Senegal - Development Management Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7106-SE STAFF APPRAISAL REPORT THE RFPUBLIC OF SENEGAL DEVELOPMENT MANAGEMENT PROJECT April 25, 1988 Africa Region Sahelian Department Country Operations Division This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorizatieq.  REPUBLIC OF SENEGAL DEVELOPMENT MANAGEMENT PROJECT CURRENCY EQUIVALENTS Currency Unit - CFA franc (CFAF) US$ 1.00 - CFAF 277 CFAF 1 million - USS 3,610 ABBREVIATIONS AND ACRONYMS PAML Medium and Long Term Adjustment Program PIP Public Investment Program UNDP United Nations Development Program FAC Fund for Aid and Cooperation MPC Ministry of Plan and Cooperation MEF Ministry of Economy and Finance MFPT Ministry of Civil Service and Labor DP Planning Department DPFC Department of Programming, Financing and Monitoring of Public Investment DGD Customs Department DGID Department of Land and Internal Revenue DDI Public Debt and Investment Department SDA Social Dimension of Adjustment DS Statistics Department DFP Civil Service Department SCS Central Payroll Agency PAU Project Administration Unit PPF Project Preparation Facility BOM Bureau of Organization and Methods CICS Inter-Ministerial Committee of Coordination and Monitoring SDR Special Drawing Right FISCAL YEAR JULY 1 - JTJNE 30  REPUBLIC OF SENEGAL wa I AWUA"L L ON,CLY DEVELOPMENT MANAGEMENT PROJECT TABLE OF CONTENTS Page CREDIT AND PROJECT SUMMARY ...................................... i-iii I. BACKGROUND ............................................... 1 Introduction ........................................... 1 Macro-economic Setting . ... 1 II. PUBLIC SECTOR MANAGEMENT ................................... 3 Early Reform Programs .......... . 3 Administrative Assessment . . 5 Lessons Learned ........................................ 5 Re-orientation of the Reform Program . . 7 Implication of the New Orientation .. 7 IDA and Other Donor Support for.................... Public Sector Management . . 9 III. THE PROJECT ............................................... 10 Project Concept ........................................ 10 Project Objectives ..................................... 10 Proiect Description .................................... 11 Nat:onal Planning System . . 12 Economic and Financial Management .................. 13 Social Dimension of Adjustment . . 14 Civil Service Reform . . ............ . 14 Project Administration . . 15 IV. PROJECT COSTS. FINANCING AND PROCUREMENT ................... 16 Project Cost ........................................... 16 Financing Plan ......................................... 17 Procurement ............................................ 18 Disbursements .......................................... 19 Accounts and Audits .................................... 19 This report is based on the findings of a World Bank mission consisting of Mrs L.H. Truong (mission leader), and Messrs. S. Amar, A. Diawara, and E. Scanteie (Bank), and J.C. Bosse (consultant), which visited Senegal in September/October 1987 to appraise the Project. It incorporates the conclusions of a pre-appraisal mission, led by Mr. E. De Gaiffier in June, 1987 and a follow-up mission by Mrs. Truong in December 1987. The SDA component was appraised by a mission led by Mr. M. Noel in November, 1987. Mmes C. Machado and B. Kerby provided cost calculation and secretarial support. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be dislosed without World anik authorization.  Table of Contents (continued) Page V. PROJECT IMPLEMENTATION ..................................... 20 Project Coordination and Administration ................ 20 Annual Work Programs ................................... 21 Reporting, Monitoring and Accountability ............... 21 Status of Project Implementation ...................... 22 VI. BENEFITS AND RISKS ......................................... 22 VII. AGREEMENTS AND RECOMMENDATION .............................. 24 Agreements Reached ..................................... 24 Recommendation ......................................... 24 ANNEXES Annex I : Criteria and Systems for Contractual Staff and. Granting Performance Bonuses ...................... 25 Annex II : Project Cost Tables ................................ 27 Table 1 : Project Cost Summary ................... 27 Table 2 : Project Components by Year ............. 28 Table 3 : Summary Accounts Cost Summary .......... 29 Annex III : Consultant Service Requirements .................... 30 Annex IV : Summary Disbursement Schedule ...................... 33 Annex V : Organizational Charts .............................. 34 Annex VI : Selected Indicators of Project Success ............. 37 Anrnex VII : Implementation Schedule ............................ 39 Annex VIII: Selected Documents Available .... . . 42 Map: IBRD No. 21021 R  REPUBLIC OF SENEGAL DEVELOPMENT MIANGEMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Government of the Republic of Senegal 'Iplem_nting Ministry of Planning and Cooperation, Ministry of Asenciess Economy and Finance, and Ministry of Civil Service and Labor Credit Amounts SDR 12.5 million JUS$17.0 million equivalent) Termss Standard, with 40 years maturity Cofinancina: CIDA (Canada), US$2.0 million equivalent Prolect The project will finance expertise, training and Descrivtion: equipment for key institutions responsible for macro-economic management and civil service in order to: (i) build Government's national planning capability through consolidating public investment programming, execution and monitoring of public investments, enhancing development policy formulation, and strengthening central planning structures; (ii) improve economic and financial management capabilities through improved fiscal administration, debt management, statistical systems, and policy formulation and monitoring; (iii) incorporate the social dimension into the structural adjustment process through the establishment of a permanent standard of living survey and the design of poverty- alleviation projects; and (iv) improve civil service performance through rehabilitating personnel agencies and modernizing personnel policies.  - ii - Estimated Costs: 2 Foreign Local Foreign Total exchange -------US$,000-------- A. National Planning System Strenghten Central Structures 421 466 887 53 Consolidate Investment Mechanism 805 393 1,198 33 Improve Development Policies Formulation 1,018 678 1,696 40 B. Economic and Financial Management Mobilize Fiscal Resources 932 1,318 2,250 59 Manage Public Debt 560 665 1,225 54 Rehabilitate Statistical System 367 811 1,178 69 Improve Policy Formulation and Monitoring 379 276 655 42 C. Social Dimension of Adiustment Establish Permanent Survey Capacity 1,884 1,99' 3,879 51 Conduct Socio-economic Studies 86 491 577 85 D. Modernization of Civil Service System Rehabilitate Personnel Agencies 1,737 2,448 4,185 58 Improve Policy Framework 582 946 1,528 62 E. Proiect Administration 628 403 1,031 39 Baseline Costs 9,399 10,890 20,289 54 Physical Contingencies 273 665 938 71 Price Contingencies 1,665 1,821 3,486 52 Total Project Cost 11,337 13,376 24,713 54 ====== ===== ======== Financing Sources: Local Foreign Total -----US$ million------ Government 5.7 - 5.7 CIDA (Canada) 0.6 1.4 2.0 IDA 5.0 12.0 17.0 Total 11.3 13.4 24.7 Estimated Disbursement: IDA Fiscal Year 1988 1989 1990 1991 1992 1993 1994 ----------------------US$ million----------------------- Annual 1.0 2.4 3.4 3.0 3.4 3.0 0.8 Cummulative 1.0 3.4 6.8 9.8 13.2 16.2 17.0  - iii - Proiect Benefits and Risks: The project is expected to generate tangible benefits in terms of better information and more effective processing systems for key administrative functions, namely, investment planning and monitoring, production of social and economic statistics, resource mobilization, debt management, and personnel management. These results should ultimately enhance policy formulation by providing Senegalese authorities with the basis needed for informed and timely decisions. At the same time, the project is designed to promote more participation of national staff in the analysis of policy options and the implementation of policies, including poverty-alleviation. The long-term goal is to strengthen GOS's institutional capacity, concomitantly with policy reforms, and to reduce its reliance on external assistance. The project has important risks, as demonstrated in past experience with parastatal and administrative reforms in Senegal and elsewhere. The process of change is often resisted by those affected; well-entrenched habits and attitudes will be difficult to break; and the motivation of civil servants is weak. Designed in a modular fashion, with distinct components implemented on the basis of annual work programs, the project reduces these risks by phasing the process of change, clearly identifying tasks and responsibilities and systematically involving and motivating those affected in the reform process. By establishing modest targets for this first phase, the project moreover aims at laying the basis for more profound administrative reforms in subsequent steges. Economic Rate of Return: not applicable Memorandum of the President: No. P-4736-SE Map: IBRD No. 21021 R AF5CO April 25, 1988  REPUBLIC OF SENEGAL DEVELOPMENT MANAGEMENT PROJECT I. BACKGROUND Introduction 1.01 The proposed Development Management Project is intended to support Government's program of strengthening its institutional capacity for managing the structural adjustment program, and establishing a firm institutional basis for sustained growth with equity in the long run. It was designed in response to the request of the Government of Senegal to: (a) extend to a second phase the Technical Assistance Project for Economic and Financial Planning (Cr. 1061-SE) which had laid the base and initiated reforms in several key areas; (b) help implement recommendations *rising from the Administrative Assessment carried out in 1985; and (c) incorporate the social dimension in the design and implementation of its structural adjustment program. Project preparation was carried out in 1986-87 by Government with Bank assistance. Two advances from the Project Preparation Facility of US$750,000 equivalent each were approved in May and December 1987, to finance project preparation and start-up activities. Hacro-Economic Setting 1.02 Senegal has a limited, fragile natural resource base, subject to periodic droughts and environmental degradation, and the economy is vulnerable to adverse movements in international commodity markets. Despite considerable efforts to diversify, the economy remains dependent on traditional mainstays, such as groundnuts. GDP growth averaged only 2.3 percent per annum between 1960-84, and progress in major economic and social indicators has been slow. Population growth is high (estimated at 3.0 percent in 1985). Senegal has an estimated per capita income (1986) of US$420 (roughly half that of Cameroon or COte d'lvoire) placing it in the ranks of the lower income countries. 1.03 Throughout the 19709, the structure of the economy deteriorated. The degradation was accelerated by severe droughts and the 1973 and 1979 oil crises. High consumptiorn, particularly public consumption, the latter brought about by an over-extended and inefficient public sector, limited the ability of the economy to generate domestic savings. This resulted in a high debt burden and balance of payment difficulties, in spite of large inflows of concessional aid. By the end of the 1970s the economic situation was critical. Senegal was confronted by unsustainable consumption levels, untenable current account deficits and growing budgetary deficits. 1.04 Starting in 1978, the Government took steps to bring the economic crisis under control. A first adjustment program, launched in 1979 and supported by IDA and the IMF, was only partially executed. In 1984, with IDA assistance, Government prepared a new medium and long term adjustment strategy for 1984-92 aiaing at restoring the major financial equilibria and providing the basis for sustainable economic growth (Programme d'ajustement a moyen et long -erme, PAML). To implement this program, the Bank  - 2 - orgaxiized a Consultative Group for Senegal in March 1987 and mobilized the support of virtually all financial institutions and bilateral and multilateral donors active in Senegal. 