Senegal - Development Management Project

Docunent of Th, World Bank FOR OFFICIAL USE ONLY Repwt No. P-4736-SE MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 12.5 MILLION To THE REPUBLIC OF SENEGAL FOR A 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 offlcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  REPUBLIC OF SENEGAL DEVELOPMENT MANAGEMENT PROJECT CURRENCY EQUIVALENTS Currency Unit = CFA franc (CFAF) US$ 1.00 = CrAF 277 CFAF 1 million = USS 3,610 ABBREVIATION AND ACRONYMS PAML Medium and Long Term Adjustment Program PIP Public Investment Program UNDP tlnited 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 Interna' '-venue DDI Public Debt and Investment Depar_a,ent SDA Social Dimension of Adjustment DS Statistics Department DFP Civil Service Department SCS Central Payroll Agency PAU Project Administration Unit FPF 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 - JUNE 30  FOR OFFICIAL US ONLY REPUBLIC OF SENEGAL DEVELOPMENT MANAGEMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Senegal Beneficiaries: Ministry of Plan and Cooperation, Ministry of Economy and Finance, and Ministry of Civil Service and Labor Amount: SDR 12.5 million (US$17.0 million equivalent) Terms: Standard, with 40 years maturity Onlending Terms: Not Applicable Financing Plan: Government US$ 5.7 million CIDA US$ 2.0 million IDA US$ 17.0 million TOTAL US$ 24.7 million Economic Rate of Return: Not Applicable Staff Appraisal Report : No. 7106-SE Map: IBRD No. 21021 R 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 authorizatio,  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF SENEGAL FOR A DEVELOPMENT MANAGEMENT PROJECT 1. The following memorandum ard recommendation on a proposed Development Credit to the Republic of Senegal for SDR 12.5 million (US$17.0 million equivalent) is subm.tted for approval. The proposed credit would be on standard IDA terms, with a maturity of 40 years, and would help finance a Development Management Project. The project would be cofinanced by CIDA for US$2.0 million equivalent. 2. Background. In 1977, the Government of Seneg?l (GOS) began taking the first steps to revitalize what had been a stagnating economy, including a large and inefficient public sector. Starting with efforts to rationalize public enterprises (supported by two IDA credits), in 1985, the GOS formulated a medium and long term adjustment program, supported by two IDA SALs, aimed at reducing public finance deficits, strengthening financial management, improving investment and production incentives, and rehabilitating the financial sector. The implementation of this adjustment program, supported by an IDA Technical Assistance Project (Credit 1061-SE) brought some positive results, although Senegal continues to face severe economic difficulties with low per capita income, slow growth, unfavorable balance of payments, and budget deficits. As a result, the desire to deepen the effects of the adjustment measures, as well as to sustain the adjustment process, has led Government to, focus increasingly on the weaknesses of its administrative system. 3. Drawing on lessons from earlier admin.strati-e reform programs, launched in 1972 and 1976 respectively, which failed to bring significant improvements, and cn the basis of recommendations by an administrative assessment carried out by IDA, the GOS has reoriented its approach to administrative reform to give special attention to three key strategic management functions: planning, financial management, and human resource management. A long-term reform program has been outlined, stressing the need to establish a national planning system, to pursue reforms in financial management, to monitor the social impact of adjustment measures, and to start the rehabilitation of the personnel system. Action programs have been developed by the ministries concerned--Plan, Finance, and Civil Service--covering the first five year period of a much longer term effort to improve the -ublic sector. 