Tanzania - Public Sector Reform Program Project

Document of The World Bank Report No: 19216-TA PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THE AMOUNT OF SDR 29.9 MILLION (US$41.2 MILLION EQUIVALENT) TO THE UNITED REPUBLIC OF TANZANIA FORA PUBLIC SERVICE REFORM PROJECT IN SUPPORT OF THE FRST PHASE OF THE PUBLIC SERVICE REFORM PROGRAM October 30, 1999 Capacity Building Unit Country Department 4 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective October 30, 1999) Currency Unit = TSH TSH = US$.00130 US$1 = TSH775 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS AFDB African Development Bank MTEF Medium Term Expenditure Frame,work APL Adaptable Program Lending NGOs Non-Governmental Organ:ization; CAS Country Assistance Strategy NORAD Norwegian Agency for Internatioral CIDA Canadian Intemational Development Agency Development CSD Civil Service Department OCAG Office of the Controller and Auditor- CSRP Civil Service Reform Program General DANIDA Danish Iiternational Development Association PAD Project Appraisal Document DFID Departnent for International Development (UTK) PCU Project Coordinating Unit DLC Distance Leaming Center PER Public Expenditure Revievw EAs Executive Agencies PFP Policy Framework Paper ESAF Enhanced Structural Adjustment Facility PHRD Policy and Human Resources De,, elopment EU European Union Fund (Japan) FINNIDA Finnish International Development Agency PIF Performance Improvement: Fund GADP Government Accounting Development Project PIM Performance Improvement Model GDLN Global Distance Learning Network PMO Prime Minister's Office GDP Gross Domestic Product PMR Project Management Report GOT Government of Tanzania PMU Performance Management Unit FHPC Highly Indebted Poor Countries PPF Project Preparation Facility IDA International Development Association PPRP Parastatal and Public Sector Reformt IProject IEC Information, Education and Communication PREMIS Presidential Management Information. System IFM Institute of Finance Management PSC Public Service Commission IMF International Monetary Fund PSRP Public Service Reform Program IMTC Inter-Ministerial Technical Coordination SAC Structural Adjustment Creclit IT Information Technology SAL Structurl Adjustment Loan IWG Inter-Ministerial Working Group SDC Swiss Development Cooperation LACI Loan Administration Change Initiative SDP Sector Development Program LCC Local Cost Compensation SIDA Swedish Intemational Development, igmcy LGRP Local Government Reform Program SPA Special Program for Africa M&E Monitoring and Evaluation UNDP United Nations Development Program MDAs Ministries, Departnents and Agencies USAID United States Agency for Internati. onal MIS Management Information System Development MOF Ministry of Finance WBI World Bank Institute WHO World Health Organization Vice President Callisto Madavo Country Director James W. Adams Sector Manager Brian D. Levy Team Leader Denyse E. Morin  Tanzania Public Service Reform Program (Phase 1) CONTENTS A: Program Purpose and Project Development Objective ........................................................3 1. Program purpose and program phasing .................................................................. 3 2. Program development objective ...... ..................................3.........................3 3. Key perfonnance indicators ..................................................................3 B: Strategic Context ..................................................................A. 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project ........4 2. Main sector issues and Government strategy ................................................................. 6. 3. Sector issues to be addressed by the project and strategic choices .................................9 4. Performance triggers for subsequent credits ................................................................. 12 C: Project Description Summary ................................................................. 13 1. Project components ................................................................. 13. 2. Key policy and institutional reforms supported by the project ..................................... 14 3. Benefits and target population ................................................................. 15 4. Institutional and implementation arrangements .... ....................................................... 15 D: Project Rationale ................................................................. 2i.0 1. Project alternatives considered and reasons for rejection ............................................. 20 2. Major related projects financed by the Bank and/or other development agencies ....... 20 3. Lessons learned and reflected in the project design ...................................................... 21 4. Indications of borrower commitment and ownership ............ ...................................... 24 5. Value added of Bank support in this project ................................................................ 25 E: Summary Project Analysis ................................................................. 25 1.- Economic ...... ........................................................... 25 2. Financial ................................................................. 25 3. Technical ................................................................. 26 4. Institutional .................................................................. 26 5. Social ................................................................. 27 6. Environmental assessment ................................................................. 28 7. Participatory approach ................................................................. 28 F: Sustainability and Risks ................................................................. 28 1. Sustainability ................................................................. 28 2. Critical risks ................................................................. 3.0 3. Possible controversial aspects ................................................................. 