Ecuador - Second Technical Assistance Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7628 PROJECT COMPLETION REPORT ECJADOR SECOND TECHNICAL ASSISTANCE PROJECT (LOAN S-006-EC) FEBRUARY 10, 1989 Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used oy recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ABBREVIATIONS CEPE = Corporacion Estatal Petrolera Ecuatoriana CONADE = Consejo Nacional de Desarrollo FONADE Fondo Nacional de Desarrollo FONAPRE = Fondo Nacional de Preinversion INECEL = Instituto Ecuatoriano de Electrificacion } JUNAPLA = Junta Nacional de Planificacion COUNTRY EXCHANGE RATES Name of Currency: Sucre (S/.) Exchange Rate: Appraisal Year Average: 1977 US$ 1.00 = 25.00 Intervening Year Averages: 1978-1981 US$ 1.00 = 25.00 1982 US$ 1.00 = 33.15 1983 US$ 1.00 = 54.10 1984 US$ 1.00 = 67.18 1985 US$ 1.00 = 95.75 Completion Year Average: 1986 USS 1.00 = 146.50  FOR OMCIAL USE ONLY THE WORLD BANK Washington. DC 20433 USA 049c, of Di tv.ce-eral Opwratwm tvaItiitn February 10, 1989 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Pass-Through Audit Report on Ecuador _ Second Technical Assistance Project (Loan S-006-EC) Attached, for information, is a copy of a report entitled "Pass-Through Audit Report oa Ecuador - Second Technical Assistance Project (Loan S-006-EC)" prepared by the Latin American and the Caribbean Regional Office. Full evaluation of this project has not been made by the Operations Evaluation Department. Attachment This document has a restricted distribution and may be used by recipients cnly in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOR OFFICIAL USE ONLY ECUADOR SECOND TECHNICAL ASSISTANCE PROJECT (LOAN S-006-EC) PROJECT COMPLETION REPORT Table of Contents Page No. PREFACE ........................ J BASIC DATA SHEET ........................ ii HIGHLIGHTS .. ...................... iv I. INTRODUCTION ............................. 1 II. PREPARATION AND APPRAISAL ............................. 1 III. IMPLEMENTATION ............................. 3 IV. COSTS, DISBURSEMENTS, AUDITS ............................. 4 V. INSTITUTIONAL DEVELOPMENT ............................. 6 VI. IMPACT ............................. 7 VII. BANK PERFORMANCE ............................. 9 VIII. CONCLUSIONS ............................. 10 ANNEX .................. ......................................... 11 This docursient has it restricted distribution and may be used by recipients oniy in the Performnaice| of their offcial duties. Its contents rnay not otherwise be disclosed without World Bank authorization.  PROJECT COMPLETION REPORT ECUADOR - SECOND TECHNICAL ASSISTANCE PROJECT (LOAN S-006-EC) PREFACE 1. The Bank approved a loan of US$11 million equivalent (Loan S-006-EC) in August 1977 to the Government of Ecuador, to assist in the financing of preinvestment studies and technical assistance for institutional development. The project was executed by FONAPRE (National Preinvestment Fund), the Government's agency for preinvestment activities. 2. The Project was designed to assist the Government, in an era of rising petroleum revenues, to address a major constraint in the development of modern infrastructure, namely, the lack of public administrative capacity for project preparation and execution. The Project was, thus, conceived as a means for the Bank to assist Ecuador in the modernizing and strengthening of the public investment process, while expanding the pipe-line of projects for Ecuador's investment program. This Project was the second such opuration. * nThe First Technical Assistance Project (Loan 1230-EC) aimed at preparation of a series of rural development projects. The Second Technical Assistance Project scope included preinvestment studies in the agriculture, hydrocarbon, power, transportation, and urban sectors; institutional development assistance to FONAPRE; and assistance to the development of the Ecuadorian consulting industry. The Bank loan was fully disbursed by June 30, 1985. 3. In accordance with the revised project performance reporting procedures, this report has been read in the Operations Evaluation Department (OED), but the Project was not audited by OED staff. The Report was sent to the Borrower in draft form for review and reaction. However, they had no comments to make.  - ii - PROJECT COMPLETION REPORT ECUADOR - SECOND TECHNICAL ASSISTANCE PROJECT (LOAN S-006-EC) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual es X of Item Expecttoon Current Esttmete Appraisal Estimate Total Project Cost (USS million) 17.6 17.8 99 Loan Amount (USS million) 11.0 11.0 100 Cofinancing Total (USS million) 0.6 0.6 100 UNDP 0.6 0.8 100 Date Physical Components Completed j/ 8/81 1/65 Proportion completed by that date (N) 5 100 Economic Rate of Return n.n n.s. Institutional Performnee good fair CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS I . FY79 FY80 FY81 FY32 FY88 FY84 FY86 FY88 Appraisal Estimate (USS million n.s. n.e. n.s. 11.0 11.0 11.0 11.0 11.0 Actual (USS million) 0.2 0.2 0.5 4.5 7.6 10.2 10.5 11.0 Actual as X of Approlsl (X) n.n. n.e. nA.. 41 s9 93 95 100 Date of Final Disbusement: Dec. 31, 1965 PROJECT DATES Original Actual so X of Plan Revl-ions Actual Orialnal Plan First Mention In Fileo 9/27/76 n.n. 9/27/76 Negotiations 6/77 n.a. 6/13/77 Board Signing na. n.n. 8/02/77 Signing (Credit Agreemnt Date) n.a. n.r. 11/0S/77 Effectiv 10/01/77 na. 8/01/78 Closltj Date 1/31/82 n.a. 6/30/86 g/ No physical words, studies only. / The President's Report estimated t dtidurusmset would take piace ovor a four year period, but gave no ye r-by-yer breakdown.  - iii - STAFF INPUTS (staff weeks) FY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY8t Tot I Identification/ Preparation 25.4 3.8 28 7 Appraisal Negotiations 1.8 .9 2.2 Supervision 14.6 10.0 11.7 6.0 12.6 4.9 5.6 8.5 69.8 Subtotal 26.7 18.7 10.6 11.7 6.0 12.6 4.9 5.6 8.5 6 00.2 MISSION DATA Date No. of Specializations Performance Types of fmo./yr.) Persons Represented Rating Trend Problem Identification 9/76 1 Fin. Analyst Preparation 11/76 1 Fin. Analyst Appraisal 2/77 1 Economist Supervilsion I 8/77 1 Fin. Analyst 2 2 n.o Supervision II 2/78 1 Fin. Analyst 2 2 n.s. Supervision III 5/78 1 Fin. Analyst 2 2 n.a. Supervision IV 8/78 1 na. - - n.s. Supervision V 2/79 1 Economist 2 2 U Supervision VI 9/70 1 Economist 2 2 U Supervision VII 10/79 1 Power Enginoer 2 2 V Supervision VIII 3/80 1 Sr. Inv. Officor 2 2 V P Supervision IX 7/80 1 Sr. Inv. Officer 2 1 N P Supervision X 12/80 1 Sr. Inv. Officer - 1 V P Supervision XI 6/81 1 Sr. Inv. Officer 2 1 T U Superv;clon XII 2/82 3 Sr. Inv. Officor 2 1 U P Supervision XIII 2/82 2 Sr. Inv. Officer - 1 T M Supervision XIV 6/82 1 Sr. Inv. Officer 2 1 T M Supervision XV 6/82 1 Sr. Inv. Officer - 1 T U Supervision XVI 11/02 1 - 1 T U Supervoison XVII 2/93 1 Sr. Proj. Officer 2 2 T Supervision XVIII 6/84 1 Instit. Devt. Spec. 1 1 - Supervision XIX 8/85 1 Instit. Devt. Spec. 1 1 - Completion 12/07 OTHER PROJECT OATA Borrower: Oovernmsn& of Ecuador Executing Agencies: FONAPRE (Fondo Nacional de Preinversion)  - iv - PROJECT COMPLETION REPORT ECUADOR - SECOND TECHNICAL ASSISTANCE PROJECT (LOAN S-006-EC) HIGHLIGHTS This is the Project Completion Report for the Second Technical Assistance Project - Ecuador (Loan S-006-EC) which was approved by the Executive Directors in August, 1977 and became effective in March, 1978. The project consisted of three components: (i) preinvestment studies; (ii) institutional development assista'ce to FONAPRE (National Preinvestment Fund); and (iii) assistance to the development of the Ecuadorian consulting industry. The institutional development assistance component was co-financed by UNDP. The first years of project implementation were difficult. The environment in which FONAPRE was operating proved to be more demanding than envisaged during appraisal, and the appointment of the experts (whose contribution was essential to get the project started) was delayed by bureaucratic difficulties (paras. 3.1 - 3.2). After two slow years, the pace * of project execution improved and all components were finally implements. The closing date had to be postponed by more than three years, to June 30, 1985 (paras. 3.3 - 3.5). Apart from the underestimation of the initial difficulties, the analysis in the appraisal report and the general thrust of project activities proved to be correct. Finally, several important project objectives were met. Notable achievements were the completion of some majo. preinvestment studies (in the agriculture, hydrocarbons, power and transportation fields)(paras. 6.1 - 6.8), good progress in the institutional development of FONAPRE (paras. 5.1 - 5.6, 6.9), and the preparation of a new law on consulting activities (para. 6.10). On balance, a difficult but useful project (paras. 8.1 - 8.3).  