4. Rationale for IDA Involvement. Improving public sector management is a critical factor to ensure the success of the adjustment process in Senegal. The weaknesses and inefficiencies, which at present characterize many government institutions, unless rectified will inhibit the implementation, on a sustainable basis, of the best formulated policy reforms. IDA, from th- start, has been most intimately involved with the conception and progress of this process, and has taken the lead in developing a constructive dialogue on adjustment related issues, including institutional strengthening as supported by this project. Thus, IDA has a comparative advantage over other donors in maintaining its involvement through support for this project. However, care has been taken to ensure that project actions complement other ongoing institutional development  - 2 - efforts in macro-economic management by other donors (mainly UNDP and FAC), and there will be a continuing effort to pursue close donor coordination throughout the project. 5. Proiect Obiectives. The project would assist the GOS to carry out administrative reforms to strengthen its economic and financial management c-pacity in the context of its new policy orientation which is simultaneously supported by structural adjustment efforts. Specific objectives are to. (a) improve Government's strategic planning capacity; (b) increase its ability to mobilize fiscal resources and manage expenditures including the public debt; (c) monitor the social impact of its structural adjustment program; and (d) reform its civil service system. 6. Project Description. Specific components of the project would: (a) establish a national planning system, essentially through strengthening the structures of the Planning Ministry, consolidating the three-year rolling investment programming and budgeting mechanism, and preparing long- term development scenarios to guide investment decisions; (b) strengthen economic and financial management, essentially through improving the efficiency of tax and customs operations, extending the coverage of public debt management, modernizing the statistical system, and enhancing the policy analytical capacity of the Economy and F:nance Ministry; (c) incorporate the social dimensions in adjustment programs, through establishing a permanent capacity in the Statistics Department to carry out standard of living surveys, and financing in-depth socio-economic studies to identify adverse impact of adjustment measures and propose appropriate actions; and (d) modernize the civil service system. essentially through improving the structures, staff level, and data processing methods of the Civil Service Department and the Central Payroll Agency, and reviewing the existing civil service rules and regulations. Annual work programs will be established for the individual components in agreement with IDA. The project, to be carried out over five years, provides funds for the services of national and international consultants, training, studies, vehicles and equipment, office refurbishing, maintenance and incremental operating costs, and a limited number of contractual staff and performance incentives to strengthen the Ministries of Planning, Economy and Finance, and Civil Service and Labor. The total cost of the project is estimated at US$24.7 million equivalent, with a foreign exchange component of US$13.4 million (54Z). The break-down of costs and financing plan is shown in Schedule A. Amounts and methods of procurement and disbursement, and the disbursement schedule are shown in Schedule B. A timetable of key processing events and the status of the Bank Group operations in Senegal are given in Schedules C and D respectively. A map is attached. The Staff Appraisal Report, No. 7106-SE dated April 25, 1988, is also attached. 7. Agreed Actions. During negotiations, agreement was reached on the following: (i) the first-year work program for each participating agency; (ii) the review of subsequent programs by October of each year; and (iii) the establishment of a Study Unit in MEF by March 31, 1989. The conditions of effectiveness will be: (i) deposit of US$50,000 equivalent made to the Project Counterpart Account; (ii) adoption of a project monitoring system acceptable to IDA; and (iii) adoption of a system of managing performance bonuses acceptable to IDA. The conditions of disbursement will be: (i) against components for contractual staff and for  - 3 - studies, the adoption of selection criteria and procedures of utilization of these funds acceptable to IDA; and (ii) against the SDA component, meeting of all disbursement conditions for co-financing from CIDA and establishment of a Users' Committee with terms of reference and composition acceptable to IDA. 8. Benefits. Tha GOS must strengthen the organization and staffing of its core ministries and build up its own capability to design and implement economic reforms in order to carry through its adjustment program and capitalize fully on the gains recently acquired through policy reforms. This project is a first step towards achieving these long-term objectives by supporting the immediate need for strengthening the capabilities of agencies involved in implementing and monitoring key SAL measures and initiating reforms in the civil service systems. 