southworth (AF2TA, project implementation arrangements), D. Sungusia (AF2TA, training and promotion of local consultancy capacity), D. Gustason (consultant, institutional development), C. Saavedra (consultant, agriculural Informaton component), K. Kiragu (consultant, civil service reform), and V. Jayaraman (consultant, financi analysis and procurement). Mr. J. Silverman (AFTES) was Lead Advisor and Messrs A. Abramovich (LA2AG) and !. Knapp (AF2PE) were the peer reviewers. Secretarial assistance was provided by Ms. M. Hileman. The Sector Division Chief I Ms. S. Ganguly, and Country Director is Mr. F. Colago.  11 STATUS OF BANK GROUP OPERATIONS IN TANZANIA Schedule D Pape of 3 A. STATEMENT OF B KN1 LOANS AND IDA CREDITS (as of March 30, 1993) Nineten (19) Loans ad siy six (66) Crodts fuUy disbursed, 313.06 931.37 of which SECALS, SAL ad Program Leans/Craft: a. Ct. 11330 1981 Tanzania Export Rehab. 50.00 0.00 Cr. A0240 1987 Tannis Multi-Sec. RIH I 46.20 0.00 Ct. 17410 1987 TaSnzia Muld-Sec. RH I S0.00 0.00 Cr. AO241 1988 Tanzania Multi-Sec. RH I 26.00 0.00 Ct. 17411 1988 Tanznia Multi-Sec. RIH 30.00 0.00 Cr. 19691 1989 Tanuzia Ind. & Trad MJus. Cr. 12.50 0.00 Cr. 19692 1990 Tanzania Ind. & Trad Adjus. Cr. 10.30 0.00 Ct. 21161 1991 Tananta APic. Adjustmt 16.10 0.00 Cr. 21162 1992 Tanzania Agric. Adjusmen 11.30 0.00 2S2.40 0.00 Cr. 101SO 1980 Tanania Grain Storage & Mll 43.00 1.36 Cr. 15360 1985 Tanzaia Pors Rehih. 27.00 0.20 Cr. 16040 1985 Tanzaia Petro Sector T.A. 8.00 2.59 Cr. 16870 1986 Tanzania Powr Re aJEny 40.00 1.69 Cr. 16880 1986 Tanzania Roads Rehab. S0.00 8.29 Cr. 18910 1988 Tanzania Agr. Eports ReL. 1 30.00 19.66 Cr. 19690 b/ 1989 Tanznia Ind. & Trade Adjus. Cr. 135.00 6.03 Cr. 19700 1989 Tanzaia Nst'l. Ag. & Liv. Ete. 8.30 6.83 Cr. 19940 1989 Tanznia Agric. Ext. 18.40 10.66 Cr.20500 1989 Tanzania Tree Crops 25.10 15.98 Cr. 20950 1990 Tanzania Ports M4oderniztion 37.00 36.45 Cr. 20980 1990 Tanznia Heah & Nuttion 47.60 45.67 Cr. 21160b 1990 Tanzaia Agric. Adjustmet 200.00 9.34 Cr. 21370 1990 Tanzaia Educ. Plannag & Rehab. 38.30 32.30 Cr. 21490 1990 Tanzaa Roads I1 180.40 154.70 Cr. 22020 1991 Tanzani Petdr Rabob 44.00 46.78 Cr. 22670 1991 Tanzania ailws Restructrg 76.00 72.56 Cr. 22910 1992 Tanzank Urban Sector EIg. 11.20 9.S4 Cr. 23080 b/ 1992 Tanzank Fin. Sector 200.00 112.90 Cr. 23300 1992 Tanzania Engioeing Credt 10.00 6.15 Cr. 23350 1992 Tnzania Forst Rsources Ma 18.30 17.34 Cr.23081 bt 1993 Tanzania pFnsncd Seodk 11.32 11.34 Cr.24130 1993 Tanzania Flnanc d Mll&elMa 20.00 19.11 Toa 313.06 2210.29 647.47 of which read 210.85 55.71 Totb held by Bank & EDA 102.21 2154.S7 TOTAL Undlsursed 647.47 :=5 al Approved aftr FY80. b/ SAL, SECAL or Progm Loan/Credit. 04-13-93  Schedule D 12 Pagr 2 of 3 B. STATIEMENT OF IFC INVEST_ENTS IN TANZANIIA (As of March 30, 1993) 198S Amboni Agricultural and Livestock Prod. 5.36 0.00 5.36 1978 Highland Soap Mfg. of Soap & Cleaning Prep 1.38 0.37 1.75 1960, Kilombero Mfg. of Food Beverages & Tobacco 3.50 0.00 3.50 1964 4.37 0.70 5.07 1979 Metal Products Mfg. of Fabric Metal Products 1.33 0.18 l.S1 1991 Mufldi Tea Beverage Industries 2.80 0.00 2.80 1990 Tasco Spinning Weaving & Finishing 2.00 0.00 2.00 Total Gross Commitments 20.74 1.25 21.99 Lss: repayments, cancellations, exchange adjustments, writeoffs, terminations and sales 13.77 1.25 15.02 Total Commiments now held by IFC 6.97 0.00 6.97 Total Undisbursed 1.87 0.00 1.87 Total Outanding IFC S.10 0.00 S.10 tan2edl.wkl 04-14-93  Schedule D 13 Page 3 of 3 DISBURS ENT ISSUES 1. IDA's pottfolio In Tanzania at the end of March 1993 consisted of 23 projects (investment plus adjustment) for a total commitment of US$1.2 billion, of which USS 647 million wu undisbursed. Of the total committed, US$ 677 mIlion was for 19 invtmen oeations, corresponding to US$508 million undisbursed. During FY92 only US$47.7 million was disbursed on such projects, which corresponds to a disbursement factor of only 9.5 (ratio of disbursements to net commiments at the beginning of the FY). One reason for the slow disbursement of investment projects is the relatively young age structure of the portfolio. Of the 19 investment projects, 9 were approved in FY89 or earlier and have an undisbursed amount of US$67 million. Since FY90 another ten have been approved and have an undisbursed amount of US$441 million. The main raon for the slow disbursement, however, is the limited domestic capacity. This is also the main cause of the slow disbursement of import support funds through the adjus_tm operations. 