1.05 Subsequently, the reform program was supported by two SALs, approved in February 1986 and May 1987. The adjustment program was also supported by other donors and the IMF. Since 1983, the Fund has successfully conducted several stand-by arrangements with Senegal as well as a Structural Adjustment Facility arrangement. These various assistance programs have supported Government's efforts to: (a) reduce public finance deficits, restore public savings, and re-establish a viable balance of payments; (b) strengthen financial management through reforms of the planning and investment programming system, the parastatal sector, and fiscal policies; (c) introduce improved incentives in agriculture and industry; and (d) initiate financial sector reforms. SAL III also addresses the social issues of adjustment through support to national employment for displaced agricultural industrial and administrative personnel, as well as for unemployed aniversity graduates. 1.06 Overall, Senegal's record in implementing the adjustment program has been good. There has been a marked improvement in key economic parameters since 1984. The public finance deficit was reduced from 6.9 percent of GDP in 1983/84 to 3.4 percent in 1986/87 and a projected 2.9 percent in 1987/88; the current account balance deficit was reduced from 17.2 percent of GDP in 1983/84 to 10.8 percent in 1986/87 and a projected 9.2 percent in 1987/88. There have been notable improvements in parastatal sector performance and in public investment programming. Moreover, the incentive systems for agriculture and industry is being reviewed to enhance competitiveness of these sectors, encourage private investment and accelerate economic growth. 1.07 Notwithstanding the good record in implementing these policy changes, Government has realized that, to ensure maximum impact and sustainability of adjustment measures, additional efforts are required. The critical areas that now need attention are: (a) monitoring and mitigating the potentially adverse impact of policy changes in social and political terms; (b) broadening the economic base of Senegal; and (c) internalizing the process of adjustment. The Government is also aware that, for these efforts to happen, it must first improve the capabilities of the administrative system, so that the new adjustment-cum-development strategy can be effectively translated into concrete policies and actions.  II. PUBLIC SECTOR MANAGEMENT 2.01 Since independence, the Government of Senegal has devoted considerable effort to building a participative political system and a viable economic entity out of a traditional society in which economic interests revolved around very few cash crops. It has established a functioning constitutional system, with a multi-party democratic parliament and elections every five years. Economic achievements, on the other hand, have been modest, and the financial performance poor, leading in the late 1970s to the economic crisis. Moreover, the serious and continuing deterioration of the administration's efficiency has frequently resulted in its inability to properly implement public policies and to play a more active role in the formulation of economic and financial adjustment measures. Early Reform Program 2.02 The Government has long recognized the need to imprcve its administrative efficiency and has made several attempts in this direction. The first large-scale reform effort was launched in 1972, to organize the country's regional and local levels of administration. The aim was to extend the power of the central government over the entire territory and establish an administrative structure responsive to local needs. The reform was successful as far as laying the basis for the central government to assert its authority over the territory, but efforts to build the local level administration have given disappointing results. From the outset, field programs lacked the necessary personnel and budget to become operational. 2.03 A second effort at administrative reform took place in 1976. This reform focused on reorganizing all central ministries with the primary objective to control and eventually reduce the wage bill. The major supporter of the reform was the current President of the Republic himself. As in the case of the 1972 effort, the 1976 reform failed to bring the expected results. Hinistries were slow to respond; those that did, asked for more staff; and in those cases where an exhaustive analysis had been made, the results were contested by the concerned ministries. 2.04 Keenly conscious of the constraint to the adjustment process that a w-Teak administration presents, the Government has set for itself the long- term goal of establishing an administration that is smaller in size, less costly, better motivated, more competent, more accountable, and more task- oriented. In view of the difficulties in undertaking large scale reforms, the Government has, so far, adopted incremental measures in response to short-term priority demands. Thus, in conjunction with SAL II, it initiated a series of actions, including reducing the percentage of tax receipts accounted for by the wage bill, the number of personnel by a strict program of not replacing retirees, inducing early retirement, reducing the number of candidates entering professional training schools, improving the management information system on public sector employees, and improving the incentive system through performance related bonuses.  2.05 The results of these effo+ts so far have been mixed. Government has been able to keep a ceiling on new recruitment and the acquisition of vehicles, and has been able to stabilize the wage bill. However, it is not sure of the sustainability of the reforms over time. Moreover, since most of these measures require approval of the Presidency, they tend to increase the burden of senior officials who now must spend an enormous amount of time on details. Thus, instead of helping to deconcentrate an over- centralized administration, these early reform maasures have by and large caused the administration to become even more centralized. 