Zambia - Social Recovery Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 9471-ZA STAFF APPRAISAL REPORT ZAMBIA SOCIAL RECOVERY PROJECT MAY 21, 1991 Population and Human Resources Southern Africa Department .is 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 authorization.  CURRENCY AND EQUIVALENT UNITS Currency Unit = Zambian Kwacha (K) K/US$ (annual average) 1985 2.71 1986 7.30 1987 8.89 1988 8.22 1989 12.90 1990 4'.40 (end-December) FISCAL YEAR Government = January 1 - December 31 ABBREVIATIONS AND ACRONYMS AIDS Acquired Immune Deficiency Syndrome CSo Central Statistical Office DC District Council EC European Community ERC Economic Recovery Credit ICB International Competitive Bidding ILS International and Local Shopping LCB Local Competitive Bidding MGEYS Ministry of General Education, Youth and Sports MOF Ministry of Finance MOH Ministry of Health MPU Microprojects Unit NGO Non-governmental Organization PC Project Committee PIC Prices and Incomes Commission PPU Provincial Planning Unit PS Priority Survey SAE Social Action Program SSS Social Statistics Sub-committee UNDP United Nations Development Program UNESCO United Nations Education, Science and . lture Organization UNFPA United Nations Fund for Population Activities UNICEF United Nations Children Fund UTH University Teaching Hospital WGs Working Groups WHO World Health Organization  FOR OFFICIAL USE ONLY TABLE OF CONTENTS BASIC DATA . . . . . . . . . . . . . . . . i CREDIT AND PROJECT VPr4MARY . . . . . . . . . . . . . . . ii E3TIHATED COSTS, FINANCING PLAN AND IDA DISBURSEMENTS . . . . . . iii I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . .1 tA. Economic Background . .. ...... . . . . . .1. . . . B. The Economic Recovery Program . . . . . . . . . . . . . . 2 C. The Social Action Program . . . . . . . . . . . . . . . 3 II. THE SOCIAL SECTORS . . . . . . . . . . . . . . . . . . . . . . 6 A. Education .... . . . . . . . . . . . . . . . . . . .6 B. Health . . . . . . . . . . . . . . . . . . . . . . . . . 8 C. Nutrition and Food Security . . . . . . . . . . . . . . . 10 D. Donor and World Bank Experience . . . . . . . . . . . . . 13 III. THE PROPOSED PROJECT .... . . . . . . . . . . . . . . . . 16 A. Objectives and Summary Description . . . . . . . . . . . 16 B. Detailed Project Description . . . . . . . . . . . . . . 16 IV. COSTS, FINANCING, MANAGEMENT . . . . . . . . . . . . . . . . . 25 A. Project Cost . . . . . . . . . . . . . . . . . . . . . . 25 B. Financing Plan .... . . . . . . . . . . . . . . . . . 25 C. Project Implementation . . . . . . . . . . . . . . . . . 26 D. Procurement .... . . . . . . . . . . . . . . . . . . . 28 E. Disbtursement .... . . . . . . . . . . . . . . . . . . 31 F. Accounting, Auditing and Reporting . . . . . . . . . . . 33 V. BENEFITSANDRISKS ..35 A. Benefits .35 B. Risks .35 VI. RECOMMENDATIONQ AND ASSURANCES .36 This report Is based on the findings of three missions to Zambia In September 1990 (identification), November 1990 (pro-appraisal) and February-March 1991 (appraisal). The appraisal team included Messrs/Mmes. Steen L. Jorgensen (mission leader, economist), Mary Barton (consultant, economist), Robert Chase (consultant, economist), Lawrence Salmen (sociologist), lb Thomsen (consultant, statistician) and BJorn Wold (consultant, statistician). Othor mission members included Messrs/Mmes Ruth Kagia (educator), Rae Galloway (nutritionist), Barry Riley (food security specialist), Susan Ulbaok (economist), and Pelad Namfus (consultant, statistician). Peer reviewers includo: Messrs/Mimes. Eugene Boostrom, Margaret Grosh, Jean-Louis Lamboray, Alexandr- Mare, Judith McGuire, Caroline Moser and Aubrey Williams. Ms. Dora Hollister provided secretarial support in the preparation of the report. Mr. D. de Ferranti and Mr. S. Denning are the managing Division Chief and Department Director, respectively, for the operation. 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 authorization.  ANNEXs I. DETAILS OF INSTITUTIONAL SUPPORT . . . . . . . . . . . . . . . 38 II. LIST OF EC-FUNDED MICRO-PROJECTS . . . . . . . . . . . . . . . 34 III. SUB-PROJECT CATEGORIES . . . . . . . . . . . . . . . . . . .. 49 IV. APPLICATION FORM . . . . . . . . . . . . . . . . . 52 V. BENEFICIARY ASSESSENT . . . . . . . . . . . . . . .... . 63 VI. BUDGET FOR ANALYSIS AND MONITORING . . . . . . . . . . . . . . 64 VII. SUPERVISION SCHEDULE . . . . . . . . . . . . . . . . . . . . . 67 VIII. DOCU1ENTS AVAILABLE IN THE PRtOJECT FILE . . . . . . . . . . . 70 LIST OF TABLES Table 4.1: Summary Project Costs . . . . . . . . . . . . . . . . . 25 Table 4.2: Project Financing . . . ............ .. 26 Table 4.3: Financing Plan for Analysis and Monitoring Program . . . 27 Table 4.4: Procurement Arrangements . .. . . . 30 Table 4.5: Allocation and Disbursement of IDA Credit. . . . 32 Table 4.6: Disbursement Profile . . . . . . . . . . . . . . . . . 32 LIST OF FIGURES Figure 3.1: Distribution of Funds . . . . . . . . . . . . . . . . . 