Guinea - Second Economic Management Support Project

sCtZ I q (G 3 4- (!/c Document of The World Bank FOR OMCIAL USE ONLY Repot No. P-4878-GUI MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 11.3 MILLION TO THE REPUBLIC OF GUINEA FOR A SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT October 19, 1988 Country Operations Division Occidental and Central Africa Department Ths docunnt has a restct ditibuon and may be used by rnipints only In the performane of their offlcial duties. Its contes may not oewise be disclosed without World Bank authorization.  4 REPUBLIC OF GUINEA SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT CURRENCY EQUIVALENTS (Annual Average, Guinean Francs per US Dollar) 1986: GF 345; 1987s GF 428; 1988: GF 475 (estimate) ABBREVIATIONS AND ACRONYMS ADETEF Association pour le D4veloppement des Techniques Economiques et Financieres ASYCUDA Automated System for Customs Data AfDB African Development Bank AfDF African Development Fund BARAP Bureau d'Aide & la Reconversion des Fonctionnaires BCRG Banque Centrale de la Republique de Guin6e CCCE Caisse Centrale de Cooperation Economique (France) CCEF Comit6 de Coordination Economique et Financibre CNPG Centre National de Perfectionnement et de Gestion DGIP Direction Generale des Investissements Publics DGP Direction Generale du Plan DGSI Direction Generale de la Statistique et de l'Informatique EMSP II Second Economic Management Support Project FAC Fonds d'Aide et de Cooperation (France) IDA International Development Association IFC International Finance Corporation IMF International Monetary Fund MEF Ministry of Economy and Finance MPCI Ministry of Plan and International Cooperation MRAFP Ministry of Administrative Reform and Civil Service PIP Public Investment Program PKC Project Management Comaittee PPF Project Preparation Facility RMU Reform Monitoring Unit SAL 1I Second Structural Adjustment Credit SED Ministry of Decentralization SGG General Secretariat of the Government SDR Special Drawing Rights SDSP Social Development Support Project SPPF Special Project Preparation Facility TA Proj. Technical Assistance Project for Economic Management UNDP United Nations Development Programme UNDTCD U. N. Department of Tech. Cooperation in Development USAID United States Agency for International Development FISCAL YEAR and PROJECT YEAR January 1 - December 31  FOR OMCL41 USE ONLY REPUBLIC OF GUSNEA ECONOMIC VARAQUEOT SUPPORT PROJECT CUDIT N POJECT SU!hIARY BORROWERs Republic of Guinea IMPLEMENTING Ministry of Plan and International Cooperation AGENCIES$ (MPCI), Ministry of Economy and Finance (MEF), Ministry of Administrative Reform and Civil Service (MRAFP), Central Bank (BCRG) and National Management Training Center (CNPG) AMOUNTs SDR 11.3 million (US$14.5 million equivalent) TERMS: Standard, with 40 years maturity ON LENDING TERMS: Not applicable FINANCTNG PLAN: Government $ 3.3 million IDA $14.5 million UNDP $ 2.2 million AfDB $ 2.5 million PAC $ 2.8 million CCCE $ 1.2 million USAID $ 1.3 million _______________________________ Total $27.4 million ECONOMIC RATE OF RETURN: Not Applicable STAFF APPRAISAL REPORTs No. 7420-GUI NAPs IBRD No. 20873R This document has a restticted distibution and may hx used b: tecipients only in the performance of their official duties. Its contents may not otherwise bv disclos-4 without World Bank authorization.  MDIORANDUK AND RECOMMINDATION OF TUE PRESIDENT OF TEE IftERNU TIONAL DEVELOPMENT ASSOCIATION TO THE ZXECUTIVE DIECTOIS ON A PROPOSED CREDIT TO TEE REPUBLIC OF =UINEA FOR A SECOND ECONOMIC )UWIGEMENT SUPPORT PROJECT 1. The following memorandum and recommendation on a proposed development credit to the Republic of Guinea for SDR 11.3 million (US$ 14.5 million equivalent) is being submitted for approval. The proposed Credit would be on standard IDA terms with 40 years maturity and would assist in financing a project which aims at improving the Government's economic management capacity within the framework of Guinea's structural adjustment program. 2. Background. In late 1985, the Government launched a far-reaching Economic and Financial Recovery Program based on a policy framework favoring a market-oriented economy. The Recovery Program was supported by an IMP Stand-By and SAP arrangements, IDA and SFA structural adjustment credits totalling SDR 38.5 million, and the Technical Assistance Project for Economic Management(Cr.1559-GUI, SDR 9.7 million). Although important progress has been made in rebuilding Guinea's economic institutions, the country's economic management remains weak, and critically so in the absence of well established public finance and civil service management systems. 