Argentina - Public Sector Management Technical Assistance Project

Donunt of The World Bank FDOR OMCIAL USE ONLY Report No. P-4S0b-AR REPORT AND RECONSTRUCTION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$18.5 MILLION TO THE ARGENTINE REPUBLIC FOR A PUBLIC SECTOR MANAGEMENT TECHNICAL ASSISTANCE PROJECT May 13, 1986 | This document has a resiricted 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.  CUIRREuCa EQUIVALETS US$1 = Austral 0.84 (November 1, 1985) WEIGHTS AND MEASURES 1 hectare (ha) = 10,000 m2 = 2.47 acres 1 kilogram (kg) = 2.2 pounds 1 metric ton (m ton) = 1,000 kg GLOSSARY OF ABBREVIATIONS ANA - National Customs Administration BCRA - Central Bank of Argentina DGI - Tax Revenue Office IMF - International Monetary Fund INDEC - National Institute of Statistics and Census ME - Ministry of Economy MD - Ministry of Defense MOSP - Ministry of Public Works and Services HREC - Ministry of Foreign Affairs and Cult OPE - UNDP Office for Project Execution PPF - Project Preparation Facility PRONAGRO - National Agricultural Development Program PSML - Public Sector Management Technical Assistance Loan SAGP - Secretariat of Agriculture, Livestock and Fisheries SC - Secretariat of Ecucomic Coordination SICE - Secretariat of Industry and Foreign Trade SCGEP - Secretariat of Public Enterprises Control SECYT - Secretariat of Science and Technology Institutes and Centers SP - Secretariat of Planning SFP - Secretariat of the Public Function SH - Secretariat of Finance UNDP - United Nations Development Program REPUBLIC OF ARGENTINA FISCAL YEAR January 1 - December 31  FOR OICIL USE ONLY ARGENTINA PUJLIC SZCTOR NANAGEMENT TECHNICAL ASSISTANCE LOAN Loan and Project Summary Borrower: Argentine Republic. Amount: US$18.5 million equivalent. Terms: 15 years, including 3 years of grace, at the standard variable interest rate. Project ObJectives: The proposed project would help strengthen the Government's management of the economy, particularly its efforts to: (a) develop and strengthen the tools needed for coherent economic policies and decision making; (b) reduce the public sector deficit; (c) increase domestic resource mobilization; (d) -improve the efficiency of public sector investment; (e) strengthen the performance of and restructure public sector enterprises; and (f) improve export and industrial policies and procedures in liae with the country's comparative advantage. Project Description: The proposed project consists of: (a) the development of analytical tools and strengthening of the Information base for use by the uinistry of Economy which includes: (i) building practical forecasting models; (ii) improving maroeconomic and sectoral data; (iii) preparing and developing social indicators and poverty impact studies; and (iv) training programs for the use of statistical and economic software packages; (b) a central resource mobilization and use component to: (i) analyze and reinforce the public investment cycle especially investment policy, programming, appraisal, and monitoring; (ii) develop a training program for project preparation and appraisal; (iii) strengthen budget preparation and control; (iv) improve tax policy and strengthen tax adainistration; and (v) improve criteria and methods relating to prices and tariffs affecting the Nizastry of Public Works and Services' public enterprises. Thu docmt hb a nuicd ditribuin and may be %md by recipiets only in the performace of thbir ocml dutLIts aontat oa not otherwia be dickad wihout WorldBDnk authorzation.  - ii - (c) a public sector enterprises management component to define the relationship of public euterprises with the Government to: (i) replace day-to-day government controls with a system of accountability and performance incentives; (ii) conduct in-depth analyses of financial, managerial and physical restructuring requirements of the major public enterpriseb; (iii) improve management supervision of these enterprises; and (iv) strengthen the institutional aspects of the public management efforts covered by the loan; and (d) an industry and trade component to: (i) simplify trade and customs procedures; (ii) improve information for exporters; (iii) strengthen the design aud implementation of export promotion policies and (iv) undertake studies to improve export and industrial policies. Benefits and Risks: The proposed project would benefit Argentina by strengtheuing economic and public sector management capabilities in the key agencies in the policy area. The project is expected to produce more effective and integrated policy development, national statistical services, sector and project analysis, multi-year iuvestment planning and program monitorirg, budget planning and coutrol, tax collection, public enterprise management, and trade and industrial policies. It would reinforce current efforts by the Government to increase efficieucy in the use of resources, improve inter-agency cooperation, reduce redundancy in goverment activities, and reinforce their linkages. The relatively large size of the proposed project and the number of activities and consultants involved entail some risk of delay or incomplete implementation. These should be minimized by the very thorough goverament project preparation, the appointment of the Secretary of Economic Coordination as Project Director, the creation of a strong Project Coordinating Unit, the participating agencies' view of the project as instrumental in achieving their economic and institutional objectives, the preparation of Annual Action Programs for each component, and the commitment of the managers of differeut compouents to more effective use of public sector resources.  - iii - Estimated Cost Local Foreign Total -- -US$ million Tools for Economic Decision Making 4.8 1.3 6.1 Central Resource Mobilization and Use 5.9 3.5 9.4 Public Sector Enterprises Management 3.9 0.4 4.3 Export and Industrial Development 5.2 1.9 7.1 Coordinating Unit 0.5 0.2 0.7 Base Cost 20.3 7.3 27.6 Physical/Price Contingency - 2.0 2.0 UNDP/OPE Fee - 1.0 1.0 Repayment of PPF Advance 0.4 0.1 0.5 Total Project Cost 20.7 10.4 31.1 Financing Plan: Bank 8.1 10.4 18.5 Government 12.6 - 12.6 Total 20.7 10.4 31.1 Estimated Disbursements: Bank FY: 1987 1988 1989 1990 --TS$ million Annual 5.2 5.7 4.6 3.0 Cuumulative 5.2 10.9 15.5 18.5 Appraisal Report: This is a combined President's and Staff Appraisal Report. 14iap: IBRD 18671R.  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE ARGENTINE REPUBLIC FOR A PROPOSED PUBLIC SECTOR MANAGEMENT TECHNICAL ASSISTANCE LOAN 1. I submit the following report and recommendation on a proposed loan to the Republic of Argentina for the equivalent of US$18.5 million in suDport of its economic and public management objectives. The loan would have a term of 15 years, including 3 years of grace, at the Bank standard variable interest rate. PART I - THE ECONOMY 2. An economic mission visited Argentina in June/July 1983 and its report (4979-AR) was distributed to the Executive Directors in June 1984. This report reflects the major findings of that mission and subsequent updating missions. The Board has also received a report entitled -Argentina: Strategies toward Industrial and Export Development- (5841b-AR), dated September 30, 1985. Country data sheets are presented in Annex I. Background 3. Argentina has rich natural resources, a highly literate popula- tion, an export-oriented and diversified agricultural sector and a diversified industrial sector. The economic performance of the country has suffered, however, from policy instability and economic distortions introduced by the frequently changing goverrnents. Except for agriculture, public sector participation in the economy is high, industrial production is largely domestic market-oriented, and available resources are not utilized efficiently. Until recently, a large public sector deficit contributed significantly to the country's very high Inflation level. A. Economic Developments of the Last Decade 4. Over the last decade, abrupt shifts in economic policies weakened Argentina's productive capacity and exacerbated structural imbalances. Changes in policies produced large and rapid fluctuations in real GDP, inflation, the real exchange rate, the external trade balance, real interest rates, and real salaries. 5. High and rising inflation, physical and technological deterioration of the country's productive capacity, major dislocations in industrial production and huge external debt service requirements have resulted in general economic stagnation, such that the real 1984 per capita GDP was 14% lower than its 1974 level. There has been no growth since 1984. Heavy borrowing in the late 1970s multiplied the country's external debt as a share of GDP sevenfold (from 10% to 68Z). Today, interest  -2- payments on the external debt absorb nearly half of gross domestic savings, compared to less than 5% in the early 1970s. 6. The productive sectors, particularly manufacturing, are beset by thorny structural and financial problems. More than 40Z of capacity in the construction industry, artificially inflated during a brief construction boom of the late 1970s, now stands idle. Significant underutilization of capacity also exists in many manufacturing industries and most firms also lack sufficient working capital. Financial intermediation is costly and inefficient, interest rates are high both in nominal and real terms, and oversized banking institutions are suffering severe difficulties. Argentina's self-sufficiency in oil has deteriorated as the ratio of oil reserves to annual output has declined. Proven reserves of gas have increased, but the processing and transport infrastructure to exploit them is deficient. 7. The public sector is simultaneously overstaffed and seriously short of managerial and technical expertise. Ineffective tax administra- tion, together with inadequate budgeting and investment planning processes, contribute significantly to the large public sector deficit. Cuts in investment to curb the public sector deficit have led to a deterioration of social infrastructure and have jeopardized the reliability of power supply. B. Policies for AdJustment 8. Economic mismanagement and the consequences of the 1982 South Atlantic war hastened the departure of the military Government. A democratically elected Government took office at the end of 1983, facing spiralling inflation and growing balance of payments difficulties. Also, the after-effects of the industrial recession were threatening the solvency of the financial system. 9. Toward the end of 1984, the Government entered into a 15-month stand-by agreement with the IMF and rescheduled its external debt with official creditors, covering interest and principal up to 1985, and with the commercial banks, covering principal up to 1985. It also obtained the commitment of US$4.2 billion in 'fresh money' to finance the current account deficit and to eliminate arrears accumulated through 1983-85. The principal objectives of the stabilization program were to: (a) lower the rate of inflation from an average of about 20% per month in the last quarter of 1984 to about 8% per month by the end of 1985; and (b) achieve a balance of payments position that would enable Argentina to meet its external obligations while satisfying the needs of domestic recovery. 10. The Government moved to comply with the conditions under the stand-by agreement despite a deepening recession. However, by the end of 1984 shortfalls from the agreed targets of the program were observed. During the first quarter of 1985, the Government's adherence to the program became weaker. Therefore, the IMF suspended the first conditional draw-down under the stand-by agreement until the completion of the 1985 first quarter review of the program. 11. A new economic team took office in late February 1985 and began preparing a new package to deal with inflation which had already exceeded 20% per month. By the second quarter of 1985, economic conditions had worsened significantly. The economy was facing spiralling inflation while  -3- the recession intensified. The Goverment then decided to abandon gradual- ism in favor of 'shock treatment" and set about to prepare the country for a major change ln economic policy necessary to break inflationary expecta- tions. In June 1985, the Government devalued the peso by 18X to improve relative pricest raised the price of meat by almost 100%, and introduced a number of fiscal measures with the purpose of drastically reducing the overall fiscal deficit. It increased prices of petroleum and gas products and tariffs on electricity, telephone, transport and postal services; a temporary 10X import surcharge and a 9 percentage points increase in the export tax were approved; a 12X cut in the 1985 budget expenditure took place; and a hiring freeze was declared in the public sector. Following these measures, the Government announced a very strong adjustment program, supported by a revised and more stringent stand-by agreement with the IMF, and initiated its implementation. 