17 Map No. 11542R  BASIC DATA"1 GNP per capita US$290 Total population 7.6 mlllion Average annual population growth rate (1980-1988) 3.7 percent Life expectancy at birth 53 years Crude birth rate per 1,000 50 Crude death rate per 1,000 13 Population per physician (1984) 7,150 Population per nursing person (1984) 740 Infant mortality rate (per 1,600 live births) 78 Adult literacy 24 percent Sources World Development Report 1990 Unless otherwise indicated, figures refer to 1988  - ii - ZAMBIA: SOCIAL RECOVERY PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Zambia Beneficiary: Ministry of Finance Credit Amount: SDR 14.8 million Terms: Standard IDA Terms Project Description (a) Objectives: To fund community initiatives to help mitigate the negative effects on the poor of the economic crisis. To this end, the Project will support the rehaLilitation and improvement of existing infrastructure and service delivery through the Microprojects Unit in the Ministry of Finance. The Project will strengthern communities' ability to improve their situation through self-help. Further, the Project will improve the information base and provide analyses to enhance the Government's planning and policy making in the social sectors. (b) Components: (i) Community Initiatives. The Project will finance a series oi small, simple and locally-generated sub-projects in health, nutrition, education and economic infrastructure. To ensure the sub-proiects' sustainability and community involvement, communities will be required to contribute to sub-project cost in the form of labor, materials or cash. (ii) Institutional Support for the Micro-- 4ects Unit. (iii) Analysis and Monitoring. This includes support for national statistical surveys, a beneficiary assessment, and a studies fund that will finance a series of studies related to poverty and adjustment. (c) Justification and Risks The direct benefits of the proposed project will be the physical and human capital improvements generated by the sub-projects. The indirect benefits fall in three categories. First, this Project and other concerted donor support to the Social Action Program will help sustain Zambia's adjustment efforts. Second, as the Project supports local, self-help activities, it will help to promote decentralized initiatives and devolve responsibility for providing services and maintaining infrastructure from the central government to local agencias. The Monitoring Component will provide a means to collect information and conduct analyses that will inform the Government's efforts to design social policies. The main risk is that the Project could be hampered by the Govern- ment's limited implementation capacity. This risk will be minimized by encouraging simplicity in sub-project design, building on local and regional initiatives, and providing institu- tional support for the Microprojects Unit.  - iii - ESTIMATED COSTS, FINANCING PLAN AND IDA DISBURSEMENTS Estimated Costs (in million US$) X 2 of Local Foreign Total Foreign Total Community Initiatives 39.6 1.6 41.2 3.9? 88.8? Institutional Support 1.1 1.6 2.7 59.2Z 5.72 Analysis and Monitoring 1.1 0.8 1.9 41.9? 4.22 Total Base Costs 41.8 4.0 45.8 8.7? 98.7? Price Cnntingencies 0.1 0.1 0.2 54.5? 0.6? Physical Cuntingencies 0.2 0.2 0.4 48.3? 0.72 Total Project Cost 42.1 4.3 46.4 9.3? 100.0? Financing Plan (US$ million, including contingencies) Zambia IDA EC Norway Total --------------------------------------- Sub-projects 9.1 18.2 13.9 0 41.2 Institutional Support 0 1.8 1.1 0 2.9 Analysis and Monitoring 0 0 0 2.2 2.2 Total 9.1 20.0 15.0 2.2 46.4 Estimated Disbursement of IDA Credit (US$ million) IDA Fiscal Year FY92 FY93 FY94 FY95 FY96 FY97 Annual 2.1 3.3 4.4 4.6 4.2 1.4 Cumulative 2.1 5.4 9.8 14.4 18.6 20.0 Cumulative (2) 10.4? 26.8? 48.9? 72.0? 93.0? 100.O0 Project Completion Date: January 31, 1997  I. INTRODUCTION A. Economic Background 1.1 In the mid-1970s the vulnerability of the Zambian economy due to its heavy dependence on opper was vividly demonstrated. World copper prices fell sharply and continued to decline in real terms until 1987. The resulting deterioration in Zambia's terms of trade threw the economy into a deep recession from which it has yet to recover. A decline in copper production (from about 700,000 tons to less than 450,000 tons) during the same period exacerbated the effects of the worsening terms of trade. 1.2 During most of the 1970s and early 1980s, the aim of economic policy was to maintain consumption levels and living standards, despite declining copper earnings. Subsidies were increased, fiscal deficits grew and, after foreign loans dried up, domestic credit expanded. The nominal exchange rate was kept fixed and price controls were tightened in an effort to contain the accelerating inflation. The resulting price distortions contributed to a severe misallocation of resources, an increased import intensity of production, and further discouragement of non-traditional exports. Agr4culture, the sector believed to have the greatest growth and export potential, and where many of the poor are economic actors, stagnated due to a lack of incentives caused by price distortions, (especially on maize). The result was a fall of 50 percent in GNP per capita during the 1980s. 1.3 In the past decade the Government tried several times to restructure the economy. None of efforts were sufficiently comprehensive to bring about the structural changes required in the economy. Probably the most ambitious was the Bank/Fund-supported program in 1985-87, which the Gove-nment abandoned in May 1987 on the grounds that it generated excessive 3conomic and political instability, and social unrest. 