ECUADOR SECOND TECHNICAL ASSISTANCE PROJECT (LOAN S-006-EC) PROJECT COMPLETION REPORT 1 I. INTRODUCTION 1.1 In the mid 1970's rising petroleum revenues allowed the Ecuadorian Government to expand the level, of public expenditure rapidly. The country lacked modern infrastructure and large programs were initiated in agriculture, energy, transportation and water supply. However, the improved financial situation made even more apparent a major constraint in Ecuador's public investment process: the lack of public administration capacity for proiect preparation and execution. 1.2 Several steps were taken to strengthen the Government's investment planning machinery. A National Development Fund (FONADE) was established to finance public investments with the rapidly rising petroleum revenues; the role of the National Planning and Economic Cocrdination Board (JUNAPLA) in the formulation and execution of development projects was strengthened; and the National Preinvestment Fund (FONAPRE), which later became the beneficiary of the prcject reviewed in this Report, was created. The project was conceived as a tool for the Bank's assistance to Ecuador in this administrative strengthening and modernization process. Preparation work started in Septembzr, 1976. II. PREPARATION AND APPRAISAL 2.1 FONAPRE is the Ecuadorian Government's agency for preinvestment activities. Its main functions are: to lend funds to public and private entities for the preparation of studies; to promote the elaboration of studies and design work for high priority projects and to provide technical assistance to its borrowers. FONAPRE classifies the studies it finances into three categories: (i) general studies, i.e., sectoral planning, social/scientific/technological studies and natural resources studies; (ii) project studies, i.e., prefeasibility, feasibility. design and engineering; and (iii) other studies, i.e., complementary studies, and special studies covering for example cartography, aerophotography, cadastral surveys, 1/ This Project Completion Report is based on a review of Bank files, on conversations with Bank staff members who worked on the project, on the P,resident's Report and Loan Agreement of 1977 and on discussions wit the management and staff of FONAPRE in December, 198?. Final reports were also issued by UNDP for the institutional assistance component (Informe Final del Proyecto de Asistencia Tecnica a las Actividades Nacionales de Preinversion - Proyecto ECU/77/09) and by FONAPRE (Informe Final, Prestamo S-006-EC-BIRF).  organizational studies. At the time of project preparation FONAPRE had a professional staff of 18, which grew to about 40 during project implementation. 2.2 The Second Technical Assistance Project was preceded by another operation (Technical Assistance Project - Loan 1230-EC), which was appraised in 1975, during the process of preparing a series of rural development projects. The earlier project included the following principal activities: (i) establishment and operation of a Rural Development P'lanning Unit; (ii) scudies to improve flood control and drainage in the lower Guayas Basin; (iii) completion of the Tungurahua and Esmeraldas Rural Development Projects feasibility studies and project preparation reports; and (iv) a pilot rice scheme which was added later, during project implementation. Funds were channeled through FONAPRE, which was the coordinating agency for project administration, but each project component had its executing agency. The project was approved by the Board in 1976 and implemented between 1977 and 1985. Results were mixed. The institutional objectives (which were to strengthen the institutional framework for rural development policy formulation, planning, project preparation and project execution)were not achieved, while the preparation of specific projects was finally carried out (to the pre-feasibility stage), although with major delays. A full evaluation of the results of the First Technical Assistance Project is in the Project Completion Report issued in February, 1986. 2.3 The Second Technical Assistance Project was prepared in late 1976 and early 1977, when the initial difficulties in the implementation of the first project were already apparent and aimed at addressing in particular some major institutional problems. The President's Report indicated that weaknesses were mainly due to: (i) the lack in most Government executing agencies of technical personnel with adequate experiences in project preparation; (ii) the insufficient number of qualified FONAPRE staff members to substitute for the required expertise elsewhere in the Government; and (iii) the cumbersome procedures for approving FONAPRE's loans to executing agencies and for hiring foreign consultants to be financed by these loans. The procedural problems emerged mainly from the need to obtain repeated and multiple authorizations from various Government agencies for each FONAPRE loan agreement and for each foreign consultant contract. The need to strengthen FONAPRE and to streamline its procedures was therefore one of the key objectives of the new project. 