12. The targets under the Government's economic program comprised: (a) a drastic cut in the total public sector deficit (including Central Bank operating losses) from 12.52 of GDP in the first half of 1985 to 2.52 on average in the second half of 1985, with the deficit to be financed by external borrowing, thus eliminating domestic credit expansion to the public sector. Further expenditure cuts were to follow the ones undertaken and lower inflation was to shorten revenue collection lags and allow for lower nominal interest rates, thus reducing interest service payments; (b) a reduction in the balance of payments' current account deficit from 3.5Z of GDP in 1984 to 2.4Z in 1985; (c) a monetary reform that included the introduction of a new currency unit pegged to the US dollar and a system for de-indexing peso-denominated contracts; and (d) a wage-price freeze. The program was supported by an agreement with commercial bank creditors to: (a) reschedule about US$13.9 billion in principal payments during the period of the stand-by (1985/86); (b) provide US$4.2 billion of new money (the same as in para. 9), of which US$2.2 billion were to be disbursed by September 1985; (c) establish a trade credit maintenance facility to maintain such financing at its level of September 30, 1984; and (d) establish a stand-by money market facility that maintains creditor banks' deposits with Argentine banks at their level of September 30, 1984. 13. The Government has been able to stabilize the economy in the short-term, and meet the targets and draw down the first and second tranches under the IMF stand-by agreement. The monthly rate of inflation, as measured by the consumer price index, has dropped from 30% in June of 1985 to 2.5% in December. The overall public sector deficit has been reduced to about 42 of GDP as a result of the revenue and expenditure measures and the sharp drop in inflation. The reserve position of the Central Bank has also shown some improvement, reflecting increased confidence in the Government's policies. The Government has also received the first and second disbursements of new money under the agreement with the commercial banks. Since cuts in public spending and high real interest rates will have a dampening effect on domestic demand, the Government has been careful not to raise expectations for a quick economic recovery. Real GDP is estimated to have declined by about 4.5% in 1985. Export response to the program has not yet been significantly positive, and recent floods have adversely affected the exportable output of grains. The Government is now moving to undertake the policy actions needed to resume economic growth on a sustained basis. The Government's program focusses on the expansion of exports, stimulation of new construction, privatization of state enterprises and greater reliance on the private sector for oil exploration and production.  -4- 14. The Government has begun to phase out the freeze on wages and prices. This has resulted in a 4.5% average increase in monthly inflation during March-April of this year compared to 1.7% in February. Following that, the Government made some compensatory adjustments in the exchange rate and public tariffs. The exchange rate has been adjusted twice in April following a policy of periodic exchange rate corrections. The Government plans to continue phasing out the wage and price freeze. It is also expected to gradually reduce import restrictions to make the economy more competitive. Moreover, the Government has stated that for the public sector the new wage policy will require compensating fiscal measures for wage increases. In this connection, while there may be increasing union pressures, sustaining the momentum of the medium-term program will require decisive actions on the part of the Goverrment in the fiscal, trade and financing sector areas. In particular, continued effort to reduce the overall fiscal deficit below current levels is necessary to break longer-term inflationary expectations and ensure the program's success. C. Development Prospects and Policy Requirements 15. Argentina's growth performance in the next five years will depend heavily on the continued success of the present stabilization policies and the implementation of structural reforms. Restoring domestic and overseas confidence in economic management and renewing private sector investment will require maintaining the recent trends in price stability. Moreover, given the burden of external interest payments on Argentina's gross domestic savings, public investment will be limited largely to improving the efficiency of existing capacity, completing unfinished projects, and starting only a few high-priority projects. The Government is in the process of revising public investment programs to give priority to those projects which alleviate immediate bottlenecks, have a high rate of return and can generate foreign exchange. 16. Argentina's key development objectives are to: (a) strengthen and expand the growth of exports in order to reduce the country's external debt relative to GDP and exports; and (b) resume medium-term growth as the stabilization program takes hold. The Government's economic program and policies are being designed to achieve these objectives. In particular, special emphasis is being given to the elimination of distortions in order to produce a rapid output and export response. Faster recovery of per capita consumption can take place only after medium-term growth has resumed. 17. The current Government strategy is based on an improvement of the investment climate and the restoration of adequate export incentives. The proposed policy measures are closely in line with the recommendations of the 1984 Country Economic Memorandum (CEM), i.e., (a) improvement in public sector finances and efficiency; (b) overhaul of the tax system and tax administration; {c) reduction in the number of public enterprises and reform of government-enterprise relatlonships; (d) improvements in incentives for private industry and agriculture; (e) reform of the financial system and active support for manufacturing exports; and (f) increased oil exports through increased private sector participation. Since the strategy aims to promote productive fixed investments, real per capita consumption is projected to rise only slightly during 1985-90. The Government is now in the process of giving this strategy concrete operational content and defining the instruments for its implementation to  -5-- make it viable over the medium-term. The Government has stated its intention of presenting, in the near-term, lts medium-term framework for growth to the international financial community. Growth and Balance of Payments Prospects 18. Improving Argentina's growth prospects for the rest of the decade would require successful implementation of the adjustment program during 1986, the rescheduling of the country's external debt by its creditors as it falls due, continued lending, and a continued expansion in exports through the rest of the decade. Under those assumptions, the current account deficit of the balance of payments has been projected to reach about US$2.3 billion during 1986, equivalent to 3.2% of GDP, to be financed by the remaining balance of the fresh money provided by the commercial banks, disbursements from the IMF. stand-by agreement, increasing disbursements of existing and projected loans from public sources, and direct foreign investment. Based on the timely adoption by the Government of medium-term growth policies, real GDP growth, beginning in 1986, could resume at about 3Z per year on average. This growth depends on the projected expansion in exports, in particular, by increasing agricultural production through intensified use of fertilizer and expanding industrial production for exports through the reduction of trade distortions and simplification of procedures, increased export promotion, and renewed private sector investment activities, and on the availability of increased external financing over the next years. This growth will also depend on improvements in budget control and execution and in increasing the operating efficiency of public enterprises necessary to maintain price stability. Under these assumptions, the current account deficit would decline rapidly from 1988 on, as a result of increasing proceeds from grain and manufacturing exports. Thus, projections indicate that Argentina would be in a position to eliminate the current account deficit of the balance of payments in the beginning of the nineties. Debt Service and Creditworthiness 19. At the end of 1985, the total public sector external debt of Argentina was US$38.7 billion. From US$8.4 billion at the end of 1978, it had grown more than four-fold. The structure of the debt also had changed radically during the 1978-1983 period. At the end of 1978, the debt to commercial banks constituted 38% of the total, but this ratio rose to 60% by the end of 1980, and to 87% by the end of 1984. By 1979, total debt service requirements already had surpassed net exports, and since 1982 the trade surplus, although large, has not been sufficient to pay the accrued interest. Thus, when the South Atlantic crisis disrupted normal roll-^-,-s and lending in 1982, Argentina began accumulating principal and interest arrears. The Government provided exchange rate guarantees for the rescheduled private external debt and eventually assumed a large part of the private sector's external obligations. Total external debt, including arrears and private sector obligations, reached US$48.4 billion by the end of 1985. 20. A sustained effort by the Government in implementing domestic policy reform, including a reduction in protectionism, combined with external support from financial sources, should enhance Argentina's export potential and thus impro-. prospects of reducing its debt to exports ratio from a level of 5 in 1985 to slightly below 4 by 1990, Its external debt  -6- servicing ratio (excluding short-term) from 61% in 1985 to 42Z in 1990, and also its total debt as a percentage of GDP from 69% in 1985 to 45% in 1990. Provided that the arrears are eliminated according to the current program and that the large debt amortization payments due in 1986 are restructured with a modest increase in the commercial banks' exposure, Argentina should be able to meet the servicing requirements of its external debt during 1986-90, including new borrowing for high-yielding projects which would support increased foreign exchange generation, efficient import substitution and increased domestic resource mobilization. At the end of 1985, the Bank's share of Argentina's total debt outstanding and disbursed was 1.4% and its share of external debt service payments was 2.3%. PART II - BANK GROUP OPERATIONS IN ARGENTINA 21. Past Bank lending to Argentina has been sporadic because of periodic macroeconomic and sectoral difficulties. In the period 1979- December 1985, the Bank made loans for ten projects totalling US$1,045 million. Bank lending since 1980 has focused on major infrastructure pro- jects and provision of credit for development of the industrial and hydro- carbon sectors. The Yacyreta Hydroelectric Project is intended to harness the enormous potential of the Parana River to provide base-load electric energy for Argentina in the 1990s. The Second Industrial Credit Project supports the modernization and expansion of export-oriented industries. A Highway Sector Project is helping to augment and maintain the road network. In parallel with the above projects, the Bank has supported the Government's efforts to exploit Argentina's energy resources; for this purpose, five loans were approved during the above-mentioned period to: (a) help Argentina assess its hydrocarbon reserves; (b) improve the basis for rational exploitation of coal resources; (c) facilitate private sector participation in exploratton and production of oil and gas; (d) alter the country's two major refineries in order to meet changing demand patterns; and (e) expand Argentina's capacity to make effective use of its hydro- carbon resources and increase the utilization of natural gas and its by-products. The Water Supply and Sewerage Project approved last December will help improve sector finances and develop provincial agencies. 