Mali - Special economic study : planning institutions and the 1974-78 plan

Report No. 3333-MU Flu F Mali Special Economic Study Planning Institutions and the 1974-78 Plan June 30, 1981 West Africa Region FOR OFFICIAL USE ONLY Document of the Ubrid Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  EXCHANGE RATES I/ 1972 US$1 = MF 504.42 1973 Us$1 MF 445.40 1974 US$1 MF 480.99 1975 Us$1 = MF 428.64 1976 US$1 = MF 477.96 1977 US$1 = MF 491.34 1978 Us$1 = MF 451.27 1979 US$1 MF 425.45 1980 US$1 = MF 422.65 1/ Period average FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY MALI SPECIAL ECONOMIC STUDY Planning Institutions and the 1974-78 Plan Table of Contents Preface Summary and Conclusions Part I. The Planning Process and the 1974-78 Plan ................ 1 Part II. Effectiveness of Plan Projects in the Rural Sector ....... 12 Part III. Regional Disparities in Plan Expenditure .... ............. 26 Appendix ........................................................... 30 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   Preface This Special Economic Study is based upon the findings of an eco- nomic mission to Mali led in January-February, 1980 by Philip Berlin (Sr. Economist) and reflects in substantial part the work of Doris Jansen (Consul- tant), mission member. This report was discussed with the Government in June, 1981 and subsequently amended to reflect the substance of these discussions.   MALI SPECIAL ECONOMIC STUDY Planning Institutions and the 1974-78 Plan Summary and Conclusions 1. The purpose of the present Special Economic Study is to review the institutions associated with economic planning in Mali and to analyze the results of the 1974-78 Plan. The study compares the workings of the planning system as it actually operates with the institutional framework set forth in Malian statutes and in light of this examines some of the reasons for the divergences between the Plan and its actual outcome. The study also analyzes the regional and sectoral import of the Plan and with respect to the latter attempts to determine the extent to which macro-economic policies may not have been consistent with the goals expressed by the Plan itself. 2. The 1974-78 Plan was conceived by the Mali Government during the period of the worst drought which the country had known since independence and, as a result, quite naturally gave heavy emphasis to the development of agriculture to ensure the availability of domestic food supplies in time of drought, mainly through irrigated rice. Other sectors of agriculture, princi- pally the export crops of groundnuts and cotton, were favored as well, both because these were crops where Mali apparently had a comparative advantage, but also because they would allow Mali to benefit through the value-added of processing these crops into oils and textiles. 3. The importance of industrial and social infrastructure projects was underscored by the 1974-78 Plan as well, unsurprising in a very poor country such as Mali suffering the multiple disadvantage of a landlocked position, endemic disease and high illiteracy rates, not to mention serious nutritional deficiencies. While one might differ on the margin with the various alloca- tions made, there is little doubt that the 1974-78 Plan was a reasonable reflection of the country's development and human needs. 4. In large part--albeit not completely--because of Mali's extreme poverty, gross domestic savings are not, on the average, much greater than zero; certainly the public sector has rarely been able to generate positive savings. This has meant that there are very few domestic resources that are available for investment, which has had the practical implication that Mali planners have only limited ability to influence the direction or volume of investments in their country. To the extent that they can influence the course of events, it is largely control in the negative sense; while planning authorities can turn down projects, they have few means within their control of attracting projects which do not interest foreign donors. Thus they are heavily dependent upon the good will of these donors,and if no donor can be interested in projects or other activities linked to the effective realization of a number of other projects, then the overall value of the Plan may suffer as well. 5. The government's nominal planning apparatus is, to all appearances, suited to the needs of the country. The Plan itself is put together under the direction of the Ministry of Plan, with the aid of Regional and Sectoral Commissions which, in their deliberations, attempt to take account both of  - ii - regional requirements and sectoral goals as well as the coordination or programming of scarce resources consistent with their requirements and goals. In all of this, there is a genuine attempt to evaluate Plan projects according to economic criteria. However, the execution and monitoring of the Plan do not have much in common with its preparation, so that goals set by the Plan are frequently at variance with realizations, with the process resulting serves primarily in a list of projects which the government would like to see financed. The system gives short shrift to questions of allocations of scarce resources, such as the timing and coordination of resource inputs among projects or the programming of associated recurrent costs. 6. The reasons for this are various. The Mali government, like that in a number of poor countries, simply does not possess sufficient skilled resour- ces and materials to allow it to obtain easily the substantial information flows required to carry out the planning tasks which it has set for itself or to manage effectively even the limited data which are available. To a certain extent the problem is exacerbated by foreign donors themselves, operating independently and using different--and not easily reconcilable--accounting standards, procurement techniques and supervision requirements. However, a major source of the problem is that the Minister of Plan in Mali has little formal control over the execution process. Rather the various ministries may solicit, negotiate and execute projects as they see fit, with the Ministry of Plan only being informed in the most general way, not possessing the role of principal disbursing officer (ordonnateur principal) which Planning Ministers exercise in a number of the surrounding countries. While there are apparently political reasons for this which carry over from the former government, it means that the role of the Ministry of Plan (in the overall planning process) does not go very far beyond writing up the Plan alone. 7. Unfortunately, this also means that important elements of information relating to overall investment levels--not to mention sectoral to temporal distribution--are lacking, and realization figures (including those used in this report) are not calculated according to uniform criteria and are at best approximate. They are also difficult to reconcile with national accounts estimates for investments, which are themselves made on a highly aggregative basis. 