Burundi - Third Technical Assistance Project

Docurent of The World Bank FOR OMCIAL USE ONLY Re t No. P-3960-BU REPORT AID RECONMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTrVE DIRECTORS ON A PROPOSED CREDIT OF SDR 4.9 MILLION TO THE REPUBLIC OF BURUNDI FOR A THIRD TECHNICAL ASSISTANCE PROJECT March 22, 1984 -w, This e_t h idb nutk mdhmy be whdb eu Wdi pkfwau o  CURRENCY EQUIVALENTS Currency Unit Burundi Franc (BuF) SDR 1.00 - BuF 122.70 SDR 1.00 - US$1.05 US$1.00 - BuE 116.77 (November 23, 1983) GOVERNMENT FISCAL TEAR January 1-December 31 GLOSSARY OF ABBREVIATIONS CADEBU: Caisse d'Epargne du Burundi (Burundi Savings Bank) CAMOFI: Caisse de Mobilisation Financifre (Resources Mobilization and FHnancing Board) CPI: Centre de Promotion Industrielle (Industrial Development Center, Ministry of Trade and Industry) DGPA: Directorate General for Agricultural Planning, Ministry of Agriculture and Livestock SNES: Service National des Etudes et StatiBtiquea (National Studies and Statistics Service) SONEBU: Sociftk Mixte d'Etudes du Burundi (Consulting Firm) SRD: SocigtE RUgionale de Dbveloppement (Regional Development Company)  FOR OFFICIAL USE ONLY BURUNDI THIRD TECHNICAL ASSISTANCE PROJECT CREDIT AND PROJFCT SUMMARY Borrower: Republic of Burundi Amount: SDR 4.9 million (US$5.1 million equivalent) Terms: Stpndard Project Description: (a) Objectives: (i) setting up mechanisms to improve project identification, preparation, evaluation and monitoring in the Ministry of Planning, and strengthen the link with macroeconomic planning; (ii) strengthening the Directorate General for Agricultural Planning (DGPA) of the Ministry of Agriculture and Livestock to improve its capacity to handle the various stages of the project cycle and to monitor Regional Development Companies management; and (iii) training in statistics and- project work, and project management for the staff of DGPA. (b) Major Components: (i) Provision of long-term advisers: one project monitoring specialist in the Ministry of Plai:ing; one agricultural statistician and one documentalist in the National Statistical Service (SNES); and one management specialist and two agricultural economists in the Ministry of Agriculture and Livestock (Directorate General for Agricultural Planning); (ii) financing of feasibility and sector studies, and specialized consultants to assist problem projects; (iii) a training program in statistics and project preparation, monitoring, and project management; (iv) a Documentation Center to centralize economic and technical information on development projects; and Cv) some equipment for the agencies receiving technical assistance. (c) Benefits: The project would continue strengthening the Ministry of Planning, SNES, and the Ministry of Agriculture. By focusing on project preparation, monitoring and evaluation, proposed activities would improve the quality of new projects and the management of on-going ones. It would also strengthen the weak link between macroeconomic and project work in Burundi's planning system, and increase the number of Burundians with skills in project work and project management. (d) Risks: Risks are essentially linked to the rapid turnover of national staff. They are addressed through an improvement of working conditions to attract and retain qualified staff in the Ministry of Planning and DGPA. 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.  Estimated Project Cost: (US$ thousands equivalent) Item Local Foreign Total Long-term advisers 370 1,530 1,900 Sector and feasibility studies and specialized consultants 650 1,660 2,310 Equipment and Vehicles 150 310 460 Training 70 180 250 Documentation Center 65 145 210 Staff allowances 55 - 55 Agricultural documentation 10 10 20 Total Base Costs 1,370 3,835 5,205 Contingencies Price 145 280 425 Physical 15 20 35 Total Project Cost, net of taxesl/ _____ 4,35~ 5,665 Financing Plan: In US$ Thousands Local Foreign Total Percent IDA 965 4,135 5,1002/ 90 Government 565 - 565 10 Total 1,530 4,135 5,665 100 1/ Taxes included in the project are negligible, as all items would be exempt of import duties and local taxes. An estimated cost table by project component can be found in Annex VI. 2/ Including refinancing of the US$750,000 equivalen. advance from the Project Preparation Facility (P-208 BU).  - iii - Estimated Disbursements: In US$ Thousands IDA FY 19841985 1986 1987 Annual 500 1,600 1,800 1,200 Cumulative 500 2,100 3,900 5,100 Appraisal Report: None Rate of Return: n.a. Map: IBRD 17164  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BURUNDI FOR A THIRD TECHNICAL ASSISTANCE PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Burundi for the equivalent of SDR 4.9 million (US$5.1 million) on standard IDA terms to help finance a Third Technical Assistance Project. PART I - THE ECONOMY 2. The last economic mission visited Burundi in May 1983 and the green cover Country Economic Memorandum was circulated in January 1984. The following section incorporates its findings and conclusions. Its main policy conclusions were incorporated 1i an Executive Summary and have been presented to the Government in Febr:ary 1984t. Background 3. Burundi is a small, land-locked country in East-Central Africa. It covers a territory of 27,835 square kilometers and has a population of 4.3 million inhabitants. With an estimated Gross National Product of US$255 per capita it is one of the world's least developed countries. The overall literacy rate is about 25X in 1982, morbidity is high, and basic social infrastructures are still lacking. Limited natural resources, popu- lation pressure, scarcity of qualified and experienced manpower, and isolation from main trade routes, explain the country's poverty. 4. Nearly 95% of Burundi's population is rural, living on scattered homesteads. Bujumbura, the capital city, had about 165,000 inhabitants in 1982. Agriculture, mostly smallholders who grow subsistence crops and coffee, contributes 60% of GDP at factor cost and 90% of merchandise exports. A few large farms grow sugarcane, tea and quinine. Of the approximate 2.3 million hectares of land available for agricultural use, three fourths are currently exploited. Most of the unused land, however, is of low soil fertility, or located in areas of risks from diseases to humans and animals. 5. The country is the second most densely populated country in Africa, with a density of 154 per km2. Population pressure has led to declining soil fertility, soil erosion and deforestation. Although  - 2 - agricultural statistics are poor, there are indications that, in recent years, fooderop production may have declined in per capita terms. Population is projected to increase at 2.7% p.a. during the current decade. The implications of rapid population growth for health facilities, schools, employment and land availability are worrisome. IDA has emphasized the urgent need to initiate family planning programs, but progress has been minimal to date despite the Government's recent acknowledgement of the problem (para. 17). 6. The country has an extensive road network. Main roads are passable all year. There is an international airport at Bujumbura. Burundi, however, remains dependent upon two transport routes to the Indian Ocean, through neighboring countries for most of its imports and exports. The Northern Route, by bighway from Bujumbura to Mombasa, Kenya, via Rwanda and Uganda is 2,020 km. in length. This routc suffers from poor road conditions, cumbersome administrative border procedures and dangerous transiting. The Southern Route, by barge dorm Lake Tanganyika, then by railway to Dar-es-Salaam, is 1,425 km. It tends to be inefficient because of long delays in clearing Bujumbura port, antiquated barges and disruptions on the Tanzanian railway. 