22. The implementation of Bank-assisted projects in Argentina has suffered in recent years from policy reversals, cumbersome bureaucratic procedures, curbs on public investments stemmlng from the need for fiscal austerity, and the private sector's reluctance to invest in an uncertain economic environment. The Government shares the Bank's concern about this situation, which has resulted in unexpectedly slow disbursements. In response, several existing projects, including the Second Industrial Credit and the Oil and Gas Credit Projects, have been restructured to improve their execution, and the Government has submitted proposals to restructure the Vocational Training Project. The Bank has also instituted procedures for monitoring monthly disbursements and for periodic project implementation reviews with the Government. Disbursements under Bank loans in 1985 were more than double the 1984 rate. 23. Promising prospects for political stability and serious efforts by this Government to tackle Argentina's thorny economic problems provide the Bank with an opportunity to play a key role in the country's economic recovery and future development. The Government has requested the Bank's help in implementing a stabilization program and in preparing the way for  - 7 - renewed long-term economic growth. Over the short-term, the Government is seeking help with economic analyses and expanded lending operations designed to enhance domestic resource mobilization and increase the avail- ability of foreign exchange. Our economic and sector work program includes a comprehensive export-oriented industrial study and a major public sector investment review which is being completed. Recently, Bank staff discussed with the Government the framework of a medium-term economic policy refsta and development program that could lay the grounds for expanded external lending to foster economic growth and strengthen Argentina's debt servicing capacity. 24. The Bank's lending strategy for Argentina is directed toward helping the country achieve sustained medium-term growth, reduce its debt to export ratio and achieve a modest increase in per capita consumption. The focus of the lending program is on: (a) technical assistance to strengthen the Government's analytical and administrative ability to design and implement economic reform programs; (b) financial assistance to support the process of structural reform and growth; and Cc) playing a catalytic role in increasing external resource flows. A key element in the Bank's strategy is supporting the Government in eliminating the anti-export bias in the incentive system, realigning the productive structure according to comparative advantage, strengthening the import and debt servicing capacity, simplifying export and import procedures and ensuring sufficient financing to expand exports. The Bank is also preparing a policy-based operation to support the implementation of important trade policy reform initiatives, export promotion and agricultural credit, in addition to an Agriculture Sector Loan which has been approved by the Bank. Another key element in the Bank's strategy is support for the reform of the financial sector. The basic objective in this area would be to help the Government lower the high interest rates and operating costs of the financial system, rationalize banking regulations and supervision, enhance competition, and provide financing for efficient industrial capacity expansion. The Bank is preparing lending operations in these areas including, inter alia, credit for industrial and financial restructuring. 25. A third lending priority is energy development. In the area of oil and gas development the objective would be to support the Government in rationalizing the scope for private sector development, clarifying the roles of public and private enterprises with a view to enhance efficiency of resource use, establishing financ.ng mechanisms to reduce demands on the budget, expand production and reserves and substitute relatively abundant gas for liquid fuels. With respect to electrical power, the objective would be to ensure adequate and reliable power supply, restore satisfactory self-financing capacity, overcome the uneven access to and quality of electricity service, improve sector organization and institutional relationships and complete the Yacyreta Hydropower Project efficiently. To support these objectives the Bank is preparing lending for private oil and gas development, gas infrastructure and power distribution. 26. A fourth lending priority is to assist the Government's program of public sector enterprise restructuring and privatization. The basic objective of lending in this area is to support programs to reduce the size of the public sector deficit, increase the efficiency of the industrial sector, and promote local and foreign private investments. Finally, the Bank is supporting infrastructure development by assisting the Government in Its efforts to improve the management of public sector enterprises,  - 8 - assisting provincial and local governments to plan and carry out programs of capital improvements, inducing greater efficiency in the use of resources, and improving and increasing the existing infrastructure. For this purpose the Bank is preparing lending operations for ports, water supply and urban development. 27. IFC has made 26 investments in Argentina, totalling US$276 million, of which US$156 mlllion has been repaid, cancelled or sold. A summary of Its investments is shown In Annex II. Promotional efforts are geared to export or import substitution-oriented projects with emphasis on oil, petrochemicals and related sectors. IFC will also continue to seek investments In projects where its presence would facilitate the formation of joint ventures with foreign participation, and act as a catalyst to attract higher levels of commercial financing. PART III - THE PUBLIC SECTOR A. Overview 28. Public sector deficits have been a principal factor in Argentina's economic difficulties, particularly since the early 1970s, and their financing has led in recent years to a sizeable accumulation of external debt, rapid monetary expansion and growing constraints on the availability of credit to the private sector. To a large extent, the inability of successive governments to control these deficits for any sustained period has stemmed from systematic weaknesses in the underlying process of planning, budgeting, and expenditure control, and from the erosion of the tax base and poor tax administration. 29. The persistence of substantial public sector deficits reflects the inability of successive governments to enforce expenditure ceilings and priorities within a framework of clearly delimlted resource availability. This inability has been derived from the lack of faniliarity with modern planning and budgetary techniques and from the lack of a strong consensus, both within the various governments and among successive governments, regarding broad development goals that could serve as a politically durable guide for spending priorities. 30. During the 1970s and early 1980s, the weakening of public sector institutions had proceeded so far that by the time the present Government took office in December of 1983, the supporting services necessary for efficient management of the economy were not in place. A poor and inadequate data base had limited the capacity for a thorough assessment of economic issues needed in decision-making; planning and budgeting mechanisms had been severely weakened; criteria for project selection, determination of priorities and monitoring had become outdated; tax policy and administration had deteriorated sharply; and the industrial sector was suffering from serious structural and financial difficulties. Public sector enterprises had become decapitalized; and inadequate pricing and tariff mechanisms, lack of management information systems, weakness in the operations of the major enterprises, and outmoded institutional and legal structures and procedures had become a major constraint in their operation.  -9- B. The Government Structure 31. The Argentine Republic has a federal structure comprised of the Central Government, 23 provincess and the Municipality of the Clty of Buenos Aires. Each of the provinces has elected authoritles and three separate branches of Government; municipal authorities are also elected. The present Central Government institutional structure originated from a law enacted by the newly-elected Congress in 1983. The structure comprises eight ministries (the maximum established by the Constttution) and seven Secretariats which are directly under the President. The Ministries also have Secretariats and Under-Secretariats within their area of competence. 32. The Ministry of Economy (ME) plays the key role in economic management and policy formulation and is responsible for all short and medium-term policy formulation and monitoring. It shares, however, with the Planning Secretariat (depending from the Presidency), the responsibility for medium- and long-term planning, setting of priorities and allocation of investment resources. In addition, both the Ministry of Public Works and Services and the Ministry of Defense play an important role in the area of public investment allocation since the 13 enterprises under the aegis of the former account for about half of public sector investment, while the latter controls 32 public sector and mixed public/private sector enterprises. C. Analysis and Information Systems 33. Within the Ministry of Economy, the Secretariat of Economic Coordination is responsible, through its Internal Policy Division, for policy work in the areas of short-term analysis, monetary and financial policy, agricultural programing and coordination, industrial and mining programing and coordination, and coordination with the rest of the public sector. It is also responsible for overall coordination with the sectoral and specialized Secretariats. Its work, however, is constrained by the lack of adequate analytical tools which impairs its ability to systematically assess the consistency, probable impact, and longer-term effects of economic decisions, as well as to monitor their results. Many of the problems encountered in the Implementation of recent adjustment plans could have been mitigated with more adequate analytical tools. 34. Although at one time Argentina's statistics were the best in Latin America, in recent years the country's statistical information base has been seriously eroded and the reliability of macroeconomic and sectoral data has been reduced. Moreover, since the economy has experienced high rates of inflation it has become essential to incorporate adequately the effects of inflation upon aggregate economic indicators. This task directly affects the National Institute of Statistics and Census (INDEC), currently under the Planning Secretariat, which was created in January of 1968. INDEC is responsible for the gathering and processing of statistical information at all levels of governments. The production of adequate statistics has been impaired by such problems as insufficient coverage, non-reliable data, delays In processing, unavailability of information, limited methodological updating and the unavailability of modern processing facilities. INDEC is neither adequately equipped nor staffed to produce accurate data on a timely basis. In particular, the results of major surveys and of the Census only become available after excessive delays, to the point of making the information irrelevant for cecision-making.  - 10 - 35. The Central Bank of Argentina (UCRA) is in charge of the main monetary, credit and foreign exchange statistics as well as preparing and publishlng annually the balance of payments and national accounts data. Improving the reliability of the information is a key priority. BCRA is also responsible for producing input-output tables. The last study on input-output tables was done in 1963 and the data contained in that study is considerably outdated. Work on the 1973 input-output table was not completed. There is also an urgent need for a more recent update of the input-output tables based on the 1984 Natlonal Economic Census, reflecting present conditions, to undertake a more in-depth intersectoral analysis required for policy decisions in the areas of industry and trade. 36. The deficiencies in the information-processing capacity of the public sector account for the low productivity of many of the Government's information centers. Although the hardware is relatively new, its utilization level is low and, in many cases, appropriate software was not introduced. In 1984, the National Commission on Information prepared a sectoral report which set the ground for. public sector policies in this field and resulted in the creation of the Under-Secretariat of Information and Development in the Ministry of Economy to coordinate and implement these policies. The lack of coordination between different departments and agencies within the public sector have resulted, in some instances, in an overexpansion, with redundant equipment. The present economic team of the Ministry of Economy is trying to rationalize and improve the productivity of the information processing capacity of the public sector, upgrade the quality of services, and introduce savings in its operations. D. Public Sector Investment 37. Secretariat of Planning (SP). Traditionally the Government has played a strong role in the country's economic activity. Given the present burden of interest payments on Argentina's gross domestic savings, public investment will largely have to be limited to completing unfinished priority projects; in the short-term, only a few new projects--designed to overcome critical bottlenecks-are likely to be undertaken. Also, given the imperative need to reduce public sector expenditures, there is a requirement to achieve greater efficiency in Argentina's investment system than now exists. Moreover, the execution of a well-designed and carefully funded public sector investment program is of fundamental importance to support the growth of private sector activity. Thus, the Government will have to identify the key priority areas for public sector activity, and the areas in which an increased participation of the private sector should be encouraged. 