1.4 This program was replaced by the Government's own adjustment program, which did not bring about the needed stability, growth and structural change. Public rector expenditures were not adjusted to coincide with fiscal reality. Instead, the Government maintained high public wage payments and subsidies to the detriment of maintenance and investment needs. Because much of the country's infrastructure (including health and education facilities) was planned when copper prices were high, the over-ambitious design of many facilities required high maintenance outlays. With budget allocations to maintenance and investment falling, infrastructure became seriously dilapidated. During the high-expenditure years, communities developed a dependency on central government interventions, and government hand-outs undermined the Zambians' spirit of self-help and self-reliance. 1.5 The economy became increasinSly unstable between 1987 and 1989. Inflation rose from about 35 percent in 1986 to 64 percent in 1988, and then surged to 154 percent in 1989. For the most part, this acceleration in inflation took place during a period of stringent price  - 2 - controls, and fixed :xchange and interest rates."2 Economic activity was increasingly being shifted to the parallel market in the 1987-89 period, and therefore out of government control: the smuggling of goods to neighboring countries, including essential and subsidized consumer items, became rampant. There were almost constant shortages of essential goods on the local market, including vegetable oil, detergents and maize meal (even following good harvests). B. The Economic Recovery Program 1.6 Zambia resumed its policy dialogue with the World Bank and UL. Fund in late 1988. Since then, the Government has taken several actions to stabilize the economy, begin the restructuring process, and put the country back on a growth path. To slow money supply growth, the Government raised interest rates and reserve requirements. To lessen the burden of paying subsidies and decrease the budget deficit, the constumner price of maize meal was tripled. A coupon scheme was introduced so that the maize meal subsidy will be targeted to assist vulnerable groups. There was also a 25 percent devaluation of the Kwacha at the time. Subsequently, the Government reached agreement with tl"e Bank and Fund on a Policy Framework Paper. In addition, an annual Fund-monitored program for 1990 was approved by the Fund Steering CoG.-ittee in March 1990. 1.7 The medium-term strategy expressed in the most recent Policy Framework Paper3/ aims at diversifying the economy away from copper, reducing the high capital and import intensity of production and consumption, improving economic efficiency, increasing savings and investment rates to restore economic growth, and improving social services. In the short-term, the emphasis is on establishing a more stable macroeconomic environment. The high and accelerating rate of inflation that has prevailed since 1989 must be brought under control. The Government must build political support to carry out the intended policy reforms, particularly those involving the removal of long- standing economic subsidies. 1.8 For the period 1989-93 the main macroeconomic targets includes (a) achieving an average annual real GDP growth of at least 3.5 percent, with positive real per capita GDP growth in the later years; (b) reducing progressively the rate of inflatior. from 154 percent in 1989 to 15 percent or less in 1993; and (c) increasing non- traditional exports by at least 10 percent per year in real terms. Given the low starting point, the latter should not be too difficult to achieve and is essential if the economy is to build an export base to replace copper by the end of the decade. V Part of the 1989 inflation reflects the price decontrol, currency depreciation and (partial) removal of subsidies in the second half of that year. S l"Zambia: Policy Framework Paper, 1991-1993", IBRD, SecM91-l51, February 7, 1991  1.9 The strategy for achieving macroeconomic stability entails a substantial reduction of the fiscal deficit, mainly through an expansion of revenxue axnd a rationalization of expenditures. Priorities will be shifte6 toward social services, and operations and maintenance. The reduced reliance on inflationary Government financing is to be accompanied by a more stringent monetary policy. In addition, the liberalizatior: and more effective use of imports under the program should allow increased supplies on the domestic market, which should help to suppress inflation. 1.10 To raise economic efficiency, tht Government intends to place increased emphasis on market-determined pricing for allocating resources and expanding the role of the private sector. The liberalization of prices is expected to benefit primarily the agricultural sector. In addition, the adoption of positive real interest rates should induce the use of more labor-intensive production techniques, thereby increasing efficiency. 