2.06 Consequently, basic structures and systems remain unchanged and Senegal's administrative system is still characterized by: (i) heavy reliance on a body of largely ill-adapted rules and regulations; (ii) a staff training system emphasizing pre-service training thus failing to keep up with technology changes; (iii) a large body of civil servants, characterized by redundancy in some skill areas and shortage in others; (iv) a considerable amount of external technical assistance, not effectively utilized; (v) increasing centralization of decision making at top levels, rendering both policy making and policy implementation more problematic and time-consuming; and, most critical; and (vi) inability to attract and retain qualified staff in key areas, due to low salaries and lack of appropriate incentives. It i. widely recognized that weak performance of the administration has contributed to Senegal's present state of financial and economic difficulty. 2.07 The administration has been particularly weak in dealing with the many problems in the economic and financial management area, the most noteworthy of which are: (i) the poor yield of public inrestments which is a major cause of Senegal's lagging economic performance; (ii) the weight of debt service which consumes an increasing share of budgetary revenue; (iii) poor fiscal performance in recent years which failed to match growth in nominal GDP; (iv) the shortage of reliable and timely economic statistics which hampers the formulation and monitoring of economic and financial policies, particularly critical in a period of rapid structural adjustment; (v) the need to address the social dimension of adjustment, particularly the impact of adjustment on the least advantaged segments of the society; and (vi) the need to reduce the weight of the public sector wage bill on the budget. At the same time, the Government has been preoccupied with short-term responses to its present economic crisis, whereas a longer-term, strategic perspective of Senegal's development is necessary. 2.08 With regards to the problem of low motivation and shortage of qualified si:aff in key skill areas, the Government's approach has been to (a) grant s ccessive salary supplements; and (b) allow the recruitment of qualified professionals under special contract. Various donors have also been financing salary supplements and contract staff under a variety of arrangements. These ad hoc measures have raised a number of issues: salary supplements are applied unevenly between ministries and among projects; they are not necessarily related to performance, and have been granted on a regular basis as entitlements rather than inducements for higher performance. The proliferation of supplements has made the administration of the wage bill complex and their budgetary impact difficult to control. As far as the employment of contractual staff is concerned, no clear guidelines have been given to ensure their effective use.  -5- Administrative Assessment 2.09 The preparation and implementation of the 1985-92 adjustment program brought about renewed urgency within Government to rationalize the responsibility, structures, operating procedures and staffing patterns of the core economic institutions. Administrative reform priorities were established and IDA was invited in 1985 to carry out an administrative assessment to examine key public administration issues. This assessment concluded that, although Senegal's administrative system is relatively well structured, these structures are overly complex and rigid, giving rise to compartmentization, overlapping responsibilities, and fragmentation of decision-making. As a result, coordination of policy formulation and implementation has suffered. Moreover, an excessive preoccupation with the legality of administrative acts and insufficient concern with the tiaeliness and effectiveness of their impact have led to a pyramiding of largely ineffective controls that delay execution and add to costs. In addition, the Senegalese administrative culture was not results-oriented and failed to reward initiative; it tended to function exclusively on the basis of status, based on educational level and seniority, and on excessive compliance with regulations, deference to superiors and loyalty to mentors. 2.10 IDA recommended that an in-depth review of the existing civil service policy framework be carried out, with a view to updating existing rules and regulations, allowing Government agencies to attract and retain the best elements, redeploying and giving appropriate training to existing staff, and making other personnel decisions based on a clear view of the personnel situation, which does not seem to exist at the present time. It also recommended the reorganization and revitalization of central personnel agencies, so that these agencies are able to carry out their support role in Government's economic development efforts. In particular, the establishment of a computerized data processing system to replace the existing manual system, which is both slow and error-prone, was recommended. 2.11 Based on the conclusions of the administrative assessment and the lessons learned during the process of effecting structural and administrative reforms, the Government announced in 1986, under its current economic program supported by SAL III, a number of administrative reform measures. These are reflected in its latest Letter of Development Policy, dated April 16, 1987, and include: institutionalizing a mechanism for the programming and budgeting of public investment, continued reform of the management of the parastatal sector, improving public debt management, strengthening public finance management, with a particular emphasis on increasing revenues, and improving economic information management. Parallel efforts were deployed by Government to strengthen the capacity of various agencies in the Finance and Planning Ministries responsible for implementing the policy reforms. At the same time, the Government took steps to strengthen tax and customs administration, and the institutional arrangements in charge of monitoring the structural adjustment program. Lessons Learned 2.12 A critical examination of early reform program implementation highlig} ts the underlying weaknesses in these first attempts, namely that:  -6- (a) the reforms lacked an overall strategy and failed