7. Transport charges on these routes add from 25 to 300 percent to the landed cost of imports. The passage of goods through neighboring coun- tries is hindered by factors which are out of Burundi's control. Inter- ruption of crucial supplies hinders project implementation and forces firms to hold large stocks of inputs and spare parts. Significant progress has been made recently to address some of these transport problems. For the Northern Route, a unified transit document has been created, and agreements have been reached concerning road tolls and vehicle weight limits. On the Southern Route, a number of external donors have been financing improve- ments in physical facilities at the ports of Kigoma and Dar-es-Salaam. Recent Economic Developments, 1978-82 8. Based on very recent data, Burundi's economic performance during the 1978-82 Third Plan period was poor: GDP at factor cost rose by only 1.9% per year in real terms and due to a 42% decline in the external terms of trade, gross domestic income (GDY) fell by over 1.5% per year. With population rising at an estimated 2.4% per year during this period, GDY per capita fell by nearly 3.9% per year. 9. The terms of trade deterioration during the Third 'Plan period is even more dramatic if measured from 1977 when the world price of Burundi's Arabica coffee, which provides most of Burundi's export earnings, was extremely high: about US$2.41 per pound. By 1982, however, it had dropped to only US$1.40 per pound. While coffee prices were falling, moreover, Burundi's import prices were doubling. As a result, the country's terms of trade declined from an index of 100 in 1977 to an index of 26 in 1982.  -3- 10. Between 1978 and 1982, value added in food crop production de- clined by 0.5% per year on average, in constant prices of 1970 while cash crop production rose by about 3.2% per year. Although statistics of agricultural production are unreliable, official sources indicate that overall, the primary sector grew by only 0.4% per year. With a 65% share in GDP at factor cost, this poor performance of the primary sector offset the 3.4% growth of the secondary sector and the 6.2% growth of the tertiary sector and resulted in a GDP growth of only 1.9% per year. 11. An especially disappointing feature of the 1978-82 experience is that real value added grew so slowly despite a vigorous effort to raise investment. Gross domestic investment spending averaged about 13.5% of GDP (at market prices) during the period, far above the approximate 8.0% share of the previous five years. The public sector took the lead in this in- vestment spending, accounting for about 90% of the total. Foreign donors financed roughly 60X of the expenditure. IDA's relative importance grew markedly, and over US$65 million was disbursed to Burundi during the five- year period. 12. Burundi has been quite successful in obtaining foreign aid from the international community. During the 1978-82 period, per capita aid to Burundi averaged US$30, which is high by African standards. Borrowing has been largely on soft terms: at the end of 1982, two thirds of the outstanding debt had an interest rate of 0.75% or less, and half of the debt was to be repaid in 50 years. Debt service averaged roughly five percent of Burundi's exports of goods and nonfactor services during the 1978-82 period but this is likely to rise to about 20X in the next few years, which is already a heavy burden for the country. External aid should therefore continue to be on grant or very concessional terms and should include a substantial share of local cost financing. Sectoral Developments and Issues 13. In Agriculture, the most important issues for future development relate to productivity increases, to soil protection, and erosion control. Food crop promotion is essential in order to assure sufficient supplies for a fast growing population. Better utilization of the country's traditional export crop potential and diversification into new export crops appears crucial because of limited possibilities for new export revenue earning activities. Priority actions to be undertaken in agriculture are therefore promotion of applied research, in particular on food crops, strengthening and improvement of extension services, adequate and regular provision of inputs, initiation of immediate and longer-term measures to protect the country's agricultural potential, and amelioration of organization and operations of the three main export crop subsectors (coffee, tea, and cotton), principally through improvement in the management of agricultural public enterprises and through adequate pricing and stabilization policies. On the institutional side, further strengthening of agricultural  - 4 - planning, and project preparation and monitoring capacity appears crucial in order to assure effective design and implementation of projects. The concept of Regional Development Companies, which the government has recently established to promote integrated rural development, needs to he carefully reviewed in order to adapt their design to the country's needs and possibilities, in particular in terms of finances and human resources. 14. Manufacturing Industry. Industrialization is constrained by the limited natural resources, low quality of the industrial labor force and the acute shortage of managers as well as by the country's small market, b the low purchasing power of its population, the country's land-locked position, a-.id difficult transport conditions which increase costs. Burundi does offer, however, certain advantage; for industrial development. Basic infrastructure is available in the major urban center at reasonable costs and the country's land-locked situation constitutes a natural protection for import substitution projects; domestic finance is readily available to manufacturers; finally, Burundi maintains a liberal foreign exchange system. During the 1977-82 period, protectionist measures created a favorable climate for manufacturing expansion. Modern manufacturing value added grew at an average annual rate of nearly 62 in real terms between 1978 and 1982, reaching about 5% of GDP in the latter year. Most of this expansion was oriented to the domestic market. Production remained typical of the first generation of import substitution, based on imported raw materials with exports limited to processed coffee, tea, cotton and a few other items. Capacity utilization was low because of the difficulty of finding equipment adapted to the small size of the domestic market and because of high tariffs in neighboring countries. Production costs are high, but the quality of the products is generally well below international standards. However, due to the monopolistic situation enjoyed by most firms and the -cost-plus" system of price control, the sector is profitable. Since the mid-1970s, the Government has participated in a number of joint ventures with foreign interests and established public enterprises to manage large industrial operations that the private sector had avoided because of their complex management and large financial requirements. Most of these public enterprises have been created without an adequate financial structure and/or sufficient qualified personnel and are now a drain on the budget. The projects they manage are also often of doubtful viability. The Government recognizes these problems and has recently created a Public Enterprises Commission (CGEP), to improve the efficiency of public enterprises, sell off enterprises to private investors when possible and phase out those unlikely to become viable. 