1.11 Public sector activities will be redirected to such areas as infrastructure and human resources that are complementary to the private sector. Within this framework, particular attention is to be given to improving the efficiency of public spending. To achieve more efficient and development-oriented public spending, the Government will emphasize maintenance and rehabilitation of infrastructure, as opposed to new projects, and will provide increased allocations to agriculture, health, and education. C. The Social Action Prc&ram 1.12 The economic decline of the past 15 years has resulted in a significant deterioration of living standards, particularly among the poorest segments of society. In addition, some vulnerable groups may be adversely affected in the short run by elements of the economic recovery program, notably the decontrol of prices of essential commodities such as maize meal, and the containment of fiscal outlays during the transitional period. 1.13 To address the problems that the poor face and cushion the impact of the economic adjustment program, the Government has launched a SAP for 1990-93 as an integral part of its overall adjustment strategy. The SAP aims to improve the availability of social services and employment opportunities for the poor in the short run and to begin initiatives in policy analysis and reform that will allow better service delivery in the long run. There is a strong emphasis on rehabilitation and repair of basic infrastructure, which has become seriously dilapidated due to lack of maintenance. The SAP encompasses: education; health; women in development; water supply, sanitation and other public utilities; small-scale industries and employment generation; and infrastructure. SAP activities range from simple, immediate impact projects to complex, structural changes in sector policy, planning and operations.  - 4 - 1.14 The SAP is a framework for action. The basic SAP document (available in Project Files) lays out the issues to be addressed in each sector, but leaves open the detailed design of programs and projects, and also implementation issues. A process is presently underway to transform SAP priorities into operational mandates. To coordir - the various institutions involved in the SAP, the Government has estaolished a steering committee for the SAP with representatives from line ministries, the National Commission for Development Planning, donors and non-governmental organizations (NGOs). The Government has also formed a series of Working Groups (WGs), one for each sector. The WGs: (a) consider priority areas for SAP activities, (b) coordinate funding in support of these prioritie- and (c) monitor and evaluate implementation progress of SAP activities. The Government has also established the position of "SAP Coordinator," responsible for keeping the SAP process moving. Financed by the European Community (EC), the SAP Coordinator has been in place since January 1991. In yearly progress reports, the Government will demonstrate to IDA that the SAP process is bringing donors, NGOs and Government ministries together to design, implement ard monitor social sector operations (para. 6.1(e)). 1.15 The activities of the SAP can be divided into three main areas: policies to improve the small-scale business environment and increase budget support for the social sectors; - longer term social development activities; and - short-term, immediate impact activities. 1.16 Policies to improve the business environment and increase budget support: As part of the recently approved Economic Recovery Credit (ERC) agreements, the Government will remove administrative obstacles to the establishment and functioning of private businesses. These policy improvements will enhance the contribution that small-scale entrepreneurs can make to generating income and employment. Another macroecornomic policy measure is the Government's commitment to increase real budget allocations for health and education as part of the general macroeconomic recovery program. The ERC includes agreements on the size and composition of such increased budget allocations. In addition, this Project includes dated covenants for real budget increases for non- personal recurrent costs in health and education (para. 6.1(d)). 1.17 Longer term social development activities: These activities generally fall under ongoing, donor-supported Government programs. The WGs are designed to promote dialogue on these issues, including reallocation and adjustment of existing programs. Such changes sho..ld help to improve the programs' impact on vulnerable groups. In the future IDA intends to begin discussions of its contribution to longer term activities in health, nutrition and education (Chapter II). Such rctivities could include sector policy lending that will assist the Government in addressing longer term issues.  5 - 1.18 Immediate impact activitiess The main emphasis in the SAP is on quick action. Several constraints make it difficult for traditional projects to provide imm.ediate responses to pressing social sector problems. There is a dearth of poverty-focused data and analysis in Zambia; n-' government or donor initiatives have produced sufficient data for clear targeting. Because it is not clear who will be affected by specific policy changes and how they will be affected, it is correspondingly diificult to focus traditional IDA interventions on the most vulnerable groups. Further, the economic crisis has decimated many str'tztures and systems that will otherwise provide social services and employment opportunities for these vulnerable groups. The traditional public sector entities' capacity is stretched to the limit with the implementation of the necessary reforms and with the daily operations of facilities and i:stitutions. 