9. Risks. The main risks are that: (a) poor civil service conditions may hinder the full implementation of project activities on a sustainable basis; (b) management of the reform process may exceed local capacity; ar.d (c) finding the right technical expertise to assist GOS may be difficult. The first risk would be minimized by (i) involving agencies in the design of the reform program; (ii) providing means and incentives to those responsible for carrying them out; and (iii) reviewing related civil service rules and regulations. The second risk would be reduced by: (i) adjusting the pace of reforms to actual capacity through review of annual work programs; and (ii) setting up effective coordination and a project administration and monitoring system. To minimize the third risk, the project would assist Government in (i) identifying the required technical expertise, both in Senegal and abroad; (ii) resorting to external consultants only in specialized areas and generally for short-term periods; and (iii) encouraging the Senegalese within and outside the Government to participate with foreian experts in the search for solutions to che problems facing their country. 10. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend its approval by the Executive Directors. Barber B. Conable President Attachments Washington, D.C. April 25, 1988  -4- SCNLDULS A REPUBLIC OF SENEGAL DEVELOPMENT MANAGEMENT PROJECT ESTIMATED COSTS AND FINANCING PLUN Estimated Costs jl X Foreagn Local Foreign Total Exchange -US$,000-------- A. National Planning System Strengthen Central Structures 421 466 887 53 Consolidate Investment Mechanism 805 393 1,198 33 Improve Development Policy Formulation 1,018 678 1,696 40 B. Economic and Financial Management Mobilize Fiscal Resources P32 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 Dimensions of Adjustment Establish Permanent Survey Capacity 1,884 1,995 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. Projiect 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 Costs 11,337 13,376 24,713 54 m in===m == ==m m a/ Includes taxes and duties of US$3.7 million. Financing Plan Local Foreign Total ------US$ million------ Government 5.7 0 5.7 CIDA (Canada) 0.6 1.4 2.0 IDA 5.0 12.0 17.0 Total 11.3 13.4 24.7  -5- SCHEDULE B Page 1 of 2 REPUBLIC OF SENEGAL DEVELOPMENT MANAGEMENT PROJECT PROCUREMENT METHOD AND DISBURSEMENTS 1/ Project Element Procurement Method ICB LCB OTHER N.A. TOTAL -----------(US$ million)--- Contractual Staff - - - 4.0 4.0 _ - - (3.0) (3.0) Consultant Services - - 4.7 - 4.7 - - (4.0) - (4.0) Training - - 1.8 - 1.8 _ _ (1.4) - (1.4) Studies - - 1.6 - 1.6 _ _ (1.0) - (1.0) Civil Works - 0.7 - - 0.7 - (0.7) - - (0.7) Vehicles, Equipment, 4.8 - - - 4.8 Furniture (4.8) - - - (4.8) Maintenance and - - - 1.4 1.4 Incremental Operating - - - (1.2) (1.2) Costs Staff Incentives - - - 1.1 1.1 ( ) (-) PAU Operating Costs - - - 0.9 0.9 _ _ _ (0.9) (0.9) Total 4.8 0.7 8.1 7.4 21.0 (4.8) (0.7) (6.4) (5.1) (17.0) 1/ Contingencies and expenditures financed by the PPF are included in the amounts shown. IDA contribution is indicated in parentheses.  SCHEDULE B Page 2 of 2 Disbursements I/ Amount of S of Expenditures CategorY Credit Allocated to be Financed (USS million) 1. Contractual Staff 3.0 100Z up to US$550,000; 901 between US$550,001 and US$1,062,000; 80Z between US$1,062,001 and US$1,507,000; and finally 5O0 above US$1,507,000 2. Consultant Services 3.4 100 3. Training 1.2 100 4. Studies 0.7 100 5. Civil Works 0.7 100 6. Vehicles, Equipment, Furniture 4.7 100 7. Maintenance and incre- mental operating costs 1.1 75 8. PAU Operating Costs 0.7 100 9. Refinancing of PPF 1.5 Amount due pursuant to Section 2.02 (c) of Development Credit Agreement Total 17.0 Estimated IDA Disbursement: IDA Fiscal