15. As prospects for the Burundi economy remain closely linked to the outlook of the agricultural sector, the objective of industry should be to support the development and modernization of agriculture. A manufacturing sector memorandum, which was discussed with the Government in January recommends that a selective import substitution strategy be pursued;  because of the large unused capacity in the manufacturing sector, Burundi dill also need to promote exports. In this strategy, priority should be given to the development of small and medium enterprises because of their potential as a source of employment creation. In the short-term, apart from the need to eliminate uneconomic projects from the current investment plan, the most important tasks are to (i) improve the country's capacity to prepare industrial projects and CiI) increase the capacity utilization of existing firms. In the long term, a relaxation of quantitative restrictions and price controls, the adoption of a more uniform tariff structure and economic criteria for project appraisal are needed to ILcrease economic efficiency, and encourage export and labor intensive industries. 16. Energy. Burundi faces a range of problems in the energy sector. The first and most important is the increasing scarcity of fuelvood and other traditional fuels on which almost all of Burundi's population depends for cooking and heating. Another is the high cost of oil Imports whose value rose by 450% between 1977 and 1982 while volume rose by only 45%. Finally, only 2% of the population has access to electricity. The Government, with assistance from the UNDP/Bank energy management program and other donors has started to implement a program (i) to improve forestry sector management and policy; (ii) to reduce woodfuel demand by introducing more efficient firewood and charcoal cookstoves and kilns; (iii) to develop the use of peat as a substitute for wood, charcoal and petroleum products; (iv) to investigate alternative and contingency supply arrangements for oil-imports; and (v) to participate in the Ruzizi hydro-electric regional project, improve the transmission network and establish a strong unit for power planning. Exploration is also underway to assess the hydrocarbon potential of Burundi. 17. The Government of Burundi recently announced its intention to adopt a program to reduce population growth and to establish, as a first step, a Population Bureau in the Ministry of Interior. One of the first task of the Population Bureau will be to plan and develop a population program. Fertility reduction will have to be an essential part of this program. This will, however, require substantial changes in the health care system, which is presently geared to hospital-based curative services and urban areas, as well as an increase in public spending on health, which declined by 9% a year in real terms between 1977 and 1982. 18. The Government has made a considerable effort to develop basic education and increase primary enrollments. Average percentages of capital and recurrent budgetary expenditures allocated to education are comparable to those of other African countries. However, they are high considering that the primary enrollment in public schools rate is only about 30% and cannot be increased given present budgetary constraints. Measures are therefore being taken to increase the share of resources which are devoted to basic education, through the adoption of cost saving measures at the secondary  - 6 - and university level, and to use these resources more effectively, in particular through the introduction of double shifting, and upgrading of teacher training. The Ministry of Education is also providing assistance to improve the qujality and scope of education given in private schools and adult social centers. The 1983-1987 Fourth Development Plan 19. Burundi's Fourth Plan anticipates real GDP (at factor cost) growth of 3.7% per year between 1982 and 1987, a rate of expansion which would imply per capita growth on the order of one percent per year. Preli- minary estimates for 1983 indicate real growth of less than 2.0%, however, which would imply that growth during 1984-87 would have to be faster than the average target rate. Barring an unexpected and substantial improvement in coffee prices and a major inflow of fresh financial assistance, the achievement of the Fourth Plan objectives does not seem likely at this time. 20. The Bank's analysis of Fourth Plan investment targets, which in- volve'a total expenditure of FBuIO7.2 billion in constant prices of 1981 (roughly US$1.2 billion), indicates that not more than 60% of planned investment spending will be feasible. Even with such a reduction, the financing provided by external donors would have to rise from the proposed 70% share to ..s much as 802 of total cost. 21. The Bank participated last February in the Round Table conference of donors, and recommended that the proposed investment program be reduced and that priority be given to the implementation of the more urgently needed projects and associated policy measures. 22. In addition to a lengthy list of project proposals requiring sub- stantial amounts of external financing, Burundi needs large amounts of non- project assistance. The International Monetary Fund sent an Article IV mission to Burundi in November 1983. It remains to be seen whether Burundi will request stand-by assistance. Since 1976, the Burundi Franc had been pegged to the US$ at a rate of FBu9O per US$. On November 23, 1983, the government announced a major currency adjustment. The FBu was de-linked from the US$ and linked to the SDR at a rate of FBu122.70 per SDR, representing a devaluation of 29.7% vis-a-vis the US$. This was a courageous policy action, since Burundi may suffer hardship in tha short run before enjoying benefits in the medium run. The objective is to swing the domestic terms of trade in favor of agriculture and export activities. One immediate benefit of the currency adjustment should be a reduction of the pressure exerted on the central bank, which administers Burundi's import licensing regime as the allocation function should increasingly be performed by the market. 23. The lesson of the Third Plan period is that Burundi must establish development priorities and select investment projects with great care. The linkage between macroeconomic planning and the selection of programs and projects needs to be improved. The private sector, nongovernmental organizations, and cooperatives must be enlisted to the  maximum extent feasible to participate in the development effort. Sustained technical assistance will be needed for several years in order to strengthen the country's ability to identify, Prepare, and carry out well-conceived plans and projects. 24. Regional development in Central Africa will also be important to Burundi's economy. In September 1976, Burundi, Rwanda and Zaire signed a convention establishing the "Economic Community of the Countries of the Great Lakes" (CEPGL). The Community, which has its seat in Gisenyi, Rwanda, aims irLter alia at stimulating and intensifying intra-regional trade and cooperation in a wide range of activities. A major objective of the Community is the electrification of the Great Lakes region. A first step is the Ruzizi Project, cofinanced by the European Development Fund, the regional Development Bank (BDEGL - see below), Italy, and IDA, which is about to start. A glass container project, which is the first major regio- nal industry to be implemented under the aegis of the CEPGL, is underway. The three countries have set up a joint development bank (BDEGL) to finance regional development projects, in particular exploitation of methane de- posits in Lake Kivu and development of a fishing industry around Lake Tanganyika. They have also instructed the secretariat of CEPGL to inves- tigate ways of improving the transport system around the lake in order to ease the transport bottlenecks affecting Burundi and Rwanda. PART II - BANK GROUP OJLERATIONS 25. Bank Group assistance started in 1966 and initially focussed on the improvement of highway maintenance and construction, and the development of coffee production. Since then Burundi has received twenty one credits totalling US$176 million, mostly for agriculture, infrastructure and human resources development. As of September 30, 1983, nine credits, totalling about US$43 million had been totally disbursed. IDA is now one of the main *aurces of financial assistance to Burundi. 