2.4 The Second Technical Assistance Project consisted of three components: (i) preinvestment studies; (ii) institutional development assistance to FONAPRE (cofinanced by UNDP); (iii) assistance to the de-elopment of the Ecuadorian consulting industry. Its main objective was .o improve the efficiency of the Government's investment machinery while expanding the pipeline of projects for Ecuador's investment program. 2.5 The p:oject rationale -- as stated in the President's Report -- was to help strengthening the ability of FONAPRE and other Ecuadorian agencies to carry out priority development tasks, and thus reduce the effects of the national shortage of manpower skilled in project preparation activities. It was thought that FONAPRE, as the central coordinating agency for all government activities related to project preparation, had a considerable potential for achieving an adequate level of technical  - 3 - competence. Furthermore it was expected that by increasing the number of well prepared projects tnle Second Technical Assistance project would encourage better resource allocation, thus contributing to more substantial benefits from the allocation, thus contributing to more substantial benefits from the public investment effort. The project was approved by the Board in August, 1977, was signed in November, and became effective in March, 1978. The UNDP Technical Assistance Program (which was part of the institutional development component) was signed in November, 1977. III. IMPLEMENTATION 3.1 Project implementation started at a very slow pace. Appointments of expatriate experts were repeatedly postponed, in some cases by up to two years. These delays resulted in major changed in the nature of the first phase of project activities. While the technical assistance component had been cuirceived as an integrated effort of five experts working simultaneously in different areas, the delays resulted in only one expert being present in the first nine months, and only two being present in the first two year. 3.2 Moreover, the environment in which FONAPRE was operating proved to be more demanding than envisaged during appraijal. Although FONAPRE was a young institution, with a comparatively small staff (18 professionals, several of whom lacked in-depth sectoral and project experience), it chose to develop a substantial, steady pipeline of projects. This required a concentration of staff efforts on project identification, sometimes at the expense of supervisior of ongoing studies. Lack of outside technical assistance -- caused by the above mentioned delays -- compounded the difficulties. By mid 1980 the project was at a standstill. Supervision efforts by the Bank were intensified, and a series of tripartite reviews (in which the Ecuadorian Government, UNDP and the Bank were represented) were carried out. During the reviews it was decided that the original objectives of the project were still valid, but that more emphasis should be given to technical assistance to the beneficiaries and to the preparation of the preinvestment studies under the first project component. In addition, the cronogram for the work of the experts was modified and procedures for the hiring of experts were streamlined. 3.3 In the second half of 1980 there was a major improvement in the pace of project implementation. FONAPRE was under new management and the agreements reached dnring the tripartite r3views started giving positive effects. By 1981 most of the studies under the first component were under way, and the experts financed by UNDP and by the second component of the loan were in place. 