38. SP, a successor to previous planrning institutions, was established in 1983. Its operations have been hampered by the lack of clear guidelines, adequate planning techniques, trained personnel, and weak management. Strengthening of the planning function would help greatly the efforts to rationalize the allocation of public resources for investment. Achieving this rationalization would involve: (a) a clear assignment of the task of medium-term investment planning; (b) reorganizing SP to address the multisectoral nature of the task; (c) establishing close collaboration between SP and the investing agencies; (d) setting up a central project screening/monitoring/post evaluation unit; (e) developing general parameters for project evaluation; and (f) preparing a viable medium-term investment program and financing plan.  - 11 - 39. Ministry of Public Works and Services (MOSP). MOSP is involved in formulating and implementing an important portion of the public sector investment program and in planning, programing and budgeting activities related to the public enterprises responsible to MOSP's sectoral Secretariats: Communications, Transport, Energy and Water Resources. In 1984, public enterprises under MOSP's authority generated US$7.5 billion in sales, employed 300,000 people and executed an investment program equivalent to 3.9Z of GDP. MOSP, however, faces serious handicaps in managing and setting policy guidelines for public enterprises. The main problems are caused by incomplete data on the current status of infrastructure and investment; a lack of coordlnation among sectors when setting objectives, goals, policies and methodological approaches to planning, programing and budgeting; an inadequate system for analyzlng costs resulting in inadequate pricing and tariff policy decisions; and the absence of guidelines for project formulation, appraisal and effective monitoring. 40. Secretariat of Agriculture, Livestock and Fisheries (SAGP). SAGP, under the ME, is responsible for establishing, coordinating, implementing and monitoring policies in the agricultural sector. The agricultural sector, traditionally important for the Argentine economy, has become even more so during the last decade because of its dual function as a foreign exchange earner and supplier of food and inputs for domestic consumption. The increasing pressure on the sector requires overcoming Its present institutional weaknesses in implementing policies. Some of the current problems include the lack of a consistent agricultural planning system; the absence of an institutional framework for planning, programIng and project iavestment design; a poor information base and inadequate information systems; and the need for training programs designed to raise management skills. E. Budgeting and Tax Collection 41. There are fewer areas in the management of the Argentine public sector which are of greater importance than budgeting and tax collectLon. The Secretariat of Finance (SH), under the ME, Is responsible for these operations through its Under-Secretariats of Budgeting and Tax Policy and Administration. The National Tax Office (DGI), under the Under-Secretariat of Tax Policy and Administration, has the responsibility for tax administration. 42. Financial programming, which plays a central role in the budgetary process, has long suffered from the uncertainties created by inflation and intermittent balance-of-payments crises. Additional problems arise out of the conduct of the process itself. Frequent delays result in budgets typlcally being prepared and approved well after the start of the fiscal year. Many agencies lack the staff and Information needed to generate relLable estimates of expenditures requirements. Control mechanisms are fragmented. In particular, the Under-Secretariat of Budgeting lacks the analytical and operative capacity needed to rationalize expenditures. 43. There Is a large gap to be reduced between the country's statutory tax system and the effective tax system. The lack of updated, accurate and timely information on taxes and taxpayers severely limits systematic analyses of the performance of different tax policies and their  - 12 - economic effects. Present tax statistics have less coverage and quality than those available in the past. This is an important constraint for estimating the tax base and revenues, tax incidence and distributional impact, both at the personal and corporate levels. 44. The existing tax administration system has a high level of non-compliance, due in part, to the lack of an actlon plan that provides guidelines on potential collections of various economic sectors and different taxpayers, and of efficient and modern control mechanisms. The need to increase the non-inflationary financing of public expenditures requires technical upgrading of the existing tax management and monitoring systems, as well as strengthening the generating, gathering and processing capacity of tax-related information. Functions such as collection, auditing, compliance, registry, statistics and data processing have been weakened as well as the guidelines, administrative and legal procedures and information processing and monitoring capacity. F. Public Enterprises (PEs) 45. In Argentina PEs are found in diverse categories: (a) those under MOSP's authority; (b) those under the Ministry of Defense; (c) those created by Fabricaciones Militares, a holding corporation operated by Lhe armed forces; (d) provincial and municipal enterprises; (e) public financial entities; and (f) other previously privately-owned corporations now belonging to the National Development Bank. PEs became heavily indebted during 1981-82 as a result of policies which encouraged them to borrow abroad to finance the Central Government. The resulting huge debt of MOSP's PEs (US$11.8 billion in 1984) practically eroded their capital and reserves. The incoming Government inherited the PEs in financial disarray, and with obsolete equipment, low productivity, low tariff levels and unskilled labor. Soon after taking office the Government created the Public Function Secretariat (SFP) to advise the President on matters related to public sector reform, and in designing and implementing training programs for upgrading public sector management. In December 1985, the Government eliminated the existing office of public sector auditing (Sindicatura General de Empresas) and created the Secretariat of Public Enterprise Control (SCGEP) to increase efficiency in the use of the PEs resources. Its functions are to control and evaluate the PEs management, monitor their operations in accordance with Government policies, and develop and supervise credit systems. SCGEP coordinates its actions with SFP in the areas of institutional change and personnel training. 46. Some of the outstanding problems of PEs relate to the existing institutional and legal framework that guides the enterprises and the rules that define their relationship with the Central Government; they also refer to the decision-making process and monitoring system and to the training level and existing management skills. One important reason for the chronically weak economic and financial performance of PEs has been the general lack of accountability of their managers. This reflects the lack of clear priorities, adequate sector planning, unambiguous goals, and performance monitoring systems. 47. To address these issues, the Government has created a Commission of Privatization to define the limits of the PEs' activities and identify the ones that may be sold to the private sector. At the same time, SCGEP  - 13 - has begun to assess the above defects. SCGEP intends to introduce a performance evaluation system that will permit the Government to judge the financial results and efficiency of the firms. It Is also in the process of designing systems to evaluate how each enterprise is fulfilling its objectives and responding to Government priorities. Through restructuring programs, SCGEP will help state enterprises deal with their underlying financial and operational problems, and will also rationalize and coordinate government policies. SCGEP will gradually hold managers accountable for final results, while strengthening and improving its guidance on objectives and major investment decisions. To accomplish this, SCGEP is improving its capacity to review and guide enterprise performance. G. Industry and Trade 48. Until recently, the Secretariat of Industry has been the branch of the Ministry of Economy responsible for the design and monitoring of industrial policy. In December 1985, it was merged with the Secretariat of Trade to form the Secretariat of Industry and Foreign Trade (SICE), under the ME, to coordinate industrial incentives with trade policies. The Ministry of Foreign Affairs (MREC) and the Ministry of Economy share responsibilities for the design and implementation of export promotion policies. MREC has been assigned the task, in coordination with the ME, to analyze international economic conditions and markets and to design policies to expand Argentina's share in international trade. 49. Argentina's industrial exports have been constrained substantially by the protectionist trade regime, wnich has, in the last five decades, created a strong inward-looking bias in the economy. Industrial export promotion had been generally co.nsidered secondary to import-substituting industrialization. As a number of incentives and disincentives for different products were introduced, a multiplicity of effective exchange rates emerged, with exports of traditional goods receiving the lowest rates. The system ultimately failed to eliminate the anti-export bias in the highly protected industries. The incentives regime was rendered particularly inadequate during the 1977-81 import liberalization attempt, basically because of a deliberate policy of not adjusting the exchange rate fully for the differential between domestic and international inflation. In 1982, import prohibitions and restrictions were introduced as the economy was affected by a very strong recession. The industrial sector has the potential for export-oriented output growth, with attendant foreign exchange earnings and employment creation. The sector lacks a clear development strategy, institutional support and consistent policy signals. The main issues are how to: (a) redress the strong anti-export bias built onto the complex systems of tariff and non-tariff barriers while maintaining a competitive exchange rate; (b) simplify trade management and procedures; (c) reduce distortions in the system of industrial incentives; and (d) improve services to exporters. PART IV - TEE PROJECT 50. The proposed Public Sector Management operation has Its origins in our 1984 discussions with the Argentine Government and in Bank sector work highlighting the need for major policy and institutional reforms to improve Argentina's economic performance. In April 1985, a UNDP-financed, Bank-executed project was launched to prepare the proposed Public Sector  - 14 - Management Technical Assistance Loan (PSML). In early 1986, the Bank approved a US$500,000 Project Preparation Facility (PPF) advance to complete the preparatory and initial diagnostic work, with a focus on public enterprise reform, public sector investment, foreign trade statlstics and analytical tools for economic decision-making. With these facilities, the implementing agencies designed the components of the proposed loan which address many serious economic management problems facing the Argentine Government. Implementation plans, Year-i action programs, counterpart arrangements and terms of reference for major assignments and most consultants have been prepared and most technical assistance personnel identified. Negotiations with the Government were held on May 1, 1986. The Government Delegation was led by Mr. Adolfo Canitrot, Secretary for Economic Coordlnation, Ministry of Economy. A. Project Objectives 51. The proposed project would help strengthen the Government's management of the economy, particularly its efforts to (a) develop and use key analytical tools in macroeconomic decision-making; (b) reduce the public sector deficit by increasing tax revenues, improving public investment and expenditure processes and performance, and increasing incomes from public assets; (c) improve public enterprise performance, by making systemic changes in the control system, and by taking steps to restructure major public enterprises; and (d) improve export and industrial policies and procedures in line with the country's comparative advantage. Thus, the Government intends to the use the PSML to help achieve its short-term economic objectives, as well as to strengthen public sector processes and performance over the medium-term. 52. The PSML also provides technical support for significant policy changes, particularly in the areas of industrial and export policies and industrial restructuring. Thus, work done under the PSML should support planned future Bank lending and economic work geared to restoring conditions for resumption of growth. Also, the PSML represents a significant expansion in the Bank's involvement in institutional development in Argentina. Past assistance has focussed mainly on institutional needs at the sector level. The proposed operation tackles the Central Government's key weaknessess in macroeconomic management, fiscal policy and administration, and overall investment choices. The PSML would contribute to a more intensive Government-Bank relationship on economic management issues, building on the improved policy dialogue. 