26. One credit (US$1.1 million) helped improve water supply to Bujumbura; six credits (US$50 million) were for agriculture (two for coffee production, one for fisheries, one for forestry and two for agricultural development); four credits (US$44.4 million) helped start and support a highway maintenance and improvement program; three education credits (US$25.0 million), two of which are ongoing, aim at improving basic and junior secondary education as well as vocational and technical training; two c-redits (US$4.0 million) were made for technical assistance; and the National Economic Development Bank received a credit of US$3.4 million. A US$15.0 million credit for an Urban Project aims at improving the conditions of the poor in the city of Bujumbura and a US$7.7 million credit for a Telecommunications Project will contribute to reducing the country's  isolation and improving internal telecommunications. A Nickel Exploration Project is financing a review of the viability of exploiting the country's nickel deposits. A local construction industry project aims at developing small scale enterprises operating in this sector and the production and utilization of local construction materials. A glass container project was approved by IFC in 1981. The plant has been built and container fabrication started in 1983 (para. 24). Burundl has also received a US$15.0 million credit under the Ruzizi II regional power project benefitting Zaire, Rwanda and Burundi. Annex II contains a summary statement of IDA credits, and the status of disbursements as September 30, 1983. 27. After some initial difficulties, performance in project imple- mentation has improved in most sectors, as indicated by the disbursement rate (para. 28). Most projects have suffered from sLart-up delays and some were not completed as initially foreseen because of cost overruns. Disrup- tions on Burundi's external supply routes were on several occasions the cause for these delays. For instance, for most of 1979, equipment, cement and fuel could not be imported becau3e of the Uganda-Tanzania war. Fur- thermore, external difficulties were often compounded by poor project mana- gement due to lack of appropriately trained personnel at all levels and high management turnover. This has been remedied through provision of technical assistance in the case of education, highways, and other infras- tructure projects. Technical assistance has been less successful in improving project management in the case of agriculture and the DFC. On the whole, given existing constraints, project performance can be considered satisfactory. 28. In fiscal years 1981-83, disbursements for Burundi totalled US$45.6 million compared to new commitments of US$92.3 million. In the same period the average disbursement rate (ratio of disbursements to undis- bursed balance) was 24 percent, which is above the average for countries of the Eastern Africa Region. 29. Future IDA operations in Burundi will aim primarily at strength- ening absorptive capacity through training and technical assistance, assis- ting the Government in defining and implementing a strategy to control population growth, increasing agricultural productivity, improving the transport and communication network, and developing mining and energy resources. The proposed Third Technical Assistance Project would continue to assist the Government in its efforts to improve the selection, preparation, and implementation of projects. A rural water supply project, a fourth highway project, and a communications project are to be appraised shortly. To strengthen the analytical basis for our lending program and assist the Government in the definition of appropriate sectoral policies, several sector studies have been recently completed or are underway. An energy assessment report was issued in June 1982, and follow up studies are financed under the UNDP Bank Joint Management Program and under the Third Technical Assistance Project. A financial sector study, health and population study, and an industrial sector study were recently discussed with the Government, and an agricultural sector memo is to be discussed shortly.  - 9 - PART III - SECTOR BACKGROUND 30. Manpower limitations are a serious constraint on Burundi's development. At higher levels of responsibility, managers have seldom been trained for the tasks they are performing and many lack professional experience, as they are hired immediately after graduation. On the job training suffers from the rarity of experienced managers. At lower levels, severe shortages exist for white-collar positions (mid-level managers, accountants, bookkeepers, etc.) and for skilled craftsmen (building trades, mechanics, etc.). Inadequacies and shortages affect all sectors of the economy, but they are particularly felt in the public sector where low salaries do not attract the most skilled or experienced Burundians. Given the importance of the public sector in the country's economy, the manpower situation has hindered the implementation of the 1978-1982 Plan and contributes to Burundi's continued dependency on expatriate skills. 31. In 1981, bilateral donors accounted for about 80 percent of technical assistance grants, the principal donors being Belgium, France, the Federal Republic of Germany, and the United States. The UN system was the main multilateral donor (11 percent for the UNDP and 8 percent for other UN agencies) but its funds have since been severely curtailed. Technical assistance is provided in all sectors: education, agriculture, and natural resources being the main recipients. Like other donors', IDA projects include project related technical assistance components. In addition, IDA's assistance has also been provided through two free-standing technical assistance projects (para. 26). These projects have striven to ensure the performance of essential planning and programming functions, and to strengthen the institutions responsible for such functions. Previous IDA Technical Assistance First and Second Technical Assistance Projects 32. When IDA-financed technical assistance started in 1976, the shortage of trained nationals was severe, and the volume of IDA operations was low (5 credits by March 1976). Consequently, the First Technical Assistance credit tried to remedy the shortage of skills and to provide assistance to holp identify feasible projects. Activities financed under the First and Second Technical Assistance Credits (Credits 613-BU, US$1.5 million credit of Marc.i 19, 1976; and 917-BU, US$2.5 million credit of May 24, 1979) covered a broad range, including planning, statistics, peat development, nickel development, agriculture, and financial institutions (CADEBU and CAMOFI). By responding to pressing needs, Bank Group technical assistance has proven useful and is appreciated by the Government. In general, the objectives assigned to the projects have been met, although components have had varied success. The