3.4 Implementation of the third project component (assistance to the development of the Ecuadorian consulting industry) received a substantial input from the Bank. The objective was to improve the legal and institutional environment in which the consulting profession operated in Ecuador, in order to enhance the competitive position and the potential of local consulting firms. In the first years of project implementation it became apparent that a major effort was needed, and that the appointment of  -4- an expatriate expert was needed to coordinate the studies. One of the experts Zinanced by UNDP ja Bank staff member seconded to FONAPRE) devoted a major part of his time during the first half of 1982 to guiding the preparation of the study. The study was completed in late 1982. It consisted of a full review of the status and prospects of the consulting industry in Ecuador and contained an analysis of the constraints to its development. Specific proposals for changes in legislation were also included. A long and complex legislative process started with the study. A new law was drafted, it was discussed by the Ecuadorian Congress in the next five years and was at the final stages of approval by the end of 1987. 3.5 On balance, project implementation did not pose unmanageable problems. The project was rated 2 during most of the implementation period. The difficulties were concentrated in the initial years, and after 1981 most project activities ran in a satisfactory way. The loan was closed on June 30, 1985, more than three years after the date envisaged at appraisal, and the full loan amount was disbursed. IV. COSTS, DISBURSEMENTS, AUDITS 4.1 Actual costs are shown in Table 1 below: Table 1. Actual Costs (US$ '000) Foreign Local Total Preinvestment Studies Agticulture 184 158 342 Hydrocarbons 1,003 512 1,515 Power 7,028 2,859 9,887 Transport 1,304 1,688 2,992 Urban 588 733 1,361 Subtotal 10,107 5,990 16,097 Institutional Development Assistance UNDP/IBRr Technical Assistance 1.216 - 1,216 Municipal Development 220 - 220 Subtotal 1,436 - 1,436 Consultirg Industry Development Consulting Registry 11 - 11 Assistance to Consulting Industry 31 - 31 Subtotal 42 - 42 TOTAL 11,585 5,990 17,575 A more detailed breakdown is in the table enclosed as Annex 1.  4.2 Actual costs were very much in line with appraisal estimates, which is normal because the Preinvestment Studies component was essentially a line of credit. A comparison is in Table 2. Table 2. Appraisal estimate and actual costs (US$ ' 000) Appraisal Estimate Actual Costs Foreign Local Total Foreign Local Total Prolnvestment Studies 10,280 5,820 16,100 10,107 6,990 18,907 Institutional Development Assistance 1,200 270 1,470 1,436 - 1,436 Consulting Industry Devt. Assistance 120 80 800 42 _ 42 TOThL 11,600 6,170 17.770 11.685 5.990 17.675 The cost of the Consulting Industry Development Assistance was lower than estimated at appraisal but a substantial contribution to this item came from the Institutional Development Assistance component through the work of one of the expatriate experts who led the preparation of the Consulting Industry Study. 4.3 Actual disbursements are shown in Table 3. The President's Report estimated that disbursements would take place over a four-year period, but gave no year-by-year breakdown. Table 3. Cumulative disbursements (US$ million) FY79 FY80 FY81 FY82 FY83 FY84 FY85 FY86 Appr. Estimate n.a. n.a. n.a. 11.0 11.0 11.0 11.0 11.0 Actual 0.2 0.2 0.5 4.5 7.6 10.2 10.5 11.0 Disbursements were extremely slow at the beginning, reflecting the initial difficulties in project implementation. They reached only $0.5 million after three years and were only at 40Z at the time originally envisaged for project completion. Disbursements accelerated thereafter, and the full amount was finally disbursed, but with a delay of more than three years after the closing date envisaged during appraisal. 4.4 A financial covenant in the Loan Agreement requested that FONAPRE have its accounts audited by the Contraloria General de la Nacion or by other independent auditors acceptable to the Bank. Audit reports for the years up to and including 1984 were received by the Bank -- with some delays -- and found satisfactory. In 1986, the responsibility for auditing the FONAPRE accounts was transferred to the Superintendencia de Bancos. This transfer has caused delays in the preparation of the Audit Report for 1985 (the last calendar year during which Loan disbursements took place). It is expected that the 1985 Audit Report will be completed in 1988.  -6- V. INSTITUTIONAL PERFORMANCE 5.1 One of the mai.. objectives of the project was the institutional development of FONAPRE. A brief description of the present structure and operations of FONAPRE follows. 