53. In improving its analytical tools for economic decision-making, the PSML would enable the Government to build: (a) an integrated system to determine how the economy is responding to policy change; (b) basic macroeconomic forecasting and policy option formulation; (c) more reliable national accounts; (d) a current input-output matrix; and (e) better statistics on trade, industry and agriculture. The PSML has been designed to provide early results to be used by the economic team in more coherent policy and decision-making. These tools will assist the Government in making possible further policy improvements, and the international financial community in evaluating Argentina's performance. 54. Project components dealing with public sector resource mobilization and use are geared to: (a) enhance the effectiveness of tax policy and administration; improve systems and criteria in public sector  - 15 - investment and budget decisions, recognizing Argentina's severe resource constraints; and (b) strengthen investment planning to resume medium-term growth. In addition to strengthening systems and performance in central finance and planning ministries, the PSML would assist the Ministry of Public Works-which accounts for about 50X of public sector investment-in controlling investment and expenditures on low priority projects. The PSML also supports improvements in policies and resource use In the key agricultural sector. 55. To realize a substantial improvement in public enterprise performance, the proposed operation will provide a diagnosis and support the evolution of reforms In government-enterprise relationships and the latter's operations. The Government intends to use the PSML to help: (a) drastically reduce the complexlty of the present legal and operational system of controls and reporting; and (b) reduce the diffused objectives now imposed on the public enterprises, to be replaced by a more rational system of financial and economic evaluation of results and Incentives based on performance. The other major focus of the public enterprise component would be to support a diagnosis leading to physical, financial and managerial restructuring of major public enterprisesd The PSML also would flnance training of publlc enterprise managers and Ctovernment officials dealing with parastatals to facilitate introduction of Lhe new systems and to improve capabilities in key functional areas. 56. The proposed operation would also contribute to improving industrial and export policies, procedures and performance. Under the PSML, customs procedures would be revamped and computerized. Diagnostic work would be completed on: (a) further simplification of export and related import procedures; and (b) means to provide indirect exporters with access to export facilities. A system would be installed to provide exporters with access to information on export opportunities and market trends. The Commerce Secretariat, recently merged with the Industry Secretariat, would be reorganized after a study of Its strategic functions. Work would be conducted on the impact of industrial policies, with particular attention to reducing distortions and inefficiencies in resource allocation caused by disparate regional industrial incentives. Subsector diagnostic work would be conducted, beginning with capital goods, on policy measures needed to encourage industrial restructuring in line with Argentina's comparative advantage. B. Project Description 57. The proposed Public Sector Management operatlon would have four major components: (a) building tools for economic decision-making; (b) increasing Government resource mobilization and Improving the efficiency of resource use; (c) improving public enterprise performance through systemic and enterprise level changes; and (d) streamlining and strengthening industrial and export policies and procedures to enable industrial and export growth in line with Argentina's comparative advantage. Tools for Economic Decision Making 58. This component, which Involves about 19X of total costs of the PMSL would provide Argentina's economic team with: (a) basic short and mediumrterm macroeconomic and sectoral models, charting the impact of alternative policy packages under various scenarios; (b) reliable national  - 16 - accounts, and means to continue improving them; (c) an updated input-output matrix; (d) tools for assessing the social impact of policy reforms; and (e) up-to-date statistics on trade flows and patterns in key sectors. In all cases, usable tools would be provided in 'year one", with final formulation made in "year two' of project implementation (see Annex V). 59. Economic Policy Models. This subcomponent, which accounts for about 3Z of total project costs, would be implemented by the Undersecretariat of Economic Policy In the Ministry of Economy over a 24-month period. The PMSL would provide consultancy assistance. This support has been initiated under the PPF, terms of reference have been drafted, and counterparts identified. Direct outputs would be: (a) a model to help evaluate and monitor the short-term impact of macroeconomic policies, identify likely sources of disequilibrium and assess likely growth patterns; (b) using the Input/output matrix, an assessment of medium-term growth patterns in major sectors under various scenarios, focussing on key economic variables and ratios; and (c) a full equilibrium model. These tools will enable the Ministry of Economy and other policy-makers to improve the consistency of macroeconomic and sectoral policies. 60. Building and Updating of Input/Output Matrices. Under this subcomponent, which would account for 2% of total project costs, technical assistance would be provided to the Central Bank in building current, reliable input/output matrices. The latest input/output matrix-a major tool for analyzing the impact of policy change on economic structure and performance-is based on 1963 data. Under the project, methodological improvements will be made and quickly tested on an input/output matrix which the Central Bank is now finalizing, with projections based on 1973 statistics. The major work will be to employ adequate methodology in constructing an input/output matrix using the 1984 Census data. The first matrix should be constructed by month 6; the second by month 18 of project implementation. The Research Department of the Central Bank has appointed a strong counterpart team. Strong consulting inputs have been contracted under the PPF. Terms of reference for the PSML and a Year-I Action Program have been developed. 61. National Accounts. The 1984 National Economic Census provides the basis for signficant improvement in the reliability of Argentina's National Accounts. Representing 5% of total project costs, it is designed to result in reliable national accounts, a system for continuous updating, and methods to further improve the availability of information provided. Technical assistance would be provided to the Central Bank in: (a) reformulating methodologies used in constructing the National Accounts, making full use of available sectoral data; (b) fully capturing public sector expenditure patterns and trade and financing flows in the National Accounts; and (c) deepening the analysis of income distribution. This subcomponent will be the repoasibility of the Research and Statistics Department of the Central Bank, working in close cooperation with INDECand sectoral ministries, and other departments of the Central Bank. Intermediate, usable results are expected by the end of Year I with the bulk of the objectives expected to be achieved in 24 months. 62. Strengthening the Information Base. Under the project, INDEC would be supported to produce key statistics and analyses for economic decision-making, and improving the system for data collection, processing  - 17 - and analysis both at the center and in the provinces. This subcomponent, which represents about 7% of total project costs, incorporates subprojects for: (a) gathering and analyzing basic information needed to assess external trade flows; (b) strengthening systems and equipment for processing statistics at the provincial level; (c) data gathering on poverty and income distribution; (d) strengthening of the agricultural census team; (e) design of a new system for industrial surveys; and (f) introduction of key statistical software packages and training of INDEC staff on their use. The durat!:n of this component Is 24 months, with the expected intermediate results mind impact established in INDEC's Year-I Action Program. 63. Economic Information Systems. Existing economic information and the additional data produced under the PSML will be integrated by the Ministry of Economy, with support under the project. An integrated economic information system, for use in economic planning, policy making and monitoring will be installed in Year 1, with refinements made in year 2. Baslc hardware is in place. PSML support would be used to achieve the following results: Ca) install systems and procedures to resolve inconsistencies in different sources of economic data; (b) build a system which provides the economic and project implementation data needed for economic decision-making; (c) diagnose, recommend and help implement a system which reduces the incompatibility of computer systems in the ME and enable better coordination of data banks; and (d) train ME staff in the use of this information system. This project subcomponent accounts for 2% of total project costs and would be completed over an 18-month period. Central Resource Mobilization and Use 64. Planning Secretariat. The main objectives of this component, which accounts for about 2Z of project costs is to strengthen systems and staff capabilities in the Planning Secretariat in the areas of investment project evaluation and monitoring. During the first year, efforts will focus on staff training, operational improvements in the Secretariats role In the investment project cycle, and constructing an inventory of projects under execution. Once organizational improvements in the Planning Secretariat are made, work would be initiated to strengthen the process of medium-term investment programming, and preparation of guidelines for sectoral ministries and agencies on the formulation and presentation of projects and sectoral strategies. The work proposed would be completed over an 18-month period Csee Annex V). 65. Ministry of Public Works and Services. In addition to supporting improvements in overall Investment programming, budgetting, policy formulation and public enterprise management, the PSML would support improvements in MOSP, whose Secretariats of Energy, Transport and utilities operate at present with excessive autonomy in borrowing, investments and operations. This subcomponent, which would account. for about 3Z of total project costs and would be carried out over an 18-month period, would provide technical assistance to MOSP in: (a) strengthening investment appraisal programming, budgetting in MDSP and related Secretariats; (b) establishing policy formulation and monitoring procedures 'or public enterprises under MOSP; (c) improving criteria and methods relating to price and tariffs affecting public enterprises under MOSP; and (d) strengthening planning and operating capabilities in the Secretariats of Water Resources and Communications. If organizational improvements in  - 18 - MOSP are made, and Year 1 Actions implemented successfully, additional resources from the unallocated segment of the PSML would be applied to this component (see Annex V). 66. Programming and Budgetting. The PSML will support the Budgetting Under-Secretariat of the Finance Secretariat in rational containment of public expenditures, recognizing severe resource constraints. Technical assistance would be provided for the improvement of its budgetting and control systems. This subcomponent, representing about 4X of project costs, would focus on: (a) diagnosis and implementation of improvements needed in budgetting methods and processes including computerization; (b) analysis of and improvements in the general accounting system of Argentina; (c) special studies to enable more systematic allocation of public expenditures by sector and region, and assessment of foreign and local financing availability; and (d) training of staff of Budgetting and Programming Division, General Accounting Office, and Treasury Superintendency. With the PSML inputs, the Secretariat of Finance expects to: (a) establish a more efficient system for programming, budgetting and monitoring; (b) determine and make improvements in the General Accounting System, with preparation of guidelines for Government accounting, and computerization of accounting information; (c) design and install a monitoring system for foreign debt-related financial transactions; and (d) build staff capabilities in use of new systems. The Secretariat of Finance has prepared a detailed work program and Year 1 Action Plan, assigned counterpart staff, identified major services of consultancy support and assessed equipment and software requirements. All of the activities are to be carried out over a 24-month period (see Annex V). 