32  G: Main Loan Conditions ........................ 32 1. Effectiveness conditions ........................ 32 2. Other ........................ 3.2 H: Readiness for Implementation ........................ 32 I: Compliance with Bank Policies ........................ 32 Annexes Annex 1 Project Design Summary Annex 2 Detailed Program Description Annex 3 Estimated Project Costs Annex 4 Cost Effectiveness Analysis Summary Annex 5A Financial Summary (Part A) Annex 5B Financial Summary (Part B) Annex 5C Financial Management for Part A Annex 6 Procurement and Disbursement Arrangements Table Al Project Costs by Procurement Arrangements (Part A) Table A2 Project Costs by Procurement Arrangements (Part B) Table A3 Consultant Selection Arrangements (Part A) Table B Thresholds for Procurement Methods and Prior Review (Part A) Table C Allocation of Loan Proceeds Annex 7 Project Processing Budget and Schedule Annex 8 Other Documents in the Project File Annex 9 Statement of Loans and Credits Annex 10 Country at a Glance Annex 11 Letter of Development Program from Govemment of Tanzania Annex 12 Decentralization & Institutional Pluralism in Tanzania Annex 13 Performance Improvement Process and Budgeting Mechanism Annex 14 Fiscal Framework for Pay Reform and Feasibility of Program Implementatici: Map IBRD 27941  Tanzania Public Service Reform Program (Phase 1) Project Appraisal Document Africa Regional Office AFC04 Date: October 30, 1999 Team Leader: Denyse Morin Country Manager/Director: James W. Adams Sector Manager/Director: Brian D. Levy Project ID: TZ-PE-60833 Sector: BA - Public Sector Management Lending Instrument: APL Theme(s): Public Sector Reform, Service Inprovement, Performance Management Poverty Targeted Intervention: [X] Yes [ ] No IDA GOT Donors Total Commitment Closing _ ~~~US$ m %/ US $m US $ m US$ m Date Date PSRP I/DLC 41.2 45% 12.5 37.2 91.0 2000 2004 Govt. of Credit Tanzania PSRP II 33.6 48% 17.5 18.9 70.0 2005 2008 Govt. of Credit Tanzania PSRP III 19.2 48% 10.0 10.8 40.0 2009 2011 Govt. of Credit ___Tanzania Total 94.0 47% 40.0 66.9 201.0 Project Financing Data I I Loan [XI Credit [] Grant [I Guarantee [ Other [Specify] For Loans/Credits/Others: Amount (US$m): 41.2 million (phase 1) Proposed terms: [] To be defined [X] Multicurrency [I Single currency [] Standard [XI Fixed [] LIBOR-based Variable Grace period (years): 10 Years to maturity: 40 Commitment fee: 0.5% Service charge: 0.75% Government of Tanzania 12.5 - 12.5 IDA 19.0 22.2 41.2 Donors 26.5 10.7 37.2 Total: 58.0 32.9 91.0 OCS APL PAD Form: October 15, 1998  Page 2 Borrower: Government of Tanzania Responsible agency(ies): Ministry of Finance, President's Office, Dar es Salaam, Tanzania Estimated Disbursements (Bank FY/USSM): FYOO FY01 FY02 FY03 FY04 Annual 6.5 9.5 13.2 6.1 6.0 Cumulative 6.5 16.0 29.2 35.3 41.2 Project implementation period: 2000-2004 (5 calendar years) Expected effectiveness date: 2000 Expected closing date: December 31, 2004 Implementing agency: Civil Service Department Contact person: Joseph Rugumyamheto, Permanent Secretary, Civil Service Departnent Address: Kivukoni Front, Dar es Salaam, Tanzania Tel: 255-51-130122 Fax: 255-51-113084 E-mail: ps-csd@intafrica.com  Page 3 A: Program Purpose and Project Development Objective 1. Program purpose and program phasing: (see Annex 1) The overall purpose of the Public Service Refonn Program (PSRP) is to support the attainment of a high rate of economic growth and ensure that delivery of quality public services within priority sectors conforms to public expectations for value, satisfaction, and relevance by end 2011. The aims of the program reflect the Government's vision of the future public service as stated in the National Vision 2025. The Public Service will be an institution of excellence playing a pivotal role in achieving sustained economic growth and prosperity. and eradication of poverty in the 21St century. The Adaptable Program Lending (APL) is most appropriate for the sequenced, programmatic and long- term implementation strategy that the Government has adopted. Phase 1 of the program (2000-2004) will: (i) complete and sustain the comprehensive structural and institutional reforms implemented with considerable success in recent years; and (ii) launch a strategic process for progressively transforming the role, capacity and performance of the public service on a sustainable basis. Phase 2 (2005-2008) will institute a performance management culture in the public service. Phase 3 (2009-2011) will bring about quality improvement practices. 2. Program development objective: (see Annex 1) Part A (Public Service Reform Program). The program development objective is to improve accountability, transparency and resource management for service delivery. The public service will deliver efficiently and effectively the Government's economic and social programs on a continuous and sustainable basis. In the medium-term (Phase 1), this development objective will be underpinned by the policy shift to institutional pluralism in service delivery and the strategic theme to deliver quality public services under severe budgetary constraints. Part B (Distance Learning Center). The main objective of the Global Distance Learning Network (GDLN) component is to test the effectiveness and sustainability of a distance leaming center (DLC) as part of a global knowledge-sharing network to strengthen the capacity of public and private decision- makers and implementers to design, plan and manage economic and social development policies. This component is an integral part of the public service reform program since one of its primary aims is to help strengthen performance capacity of government officials and private sector managers. 