5.2 FONAPRE operates under the supervision of a Board of Directors chaired by the Vice-President of the Republic and composed of representatives of the Ministry of Finance. the National Security Council, CONADE and the Association of Consulting Firms of Ecuador. Its principal functions remain the same as described in Chapter II above, i.th the addition of the development and updating of the Registry of Consulting Firms, which is a newly added responsibility. FONAPRE's loans cover up to 902 of the cost of the studies financed. Interest charged is 80? of the prime rate at the time of loan approval. 5.3 At the end of 1987 FONAPRE had a professional staff of 41, including 18 engineers and architects, 15 economists and sociologists, 4 lawyers and 4 business administration professionals. The operating department is divided into four units (each headed by a deputy director) which are in charge of infrastructure development, agriculture and the private sector. In 1986, FONAPRE received 69 applications for studies, started 34 new contracts and completed 17 studies. The largest concentration of new contracts is for urban studies (14) followed by fisheries (6). The latter cover studies and technical assistance for the shrimp industry which are of special interest to the private sector. 5.4 An interesting feature of the present work program of FONAPRE is the heavy emphasis on urban and water supply activities. This is a comparatively recent development. While in the years 1975-83 the urban studies were 20? of the total in number, in the years 1984-86 the percentage increased to 342. This is a very positive development, which was actively encouraged by the Bank during the supervision of Loan 006. This trend is likely to continue as the large sectoral agencies (such as INECEL) show a decreasing need for FONAPRE's services while a multitude of medium and small projects in the municipal development field will require an increasing amount of planning and coordination efforts. 5.5 The shift towards a larger number of smaller studies will also require a strengthening of FONAPRE's evaluation capabilities, particularly in the field of economic e.nalysis, because the typical client will be a smaller, less sophisticated institution than the large agencies served in the past. Economic analysis has been a weakness of FONAPRE since the completion of the institutional development assistance component. The present management team intends to address this problem through a combination of hiring and training. Progress on this should be watched -- and perhaps further assistance should be considered -- if FONAPRE will be associated with Bank projects in the future. Prospects of improvement are good, based on the fact that on the technical, financial and administrative side FONAPRE has developed the staff skills and expertise that are necessary to perform its functions successfully.  5.6 On balance, the close association of FONAPRE with the Bank which resulted from the project activities seems to have given useful results. Although some weaknesses remain (see above) FONAPRE is well on its way to becoming a well-structured, mature institution. As a part of its central role in Ecuador's development planning structure, it can act as a useful counterpart for the Bank, particularly in the urban and water sector-. VI. IMPACT 6.1 The impact of the preinvestment studies carried out under the project wab reviewed jointly by Bank staff and FONAPRE in December, 1987. Results are summarized in Table 4 below. Table 4. Impact oL )reinvestment studies Was there Overall follow-up? Impact Agriculture Cocoa Rehabilitation yes ++ Banco de Cooperativas Credit Line no 0 Hydrocarbons !' Hydrocarbons Reserves yes ++ Petrochemical Complex no + Power Hydroelectric Resources Inventory yes ++ Power Master Plan yes ++ Paute-Mazar Dam "Feasibility) yes + Paute-Mazar Dam (Final Design) no + Medium-size Power Plants yes + Transportation Azusy Rural Roads yes ++ Guayaquil Port Dredging yes + Urban Guayaquil Sites-services no 0 Guayaquil Urban Planning yes + Guayaquil River Transport yes + ++ Full success and major impact + Satisfactory O No substantive impact 'Follow-up" means either project implementation or further studies. 6.2 Five studies stand out as particularly successful. The Cocoa Rehabilitation feasibility study aimed at preparing a national plan for the rehabilitaLion and renovation of cocoa plantations (including the introduction of disease-resistant varieties, modernization of input and cultivation techniques and improvements to the marketing system). The study was completed in 1983 and resuiced in the beginning of the first phase of a naticnal Cocoa Rehabilitation program which is very promising.  - 8 - 6.3 The Hydrocarbon Reserves study was carried out at a crucial time. when the Ecuadorian Government needed an independent evaluation of the country's petroleum reserves to establish its policies regarding concessions and rates of exploitation. The study contributed to the formulation of policies and helped establish a fruitful relationship between CEPE (Corporacion Estatal Petrolera Ecuatoriana) and the Bank, which has resulted in subsequent projects. 6.4 The Hydroelectric Resources Inventory and the Power Master Plan were carried out to assist INECEL (Instituto Ecuatoriano de Electrificacion) in planning a major expansion of tne Ecuadorian power system. The studies were successfully completed and constitute the basis for the planning of the system (including the substitution of thermal with hydroelectric generation). The plan is being used a'. present and is being updated, particularly in view of the changes in demand forecast. On balance these studiet had a major impact on the power sector and were a full success. 6.5 The Azuay Rural Roads study was completed. A usable construction program based on this study is under implementation. The study also contributed to strengthening the planning and implementation capabilities of the Provincial Council of Azuay which is the executing agency for the project. The study also had a useful demonstration effect for similar pro_ects in other parts of the country. 6.6 Two studies failed. The Banco de Cooperativas Credit Line was abandoned with only one sub-project (which accounts for the cost incurred) completed. The intention was to put together a pilot scheme to finance studies for small projects in rural areas. However, financial conditions were not competitive with alternatives offered by other institutions, and the project was discontinued. 6.7 The Guayaquil Sites and Services study started with the ambitious objectiv- of providing a model for the provision of services to the inhabitants of the Guayaquil slums (which were and are in disastrous condition). The study was technically completed but an invasion of the site took place and the project was not implemented. 6.8 The remaining studies were completed and at the time of the review had achieved or were on their way to achieving their objectives in a satisfactory way. As usual with preinvestment activities, some studies played a useful role even if the projects reviewed were not implemented. For example, the Petrochemical Complex study was an attempt to take advantage of an earlier intention to assign to Ecuador the production, within the Andean Pact Market, of certain petrochemical products (ethylene oxide, ethylene glicol, ethylamines, etc.). The study was completed but production of petrochemicals -- also in the light of the evolution of international prices -- was not found economically feasible and the project was abandoned. 6.9 The impact of the Institutional Assistance Component, which can be measured in terms of the extent to which FONAPRE is performing its institutional objectives, is discussed in Chapter V above. This component included (see Table enclosed as Annex 1) a pilot scheme for Municipal Development. Diagnostic studies on the organization and provision of  services in five medium-sized municipalities were carried out. Interventions based on the studies were implemented with promisinp results. This scheme had useful demonstration effects and constitutes the basis for the expansion of FONAPRE's activities in municipal development. 6.10 The Consulting Industry Assistance Component resulted in the preparation of a comprehensive study and the drafting of a new law which restructures the legal and administrative framework for consulting activities (see Chapter III above). Thus, the impact has been substantial. Time will tell whether the profession will respond positively to the new regulatory system. VII. BANK PERFORMANCE 7.1 On the basis of the successful implementation of the project and of its overall positive impact, one can conclude that the Bank's analysis and interpretation of the constraints affecting investment planning and project preparation in Ecuador at the time of appraisal was correct. Subsequent events, including the initial difficulties and delays in project implementation, confirm the validity of the approach used. On balance, results suggest that thee size and structure of the project -- although complex and rather ambitious given the prevailing circumstances -- were appropriate. 