67. Secretariat of Agriculture, Livestock and Fisheries. The Technical Assistance under the PSML would complement and support measures taken and actions initiated under the Agricultural Sector Loan. Major actions supported by the SAGP under this component, which constitutes about 8% of total project costs, and would be carried out over a 36-month period, would consist of: (a) design and implementation of an information system on the agriculture, livestock and fisheries sectors, in a form which will be useful in evaluating policies, programs and projects for uses by the public and private sectors; (b) elaboration and implementation of a sound set of strategies, policies and programs as outlined in the National Agricultural Plan with the objective of increasing output, productivity and exports of the sector; (c) mount a major training program in sectoral and project design, planning and implementation, and itn use of computers for national and provincial officials dealing with the sector. SAGP has developed a strong set of staffing objectives, staffing elements, arrangements and expected results during Year-i and also for the entire three yea-r implementation period (see Annex V). 68. The Tax Policy and Administration component, which would account for 13% of project costs, will focus on implementing measures to increase tax collection as well as providing analysis leading to reform in tax policies. The PSML wlll provide technical and systems support to install a taxpayer master file, economic activity codes and current tax account system. This work will result in an integrated tax compliance system based on adequate Information and a greater use of automatic processing systems. In Year-1, the system will be installed for large- and medium-scale taxpayers, to provide a focussed tax collection effort with the largest revenue generating possibilities. In Year-2 a similar system will be  - 19 - introduced for smaller taxpayers, new tax audit techniques will be introduced and other improvements in the operational structure for tax collection and auditing will be installed. These improvements in tax administration should have a significant positive impact on revenue collections, and should improve the tax system' s equity by ensuring more even enforcement among taxpayers. While the bulk of funding for this component will be geared toward improving collection systems, diagnosis also will be undertaken to assess policy and longer-term administrative changes. Aspects covered will include: (a) assessment of the adequacy of present tax policies including sources and uses in financing the fiscal deficit and impact of inflation; (b) establishment of a mechanism to formulate and implement tax policies and monitor their impact; (c) determine, within alternative growth scenarios, the feasibility of increasing domestic resource mobilization; (d) strengthening institutional and staff capabilities of the Tax Policy Unit through diagnosis, training and computeiization (see Annex V). Public Sector Enterprise Management 69. The PSML includes a major thrust in improving public enterprise performance by doing the diagnostic work and supporting changes in the "rules of the game' affecting public enterprise operations, and in the restructuring of major public enterprises. These elements will account for about 14% of total project costs and would be implemented over a two-year period. SCGEP will be responsible for PSML elements dealing with institutional reform and enterprise restructuring. SFP will be responsible for training of enterprise managers and officials. The diagnosis of government-enterprise relationships initiated under the PPF is expected to take six months. During the remaining 18 months, the PSML will focus on supporting implementation of reforms in the Government/public enterprise relationship under which public enterprises operate. Preliminary diagnosis indicates that major areas for legal and institutional reform will include: (a) simplification of reporting and control systems, with a move from day-to-day intervention to evaluation and reward of performance; (b) role and composition of Board of Directors; (c) modifications in the legal structure of public enterprises to enable greater autonomy and accountability for results. In parallel with these systemic changes, SCGEP will use technical assistance funds to carry out a diagnosis of physical, financial and managerial restructuring requirements of major public enterprises, with a view to make more radical changes in the control system, to test systemic changes and at the same time, identify sector-specific policy reforms and restructuring requirements to increase revenues from existing assets. In many cases, such reorganization is seern as a prerequisite to privatization; in others, the enterprises are expected to remain public with the objective to improve operating efficiency and competitiveness. The SFP will support these systemic and firm level changes by providing training to about 400 PE managers and Government officials to facilitate implementation of reforms and to increase managers' capabilities in key areas of finance, accounting, marketing and general management (see Arnex V). Industry and Trade Policies and Procedures 70. About 22% of total project costs would be largely used to support SICE in its measures to improve industrial and export policies and procedures, assist in efficiency improvements and modernization of Customs  - 20 - Administration, and improve services to exporters, strengthen the design and implementation of export promotion policles and undertake studies to improve export and industrial policies. The Ministry of Foreign Affairs would use about 2% of total project costs to analyze world markets and design policy proposals to expand Argentine exports (see Annex V). 71. Export Policies and Procedures. The PSML would provide consulting, trainlng and equipment support to SICE in: (a) diagnosing and taking additional measures to streamline export and related import policies and procedures; (b) designing and installing a system of information for exporters on market opportunities, trends and requirements, making full use of strong secondary data banks available and directly linked with commercial offlces abroad; (c) reorganizing the Commerce Under-Secretariat; (d) devising means to incorporate repayment of Indirect taxes into the duty drawback and to provide indirect exporters with access to export facilities; and (e) study of service export opportunities and international trends. These action-oriented studies and initial steps would help form the basis for subsequent lendlng operations in support of trade policy reform and export development. SICE has prepared a detailed implementation program, Year-i action plan, and draft terms of reference for major activities. The PSML would provide consulting and equipment support to the Ministry of Foreign Affairs in analysis of medium- and longer-term trends of the international economy and information required for policy decisions in bilateral and multilateral trade arrangements. 72. Industrial Strategy and Policy. Under the PSML, consultancy support will be given to diagnosis of industrial policy problems and restructuring requirements In private industry. SICE, with technical assistance under the project, will diagnose national, sectoral, and regional impact of existing policies: why they have not achieved the desired results; impact on industrial structure, efficiency, and balance of payments; and required reforms in industrial policies and incentives. Particular attention will be given to assessing costs and benefits of the diverse regional incentives, as a basis for discussing with the provinces the need for a more rational and consistent set of policies and strategies. In addition to supporting policy diagnosis and change, the PSML will help finance subsector diagnostic studies, beginning with capital goods focussing on reasons for low international competitiveness of costs and quality in major market segments; export and domestic market opportunities; physical, financial and managerial restructuring requirements; and policy changes needed to achieve efficiency Improvements. C. Project Features and Operation 73. Project Costs and Finaalcing. Total project costs are estimated at US$31.1 million, of which US$ 10.4 million (33%) represents the foreign exchange costs. The estimate excludes taxes which are borne by the Government. A loan of US$18.5 millilon (59% of total costs) is proposed. It is proposed that the loan finance this proportion of total costs in view of the serious fiscal constraints of the Government, which reflect the desirable stringency of public sector expenditures, and the priority of these activities. The loan Includes: US$15 million of base costs, which comprise the four Public Sector Management components and US$0.7 million to fund the Project Coordinating Unit; a physical and price contingencies amount of US$2 million (13% of base costs)-external inflation projections of 7.2% in 1986, 6.8% in 1987 and 6.8% in 1988 have been utilized in the  - 21 - project cost estimates; up to US$1 million (5Z of loan costs) in a fee to be paid to UNDP/OPE under the Management Services Contract; and US$0.5 million (3X of loan costs) to repay the PPF advance. Of the total loan amount, an estimated US$13 million (70X) would be allocated to contract consultants, US$1.3 million (7%) for training, US$3.7 million (20X) in goods (computer hardware and software, and supplies), and US$0.5 million (3Z) to repay the PPF advance. The project execution period is estimated to be four years. US$600,000 of retroactive financing would be allowed to ensure continuity of activities initiated under the PPF. Costs of international and Argentine consultants services have been estimated on the basis of actual prices for management, economic and financial consultants services in Argentina in April 1986. 74. The Government's contribution is calculated in value at US$12.6 million (41% of total project cost) consists of US$10.6 million of the imputed value of manpower, office space and equipment in the implementing agencies which will be used for executing the project. An additional US$2 million in counterpart funding would be incorporated in the public sector budget for 1987-88 to enable hiring qualified incremental staff to strengthen the process of implementation of the Government's medium term institutional development objectLves. This would make it possible to hire permanent staff in the participating agencies to work on the key activities supported by the loan. 75. Prolect Organization, Management and Administration. The Ministry of Economy will have overall responsibility for project organization, management and administration. The Ministry has appointed the Secretary of Economic Coordination as Project Director to be responsible for project implementation and follow up on recommendations of the consultants. 76. The proposed PSML would fund a strong Project Coordinating Unit which would report to the Project Director. The main functions of the Unit would be to: (a) coordinate implementation of all project components, with emphasis on expeditious completion of project activities, and achievement of intended impact; (b) provide technical backstopping to the 11 participating agencies in implementing project components; (c) guide and assist each implementing agency in drafting terms of reference, determining qualifications and selecting of local and foreign consultants subject to Bank approval; (d) review all consultants, interim and final reports, providing feedback to the Project Director, implementing agencies, and the Bank on their content and use of recommendations; Ce) provide quarterly progress reports on planned vs. actual activities, commitments and disbursements, and results, with in-depth reports prepared semiannually for use in the six monthly field reviews of project implementation; (f) with assistance from the UNDP Office for Project Execution (OPE), make all administrative arrangements for contracting of local and foreign consultants, and purchase of equipment and supplies; and (g) assist the Project Director to ensure that activities result in policy, institutional and performance improvements in public sector management. 