1.19 Because Zambia faces these constraints, the Government wishes to rely on local communities to identify, design and implement immediate impact actions under the SAP. To facilitate such actions, the Government has asked IDA to support a series of local initiatives under the SAP umbrella to be administered by the Microprojects Unit (HPU) in the Ministry of Finance (MOF) (Chapter III).  - 6 - II. THE SOCIAL SECTORS 2.1 This chapter ,rovides a brief overview of the situation in the social sectors4' in Zambia and describes Bank and other donor experiences in these sectors. Each section briefly describes the issues in each sector and identifies possible IDA interventions to address such issues. The primary issue that cuts across sectors is the lack of sufficient maintenance resulting in seriously dilapidated infrastructure. Further, there has been insufficient expansion in infrastructure to keep pace with the rapid population growth. Thus, the first priority is rehabilitation and expansion of infrastructure. To ensure that needs are expressed and addressed at community levels and to begin reorienting communities toward greater involvement, the Government wishes to emphasize community-based projects in addressing this priority. 2.2 Other common issues include: (a) weak donor-goverinment and donor-donor coordination, (b) weak links between the Government and NGOs, and (c) the need to ensure sufficient budget allocations. The coordination issues are being dealt with in the context of the SAP (para. 1.13) and progress will be monitored under this Project (para. 6.1(f)). Reasonable budget allocations to health and education are a condition under the recently approved ERC, and progress will be monitored under this Project (para. 6.1(e)). 2.3 The Chapter also assesses the Bank Group's experience in the social sectors in Zambia and in similar projects in other countries. Finally, an assessment is made of the experience of the EC-supported Microprojects Programme, on which this project is based. A. Education 2.4 During the 1980s, the progress made in the previous decades has been largely reversed. Schools are in dire need of rehabilitation after years of no maintenance. Construction and provision of materials have not kept up with enrollments, resulting in over-crowded and under- equipped classrooms. As a result, primary school class sizes are over 75 students in rural areas and 120 in urban areas. Even with such large class sizes, 30 percent of the seven year olds in urban areas cannot enter school becaust of lack of classrooms. Textbook supplies are so limited that the best supplied schools have only one book for every six students. 2.5 Responsibility for r-oviding education at all levels lies mainly with the Government, although historically communities have contributed substantially in the construction of nrimary level infrastructure. Formal educrtion is the responsibility of three The social sectors are defined here as health (including water and sanitation), education, and nutrition and food security.  - 7 - ministries: the Ministry of General Education, Youth and Sports (MGEYS) that handles pre-primary, primary, secondary, special education, continuing education and education broadcasting; the Ministry of Higher Education, Science and Technology that handles technical and vocational, university, and teacher education, as well as examinations, curriculum development and school book publishing; and the Ministry of Labor, Social Development and Culture that handles non-formal education including adult education. 2.6 The share of the public budget allocated for education declined from a high of 37 percent in 1978, to 16 percent in 1986, and to 8 percent in 1989. Petween 1974 and 1984, expenditures per student fell by 39 percent at the primary level, 51 percent at the secondary level, and 20.5 percent at the university level in real terms. As a dated covenant the Government will assure IDA that allocations to non- personnel recurrent cost allocations to education will increase in real terms in each budget beginning with the 1992 budget (pPra. 6.2(d)). 2.7 The severe cutbacks on educational expenditure have been somewhat mitigated by external support to the sector. Further, citizens have taken an increasingly large role in supporting education. Parental contributions are at least K160 per child per year of primary education and K400 per child per year of secondary education. Communities contribute initiative and labor to build primary school buildings51 and (though it does not result from declared Government policy) they buy most of the learning inputs. At the secondary school level parents pay fees, while at the university a cost recovery program has recently been introduced. 2.8 In schools where textbooks and furniture are available, these materials have been provided largely through donor support. In 1988 development assistance to education amounted to US$10.7 million. Donors include Canada, Finland, Japan, Norway, Sweden, the United Kingdom, the African Development Bank, UNICEF, UNDP and UNESCO. A major problem with donor support to education is poor coordination which sometimes leads to conflicting strategies and a rather fragmented perception of the needs of the sector. The WG for education established under the SAP will play an important role in donor-government coordination. 