review below summarizes the experience gained under the Association's first two credits. Assistance to the Ministry of Planning 33. Macroeconomic Planning. The first two credits financed the services of a senior adviser in the Ministry of Planning from October 1976  - 10 - to July 1982. His main accomplishments were to set up a macroeconomic framework for planning activities, and to advise senior government officials on policy issues. His work was well received and his advice taken into consideration. With his assistance, the Ministry of Planning has established a simple, but effective, computerized system of monitoring investments in development projects in all sectors of the economy. The inputs to the system are collected on project summaries which include information on investment expenditures in current and constant terms, their distribution over the plan period, the sector and province concerned, and sources of financing. This information is updated regularly and various outputs can be obtained, such as projects by sector, province, or source of financing. This, as well as other relevant information, serves as input to a macroeconomic model for Burundi which, in turn, is the basis for government planning and budgeting. 34. Young Burundians have been trained to run the computer models, but they lack the experience and authority to identify emerging issues and bring them to the attention of senior officials. Since his departure, the IDA-financed senior adviser has been replaced by another expatriate, financed by the Federal Republic of Germany. Since macroeconomic work is now well established, Bank Group assistance to the Ministry of Planning should now concentrate on project identification, preparation, monitoring, and execution, and on the link between macroeconomic and project work. 35. Statistics. Besides the senior planning adviser, the first two technical assistance credits also financed a senior statistician in the Ministry of Planning. Two advisers have successively occupied this position: the first, from October 1976 to October 1978; the second, from October 1978 to November 1981. During their tenure, they helped organize data collection, develop price indices, prepare national accounts, and launch a number of surveys (industrial and commercial surveys; household consumption survey; energy survey; road traffic; and fire-wood consumption surveys). The second incumbent helped reorganize statistical services into an independent entity (Service National des Etudes et Statistiques, SNES). In August 1980, SNES was granted the status of autonomous agency, with the Ministry of Planning as its parent ministry. This reorganization contributed to improving the flexibility of SNES in designing its work program and in responding to users' requests, thus increasing its efficiency. In spite of these achievements, the overall performance of the senior statisticians has been mixed, in part, because of the inherent difficulty of setting-up a complete statistical system in Burundi. 36. After November 1981, the position of senior statistician in SNES was to be financed by UNDP, but the reduction of UNDP resources limited the continuation of this assistance to January 1983. Since SNES' top officials are competent and dedicated (SNES' director was trained abroad under a fellowship financed by the Second Technical Assistance Credit), a senior adviser is no longer needed. However, some divisions, which perform important functions (in particular national accounts and agricultural statistics), need assistance to pursue on-going efforts. The proposed credit would therefore continue our assistance or complement other donors' assistance to these divisions (para. 52).  - 11 - Assistance to Agricultural Planning 37. This assistance was provided under the Second Technical Assistance Credit through two channels: the agricultural statistics division of SNES, and the Directorate General for Agricultural Planning (DGPA) of the Ministry of Agriculture and Livestock. 38. Agricultural Statistics Division in SNES. The Second Technical Assistance Credit financed the services of an agricultural statistician, and the necessary equipment. The adviser has set up, in close collaboration with national staff, a system of continuous agricultural surveys designed to cover progressively all of the country's provinces. Work was carried out on schedule, with final results for the first two provinces (Ngozi and Gitega) available in June 1983. Data collection for three more provinces was completed in December 1983. 39. The success of this component results from a major training effort by the expatriate statistician. About 25 SNES interviewers have been trained on the job to work with agricultural extension workers in order to gather the necessary information. Frequent site visits by the expatriate statistician and other senior SNES staff contributed signifi- cantly to field training, both of interviewers and extension workers. The overall result is a reliable team of statistical support staff able to follow-up on the initial effort. The expatriate adviser also prepared a compendium of available agricultural statistics, and published two documents (a typology of farming systems and a survey of the Makamba- Mabanda region). In September 1982, he introduced a microcomputer to speed up analysis of the data collected by the surveys. Surveyors were trained and use this equipment regularly. 4O. DGPA. This Directorate has four main responsibilities: (i) design of overall agriculture and livestock policies (in collaboration with other directorates in the Ministry of Agriculture and with the Rural Division of the Ministry of Planning); (ii) preparation and/or evaluation of prefeasibility and feasibility studies for specific projects; (iii) monitoring of the activities of Regional Development Companies (SRDs) and of the physical and financial implementation of projects; and (iv) ad-hoc interventions to assist project management (setting-up accounting systems, preparing budgets and balance-sheets, setting up organizations, etc.). 41. DGPA comprises two divisions: (i) Studies and Progr=ms; and (ii) Monitoring and Control. The Second Technical Assistance Credit financed the services of an expatriate adviser in each of the two divisions: an agricultural economist in the Studies and Programs Division and a management/accounting specialist in the Monitoring and Control Division.  - 12 - 42. The agricultural economist has helped to elaborate methodologies for project identification and feasibility studies and to set up an agricultural documentation center. He participated, in collaboration essentially with expatriates financed by the Federal Republic of Germany, in the preparation of a livestock policy document. He also taught courses on agricultural planning at the University of Burundi. The rapid turn-over of staff and heavy travel schedule of the Chief of the Studies and Program division have, however, limited on-the-job training and skills transfer. Initially, this assistance also suffered from a lack of clarity in the respective responsisilities for policy design and programming of DGPA and the Rural Division in the Planning Ministry. Their respective responsibilities have now been clarified and the two institutions have collaborated to prepare the agriculture sector chapters on the Fourth Development Plan (1983-87). In future, the Studies and Program Division is expected to focus more sharply on policy design and project preparation. 