77. The Unit would consist of: a project coordinator; two economists/public sector management specialists; two programming officers; one administrative assistant; and two secretaries, all of which would work full time. The Government and the Bank have agreed on: the composition of the Project Coordinating Units and the terms of reference for the Unit and  - 22 - each member. Establishment of the Project Coordinating Unlt would be a condition of loan effectiveness. 78. Annual Action Programs. To administer the project, there would be a series of annual action programs for each component. These would be based on a multi-year framework reflecting: (a) the major issues that need to be addressed; (b) each particular agency's implementation capacity; and (c) the system required for more effective government operation. Each impiementing agency has already prepared, and the Bank has in turn received, an Action Program for Year 1 of the PSML operation. These programs specify objectives, activities, institutional development arrangements, terms of reference, and expected impact for Year 1 for each of the sub-components; they also provide loan and counterpart costs and arrangements. A major Government-Bank review would be conducted after Year 1 at which allocations would be reviewed, and if need be, revised to maximize the impact of the operation as a whole. Action programs for years 2 and 3 would be submitted for Bank approval by December 30, of 1986 and 1987, respectively. The Government and the Bank have agreed on Year 1 Action Programs for each component. Joint project implementation reviews (IBRD, the borrower, and the implementing agency of each component) would take place semiannually. These reviews would cover progress made on completing activities supported under the project, and also consultation with the Bank on which and how recommendations emanating from PSML work will be implemented. 79. Hiring of Procurement Agent. To facilitate project administration and overcome the cumbersome government procedures for hiring consultants and importIng equipment, the Government would hire UNDP/OPE as procurement agent under a Management Services Contract, financed by the PSHL. UNDP/OPE would procure goods and services under procedures consistent with Bank guidelines. The Government has agreed with UNDP/OPE --n the administrative services to be rendered and the fees to be provided. Execution of a Management Services Contract between the Borrower and UNDP/OPE, satisfactory to the Bank, would be a condition of loan effectiveness. 80. Procurement. All goods, services and consultants would be procured under procedures consistent with Bank Guidelines. The Bank would review and approve the terms of reference, selection procedures, qualifications and fee range for all foreign and local consulting positions. After approving these, and for consultants earning less than US$2,000 in monthly fees, the Bank would review the selection process and contracts for the flrst ten such consultants and, if adequate, delegate to the Project Coordinating Unit the responsibility for selecting and approving all further consultants under this threshold. It is estimated that 75-80% of consultants would be Argentines. Procurement of all goods, principally computers and their corresponding software and office technology equipment, would be carried out through international shopping including quotations from at least three suppliers in conformity with the Bank guidelines for procurement. 81. Disbursement. Disbursement of loan funds is expected to require about four years. The Bank loan would disburse: (a) 100 percent of the costs of consultants and associated services; (b) 100 percent for directly imported equipment; (c) 100 percent of expenditures for training and scholarships; and (d) 100% repayment of the PPF advance. The project is  - 23 - expected to be completed by June 30, 1990; the closing date would be December 31, 1990. 82. As conditions of loan disbursements for individual components, each of the 11 implementing agencies would be required to send letters to the Bank containing: (a) a chart outlining the main features of the component during the implementation period: key government objectives to which project-financed activity will contribute; results and impact expected; activities to be undertaken; organizatlonal arrangements to be made to ensure effective implementation and institutional development; and (b) Year 1 action program for each component being Implemented by the respective agency, including breakdown of costs to achieve Year-I results. In the case of the Central Bank and INDEC. they would have to enter into contractual arrangements with the Government for the execution of their respective parts in the project. The Government and the Bank have agreed on the substance of these letters, including Implementation Plans and Year I Action Programs. 83. Consultation/Supervision. With the proposed implementing arrangements--Coordinating Unit, UNDP/OPE administration contract, specific annual action plans--Bank supervision work would focus primarily on substantive aspects relating to improved economic management, policy reform, and institutional improvements. In a number of components-notably public enterprise reform, investment planning and budgeting, and export and industrial development--work under the PSML is likely to result in key policy-making decisions during the course of FY87 and FY88. 84. Accounts and Audit. The Borrower would establish and maintain consolidated project accounts for all expenditures financed under this loan in a clearly identifiable manner. The Special Account, as well as other accounts and supporting records pertaining to the services and goods financed under the loan, would be audited annually by independent auditors acceptable to the Bank. E. Benefits and Risks 85. Benefits. The proposed project would benefit Argentina by strengthening economic and public sector management capabilities in the key agencies taking decisions in the policy area. This would take place at a time when the Government is in the process of giving its development strategy concrete operational content and defining the instruments for its implementation. The project is expected by the Government and the Bank to produce more effective axd integrated policy development, national statistical services, sector and project analysis, multi-year investment planning and program monitoring, budget planning and control, tax collection, public enterprise management, and trade and industrial policies. It would reinforce current efforts by the Government to increase efficiency in the use of resources; and Improve inter-agency cooperation, reduce redundancy In Goverment activities, and reinforce their linkages. 86. Risks. The relatively large size of the proposed project and the number of activities and consultants involved entail some risk of delay or incomplete implementation. Successful project implementation will require the continuing commitment of Bank supervisory staff as well as Argentine managers and staff. The Government is, however, firmly committed to the program of improvement in public sector management as an integral part of  - 24 - its medium-term growth framework. Recent government measures demonstrate both the willingness to undertake necessary reforms and the ability to implement them. The project' s risks should be minimized by the very thorough government project preparation, the appointment of the Secretary of Economic Coordination as Project Director, the creation of a strong Project Coordinating Unlt, the preparation of Annual Action Programs for each component, and the degree of commitment of the managers of different components to more effective use of public sector resources, together with their view of the project as instrumental in achieving their economic and institutional objectives. 87. I am satisfied that the proposed loan would comply wlth the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed project. A.W. Clausen President Attachments May 13, 1986 Washington, D.C.  - 25 - ANN I T A A L e 3 Pag e of 6 AGNTInlA - SICIAL l OIATy5 DATA Silt ANGWIRA REiPSNKNC Gmagjfl MelW3TfoD AVAS) 7- MST (MSr wcarT mArcDATh) /b igbaLb~~ li?l ECENT tIloLW LAWCu qtOULC I"ClCO 19bo!t 197ut!Z CspL0TII4b LA1f. AIICCICA L CAR w'alpE -MA (Tmam . a) TOTAL 276b.9 27b..9 2706.9 ACAICULTURAL 174t.2 1777.0 1753.0 GNP PR CATA (550) .. .. 2070.0 1l75.9 2144.3 sits?Y wNlnwnou PE Cii rA (KILOcQs OF OIL RQUrVALEUT) 506.0 1211.0 1415.0 993.6 11W.8 OPULAON Asn VAL STATISTICS PoPUUSION aa11ua-v (TmOUSANDS) 20616.0 23962.0 29627.0 URW POPULATION (2 UV TOTAL) 73.6 78.4 53.6 67.7 A7.5 POtIAUTION PalOECrZONS POPIiATION IN YEAR 2000 (MLL) .. .. 30.5 STATIONAXY POPULATION (KILL) .. .. 54.0 POPULATION METUM ., 1.5 POPULATION ENSy PER SEq. KR. 7.5 5.7 10.7 45.0 84.7 PER SO. I. ARI. LAND 11.1 13.5 16.3 91.1 166.1 POPUIATION AGE STRUCTURE (X) 0-14 llS 3a.7 29.1 3U.6 3B.5 31.2 15-04 YRS 63.6 63.6 61.1 57.1 61.5 65 AND IDOMI 5.5 7.1 8.2 4.2 7.2 POPUlATION Gru RATE CZ) TOIAL 1.5 1.5 1.6 2.4 1.6 UVNA 3.0 2.1 2.1 3.6 3.7 CRUDE lIOn RAtAE (PER TROlS) 23.0 22.9 24.3 30.9 23.4 CRUDE DEATH RATE (PER THOUS) 8.7 9.4 9.0 8.0 8.9 GROSS REPROWCTION RATE 1.5 1.5 1.6 2.0 1.5 FArILY PLANNING ACrTORs. ANNUAL (TKOUS) .. USERS (Z OF MARRISED WO) .. .. .. 45.3 FOOD AM am ino. INDEK OF FOOD PROD. PER CAPITA (1969-71-100) 90.0 101.0 116.0 3U9.6 1t9.1 PER CAPITA SUPPLY OF CALORIES (Z OF RS)UIR1ENTS) 124.0 125.0 121.0 113.2 131.5 PROTEINS (GRIS PER DAY) 110.0 107.0 106.0 69.A 92.4 OF JHICH ANIMAL AND PULSE 66.0 68.0 69.0 7c 34.2 34.5 CHILD (ACES 1-4) DEATH RATE 4.5 3.2 1.0 4.8 4.7 STALlN LIFE EPECT. AT lRTH (YEARS) 65.1 66.6 69.5 64.b t7.2 INFANT nWErr. RATE (PER THOUS) 60.0 53.0 3b.0 59.7 53.3 ACCESS TO SAFE "ATEg (Pl'P) TOTAL 47.3 5e.0 57.0 Id 65.3 70.2 UIBAN 58.9 69.0 65.0 /d 76.5 59.4 RURAL 9.6 12.0 17.0 7i *4.2 57.u ACCESS TO EXICRTA DISPOSAL (Z OF POPULATION) TOTAL 62.0 85.0 79.0 Id 50.3 59.6 URBAN .. 87.0 59.0 7i 73.4 65.9 RURAL ** 79.0 32.0 7d 25.5 47.0 POPULATION PER PHYSICIA 740.0 520.0 430.0 /c 1909.7 1070.6 POP. PER NURSING PERSON 760.0 la 590.0 ' 1 08.2 769.5 POP. PR HOSPITAL BED TOTAL 160.0 180.0 .. 362.0 325.3 UR1AN 190.0 Ie 200.0 .. 422.0 201.9 RURAL "490.0 7 1030.0 .. 2716.7 4519.7 ADMISSIONS PER HOSPITAL RED .. .. .. 27.5 2U.0 OUSUI AVERSZE SIZE Of HOU5EHLD TOTAL 3.7 3.8 URIAN 3.5 .. RURAL 4.3 AVERACE NO. OF PERSONS/ROOI TOTAL 1.4 1.4 URBAN 1.3 .. RURAL 1.7 .. PERCENTAGE OF DWELLINIS 111TH -LECT. TOTAL 69.2 76.0 87.0 /d URIAN 54.7 .. RURAL 18.6 ..  -26- ANN I TAbLI 34 Pase 2 of 6 AmIWt1UA - uocWM. TIIHO SOC DATA MUEUT A5~~NZ1NA NM " REC OIU' (twiffEU AVIRAOS) Lo tDYT 101T RMT SSTMATS) fb IlltCCHT NKN0 1O HIDOLE INCOMI IP.OLk. 197aLkb USIHATllt LAT. AMELICA i CAt KM ADJUUI ENROLIMNT RATISOS PRmARtI TCTAL 98.0 1Ub.0 119.U 106.7 101.9 mAL 93.0 106.0 120.0 106.5 103.2 FPIALE 91.0 107.0 119.0 I14.6 97.5 SKCONDWt TOTAL 23.0 45.0 59.U 44.2 57.5 IALL 23.0 42.0 54.0 42.7 b4.9 pHALI 14.0 4U.0 63.0 44.9 50.0 VOCATIONAL CZ O1 StCONDAJ ) 50.3 58.4 61.3 13.3 Z1.0 PUP1L-T!AcME RATIO PR81LM 22.0 19.0 20.a 29.9 Z5.1 SKE010A 7.0 7.0 7.0 /f 16.7 19.1 PASSRUIQ CARS/TIOUSAND POP 23.0 0.l .. 4b.0 54.2 RADIO 80CSIVEUSITUUSAND POP 169.3 375.6 727.1 328.3 170.7 TV RICKIVERS/TROUSAND POP 21.8 146.1 202.3 112.4 149.3 UEVSPAPE ("DAILY GCNERAL DINTESTM) CIRULATIOu PER TIOUBIAND POPULATION 154.5 177.2 114.7 81.1 97.0 CIMNUA ANIIUAL ATTEINDAM/CArTr 7.0 2.2 1.5 2.4 2.7 TOTAL LUOR FORCZ (IROUS) 11133.0 12700.0 14589.0 FCKALE (PERCNT) 21.4 24.7 27.1 23.6 36.3 A=EICULTURE (PtRCNT) 20.0 16.4 13.1 _Jd 31.4 40.8 IDUSTRY CFERCNT) 35.9 32.1 34.0 7; 24.3 23.3 PARTICIPATION RATE (PRCENT) TOTAL 54.0 53.0 47.7 33.5 43.1 HALE 84.0 81.0 75.0 d 51.3 55.1 FLE 23.0 27.0 27.0 /d 15.9 31.4 ECONOMIC DPENDECY RATIO 0.7 0.7 1.0 1.3 0.9 loo DISTRIBUTION PERCENIT OF PRIVATE ICOME RZCZiED Ft iGSmT 5X OP VOUSEROLDS 27.5 RIGISl T 20Z oF UOUSVAOLDS 50.9 50.3 LOWZST 20X OF HOUSEHOLDS b.9 4.4 LUOEST 402 0F HOUSEOLDS 16.6 14.1 Pmzm TANT -S tSmDATED AmSOujT ioRm INCOtmS LEVL (USS PER CAPTAT) u.. .. .. 2U8.3 RURAL .. .. .. 155.3 ESTDUZD REATI POVERT IlNCOM LEL CUMS PER CAPITA) uI. 5. .. .. 519.a m .. .. .. 359.7 ESYDGAE POP. BEW ABSOLUTE POVERT iicmgz LEML () UCREm .. RUMAL .. .. . 01 AVAILAU N. T APPLICAE NOTSS f The graup vrape for each ncator are populat1on-ubited aritlutic _ane. Cverpe of countriAm aSng the Indicators dapenda an availabilty of daa and Lo not amdform6 b Udnles otbend..e noted, "Data for 1960" rotr to aV year between 1959 ed 1961; 'Data for 1970" b-tern 1969 ad 1971; end data for "Hmt laent atiLute' bat_m 1951 aud 1983. Ic 1977; id 1980; 1. 