to tackle simultaneously the three basic management functions, namely planning, personnel administration and financial management. Indeed, the 1972 attempt to establish a development capacity in field administration did not materialize because the resource management systems were not geared to support this new goal. The 1976 reform of central ministries suffered from lack of a reform strategy since it addressed indiscriminately all ministries, regardless of the role they were to play. The reform strategy failed either to include the identification of development objectives and the formulation of appropriate policies and programs, or to provide the human and financial resources necessary to support the implementation of the program; (b) the reforms were not designed as an integral part of an overall strategy for the country's development. In the 1972 reform effort, there was no operational development strategy to direct the reform to specific priority areas. The 1976 reform aimed primarily at cutting the wage bill and reducing public employment but its focus was on the entire government structure and not on specific programs identified in the adjustment process. This entailed excessive human and financial demands on the Government; yet at the same time, it was hard to see the cost-effectiveness of the effort. To be meaningful and relevant, the administrative reforms should have been tailored to the on-going needs and strategy defined by Government; (c) the reforms did not address behavioral aspects even though the key problems with the Senegalese administration lie less with the formal structures than with the attitudes and behavior of the people operating in these structures. While the negative attitude toward the civil service is largely a result of socio-political factors, behavior is also significantly conditioned by the organizational setting in which the public employees operate. To restore the ideals of the classical bureaucratic model on which the Senegalese administration is patterned, reforms are needed to: (i) reestablish the spirit of accountability by updating existing administrative codes; (ii) limit the scope for dlrosretionary decision making that exists; and (iii) make specific improvements in the work procedures and methods, staff training, working conditions, and the civil service compensation and incentive policies; and (d) the reforms did not address effectively the issue of building a permanent capability in the existing agencies, by tackling the problem of the flight of qualified staff and the difficulty of recruiting new ones due to low salaries and the lack of relevant civil service position schedules. As a result, the formulation of public policies and their implementation were carried out with excessive reliance on  foreign expertise, which now may have reached a point of diminishing returns. The 'high costs involved, the resentment on the part of the Senegalese, and the shifting needs in the implementation phase that Senegal has now reached in its reform program, make external technical assistance less effective. Re-orientation of the Reform Program 2.13 On the basis of lessons learned from its past efforts, the Government has recently turned to a new orientation of its admiristrative reform, taking into account the priority needs for structural justment and the recommendations of the Bank's administrative assessmenL. At the same time, it recognizes that a long term approach needs to be adopted, especially to internalize the reforms. This new orientation encompasses both economic policy and administrative aspects. With respect to economic policies, the emphasis is now on strategic planning with a global, long- term perspective, incorporating the social dimension, and projecting the development scenarios for 20 years. With respect to administrative policies, the new orientation contains a number of innovations. For the first time, it incorporates a focus on improving the strategic function of planning and investment programming while at the same time strengthening the financial management and personnel management functions. The focus on the Ministries of Planning, Economy and Finance, and Civil Service and Labor, and on specific units in sectoral and regional administrations concerned with these three strategic functions, helps ensure that actions by key agencies are mutually supportive and designed to minimize disruption by any future changes in government structures. Moreover, the reform program is tied to the implementation of a clearly defined economic and financial adjustment program and considered an integral part of the overall development effort. It also includes efforts to rehabilitate the personnel management system and to update the civil service rules and regulations, to resolve more satisfactorily the wage and incentive problem. Finally, it tackles the issue of the management of technical assistance and internalization of policy formulation and implementation, through careful injection of external expertise only where needed combined with the direct involvement and participation of local staff with proper training and incentives. Implications of the New Orientation 2.14 The challenge is now to translate this new orientation into concrete action programs. To this end, the Ministries of Planning and Cooperation, Economy and Finance, and Civil Service and Labor have each prepared a five-year action program. The proposed actions deal with: (a) the implementation of the existing adjustment program, which includes policy measures already under implementation (e.g. price liberalization), those for which implementation has started (e.g. public investment program (PIP), public employment) and those that remain to be implemented (e.g. administration of new fiscal policies); and (b) the design of new policies in the areas of social implications of adjustment, long-term development perspectives, and technical assistance management. With respect to existing programs, there is a need to strengthen the capacity of agencies concerned with monitoring on-going implementation, consolidating new efforts, starting new actions  and, at the same time, ensuring their sustainability. With respect to new policy areas, there is a need for more in-depth studies to identify critical issues and formulate related policies and programs that extend the adjustment process. 