2. LImited domestic capacity has been a major constraint across sectors and a Parastatal and Public Sector Reform Project considered by the Board in early June 1993 is iotended to address issues of civil service reform which should lead to increased efficiency of the civil service. In addition, the proposed agriculture sector management project would reinforce the sector's capabilities, and supervision of projects in the PHR sector has been intenified. 3. Another issue has been a lack of counterpart funding due to severe budget constraints. This issue will require greater prioritization of public expenses under the rolling expenditure framework, improved financial management capabilities (to be developed under the recently aproved Financial and Legal Management Upgrading project (Cr. 2413-TA) and better revenue generation through tax reform also being supported by IDA. 4. A Country Implementation Review (CIR) is being planned for early FY94 to review the above issues and others of relevance to improve implementation of the Tanzania portfolio.  14 THE TREASURY, P.O. am g1III. TELEPHONE: 21271 DAR ES SALAAM THE UNITED REPUBLIC OF TANANIA TE MIN-SUTR FOR FINANCE Ref No:IYCIB140188 June 1993 Mr. Lewis T. Prston President The World Bank 1818 H Street, N.W. 24033 Unked Stas of America Dear Mr. Preston, 3ubJeot: Leer of Institutional Development Objectivs and Strategy for Agrliculur The govemment embarked on. an ambitious adjustment process In 1986 with the Economio Recovery Programme (ERP), which oontinues today under the Economlc and Social Acdon Programme (ESAP). Since tha time, the country has been moving awayfrm a situation of pervase controls In which the public secor was responsible lor organising economio acty to one of dcoentralled marketdrhven economic grwth. Govemment porfflts fr ricultural In ons are undergolng corresponding changes, wIththefocus shffting tothe pro, on of basicsocal and Infrstructursa sercs to the eonomy and away ftrom involvemens In productive actMes. This shift emphases an agriultural production system more determined by maret forces and te acvkis of farmers, co-operativ socite, and other private sctor agents, and less determined by dirct govemment interventon.  15 Far from removing the need for public sector Involvement, this development strategy requires even more efficient and responsible supporting Instftutions. Tanzania Is now entedng a more complex and Institutional demanding phase of the economic recovery programme. Acceleration of the pace of IMplementation of reforms is crical for sustining the gains already made and ensuring significant Increases In the standard of living for alt segments of the population, Nevertheless, weak management capacity to carry through reform implemen- tation has constrained progress. I mproving public sector management is a critical issue and it must be addressed quickly and effectively In order to accelerate the pace of adjustment. The Govemment has embarked on a process that includes; #) reassessing the role of govemment in the economy; (II) budgetary restructuring and reallocation toward priority sectors; (11 chMi service reform: A1v) restructuring of the financial system; and (v) restructuring and privatsation of parstatals. This proces Is especially importnt for govemment instiutions In agriclture, which have acquired overly broad mandates that Include tasks for which private sector delivery is better suited, while suffering from a decining resource base. As a consequence, other acivitis in support of agrcultural growth that only govemment Insitutions can provide are not being adequately carried out. To retify this shuation, the Government has initiated a series of reforms to redefine ts role, Including such policy changes as restructurng the tasks of the grain and export crop marketing boards and adopting the initial steps to reorganise the cooperative system. The strategic vsion outlined in this letter takes the process further by commitng to a process that deflnes and enhances the appropriate role of govemment In agriculture. 