7.2 While appraisal costs in terms of Bank staff time were modest, supervision has been costly. In addition to the time spent by the project officer, substantial contributions were made by sector experts. The high supervision input was associated with the transfer of expertise through comments cn terms of reference, consultant selection, contract preparation, revision of studies, etc., which required the involvement of specialized staff and coordination within the Bank. Given the multisectoral nature of the project, it was not deemed appropriate to assign the supervision responsibility to a project division, and the coordination work was handled directly by the LAC Projects Department front office. 7.3 Working relationships have been good throughout project preparation and implementation. The decision to do the coordination in the LAC Projects Department front office proved effective. Both FONAPRE and UNDP officers have expressed appreciation for the extent and the quality of Bank cooperation. 7.4 In conclusion, the Bank's contribution to the overall success of the project was critical. However, the cost in terms of management and specialized staff input was high. This confirms the validity of the approach used in the LAC Region in recent years, i.e. that technical assistance in the preinvestment field would normally be associated with project and sector lending, and that multisectoral technical assistance to preinvestment funds should be given only in exceptional cases, like the present one. An informal division of work with the Inter American Development Bank (IDB) has also taken place. IDB is very active in financing preinvestment funds (including FONAPRE) and has been able to allocate low-interest resources from its Fund for Special Operations for  - 10 - this purpose. As a result, while five preinvestment fund loans/credits were made by the Bank between 1974 and 1980, no such lending has taken place in recent years. VIII. CONCLUSIONS 8.1 This was an ambitious project. It was weli conceived, but it was overoptimistic in assessing the constraints of institutional nature and in estimating the time needed for execution. Implementation was difficult, with long initial delays that resulted in the postponement of several activities. The closing date was delayed by more than three years. 8.2 Apart from the underestimation of the initial difficulties, the analysis in the President's report and the general thrust of project activities proved to be correct. Several important project objectives have been met. Notable achievements were the completion of several major preinvestment studies, good progress in the institutional development of FONAPRE and the preparation of a new law on consulting activities. 8.3 Project supervision required an unusually large amount of Bank staff time for coordination. The overall experience of this project confirmed that technical assistance should normally be provided on a sectoral basis, and that complex multisectoral operations should be limited to exceptional cases when a sector-by-sector approach is not feasible and alternative sources of financing are not available.  ANNEX - 11 - ECUADOR SECOND TECHNICAL ASSISTANCE PROJECT (LOAN S-006-EC) FINAL COST DATA (USS '000) Foreign Local Total A. PREINVESTMENTS STUDIES Agriculture Cocoa Rehabilitation 147 141 288 Banco de Cooperativas Credit Line 37 17 54 Hydrocarbons Hydrocarbons Reserves 373 248 621 Petrochemical Complex 630 264 894 Power Hydroelectric Resources Inventory 975 325 1.300 Power Master Plan 651 254 905 Paute-Mazar Dam (Feasibility) 3,288 1,047 4,355 Paute-Mazar Dam (Final Design) 1,330 - 1,330 Medium-size Power Plants 784 1,233 2,017 Transportation Azuay Rural Roads 754 462 1,216 Guayaquil Port Dredging 550 1,226 1,776 Urban Guayaquil Sites and Services 568 439 1,007 Guayaquil River Transport 17 7 24 Guayaquil Urban Development 3 327 330 Subtotal 10,107 5,990 16,097 B. INSTITUTIONAL ASSISTANCE UNDP/IBRD Project a/ 1,216 - 1,216 Municipal Development 220 - 220 Subtotal 1,436 - 1,436 C. CONSULTING INDUSTRY DEVELOPMENT Consulting Register 11 - 11 Assistance to Consulting Industry 31 - 31 Subtotal 42 - 42 TOTAL 11,585 5,990 17,575 a/ Partial cost, excluding $1.280,000 financed under BID Loan 636-SF-EC