Year 1988 1989 1990 1991 1992 1993 1994 -----------------------(US$ million)------------------------ Annual 1.0 2.4 3.4 3.0 3.4 3.0 0.8 Cumulative 1.0 3.4 6.8 9.8 13.2 16.2 17.0 1/ For purposes of this table, the unallocated category is distributed among other categories  7- SCHEDULE C REPUBLIC OF SENEGAL DEVELOPMENT MANAGEMENT PROJECT Timetable of Key Project Processing Events (a) Time Taken to Prepare Project: 18 months (b) Prepared by: Government with IDA Assistance (c) Apprais3l Mission: September/October 1987 (d) Date of Negotiations: February 1988 (e) Planned date of Board Presentation: May 1988 (f) Planned Date of Effectiveness: September 1988 (g) List of Relevant PCR's and PPAR's: Not Applicable  REPUSLIC OP SENEgAL STATUS OF LD IANK OPERATIONS A. STATEMENT Of ANK LOANS AND IDA CREDITS (as of Docember SI. lJN70 Loen or Amou t (UJJ mtlll*n 3/V Credit Year (Lee: Conel tto Number Jlaned Borrower Purpose Lae nD I eA I ev. teen Loans A Twenty-soven Credits Fully Disbursed V/ 169.98 268.61 1412-T-SE 1977 Sonegal Petite Coto Tourism 6.00 o.a2 1413-SE 1977 Senegal Petite Cote Tourism 5.66 0.39 991-SE 1966 Sonegal Small Rural Operations 11.66 0.49 1061-SE 1966 Sonegal T.A. for Planning 5.30 6.46 1973-SE 1961 SOFISEDIT Investment Promotion 6.560 1.81 1136-SE 1961 Senegal Investment Promotion 2.560 0.74 1103-SE 1961 Senegal Forestry 9.86 5.71 1176-SE 1982 Sonogal Agricultural Rosearch 19.560 6.6 1310-SE 1983 Sonogal Rural Health 15.66 4.96 1323-SE 1983 Sonogal Petroleum Exploration 9.56 2.18 136e-SE 1683 Senegal Phoo. Ind. 7.70 1.24 1396-SE 1983 Senegal Second T.A. Parapublic 11.00 4.70 1406-SE 1983 Senogal E.S. Rural Dev. 16.16 9.20 1448-SE 1984 Senegal Fifth Highway 10.76 2.16 SF-1t-SE 1984 Senegal Fifth Highway 10.76 0.54 1468-SE 1964 Senegal T.A. for Urban Mgmt. A Rehab. 8.f6 0.37 SF-13-SE 1984 Senogal T.A. for Urban Ugmt. A Rehab. 2.96 1.66 1459-SE 1984 Sonegal Dakar Container Port 2.65 1.065 SF-14-SE 1984 Sorogal Dakar Container Port 4.86 3.14 1654-SE 1986 S egal Eleven Centers Water Supply 24.00 9.61 1632-SE 1986 Seo-gal Irrigation T.A. 4.90 4.46 1838-SE 1966 Sen Znl Regional Mgmt. School (CESAC) 5.6e 8.91 1710-SE 1986 Senew..l First Enorgy Sector Rehob. 20.00 16.40 1714-SE 1966 Senegal Second Telecommunications 22.00 20.07 1736 1987 Sonegal Primary Education Dev. 12.00 12.00 1862-SE 1987 Sonogal Structural Adjustment III 46.00 36.42 A027-SE 1987 Senegal Structural Adjustment III 46.60 18.46 Total 136.03 563.91 171.46 of which repaid 34.88 8.91 Total now outstanding 96.70 576.66 Amount sold 3.26 2.48 of which repaid 8.26 2.41 Total 6.66 6.62 Total now outstanding 92.44 672.59 Total now undisbursed 2.02 169.44 1?.i46 1/ Prior to *xchange adjustments. 2/ A loan of ust3.5 million for agricultural credit (684-SE) made in 1969 was cancelled on March 26, 1971. 3/ Credit No 1061-SE and higher are denominated in SDRs and are shown in US$ equivalent based on the exchange rates in effect at the time of negotiations.  -9- SCHEDULE D Pa 2 of 2 B. STATEMENT OF IFC INVESTMENTS (as of December Si. 197) Amount (USS Milion) Fiscal Year Obligor Type of Business Loan Invostment Total 1967 Soci6t6 Indus- Fertilizer Plant 2.45 1.01 3.46 trielle d'Engrais du S6n4gal 1072) 1973) BUD S6n6gal, S.A. Vegetable Export - 0.84 6.64 1976) 1974 SOFISEDIT Development Finance - 0.34 0.34 Company 1980 SocihtA d'Habitat Money and Capital - 0.47 0.47 du S6n6gal, S.A. Market 1980 Soci6t6 Hgtoli&re Tourism 3.00 - 3.00 1982 Industries Chi- Fortilizer 26.00 - 26.00 mique du S6n6gal 1984 African Seafood Fish Processing 2.560 0.70 3.20 Plant 1986 SOTIBA-S'MPAFRIC 1/ Print Manufactu- 2.26 - 2.26 ring - T-tal Gross Commitments 32.95 3.36 36.31 Loss Cancelations, Terminations, Repayments, Sales and Losses 7.64 1.16 8.69 Total Commitments now hold by IFC 26.41 2.21 27.62 Undisburosd Balant 9.60 6.76 16.20 1/ Approved but not yet signed/committed (not included in totals)  M A U R I T A N I A SENEGAL nn 'om. _._ i _ { ' \~~~~ ---~~c _. _f q - }S /' * Nd,",d Ctpd f , ~ ~ ~ TW e s ORB;'\EL. o__ r- A\" 1 wov~~~~~~~ ~ ~~~~~~ ~ A Lo I lltO=tTEtS~~ ~~~ A_t _ L A/ K Lj - ~ ~~~~~ ~~ ~~~~~~~~~ 'J t" D JA ,IUNCO N16O rK -tw nt >\\A CAP VERr \ ' T ~~~~~~~~~~~~~) NfDONA PRKE j . ', trv _, bd t // -__ o' \ K y C~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~r c~~~^ ye2~ h w~~G IE BISA G U I N -B AA,OU,.DA T H E GA M B I At \ . r--Mr ,- -, \