2  16 The Instltutional evloQoment tatgy for AcriculturM the Government recognises the need to re-direct the role of public instutions In agriculture In line with the following mission statement: To promote and sustain an enabling environment for growth In agricultural production, trade, and Investment in order to achieve the national objectoves of I Increasing rural Incomes, IQ enhancing food securiy for the entre population, lil) achieving export growth and iv) conserving the environment. The Govemment's strategic vision for Instutional development of the agricultural sector calls for changes so that: i) the legal and regulatory iramework promotes an enabling environment for the expansion of production, trade, and Investment by the private sector; ii) govemment organisations phase out, through an orderly process, func- tions best carried out by the private sector, afterwhich the Govemment will provide only those goods and services that are public In nature and that serve as catalysts for agricultura growth, In llne with national objectives; and ill the insitutions Intemal Incentive and resource allocatfon systems pro- mote and facilitate high quality performance in these areas where the govemment has a critica role to play. The proces of Institutonal reform to reach the straegic vision outlined above Is necessarily a long-erm effort. Although the government has identified many of the mileposts, the process for achieving them must remain flexible, adapting and leaming from the experience as our progres unfolds. In this way, the govement has adopted a systemaic process through which our public 3  17 Instiutions make continuous adjustments modifying approprlate laws and regulations, setting priorkites, spinning off activities to the private sector, reallo- cating resources, and strengthening core tunctions. The Govemment Is oommitted to carrying out this institutions development strategy, Including the following key elements: i) Revising the legal and regulatory framework to encourage growth of private sector agricultural production, trade, and investment. An example of this work Is the 1991 revislon of the Cooperative Development Act. Other revlsions will follow to enable effective implementeion of the proposed agenda of institutional and policy reftoms. iiQ Phasing out the provbion of cortaln goods and services by the public sector. The Minitry of Agriculture (MOA) recently identffled functions that should be phased out and taken over by the private secor and others that should be provided jolntly by the govemment and private sector participants. Priorities will be determined ana action plans developed accordingly. In 1993/94 the Government will initate the phasing out of functionethat afe *private In natur Including seed production, the sale of veterinary drugs, tractor hire services, heifer production and the sale of agricultural chemicals. The actvity of phasing out the functions that are purely private and those for joint operation with the prae sector will continue in the course of the next five years. Ill Implementing the divestiture of appropriate agricutural parastatals. The MOA has prepared options for distiture of parastatais and is working In close collaboration wih the PresIdental Parastatal Sector Reform Commssion (PSRC) to Implement a number of priority diwstiture operations. At the request and with guidance from PSRC, the MOA will support the preparation of partatals up to the point of sale by PSRC. 4  18 lv) Strengthening the rolling plan and forward budgefing process. This process will take Into considemtion the pririties of the remaining core functions In the allocaton of human and financial resources and the restructurng of projects and donor aid associated wth the functions to be phase out. v) Utilising the ratonatisatlon of functiona already Initatd In the MOA as one of the first experenoes of general civii servie reform, and taking advan- tage of the sorn leaned as the process of restructuring the role of govemment expands to other sectors and ministres. vi) Pladng a high prioorit on Improving agricultural staistics and Informatian management as part of the process of tranformation from central economic planning and control to a marketnodentd system. In view of the Institutional development measures that have already been Initiated and those that will be implemented In the ner future, th govemrnment requests your favourable consideration of an Agricultural Sector Management Project. Implementa- tion of the project would be consistent with the broader civil ervice reforms. It Is our intention to expedite the transition to the new role and mission of Govemment Institutions In agrlculure in a manner and pace that are technically and administratively feasible and consistent with our overall development goals. Yours Sincerely, oma A MINISTER FOR FINANCE Copy: Ron: J. Malwetta Hon: S. Jibona bfiWsW for Agkulhm Mniter of Ste =d VMee baInnan SD RE  ISRD 1082 i. :~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ MULE \AA UK e" D i W : 1,A4 D A 51 kfN ,-,- T,EM MPWAFWA '.10. {' /I A_ AFI54 I _-A i.R t | .. / M8EYA<NI 1 9= N i Z A M O I Ag00