2.15 The immediate concern of Government is to pursue the implementation of its long-term adjustment program as reflected in its latest Letter of Development policy. Specifically, the efforts are aimed at: (a) improving the efficiency of the administration while reducing its costs. A competent and motivated c'vil service is the key for the successful implementation of the economic reform program, yet public finance constraints prevent the increase of personnel outlays. The challenge is to find solutions which would be consistent with both the goals and the constraints; (b) improving the efficiency of public investments. Analysis of past results has highlighted the poor yield of public investment as a major cause of lagging economic performance and inability to service the debt. The challenge is to strengthen the planning and investment programming system so that the quality of public investment will improve; (c) improving public debt management. Public debt service has been consuming an increasing share of budget revenues and its relation to export earnings has become untenable. Important efforts have been made to improve its management and to reduce its adverse impact on the economy. These efforts should continue; (d) improving resource mobilization. Fiscal performance in recent years has failed to match economic growth. The latest tax and tariff reforms introduced measures to address this issue. Yet much remains to be done to strengthen tax and customs assessment and collection and to pursue reform in this area; (e) improving economic statistics. The shortage of reliable and timely economic statistics is hampering the formulation and monitoring of appropriate economic and financial policies. This shortage is particularly critical in a period of rapid structural adjustment; (f) strengthening the monitoring of the structural adiustment program and the ability of Government to formulate economic and financial policies. While the Government has succeeded in finding interim solutions to these issues, a more perwanent institutional capacity is needed; and (g) last but not least, addressing the social dimension of adjustment, particularly the impact of adjustment on the least favored segments of Senegalese society.  - 9 - IDA and Other Donor Support for Public Sector Management 2.16 IDA and other major donors have long been associated with Senegal's efferts to address its critical economic and financial problems. Starting in the 1970s, the dialogue on economic issues has increasingly focused on public sector management issues. One of the first priorities was the public enterprise sector. A Parastatal Technical Assistance Project (Cr. 764-SE) was approved in 1977, followed by a second project (Cr. 1398-SE) approved in 1982. This latter project supported the preparation and implementation of the Government's parastatal sector reform that was adopted in 1985 and subsequently became a key component of the SAL II and SAL III operations. Lessons learned from these projects, particularly the need to provide technical support at the same time as changing the policy framework and the need to take adequate time to internalize these policy changes, have helped to shape this project. 2.17 The Bank's strategy for Senegal calls ior increased support for improving public sector management and effecting institutional development, particularly in the other key sectors of the structural adjustment program. In the broad area of macro-economic management, the Technical Assistance Project for Economic and Financial Planning (Cr. 1061-SE) was approved in 1980. This credit, now almost completely disbursed, has been primarily used to identify and support key policy reforms under the on-going SAL operations. Since 1985, it began to support Government to develop and implement a reform in the public investment programming mechanism and the rehabilitation of the external debt monitoring system. It has also financed other SAL-related studies and activities, including workshops that have served to prepare the present project. 2.18 Additional support has also been provided to key sectors by IDA. Support for sector planning and investment programming functions are provided under the primary education sector loan, the industrial sector loan, as well as other operations in the transportation, agriculture, health and urban sectors. 2.19 The Bank's assistance complements that of other donors who are also supporting Senegal's adjustment effort. Other donors' on-going or planned actions include: (a) French technical assistance in investment analysis, budget forecasting, and methodologies for national accounting; (b) USAID assistance in tax administration and population census; (c) the IMF program of tax and customs regulations; (d) the UNDP program of macro planning, monitoring structural adjustment programs, and coordination of technical assistance; and (e) joint UNDP, USAID and IDA assistance for carrying out a national population census. The proposed Development Management Project, by expanding the institutional focus of the previous TA project and providing an overall, intersectoral framework, would complement and strengthen the activities supported by the Bank and these other donors.  - 10 - III. THE PROJECT Project Concept 3.01 The project would support the first five years of Government's reform program designed to improve its administrative capacity. Since this objective cannot be realized without a competent and motivated civil service, the modernization of the civil service system is an integral part of the reform program. Specific project actions would be integrated into the current programs of Government's central agencies responsible for overall economic and financial management with a particular emphasis on those bodies critical to the adjustment program; they would focus on improving structures, administrative procedures and methods, and staff capabilities. Actions, in keeping with the overall program, would be adjusted over time, to ensure that they respond to defined needs. While external consultants would be engaged to carry out non-permanent tasks requiring specialized expertise, Government would make an effort to redeploy existing personnel and recruit national staff under contract. Careful selection of counterparts and on-the-job training will, at the same time, build up a pool of qualified candidates from which Government can choose for permanent positions once the project ends. Project Objectives 3.02 The primary objective of the project is to assist Government to build up the internal capabilities for strategic planning, financial management and personnel management in the relevant agencies within the Ministries of Plan and Cooperation, Economy and Finance, and Civil Service and Labor. In particular, the project would support action programs prepared by these agencies to carry out the tasks related to the implementation of the on-going structural adjustment program. Specific project objectives, corresponding to the priorities set out in the Government of Senegal,s (GOS) Letter of Development Policy, are to: (a) establish a strategic planning capacity, through producing reliable and timely statistics, producing data on constraints and potentials of the economy, consolidating the implementation of the investment programming mechanism, and preparing long-term alternative development scenarios for Senegal; (b) further strengthen economic and financial management through introducing measures to improve tax and customs administration and collection, consolidating public debt management, reinforcing and monitoring current economic and financial policies, and formulating new policies in these areas; (c) incorporate the social dimension into the adjustment process through introducing a system for regular production of standards of living and household budget data, and producing data on socio-economic aspects; and  (d) rehabilitate the personnel management function through modernizing personnel data processing system, strengthening personnel administration agencies, and revising personnel policies. Proiect Description 3.03 The project consists of four main components, as follows : (a) Establishment of a New National Planning System which includes: consolidating and completing the establishment of the investment programming and budgeting system; starting an improved process of formulating development policies; and strengthening central planning structures; (b) Strengthening Economic and Financial Management which includes: improving the mobilization of fiscal resources; consolidating and fine-tuning the public debt monitoring system; rehabilitating the statistical system; and improving the formulation and monitoring of economic and financial policies; (c) Incorporation of the Social Dimension in Adiustment Programs which includes: carrying out a permanent survey of the standards of living; and conducting socio-economic studies to prepare poverty-alleviation projects; and (d) Modernization of the Civil Service System which includes: upgrading the capacity of personnel administration agencies; and improving civil service policies. In addition, the project would include a Project Administration Unit (PAU). 3.04 Project financing covers: (i) national consultants under contracts of less than one year as well as international consultants to carry out studies, develop analytical tools, and train national staff; (ii) overseas and in-country training and workshops; (iii) vehicles and equipment (including computer equipment and materials); (iv) office refurbishing for the Civil Service Department, the Central Payroll Agency, the Statistics Department and the Debt and Investment Department; (v) maintenance and incremental operating costs; (vi) a limited number of national staff hired under contract during the project period; and (vii) performance incentives for staff financed under the Government's budgetary contribution. The adoption of criteria and procedures for using the funds earmarked for studies under each component and recruiting contractual staff acceptable to IDA is a condition of disbursement against these items. The adoption of a sstem for administering performance incentives is a condition of effectiveness. 3.05 In particular, the project will support extensive staff training under various forms: attendance of regular courses in-country and overseas, study tours to observe similar experiences in other countries, and on-the-job training with short-term support from external consultants. The Government would contract with local and international training institutions to develop courses responding to the needs of the agencies. In addition, the project would also support workshops and policy seminars to allow exchange of ideas and dissemination of information among public agencies and between them and the private sector. In parallel with these short-term actions, Government would also review its training policy to incorporate the training dimension into the existing personnel management system.  - 12 - Establishment of a New National Planning System (US$3.8 million) 3.06 In support of the Government's commitment under SAL III to improve the efficiency of resource utilization, the project would support the strengthening of planning structures (US$.9 million) through: (i) a review of the structures and procedures of the Planning and Cooperation Ministry (MPC) and its staff capacity and an assessment of the planning capabilities of selected sectoral ministries; (ii) the gradual transfer of the responsibility for project evaluation and preparation to sectoral ministries; and (iii) upgrading sectoral and regional planning capabilities by creating new planning units or improving existing ones through staff reassignment and training. The review would lead to a clear definition of responsibility between the MPC and sectoral ministries, improved internal organization, procedures and staffing for MPC and better coordination between MPC and sectoral ministries. It should also help to integrate better the planning function with the financial processes of budgeting, and thereby establish closer links between MPC and the Ministry of Fconomy and Finance. About eight months of national and six months of international consultant services would be provided to help carry out the review and train staff in the new structures and procedures. 