2.9 The higni population growth rate generates a rapidly increasing demand for classrooms. To maintain enrollments at par with the population growth rate, it is necessary to construct at least 550 new primary classrooms and 40 new junior secondary schools per year. For the last five years, only about 25 percent of these targets have been met. 2.10 Because of the drastic decrease in education resources available, the education budget has been almost completely absorbed by payments for teachers' salaries and other personnel emoluments. These now account for 91 percent of the priniary school recurrent budget and 63 Mainly in rural areas.  - 8 - percent of the secondary school recurrent budget. Thus, expenditures on learning materials have fallen to about K7 (US$0.16) per student. This shortage is one of the greatest problems facing Zambia's education system. Though it reflects actual resource constraints, the shortage is exacerbated by a weak local printing capacity and a poor distribution system. Appropriate books are not available even if schools were willing to pay for them. Several donor supported programs are underway to help alleviate this problem. Government Strategy 2.11 Government priorities for education are: (a) reversing the trends in access and qu-ality of education; (b) shifting educational expenditures in favo: 't primary education; (c) strengthening literacy programs and other n- Formal education programs; (d) rehabilitating existing infrastruct .ather than constructing new facilities; (e) increasing recurr.- .4',et allocations for learning inputs; (f) extending user c}. .- xr' education especially at the higher levels; and (g) encouraging pl .ra ism in the provision of education. IDA Response 2.12 With the recent resumption of World Bank lending to Zambia, it is proposed that the IDA contribution to the education sector consist of support for both immediate, emergency activities and longer term structural revisions. In the short term, IDA support to education will flow through the MPU to simple, community-based sub-projects serving education. Such activities will help rebuild the tradition of self- help. The community initiatives will serve as pilot activities that will help to forge and strengthen links between the Government ministries responsible for education and communities taking the initiative to improve their education. In the longer term, the Government has asked IDA's assistance in developing a policy-based credit that will address structural and policy issues such as those mentioned above. The investment package included in such a possible future project will benefit from insight provided by the community-based projects that this Project proposes to finance. B. Health 2.13 Health services are barely functioning. Lack of adequate supplies and maintenance have severely reduced the effectiveness of the health system. While health problems are worsening, motivation among health workers is deteriorating mainly due to poor working conditions and insufficient pay. Childhood diseases are rampant and there are periodic epidemics of cholera and other water-borne diseases. Currently, about 40 percent of the population has access to safe water and about 30 percent to adequate sanitation. These average figures mask the much lower sanitation conditions in rural areas and small townships. In a sample survey of diarrheal illnesses in 1986, 45 percent of households reported a case of diarrhea in the last two weeks.  - 9 - 2.14 Epidemic diseases are another crucial factor in Zambia's health situation. A major concern is the rising number of cases of AIDS, its attendant complications such as tuberculosis, and its debilitating general social and economic impact. HIV sero-positive cases presently account for about 30 percent of admissions to medical wards and over 40 percent of the cases seen at the University Teaching Hospital (UTH). Malaria appears to be on the increase as other diseases have been targeted for treatment and prevention. There is room for optimism in some areas as the Ministry of Health (MOH) reports an increasing coverage in immunizations and the disappearance of tetanus. 2.15 The MOH has responsibility for coordinating health sector activities. Unfortunately, it is over-burdened and over-centralized. Duplication of responsibilities in its senior ranks and loss of junior staff aggravate these problems. As a result, its planning, budgeting, and disbursement activities are often weak. Private and parastatal institutions, particularly the state mining company, are involved in providing health services. A series of NGOs provide health services, the principal one being the Church Medical Association of Zambia, which handles about 50 percent of rural primary health care. Private medical practice is limited to large urban centers such as Lusaka, Kitwe, and Ndola. Government Strategy 2.16 In 1987, one quarter of Zambia's health expenditures was financed by donors, although that figure has decreased since then. The donors involved include the Governments of Sweden, the Netherlands, Norway, United Kingdom, Ireland, Japan, USA and Finland, and the multilateral agencies involved are the EC, WHO, UNICEF, UNFPA, and UNDP. With so many donors active in the sector, the Government needs to play a more decisive role in coordinating their efforts. This effort has begun under the aegis of the SAP where donors have appointed a lead agency to work with the Government in the WG for health. 