3. Key performance indicators: (see Annex 1) Key performance indicators of progress towards the program goal will include the following: * the Performance hnprovement Model (PIM) successfully piloted in central government key social sector Ministries, Departments and Agencies (MDAs). Success will be reflected in terms of measurable improvements in the MDAs' redefined roles, decentralized functions and enhanced private sector participation. These will translate into improved quality of services. On the basis of such outcomes, the MDAs will also receive a predictable (budget-based) flow of funds in key sectors. * the "quick win1" service improvement program initiated under the past phase of the program will be completed. * improvements in real wage levels for professional, technical and managerial staff towards levels consistent with incentives for performance and enabling the public service to hire and retain adequate numbers of staff in areas of critical skills, especially in policy and regulatory functions. "'Quick wins" are identified as reform measures that MDAs can effect to improve quality or to deliver services efficiently with zero or minimal requirement of new teclmical or financial resources.  Page 4 * demonstrated improvement towards reinstating mentocracy in the public service, i.e., appointments and promotions to the public service carried out on a transparent and competitive basis. * progress in building institutions for safeguarding and sustaining meritocratic practices, as specifically reflected in a legal framework, and a new, independent Public Service Cormmission. * progress in building sustainable capacity for bothk change management as well as service improvements. To this end planning and policy units in MDAs will be properly equipped and staffed with competent policy analysts and in-service training programs will be readily accessible to public servants. * for Part B, sustainability of the DLC measured by demnand for and utilization of the center's services and ability to cover operating expenses through fees. Specific perfomiance indicators that will trigger transition to successive phases of the programn are tabulated in Section B. 4. Indicators for the outputs and outcomes for Phase I components are in Annex 1. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Docunmentnumber: 16554-TA Date of latest CAS discussion: June 20, 1997 The CAS's primry development objective is broad-based economic growth with poverty reduction by about 5 percent by 2000. To realize this development objective, it is planned to (i) improve and stabilize: fiscal performance; (ii) strengthen the base for economic growth by giving a high priority to the rural seetor and facilitating private sector investments; (iii) improve environment management; (iv) liberalize prices and marketing; (v) imnprove market integration and access to productive assets and services; (vi) improve the efficiency of social services and target vulnerable groups; (vii) improve expenditure efficiency; (viii) eliminate redundancies and build capacity; (ix) enhance perfornance of regulatory functions; and (x) eliminate opportunities for rent-seeking and enforce accountability. The PSRP will directly support a number of these objectives by systematically introducing a strategic process that focuses public service managers on: (i) more efficient use of limited public resources through selected decentralization options and enhanced private sector participation in service delivery; and ii) sustainable improvements in capacity and overall perfonnance. The GOT's objective is to "restart progress in poverty reduction by raising growth performance and e:.tending access to basic social and economic services'2. The World Bank and other donors are supporting this o 1jective mainly through sector development programs (SDPs) and other programs aiming at improving the perfo:fnance of the MDAs. From a systems perspective, the PSRP's interventions are critical to effective implementation of the development processes initiated under various SDPs. While the SDPs will mainly provide physicaL, :nterial and sector-specific inputs for the development processes that improve the supply quality and access to basic social services, the PSRP, together with the other main institutional reform programs (Public inmancial Management Reform Program and Local Govermment Reform Program), will provide the "systemic inputs (systems, policies, rules and regulations, and others) to the development processes (see Figure 1 overleaif l. 2 World Bank "Memorandum of the President of the Intenational Development Association on a Country Assistance Strategy of the World Bank Group for the United Republic of Tanzania", (May 6, 1997), p. 10.  Page 5 Figure 1: Total System Perspective of PSRP and SDPs Nexus PSRP/Systemic Inputs SDPs Inputs Institutional Infrastructure - Physical Infrastructure * Policy Management - Human Resources * Management Systems - Materials * Decentralization = + * Others - Others Development Processes Monitoring | ServicesDl Evaluation Services Delivered  Page 6 2. Main sector issues and Government strategy: Background to Sector Issues. Soon after independence, Tanzania adopted a socialist development strategy. By the late 1980s, after a decade of economic decline and pervasive deterioration in public services, it was clear that the strategy had failed. By then also, the public expenditure framework had expanded far beyond what the Government could afford. The public administration had become characterized by underfunding and overstaffing. Civil servants were increasingly demotivated b,. cause, among other reasons, there was a downward spiral in their real incomes and political interference in appointments and pay decisions. Serious distortions and inequities in promotions and compensation took hold. Consequently, discipline, ethical standards and productivity deteriorated. Further, establishment and payroll controls fell into disuse. The public service wage bill was largely out of control, which significantly contributed to fiscal instability and deficits. Implications of Decentralization and Institutional Pluralism 3. The Government is launching the next, phase of its reform program (PSRP) against the backdrop of on-going decentralization and institutional pluralism to improve the delivery of services. In that context, the design of the PSRP strategy takes into accoumn three key institutional changes launched under the Civil Service Reform Program (CSRP): * Redefined role of the State;