3.07 To consolidate the mechanism for investment programming and budgeting (US$1.2 million), the project would support the expansion of the three-year rolling investment programming system to cover project evaluation, selection, and physical as well as financial monitoring. MPC would develop analytical tools for formulating a macro-economic framework, improve project identification and evaluation, train staff in macro-economic analysis, forecasting and simulation, and develop guidelines and procedures for selecting and programming investments, and for their monitoring, and evaluation. These actions would lead to the establishment by 1990 of a permanent mechanism for preparation and implementation of rolling three-year investment programs. Effort will also be made to address the issue of generating feasible project ideas and creating a stock of sound projects from which Government can choose for its investment. About 30 months of national and 5 months of international consultant services would be provided. 3.08 To develop MPC's capability to formulate long-term development policies (US$1.7 million), the project would finance prospective studies to assess the potential and constraints of the economy and society, with a view to helping Government formulate a long-term, global development strategy for Senegal. This strategy would serve as a basis for formulating sectoral and intersectoral policies, to ensure coherence among these policies and consistency with long-term interests of Senegal. About 30 months of national and 5 months of international consultant services, with specialization in macro-economic analysis and extensive experience in other disciplines and in prospective studies, would be funded to develop appropriate analytical tools and train national staff. A separate UNDP project is to finance technical assistance to support MPC in the areas of long-term perspectives, forecasting and simulation tools, human resource planning, and regional planning. French assistance includes financing of a resident economist and a volunteer providing advice in project evaluation and monitoring.  - 13 - Improvement of Economic and Financial Management (US$5.3 million) 3.09 In line with the Government's intention to restore its public finances under SAL III, the project would support the mobilization of additional fiscal revenues (US$2.2 million), through helping tax and customs agencies. For the Customs Department (DGD), support would be provided to increase the efficiency of customs operations and control of fraud by: (i) introducing computerized data processing techniques; (ii) improving knowledge of imported goods values; (iii) training customs inspectors; and (iv) increasing the mobility of customs control brigades. About sixteen months of national consultant services in data processing systems would be provided. For the Department of Land and Internal Revenue (DGID), the project would support the expansion of the tax base and the improvement in tax collection through the provision of: (i) consultant services to review the proposed delegation of decision-making authority to field offices, tax filing procedures and forms, and to study the possibility of expanding the application of the value-added tax, and additional use of modern data processing techniques; (ii) micro-computers; (iii) vehicles and land survay equipment; (iv) extensive staff training and public information to disseminate the new tax code. Project support would complement the assistance provided by IDA's Technical Assistance for Urban Management and Rehabilitation (Cr. 1458-SE) and by USAID for land surveys in two towns. About 9 months of international and 2 months of national consultant services would be provided to DGID. 3.10 Responding to another key area under SAL III, the project would assist the Debt Division to further improve and consolidate the management of public debt (US$1.2 million) by: (a) expanding its monitoring system to cover short-term external public debt, external private debt, domestic public debt, as well as external grants and Government guaranteed debts; (b) increasing its analytical capacity to forecast debt service and commitments; (c) producing regular reports on the debt situation, data on financial implementation of externally financed investments, and analysis of debt impact; and (d) providing analysis for the formulation of borrowing strategies. Project financing would cover 50 months of national and 17 months of international consultant services to refine the existing monitoring system, develop analytical tools for debt projections and analyze borrowing strategies. 3.11 The project would support the Statistics Department's (DS) efforts to rehabilitate the statistical system (US$1.2 million) by: (a) developing and applying methodologies for producing rapid provisional figures for national accounts; (b) accelerating the production of national accounts; (c) evaluating users' needs and data produced by administrative agencies; (d) harmonizing codification and updating legislation regarding the collection of statistics; (e) establishing a central data base on enterprises; and (f) carrying out various surveys of the informal sector. Financing under the project would include 12 months of short-term international consultants to develop methodologies and procedures and to train DS staff. 3.12 To improve the formulation and monitoring of economic and financial policies (US$0.7 million), the project would support the establishment of a study unit in MEF responsible for providing technical support to various working groups established by MEF to review policy issues, each group under  - 14 - the coordination of a cabinet advisor. The establishment of this unit will be carried out in two steps. During the first phase the unit will operate within the Ministry's cabinet. The permanent status and location of the unit will be determined by the Minister of MEF by March 31, 1989, at the latest, at which point the Unit would be transferred with terms of reference and composition acceptable to IDA. Agreement to this effect was obtained during