2.17 Some health sector problems are linked to the lack of a carefully designed and implemented health policy. Such a policy will define the exact roles, responsibilities and resource needs for each step in the referral chain. It will thereby set priorities for investment and other expenditures. A comprehensive policy should addrese the activities of parastatal and private companies, churches, NGOs and private practitioners, to ensure that all health institutions act in concert with one another. One hindrance to forming this policy is the lack of up-to-date, reliable epidemiological and statistical information: neither has been updated since 1986. Such policy formulation is under discussion with the Government. 2.18 In the recent budget, the Government decreased the recurrent departmental budget for health by 20 percent in real terms and increased capital expenditures by 82 percent compared to the 1990 budget. A reversal of the trend in recurrent expenditures is a dated covenant under the Project (para. 6.1(e)). To help finance health services, the Government has stated its intention to institute user fees. It introduced fees for non-essential services in 1988, and fees for  - 10 - registration, expatriates, government hospitals, and 20 percent of UTH beds in 1989. The introduction of user fees is a key feature of the Government strategy as laid out in its Policy Framework Paper. IDA Response 2.19 IDA's contribution to the health sector will consist of support for both immediate, emergency activities and longer-term structural changes. In the short-term, IDA will support health activities through the MPU, financing simple, community-based sub- projects. The community initiatives will serve as pilot activities that will help to improve the links between the national, regional and local governments; NGOs; and communities. In the longer-term, the Covernment and IDA will develop a policy-based project that will address the underlying structural and policy issues in a sector-wide investment package. Such a project will benefit from insights gained under this Project. C. Nutrition and Food Security 2.20 Many Zambians, particularly women and small children, suffer from food insecurity resulting in high levels of chronic and acute malnutrition. In 1970-71, 38 percent of rural children 0-6 years of age were stunted.6 From data collected in a 1990 household survey, it appears that rates of stunting or chronic malnutrition have increased to 54 percent in rural children 6 to 60 months of age. These rates are nearly twice those of neighboring countries like Namibia (rural), Lesotho, Zimbabwe, and Rwanda. Illustrating widespread short-term malnutrition, the 1990 household survey found that 7.3 percent of children 6 to 60 months were below the reference mean for weight for height.' Protein-energy malnutrition is also probably high in women of reproductive age. 2.21 National prevalence rates for micronutrient deficiencies are not well-documented for the country, but deficiencies in iron, iodine, and vitamin A are likely. A study in Ndola found that 34 percent of pregnant women had anemia caused by iron deficiency and malaria. Pockets of goiter exist, and a recent survey of school children in Southern Province revealed high rates of goiter. Vitamin A deficiency also exists. It seems to be particularly high in the northern parts where it peaks in children at age three and a half years. 2.22 Causes. There are many reasons for food insecurity and high rates of malnutrition in Zambia. The inability of households to access income is one cause; this may be because of poor economic growth, inadequate employment opportunities, low worker productivity and low More than two standard deviations below the median height for age of the National Center for Health Statistics reference population Z/ Below 85Z of the mcdian of the National Center for Health Statistics reference population.  - 11 - average wages. However, inequitable intra-household allocation of food, poor feeding practices, and food taboos also contribute to food insecurity and malnutrition. Thus, it is possible for household incomes to increase and household food supplies to be sufficient while malnutrition exists. 2.23 Seasonal changes and geographical differences also intensify food insecurity. As a result, malnutrition can double between November and February during the land preparation/planting period prior to harvest. The country's emphasis on maize has decreased crop diversity and accentuated seasonality. The production of root crops such as cassava, sweet potatoes and yams, which can be harvested during the hungry season in January and February, has declined. In additior, post- harvest losses are high (estimated at 30-40 percent), discouraging on- farm storage to protect families during seasonal shortages. Great distances and poor transportation infrastructure also limit access to food and contribute to malnutrition. Northern, Luapula, Eastern and Western Provinces are most at risk for chronic malnutrition. Transport constraints in some areas, especially those far from the "line of rail," and inadequate food marketing