43. The task of the management/accounting specialist proved difficult for three sets of reasons: (i) the lack of properly trained personnel in the Monitoring and Control Division, including its Chief, forced the adviser to carry out most of the work himself; (ii) the increased demand for his services led to ad-hoc interventions and prevented a systematic and comprehensive approach; and (iii) the lack of DGPA's statutory authority over the directors of agricultural projects and SRD's hindered the adviser's access to these entities' records and accounts. It is expected that reorganization measures will alleviate this last problem (para. 54). In spite of these difficulties, the adviser set up accounting systems in a number of SRDs, participated in a comprehensive review of the tea subsector, organized training seminars in management and accounting, and trained bookkeepers for two IDA-financed agricultural projects (Ngozi and Kirimiro). 44. To improve DGPA efficiency, the Government, in agreement with IDA, has decided to reorganize it by separating the management assistance function from the Monitoring and Control Division. DGPA now includes three divisions: (i) a Studies and Programs Division responsible for policy design, preparation and/or evaluation of prefeasibility and feasibility studies, and ex-post project evaluation; (ii) a Monitoring and Evaluation Division responsible for monitoring the execution of the work programs of SRD's and agricultural projects and for carrying out spot-evaluations of on-going projects; and (iii) a Management Assistance Division responsible for providing assistance to project units in management, accounting, and organizational matters.  - 13 - Other Assistance 45. The First and Second Technical Assistance Credits also financed a number of feasibility and sector studies. In particular, to help the Government design a program of action for the parastatal sector, the Association financed an in-depth review of selected public enterprises. This helped highlight the major issues, and identify a series of institutional and financial measures to start addressing them. The dialogue thus established with the Government should help identify the potential role of the Association in providing assistance for restructuring the parastatal sector so as to streamline it and improve its performance. PART IV. THE PROJECT 46. Project components were identified and prepared during supervision of the Second Technical Assistance credit. Appraisal took place in January-February 1983. A post-appraisal mission visited Burundi i.n September 1983. Negotiations were held in Washington from March 1 to March 8, 1.984. The delegation from Burundi was led by H.E. Pierre Ngenzi, Minister in the Presidency, reponsible for Planning. The main features of the pioject are highlighted in the Credit and Project Summary given at the beginning of this Report. Special conditions of the Credit are summarized in Annex III. Project Objectives 47. The project's main objective is to strengthen project identification, preparation, evaluation and monitoring in the Ministries of Planning and Agriculture. Intermediate goals include: (i) setting up mechanisms to improve project identification, preparation, evaluation and monitoring in the Ministry of Planning, and to strengthen the link with macroeconomic planning; (ii) strengthening the capability of the Ministry of Agriculture's Directorate General for Agricultural Planning (DGPA) to handle the various .rages of the project cycle and to monitor the management of agricultural projects and of Regional Development Companies; and (iii) training in project work, project management, and statistics. Project Description 48. Proposed project components are: (M) Assistance to the Ministry of Planning: (a) Project development and evaluation: the project would finance statistical Pirveys, sector studies, prefeasibility  - 14 - and feasibility studies, specialized consultants to help in solving project implementation problems, and short-term missions by the former senior adviser to the Ministry of Planning (para. 33); (b) a project monitoring system, including the services of a systems analyst for three-years, one vehicle, equipment, and staff travel allowances; (c) strengthening the agricultural statistics and national accounts divisions of SNES, the National Statistical Service (one agricultural statistician for three years, training, computing equipment, two vehicles, and staff travel allowances); and (d) construction, equipment, and putting into operation (documentalist for about 20 months) of a Documentation Center in Bujumbura to centralize and keep up to date the economic, social and technical information and data pertaining to development projects. (ii) Assistance to the Ministry of Agriculture and Livestock, Directorate General for Agricultural Planning (DGPA): (a) three advisers for three years each: one management expert to help set up management and accounting iystems in projects and Regional Development Companies (SRD's); two agricultural economists to assist in project monitorilg, project evaluation, and policy development; (b) training seminars for DGPA, agricultural proJects, and SRDW's staff on project management and project work (identification, preparation, appraisal, monitoring, and evaluation); and (c) three four-wheel drive vehicles; computing equipment; staff travel allowances and other operating costs; and organization of agricultural documentation. Detailed Features A. Ministry of Planning: Project development and evaluation 49. The Project would finance statistical surveys, sector studies, prefeasibility and feasibility studies, and specialized consultants to help in solving problems arising in the course of project execution. The Directorate General of Programming would each year submit to the Association two six-monthly programs of surveys and studies. The sectoral breakdown of these programs, established on the basis of submissions by technical ministries, would reflect the country's development priorities. The six-monthly programs would be submitted in September and April, during preparation and review of the investment budget (Section 3.05 of the draft  - 15 - Development Credit Agreement). The Association would give its prior approval to the detailed terms of reference for each of the studies, as specified in the terms and conditions of employment of the consultants who will carry them out (Section 3.02 of the draft Development Credit Agreement). To promote the development of a local consulting capacity, a local firm, SOMEBU, a mixed enterprise, would conduct some of the studies (para.64). Project Monitoring System 50. In the long term, the project monitoring system would operate at three levels: at project level for daily monitoring, at the technical ministry level for all projects in a given sector, and at the Ministry of Planning level for overview of macroeconomic consequences and supervision of Plan implementation. Under such a system, the Ministry of Planning should have resources enabling it to carry out audits and checks so as to obtain information independent of that transmitted by the technical ministries. Given existing resources constraints, the system would be set up gradually on the basis of existing monitoring units, namely the Directorate General of Agricultural Planning (DGPA) in the Ministry of Agriculture and Livestock (para. 40), the Industrial Promotion Center (CPI) in the Ministry of Commerce and Industry, and the sectoral specialists in the Ministry of Planning. The central system would be located in the Directorate General for Programming. This should permit to draw upon the experience of project implementation for the selection and programming of new investments. 