8. Although the information in the text bearing upon realizations must be taken with a grain of salt, comparisons of these data are nonetheless instructive, and they do reflect the relative performance of the Plan (or in a broader sense, the government) in carrying out the original planning goals set in 1974 and revised in mid-1977. As compared to aggregate national accounts data, realizations (investments actually carried out) were only about one- third to one-half of planned investments in real terms, depending upon whether investment is measured in national accounts terms or on the aggregative basis used by the Ministry of Plan to evaluate the 1974-78 Plan. 1/ Realization rates varied sharply among sectors. Low realizations in part reflect the difficulty of mobilizing investment funds, and a poor appreciation of what 1/ "Rapport Provisoire d Execution du Plan Quinquennal, 1974-78", Vol. I: Resultats Globaux, November 1979.  - iii - attracts donor finance, as well as the effects of Mali's endemic public finance crises (described in the Country Economic Memorandum of June, 1981), also suggest that the government was sufficiently prudent to abandon or scale down projects which were clearly not feasible with the financial and manage- rial resources available. 9. The analysis of the report suggests that the repercussions of Mali's ongoing budgetary impasse resulting primarily from excessive growth in expendi- tures with low returns (e.g. automatic stipends for students and government jobs for graduates) has as much or more of a negative impact on the growth and equity objectives of Plan than any of the implementation or monitoring problems described above. The impact has been largely upon the agricultural sector--by far Mali's most important--operating directly through the maintenance of agricultural prices at levels far below world market prices. This policy, equivalent to heavy indirect taxation, has meant that investible resources were inexorably drained from the countryside during the Plan period to support current government expenditures in areas with low marginal productivity. 10. A careful examination of the data also suggests that the total resources absorbed from the agricultural sector through the operation of implicit taxation (including offsetting subsidies) were in excess of Plan expenditures on the sector; net absorptions were highest for the export crops of cotton and groundnuts, barely negative for rice and coarse grains. Of course, price is not the only factor affecting production; the cotton sector prospered despite substantial net outflows and coarse grains did poorly despite a small net positive inflow. However, there are strong indications that low real cotton producer prices have serious negative repercussions on production. Similarly, while investments in rainfed agriculture (for millet, sorghum and maize) have roughly offset the implicit net taxation of the sector, circumstances suggest that both improved prices and new investments are necessary to stem the approximately 10-20 percent decline in per capita production of these grains over the past 20 years--a decline which has occurred in spite of the substantial amounts of underutilized land resources of which Mali disposes. 11. The regional distribution of Plan expenditures during the 1974-78 Plan heavily favored the urban areas, and in particular, Bamako district. The Bamako district received, as a total of Plan expenditures, a share which was nearly four times its share in the population, whereas the ratio for the region of Timbuctou was less than 15 percent. While some of the differences can be explained by necessities of concentrating expenditures for some kinds of infrastructure in the administrative capital or by lower per capita cost of some services in urban areas, it is nonetheless striking how little the allocation of Plan expenditures has been used to compensate for sharp income disparities which currently exist throughout the country. On the other hand, the disparities in Plan expenditures by region also reflect donors' apprecia- tions of those areas where investments would be most viable or yield the highest rate of return. These would not necessarily compensate for income disparities; nor should they. 12. The findings of the report thus bear out the fact that Malian planning mechanisms, as they operate in fact, are not entirely equal of an effective implementation of economic plans as set forth in planning documents. Moreover, even if these mechanisms could operate more effectively, it is not clear that they would compensate for the loss of investible resources, particu- larly from the agricultural sector, which current economic management entails.   Part I. THE PLANNING PROCESS AND THE 1974-78 PLAN Introduction 1.01 This study focuses in large part on the problems evident in the planning process during the 1974-78 plan. It must, however, be emphasized that formulating and implementing a development plan in a country with as limited natural resources and domestic savings as Mali is an extremely diffi- cult task; among others planning authorities can seldom count on being able to carry out possibly crucial development expenditures for which they cannot find foreign financing. Consequently, even the best constructed plan integrating a number of interlinking economic elements may fail when no donor finds it compatible with its own objectives. In particular, Malian planners must begin with projects which are eligible for foreign financing, so that the smaller- scale interstices, and recurrent financing needs often crucial for development, cannot easily be planned. However, it is on the other hand clear that even a modest improvement in economic management could generate some domestic savings for public use and perhaps even allow for the improvement in mobilization of resources for productive private investment. The Malian authorities deserve credit for having undertaken a very ambitious plan, and while it is not surprising that it turned out to have been overly so, this should not detract from the considerable achievements which were made. 1.02 In order to understand the strengths and weaknesses of the planning process in Mali, it is useful to have an overview of the relevant institutions as they exist and function. This section begins with an examination of the institutional planning structure as it existed prior to, and during the 1974-78 Plan period and compares the institutions with the realities as they manifested themselves. Mali-s economic planning, which must be understood to include implementation, coordination, budgeting and follow- up, as well as the original plan design, is symptomatic of the many problems which the government faces at all levels of the economy. While Mali still bears the legacies of the past in the domination by the state of virtually all aspects of the country's economy, including its agricultural sector, what is nonetheless most characteristic of Mali