1962; I/f 1979. Jun, 1985  - 27 - ANNEX I Page 3 of 6 No AMtoghthe datadssdmwn efromsoumnwayjudhmd trn utholut ad ml. lI mmalma be note thal they may not beIntermlonafly couparab baumo do lak of b mddrdim dekidhhl and ,Uts umd by dOrsa countruie In eollacdng be data. Tme dat am, musthalea muaul to dowdb aa ot malmu, indidn uaWd6, and _hracwiucna mor dlwdMne- bawa. cunuin ohe crsocaogpa at (I) the m-m any gomp of da sbja comutry and (2) a cowntry group wisth oonwwhat hig4br avenge laon than the country group ofldaabjotantsy (exp for "HIh looe Oll Ean"group wh idd Ina North Afl adS Middle East" ih disn beme of stronger socilo4lkural alWIn a the rafarea gpoup data WMausn an population weighted authmade samma for eah Indcato and ahown only whn majority oftdoaeotrtl In a up baa da ror tat rltior. ma tb covawa ofcounrl among tIdo hIdlato dIrd _on dw a vaikbilky of da and Is amt uform. cuadmn mibe ea d in reltIawr of one Inator to eothet. Tme avweue a ouly umrl In comprarng tk wvae of Indictor at a tin, among th ountry and *rnce group AREA (thousan sq.km.) Cre hWAiNot fl er(enrkuuhdD-Number orlive births in the year Teed-Total surface area comprising land area and inlnd waters; per thousand of mid-year population; 1960, 1970, and 1983 data. 1960, 1970 and 1983 data. Chr Deth lat (per toskuama-Number or deaths in ihe year AgriubwwnF-Etimate of agicultural are used temporarily or per thousnd or mid-year population; 1960. 1970. and 1983 data. pennanently for crops, pture market and kilchen prden or to Gro Rlpvedue Asat -Average number of daughters a woman lie fallow, 1960. 1970 and 1982 data will bear in her normal reproductive period if sht experiences presnt agepecific fertility rates; usually five-year averages ending GNP PER CAPTA (US)-GNP per capita aetimates at current in 1960. 1970. and 1983. market prices, cakulated by me conversion method as World Bank Adtl (198143 basis); 1983 data. ber of acceptors of birth-control device under auspices of national ENERGY CONSUMMON PER CAPITA-Annual apparent family planning progrm. consumption of commercial primary energy (coal and lignite. kiAsu PliUr-L mrs (pmewt of irmird n ne-The peren- petroem, natul gas and hydro-, nudear and geotbermal ec- tiFae of nmuried women of child-bearing age who are practicing or trcity) in kilograms of oil equivaknt per capita; 1960 1970, and whose husbands are practicing any form orcontraeeption Wbmcn 1982 datL orchild-bearing age are generally women aged 15-49, although for snoe countries contraceptive usage is measured for other age POPULATION AND VITAL S'LTISTICS group. Teed P1p98-a, ti. -Yewr (thkusandaI-As of July l; 1960, 1970. FOOD AND NUTRITION and 1913 data. (Ue ?epasa (p_ es of setl)-Ratio of uban tO toull Indezf FoodPrdwda PerCapita ( 169-71 - 109-n ndex of per capita annual producton or all food commodities. Producton populaton; different deftions of urban areas may affect compar- excludes animal feed and saed for agriculture. Food commodities ity of dt amog countries; 1960,1970, and 1983 data. inldude primary commodities (eg. sugarcane instead of sugar) Ap4fir Rjcdms which are edible and contain nutrients (cg. coffee and tea are Populai. h yer 20W-The projection of poputation for 2000, exduded); they comprise cereals, root crops. pulses. oil seeds. made for each economy separatdy. Startng with information on vegetablos fruits, nuts. sugarcane and sugar beets, livestock, and total population by age and sa, fertility rates. mwortlity rates, and livestock products. Aggregate production of each country is based intnational nigration in the bae year 1980. these paameters on national average producer price weights 1961-6S. 1970. and were projected at five-year intervals on the bais of generalized 1982 data. sumptin until the poptulaon beame staionary. Pli, Cpi.SeIy ofCalris (pew efreqtenreurs)-Comput- Sadoaarypopulauioa-ls one in which age- and sex-specific mor- ed from caloricequivalent of net food supplies available in country talty rate have not changed over a long period. while age-specific per capita per day. Available supplies comprise domesdc produc- fertiity rtes have simultaneously remaiied at replcmt level tion. imports kss exports. and changes in stock. Net supplies (net reproduction rate-1). In such a population, the birth rate is exdude animal feed. seeds for use in agriculture, quantities used in constant and equal to the death rate, the age structure is also food processing. and losses in distribution. Requirements were constant. and the growth rate is zero. The stationary population estimated by FAO based on physiological needs ror normal activity size w estimated on the basis of the projected charactristics of and health consideing environmental temperature. body weights. the population in the year 2000, and the rate of decline of fertility age and sex distribution of populadon. and allowing 10 percent for rate to replacment kveL waste at household leks 1961. 1970 and 1982 data. Pop lotar Mea_erw-fs the tendency for populaton growth to Per Capia Supp of Protein (gro per day)-Protein content or continue beyond the tame that replacement-level fertility has been percapita net supply of food perday. Net supply of food is defined achieved; that is, even after the net reproduction rate has reached as above. Requirements for all countries established by USDA unity. The momentum of a population in the year t is measured as provide for mrinimum allowances of 60 grams of total protein per a ratio of the ultinate stationay population to the population in day and 20 grms of animal and pulse protein, of which 10 grams the yea rt. g the asumpton that fertility remains at replace- should be animal protein. These standards are lower than those of mnt eved from ewr otnwaA. 1985 dat 75 gmns of totaI protein and 23 grams of animal protein as an - DBeuty average for the world, proposed by FAO in the Third World Food Per seAm-Mid-year population per square kilometer (100 hec- Supply; 1961, 1970 and 1982 data. tares of total are; 1960 1970. and 1983 data. Per Capita russi Supply rom Animal and Pire-Protein supply Per sq.kJL agrdharin lu te-domptel as above for agricultural of food derived from animal and pulses in grams per day, 1961-65. land only, 1960, 1970, and 1982 data. 1970 and 1977 data. Ampai Age Savant (paesrc l-Chldren (0-14 years), wrk- CAild (as 1-4) Dusk Rare (per rkJusamd)-Number of deaths or iag age l(5-64 yers) and retred (65 years and over) as percentage children agd 1-4 years per thousand children in the s-me age of mnid-year population; 1960.1970. and 1983 data. group in a given yea. For most developing countries data derived Ripalai Guwk Rare (pewcus-retaf-Annual growth rates of from life tables; 1960.1970 and 1983 data. total mid-year populaton for 1950-60. 1960-70. and 1970-43. HEAIT'H Apulda Growth Rar (enS _r) aAnnual growth rates life Erprwy as Dith (yewsn-Number of years a newborn of urban population for 1950-60. 1960-70. and 197083 data. infant would live ir previing patterns of mortality for all people  - 28- ANNEX I Page 4 of 6 at the time of of its birth were to sfy the saume throughout Its lire; AqMlI-eaher Rato - prhaary, and seondarp-Total students en- 1960.1970 and 1983 data. rolled in primary and secondary levels divided by numbers of hIos Mtalsp Em(er trhusuu)-Number of nlfts who die teachers in te corrsponding levels. beore reaching one year ofage per thousand live births i n given year, 1960, 1970 and 1983 data CONSUMPTION Aes to Soft W.p (pu . pofm) rban. WI hser Con (per thme d papuheleub)-Pftuenger cars cormn- rrnl-Number of people (total urban and rual) with reaonable priw motor cars sting lek than eight persons; excludes ambul- access to Sfe water supply (includes treted surface water or ances, hearses and military vehicles. untreated but uncontaminated water such - thet From protected RDod Rcems (per t* mandpopmWan)-All types or receivers borehole, springs ndw tary wells) prcentges of their repe- for radio broadcasn to gneral public per thousand or population: tive populations In an urban area a public fountain or standpost exdcudes un-licensed receivers in countries and in years when located not more than 2DO metr from a house may be considerd registration of radio sets was in effect: data ror recent years may as being within reanable acce of eth houew. In rural mes not be comnparble since most countrics abolided licensing, reasonable acces would imply that the housewife or members of the houselhold do not have to spend a disproportionate part of the day TYRee dimers (rdonsmadpopudoalJ-TV receivers ror broadcast in fetching the family's water need6 to general public per thousand population: exdudes unlicned TV AXeLvss to E xem Dirposal (pac of {popefitio)--ro . wr , freceivers in countries and in yeas when registration of TV sets was an rural-Number of people (total, urba and rural) srved by in excreta disposal as percentages of their respective populations. Newspar Circulto (per thmasd popuhta)-Shows the aver- Excreta disposal may include the coliction and disposal, with or age circulation of "daily generl interest newspaper." defined as a without treitment, of human excreta and waste-water by water- periodial publication devoted primarily to recording nerl news borne systems or the use of pit privies and similar installitions. It is considered to be "daily" if it appears at east four times a week. Pop.lai. per Phjslium-lbpulation divided by number of prac- Chem Ar_ Attendance pr Capit pr Year-Based on the tising physicians qualified from a medical school at univenity kwel number of tickets sold during the year. including admissions to Pepwhar5o pr Nsun Permau-FPbpulation divided by number of drive-in cinemas and mobile units. practicing male and female graduate nurses, assistant nurses, practical nurses and nursing auxiliaries. LBOR FORCE Awldthu p.er ilpept Bmi--mel, urban and noWalPbpulation Twt Labor Foce (thousandrl-Economically active pesons in- (total, urban. and rural) divided by their respective number of duding armed rorces and unemployed but ecduding housewives, hospital beds available in pubic and private. general and students, etc., covering population of all ages. Definitions in hospitals and rehabilitation centers Hospitals ae c lishments various countries are not comparablc. 1960, 1970 and 1983 data. pemmanently staffed by at least one physicma. Establishments prov- Feiak (percenth-Female labor force as percentage of total labor iding principally custodial care are not included. ural hospitals forc. however, include heath and medical centers not permanently saffed Agriculre (percentj-Labor force in farming, forestry, hunting by a physician (but by a medical asistant, nurse, mnidwife. etc.) and fishing as percentage of total labor frce; 1960, 1970 and 1980 which offer in-patient accommodation and provide a limited range data. of medical racilities. ludstry (percentl-Labor force in mining, construction. manu- Admisns Per Hospial Red-Tot number of admissions to or facturing and dectricity. water and gas as percentage of total labor discharges from hospitals divided by the number of beds. force; 1960. 1970 and 1980 data. frskadan Rat (percear i-ra mfle. nvdfnmIe-Participation HOUSING or activity rates are computed as totaL rmale. and female labor force Avege Sme of Housebo (persons p. hmnsehoj)-tata. urd as percentages of totaL mae and female population or al ages anwal-A householconsistsofagroupofindividualswhoshare respectively. 1960. 1970. and 1983 data. These are based on lL's living quarters and their main mes. A boarder or lodger may or participation rates reflecting age-sea structure orthe population, and may not be included in the household for statistical purposes long tme trend. A few estimates are from national sources Average Number of Pron pe Reon-eal, urba and rural- Ecosni DepedewyAp Rio--Ratio of population under 15. and Average number of persons per rootm in all urban, and rural 65 and over, to the working age population (those aged 15-64). occupied conventional dwellings, respectively. Dwellings exclude non-permanent structures and unoccupied parts. INCOME DISTRIBUTMON Pecetev of Dueings with Elersricitp-val ura, ad rural- Percenrge if Tarot Dposable eJre (bah in cash and kind)- Conventional dwellings with electricity in living quarters as percen- Accruing to percentile groups of households ranked by total house- tage of total, urban, and rural dwellings respectively, hold incorne. EDUCATION POVERTY TARGET GROUPS A 4utd EweErmen Ratios The following estimates are very approximatc measures of poverty PJimary school - total. mal aid femake-Gross total, male and klvels, and should be interpreted with considerable caution. femal enrolment of al ages at the primary lvel as percentages of Esimwed Absote Poverty Incomw Level (d US per capitak-erban respective primary school-age populations. While many countries and rral-Absolute poverty income level is that income kvel consider primary school age to be 6-11 years, others do not. The below which a minimal nutritionally adequate diet plus essential differences in country practices in the ages and duration of school non-food requirements is not affordable. are refleated in the ratios given. For some countries with universal Estmared Relrive Por Income Level (U=Spr cpa)-nrhan education, gross enrollment may exceed 100 percent since some ad rural-Rural relative poverty income level is one-third of pupils are below or above the country's standard primary-school average per capita personal income of the country. Urban kve,l is age. derived firom the rural level with adjustment for higher cost of Seconary sckoot - total, male and feak-.Computed as above; living in urban areas. secondary education requires at least four years of approved pri- Estinurei Ppulaieon Beloa AbsoltPert y Income Leve (per' mary nstructioi