51. The monitoring system would include preparation of quarterly reports indicating the progress of projects, and comparing the rate at which projects are being physically executed and expenditures are being incurred. These reports would make it possible to identify problem projects and to propose appropriate action. The proposed project would finance the services of an adviser for three years to help establish such a system. In collaboration with DGPA, CPI, and sector specialists in the Ministry of Planning, this adviser would develop standard forms to program and to monitor project activities and expenditures. This activity would complement the computerized project list (para. 33), which would continue to be refined and updated. The Project would also finance the equipment needed to set up the project monitoring system. Assistance to the National Statistical Service (SNES) 52. The project would continue the work started under the Second Technical Assistance Project. The credit wouald finance the services of an agricultural statistician for three years to complete the agricultural surveys in the remaining provinces (para. 38), to analyze the evolution of farms surveyed in 1980-81, and to undertake new activities, including in-depth study of a farm system typology, analysis of yields and processing of agricultural products, a household consumption survey, and a survey of non-farm activities in rural areas. The adviser would also assist SNES in studying the possible establishment of a computing division, with a view to introducing microcomputers in a concerted and systematic way. The credit  - 16 - would finance complementary expertise in the computer field, equipment (one vehicle each for the agricultural statistics and the national accounts divisions, computing equipment, including a microcomputer for the national accounts division) and training (in-country training for the staff of the agricultural statistics and national accounts divisions, and two one-year fellowships to train computer specialists abroad). Finally, the project would finance ad-hoc missions to carry out an organizational diagnosis of SNES and to help strengthen it. 53. To permit the collection and regular updating of information available in Burundi pertaining to project preparation, identification, evaluation and monitoring, the project would finance the construction and equipment of a Documentation Center of about 300 m2 of usable space. This Center would, in particular, maintain a current set of the studies on Burundi and on the Region. These studies are now often inaccessible and thus frequently duplicated. The Center would serve the technical ministries and the University. The Government has allocated a centrally located plot, easily accessible, for the Center. Aftei the Center is built, the project would finance the services of a documentalist for twenty months to help organize its operations. B. Ministry of Agriculture and Livestock. Directorate General for Agricultural Planning (DGPA) 54. The project would continue the work started under the Second Technical Assistance credit (paras. 41-44). It would be geared toward reorganizing DGPA, over the project period, into a three-division department comprising: (i) a management assistance division; (ii) a monitoring and evaluation division; and (iii) a studies and programs division. To strengthen DGPA's authority, the Minister of Agriculture and Livestock has issued a directive informing projects and SRD's directors of DGPA's role and instructing them to cooperate with the Directorate. 55. Experts. The credit would finance: (i) a management expert: this expert would (a) help set up accounting and management systems for major projects and SRD's (Regional Development Companies); (b) establish a system for annual programming of activities and expenditures of agricultural projects and SRD's, compatible with the monitoring system set up in the Ministry of Planning (para. 51); (c) study the establishment in DGPA of a central project assistance division; and (d) advise the Director General on matters pertaining to (a), (b) and (c); (ii) an agricultural economist in the Monitoring and Evaluation Division: this expert would assist in setting up the monitoring system and would make periodic evaluations (every six months or every year) of selected projects. He would work in c1.se cooperation with the management expert and with the system analyst who will introduce the monitoring system in the Ministry of Planning (para. 51); and  - 17 - (iii) an agricultural economist in the Studies and Programs Division: this expert would help to design policies, to identify, prepare, and evaluate new projects, to develop methodologies for these activities, and to supervise ex-post project evaluations. 56. Training. The credit would finance short-term in-service training courses for DGPA staff, and two series of seminars on the project cycle and the management of agricultural projects organized in Burundi for DGPA, projects, and SRD's staff. EDI would help in selecting consultants and in reviewing proposed training activities. A summary of training financed under the project can be found In Annex V. 57. Equipment and Documentation. The proposed project would finance three four-wheel drive vehicles and operating expenditures, and computing equipment (including microcomputers) to be chosen after a study which will determine the requirements of the project units, the SRD's, and DGPA in the context of the project monitoring system (para. 55-i). The project would also finance the equipment necessary to organize the documents gathered by DGPA, while the Documentation Center (para. 53) is built. These documents would then be transferred to the Documentation Center. Project Implementation 58. The Ministry of Planning would coordinate the implementation of the various Project components (Section 3.01 of the draft Development Credit Agreement). The Directorate General of Programming in the Ministry of Planning would administer the project development and evaluation component, and the contracts with the project monitoring specialist (para. 51) and with the firm providing long-term advisers to SNES and DGPA (para. 60). It would also be responsible for procurement of vehicles and equipment provided to the Ministry of Planning, SNES, and DGPA. Finally, it would administer local staff travel allowances for the project monitoring system in the Ministry of Planning and for DGPA staff. These arrangements would be similar to those existing under the Second Technical Assistance Credit, which have proven satisfactory. Plans for the Documentation Center have been prepared by the Ministry of Public Works, which would prepare the bid request (para. 66). The Documentation Center would be placed under the responsibility of SNES. D 59. The Mlnistry of Planning would: (i) establish and maintain accounting records for all activities under its responsibility; and (ii) open with the Bank of the Republic of Burundi a project account to finance local expenditures incurred by the project. Funds would be deposited in this account by the Government (US$113,000 equivalent on January 1 and July 1 of each year, ending on July 1, 1986; Section 3.04 of the draft Development Credit Agreement). The first Government deposit would be made on June 1, 1984 (Section 3.04 of the draft Development Credit Agreement) and would be a condition of effectiveness of the Credit (Section 5.01 of the draft Development Credit Agreement).  - 18 - 60. Recruitment. The project monitoring specialist in the Ministry of Planning and the documentalist would be recruited as individual consultants. Advisers to SNES and DGPA would be recruited through consulting firms. The terms of reference of all long-term advisers were agreed during negotiations (Annex IV). The Government would assign qualified national staff in adequate number, and with appropriate prior training, for project activities in SNES, in the Ministry of Planning, and in DGPA (Section 3.03 of the draft Development Credit Agreement). 