3. Rationale for IDA Involvement. The Project is critical for the successful implementation of the second phase of the Recovery Program supported by SAL II (Cr.1926-GUI, approved in June 1988), and to the substantial improvements required in revenue collection, expenditure control, public investment programming and budgeting, and the implementation of investment projects. IDA involvement is also expected to enhance coordination of technical assistance for economic management. 4. Proiect Obiectives. The Project would support long-term institution building while providing short-term responses to current weaknesses in economic management. Specific Project objectives would be to: (i) strengthen key government functions in the areas of planning and investment programming, and public finance and civil service management, (ii) facilitate the implementation of the Recovery Program, and (iii) strengthen the Government's capacity to train public sector staff. 5. Proiect Description. The Project would be executed over a period of 4 years and would help finance an integrated package of mutually supporting operations: short- and long-term consultant services, training * programs, studies and financing of equipment and vehicles. It would include the following six components: * I. Economic Analysis and Planning. Under IDA and AfDF financing, the Project would help strengthen WPCI's analytical capacity through the provision of about 20 person-years of resident specialists and short-term consultants including three statisticians, a macroeconomist, an investment programmer and a sector economist/project analyst. Expected results would be: (i) a stronger economic data base and tiniely preparation of national  -2- accounts, (ii) improved medium term projections and monitoring of macroeconomic indicators, (iii) better screening of projects on technical, financial and economic grounds, and (iv) improved programming of public investments. II. Public Finance Management. The Project would finance about 38 person-years of resident specialists and short-term consultants to the MEF including ti) a senior economist and a training/personnel management advisor, both reporting to the Minister; (ii) specialists in each of the MEF's general directorates: Budget, Treasury, Tax, Customs; and (iii) specialists to support the Debt and Procurement Divisions. CCCE and FAC would finance the services of the advisors to the l4inister and provide most of the assistance to MEF's directorates while the prcposed Credit would finance the services of the debt and procurement advisors. Expected results would bet (i) improved budget preparation and increased efficiency in budget execution, (ii) increased tax and duty collection, and (iii) increased efficiency in the debt management system. III. Administrative Reform. The Project would help the Government -i) rationalize the structure and staffing patterns of Guinea's administration; (ii) conduct staff testing with the intent of progressively adjusting the size and the composition of the civil service, and (iii) establish a permanent personnel data base. The UNDP would finance 15 person-years of resident specialists and short-term consultants. The proposed Credit would finance training activities and office equipment and computers. Expected results would includes (i) new organizational structures for central ministries and local administration, (ii) improved civil service management based on a reliable civil service roster, and (iii) improved administrative procedures and practices in a selected number of key ministries and agencies. IV. Professional Skills Development. In addition to intensive and closely monitored on-the-job training, the Project would supports (a) training needs assessments in MPCI and MEF; (b) CNPG's existing training programs in economic and financial management, business accounting and auditing; and (c) two new training programs ins (i) administrative techniques, personnel management and office management; and tii) project analysis and management. The Project would aiso provide fellowships for short-term training abroad. Finally, a Junior Professional Program would be implemented to permit the recruitment of young Guineans with solid educational background. They would work closely with the technical assistance personnel and could join the civil service at the end their 24-month junior professional assignment. V. Other Support would be provided: (a) to help the BCRG establish a commercial bank supervision division and improve the preparation of balance of payments data; tb) for the preparation and dissemination of sound economic legislation; and (c) for other SAL related studies and activities c such as the establishment of an adequate institutional and regulatory framework for public enterprises.  -3- VI. Management of the Recovery Program. The Project would help establish and operate a Reform Monitoring Unit (RMU) composed of a Recovery Program Coordinator, the Project Administrator, and an economist. Reporting to the CCEF (the ministerial-level reform coordinating committee) for which it would provide the Secretariat, the RMU would be responsible for coordinating and monitoring Government economic and institutional 1 reforms at the technical level, and for administering the Project and coordinating the implementation of its various components. 6. The total Project cost is estimated at US$27.8 million equivalent, with a foreign exchange component of US$15.9 million (57Z). The breakdown of costs and the financing plan are shown in Schedule A. Details on procurement and disbursement, and the disbursement schedule are given in Schedule B. A timetable of key processing events and the status of Bank Group operations in Guinea are given in Schedules C and D r-spectively. The detailed description of the Project and the project administration and implementation arrangements are described in the Staff Appraisal Report No. 7420-GUI. A map is attached. 7. Agreed Actions. During the negotiations, the Government has agreed, inter alia, on the following: (i) by October 31 of each year, transmission to the Association for review, of draft annual work programs by component for the following year; (ii) transmission of the reports on training-needs assessments no later than September 30, 1989 for the MPCI and March 31, 1990 for the MEF and the MRAFP; (iii) by December 31, 1989, reduction of the delays in the publication of the official gazette to a maximum of three months. The conditions of effectiveness will be: (i) opening of local funds account and initial deposit of an amount in local currency equivalent to US$50,000, (ii) assignment of civil servants selected pursuant to testing in the central units of MPCI, MEF, and MRAFP; (iii) signature of an Arrete defining the functions of MEF directorates; (iv) appointment of the Recovery Program Coordinator, the Project Administrator and the Chiefs of Operations responsible for the execution of individual project components and establishment of the PMC; and (v) availability of UNDP, AfDF, PAC, CCCE and USAID financing. 8. Benefits. The overall outcome would be the effective and timely implementation of the second phase of the Recovery Program and substantially strengthened government agencies capable of formulating and implementing sound economic policies leading to sustained economic growth. Specific benefits would include: (i) better-prepared and executed : investment projects; (ii) improved financial management, both in terms of revenue collection and expenditure control; (iii) a more reliable civil service personnel management system; (iv) a stronger economic data base (v) a more coherent set of economic and financial regulations; and (vi) the availability of nationals better equipped to perform effectively in a liberal economic system. . 9. Risks. First, the pressure to carry out the reforms expeditiously may stand in the way of achieving long-term institution-building objectives. This risk should be minimized by the emphasis put on developing new procedures, selecting suitable counterparts,  - 4 - and close monitoring of training activities. Second, the large number of activities to be undertaken under the Project and the involvement of six donors may create implementation and coordination difficulties. The Project management and implementation arrangements have been designed to provide sufficient flexibility, efficient leadership, and effective coordination. Third, given the profound changes that the adjustment process is introducing in the social fabric, there is a risk that the resistance of interest groups benefiting from th3 status quo could, -t times, delay the implementation of some reforms and thereby affect the Government's ability to achieve some Project objectives in a timely manner. 10. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington. D.C. October 19, 1988  SCHEDULE A REPUBLIC OF GUINEA SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT ESTIMATED COSTS AND FINAXCING PLAN Estimated Costs Local Foreipn Total Z of Base Cost .... (USS million)...... 1. Economic Analysis & Planning 1.3 2.5 3.8 17.1 2 Public Finance Management 2.0 3.8 5.8 26.1 3. Administrative and Civil Service reform 1.1 2.4 3.5 15.8 4. Professional Skills Develop. 1.5 2.3 3.8 17.1 5. Other Direct Support to the Recovery Program 1.2 3.2 4.4 19.8 Central Bank (0.2) (0.9) (1.1) (4.9) Legal Assistance. (0.7) (1.6) (2.3) (10.4) Other Activities (0.3) (0.7) (1.0) (4.5) 6. Reform Monitoring and Project Management 0.3 0.6 0.9 4.1 Total base costs 7.4 14.8 22.2 100.0 Physical contingencies 0.2 0.4 0.6 Price contingencies 1.9 0.7 2.6 Total Proiect Cost 9.5 15.9 25.4 (Taxes excluded) Taxes 2.4 - 2.4 Total Proiect Cost 11.9 15.9 27.8 (Taxes included) Financina Plan* Local Foreign Total ......... . (US$ million) Government 3.3 - 3.3 IDA 5.3 9.2 14.5 UNDP 0.8 1.4 2.2 * AfD8 0.9 1.6 2.5 FAC 0.9 1.9 2.8 CCCE 0.4 0.8 1.2 * ITSAID 0.3 1.0 1.3 TOTAL 11.9 15.9 27.8 * Donors' assistance would be provided on a parallel financing basis.  -6- SCHEDULE B Page 1 of 2 REPUBLIC OF GUINEA SECOND ECONOHIC IMANAGEMENT SUPPORT PROJECT PROCURE!NT METHOD AND DISBURSEMENT Procurement Arranoement. / ICe LC9 Other N.A. TOTAL - --------U----IJS 8 millon Nature of Costs Resident Specialist" 12.4 12.4 (5.6) kI (656) Short-term Consultantn 4.1 4.1 (8.9) kI (8.8) Equipment, Furniture 1.4 g/ 2.1 8.5 and Vehtcles (1.0) S/ (1.6) (2.5) Operating Costs 2.7 2.7 (0.9) {/ (0.9) $PPF & PPF rfinancing 0.7 0.7 (0.7) (0.7) Fellowships 0.7 0.7 (0.8) S/ (0.8) Junior Prof. Prog. 0.8 0.8 (0.2) jI (0.2) Activltiea to be Identified 1.0 1.0 (1.0) (1.0) TOTAL 1.4 .1 20.2 1.? 21.4 (1.0) (1.5) (10.6) (1.2) (14.5) a/ Amounts In parentheses Indicate IDA financing. Parallel financing by other donors will be under their own procurement procedure. b/ Services to be procured following IDA Guideline. for the use of consultants c/ Estimated at 40% of equipment, furniture ond voehcles to be pr4cured d/ Following Government procurement procedures e/ Includes local and international travel costs, tuition and per diem f/ Doetatls of compensation package for Junlor Profesoionals to be determined  -7 SCHEDULE B Page 2 of 2 IDA Dishursements Disbursement Categories Amount of the 2 of Credit allocated Expenditure US$ equivalent to be financed Cat 1. Office equipment and 2,450 1002 vehicles Cat 2 Consultant services (including 9,150 0OOS junior professionals) Cat 3 Fellowships 300 1OOS Cat 4 Operating costs 900 80S Cat 5 Refunding of SPPF 700 1OOS and PPF advances cat 6 Unallocated 1,000 Total 14.500 Estimated Disbursement Schedule IDA Fiscal Year ~~~~..........mllion....... ................(U$mlon 1989* 1990 1991 1992 1993 1994 1995 Annual 1.4 3.0 3.0 3.0 2.0 1.6 0.5 Cumulative 1.4 4.4 7.4 10.4 12.4 14.0 14.5 ---c---e--the-repayment-o--the------and--- *Includes the repayment of the SPPP and PPF  SCHEDULE C REPtULIC OF GUiNEA SECOND ECONOMIC MANAGEHENT SUPPORT PROJECT Timetable of Key Processing Events A. First IDA mission July 1987 B. Identification mission September 1987 C. Prepared bys Government with the assistance of consultants. Project preparation included a Workshop on the Preparation of the Second Phase of the Recovery Program, organized in December, 1987. D. Appraisal mission April and July 1988 S. Negotiations September 1988 F. Board presentation November 1988 G. Planned date of effectiveness February 1989  - 9 - Schedule D Page 1 of 2 STATUS OF WORLD BANK OPERATIONS IN GUINEA A. Statement of Bank Loans and IDA Credits (as of Sept. 30, 1988) AIount in USS miliun tins cantellatos) Loan or Fiscal Undis- Closing 4 Credit No. fear Borrower Purpose Bank IDA bursed Date Credits 9 Creditsis) closed 95.23 C12340-GUI 1982 GUINEA INIUSTRY REHa4 (OPC) 19.00 6.44 12/31/894RA C13410-6U1 1983 6UINEA EDUCATION II 11.00 1.05 12131188 C13820-Gl1 1983 GUINEA CONAIRY PORI 13.00 .35 12131/68(R) C143U6-6U 1994 GUINEA PETROLEUN EIPL. 6.00 .96 061?'0/9(RI C14570-GU1 1984 SUINEA N6HMAYS III 28.00 20.99 09. 0169 C14660-GUI 1964 GUINEA URBAN I & SUPPLiU4'T 10.10 3.17 12 Zt' lO(R) C15590-GUI 1965 6UINEA TECHIICAL ASSISTANCE 9.50 2.56 06P50/89