61. Each long-term adviser would prepare a yearly work program vhich would be approved by their supervisors and reviewed by the Association (Section 3.06 of the draft Development Credit Agreement). Programs would include time-tables for the completion of planned activities and specify the respective tasks of expatriate and national staff. Project Costs 62. Total project costs at the base date of October 1, 1983 have been estimated at about US$5.7 million equivalent, of which US$4.2 million (74 percent) are foreign costs, and US$1.5 million (26 percent), local. The Association would finance US$5.1 million equivalent (100 percent of foreign costs and 60 percent of local costs) representing 90 percent of total project costs. The Government's net contribution would amount to about US$565,000 equivalent. A summary cost table appears in the Project and Credit Summary. A cost table by project component can be found in Annex VI. 63. The average staff-month for long-term experts (about 180 staff- months) has been estimated at US$10,000, including housing and travel allowances; the average staff-month for the documentalist (about 20 staff-months) has been estimated at US$5,000, including housing and travel allowances; the average staff month for expatriate short-term consultants (about 160 man-months) has been estimated at US$12,500. Construction costs for the Documentation Center have been estimated by the Ministry of Public Works. At about 50,000 BuF per square meter (US$430 equivalent) for 300 m2 of usable space, they are acceptable. Price contingencies have been added as follows: 1983-international 8.0 percent, local 10.0 percent; 1984--international 7.5 percent, local 10 percent; 1985-international 7.3 percent, local 10.0 percent; and 1986-international 6.0 percent, local 8.0 percent. Physical contingencies have been added: 5.0 percent for equipment, 10 percent for construction, and none for experts services. Travel allowances for national staff have been estimated on the basis of Government standards (BuF 1,500 or US$13 per day). Travel allowances of BuF 1,500 per day per participant have been included in cost estimates of training seminars to be held in Burundi.  - 19 - Procurement 64. The selection of experts and consultants would be in accordance with the Association's "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published in August 1981. Price would not be a selection criterion. The Government would approach a local firm, SOMEBU, for proposals to conduct some of the simpler studies financed by the project development and evaluation component (para.49 and Section 3.02 of the draft Development Credit Agreement). For the larger studies, proposals would be invited from foreign firms. 'SOMEBU has developed its expertise in two areas (agriculture and civil engineering for small projects) and has competent national staff to cover them. 65. Equipment (vehicles, office furniture, typewriters, and office machines) not exceeding US$100,000 equivalent after grouping would be procured locally after quotations from three firms which can provide proper customer services. All other equipment would be procured through ICB in accordance with IDA guidelines. 66. Construction of the Documentation Center would be carried out after local competitive bidding or by force account, whichever is the least cost method. Disbursements 67. Funds from the credit would be disbursed over three years on the following basis: (i) 100 percent of total expenditures for recrui-tment and services of long-term advisers; (is) 100 percent of foreign expenditures and 80 percent of local expenditures for activities financed under the Project development and evaluation component; (iii) 100 percent of foreign expenditures and 80 percent of local expenditures for vehicles and equipment; (iv) 100 percent of total expenditures for training activities; (v) 80 percent of expenditures for construction and equipment of the Documentation Center; (vi) 60 percent of expenditures for operating costs of vehicles procured urj - the project; and (vii) 60 percent of domestic travel expenditures of local staff.  - 20 - 68. Disbursements would be fully documented except those for local expenditures against staff travel allowances, training, and small equipment which would be reimbursed by the Association according to the above percentages upon submission of statements of Pxpenditures. An advance of US$500,000 under the Project Preparation Facility was granted to the Government in June 1982 and a supplementary advance of US$250,000 in October 1983 (P-208 BU). It would be refinanced by the proposed credit (Section 2.02 (b) of the draft Development Credit Agreement). Audit 69. Project accounts would be audited annually by independent auditors acceptable to the Association (Section 4.01 (c) of the draft Development Credit Agreement). Special attention would be paid to expenditures reimbursed under statements of expenditures. Project Implementation Schedule 70. The proposed credit is expected to become effective in July 1984. The agricultural statistician in SNES and one of the advisers to DGPA are already in Burundi. Training seminars would start in January 1985. Bids for the Documentation Center would be requested in January 1985, construction would start around March 1985, and the documentalist would arrive around June 1985. The Closing Date would be March 31, 1988. Benefits and Risks 71. The project would continue strengthening the Ministry of Planning, SNES, and the Ministry of Agriculture. By focusing on project preparation, monitoring, and evaluation, the proposed activities would improve the quality of new projects, and the management of on-going ones. They would also strengthen the link between macroeconomic and project work in Burundi's planning system. On-the-job training, seminars in Burundi, and visits and fellowships abroad would help increase the mumber of Burundians with project preparation and management skills. 72. Risks associated with the project are the high turn-over rates of Burundian staff and the need to guarantee institutional arrangements through which expatriates can provide efficient services. These risks are minimized by project design: improved working conditions in the Ministries of Planning and Agriculture would provide an incentive to attract and to retain qualified staff; and agreed institutional arrangements (especially in DGPA) take previous experience into account. Recruitment of advisers for SNES and DGPA would not be a problem, as current contracts are likely to be extended in view of the advisers' satisfactory performance.  - 21 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 73. The Draft Development Credit Agreement between the Republic of Burundi and the Association and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement are being distributed to the Executive Directors separately. Special conditions of the credit are listed in Annex III of this report. 74. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 75. I recommend that the Executive Directors approve the proposed credit. A.W. Clausen President by Ernest Stern Attachments Washington D.C. March 22, 1984  - 22 - Annex I (Page 1 of 5) r A 8 L E' 3A FACE L HUIR1NUL - SOCIAL INDICATORS DATA SlHEET IURUNDI REFERENcE. CROUS (WEIGHTED AVERAGES) Is ? . t805(HST RECENT ESTIMATE) lb .6 lb KRECENT lb LOW IHCDliE MIDDLE INC I : I lf ulu EsTiMATE- AFKICA S. UF S,:H1ARA AFRICA S. OV SAIAbA AREA (TlUSAND Su. M1) TOTAL Z7.D 27.5 27.D ;gRlCULTUKRAL 15.2 LO.0