systems adversely affect food availability in local communities. Food insecurity and malnutrition may also be caused by increased food needs during episodes of disease due to poor sanitation facilities and practices. Improving the nutritional status of families will, therefore, depend on an improved water and sanitation situation. Government Strategy 2.24 The Government's response to food insecurity and malnutrition has resulted in many policies and programs. The Government has traditionally addressed food security by focusing on the sufficiency of food production--principally of maize--at the national level. Therefore, the cornerstones of Zambia's food security strategy have been maximizing maize production (by subsidizing inputs and increasing maize producer prices around the country), maintaining large carry-over stocks to smooth inter-year production variations, and establishing the maize transfer scheme for the urban poor. More than 50 percent of the country's population now live in urban areas. Thus, rather than producing their own food, nearly 4 million people are members of households that must earn enough income to buy food in official or unofficial markets or must be provided food through transfer mechanisms. Urban people receive transfers in the form of food stamps or coupons, food-for-work or direct distribution. 2.25 Because of spiraling food costs, the lack of jobs and the size of the urban poor population, a major government food transfer scheme has existed for many years. It is now estimated to serve 2.5-3.0 million people by providing free rations of maize meal to urban households with monthly incomes of less than K20,500. This ration is presently estimated to cover about one-quarter of the household's monthly caloric requirement. While good data are lacking, based on informal surveys it appears that many urban families must subsist for many days of the month on one meal per day, even when the transfer scheme is considered. This meal, typically consisting largely of maize  - 12 - porridge, supplies significantly less than the needs estimated by the WHO for a physically active adult in the tropics. Further, even this minimal level of support is in danger, for though the food supplied in the households under the maize subsidy scheme covers only about one- quarter of caloric requirements, it is still enormously costly. The Government clearly does not have the financial resources to sustain an urban safety-net program of this magnitude over the long-term. 2.26 Although Zambia has been an active participant in regional food security discussions within the Southern Africa Development Coordination Conference framework, other Government activities in food security and nutrition suffer from lack of coordination, excessive research orientation, and under-financing. Public institutions includes the National Food and Nutrition Commission, a parastatal under the MOH; the Nutrition Unit in the MOH; the Home Economics Extension Service and Early Warning and Crop Forecasting Unit in the Ministry of Agriculture. Of these, only the Home Economics Extension Servi( has developed a community-based operational network to address household food security and nutritional needs; the others have remained tied to primarily data- gathering and research activities. 2.27 Several donors and NGOs are involved in food security and nutrition work. Food and Agriculture Organization-assisted work is now attempting to look at all that is being done in the relevant sectors to address food security problems. Sweden and UNICEF have been major donors for nutrition activities in the country. UNDP is planning a major community-based nutrition effort to be implemented by the Government and executed by an NGO. NGOs conduct various food security and nutrition-related activities such as promoting small gardens, food processing and preservation, cooking classes, teaching women how to feed their children and establishing daycare centers for working mothers. Several NGOs have been created to address malnutrition specifically, but little has been done to systematically assess program effectiveness of this and other NGO work. IDA Response 2.28 The first focus of IDA will be to help households and communities improve their food security and nutrition situation. This will be done through the MPU's funding of community-based activities. Such activities will include the rehabilitation of water and sanitation systems, feeder roads, market places; and support for nutrition training. This also will give the country programmatic experience that should be analyzed and assessed. Long-term strategies in nutrition need to be anticipated and prepared for while the MPU is operating if momentum from these activities is to be sustained. It is anticipated that long-term strategies will involve in-titution-building to help the Government and NGOs make the transition from collecting information to developing, implementing, monitoring, and evaluating community-based programs in food security and nutrition and setting nutrition policy based on operational experience. During this period, the National Food and Nutrition Commission, the Home Economics Extension Service, and the Nutrition Unit in MOH should identify the training needed to carry out these functions in the longer term. Based on their performance during  - 13 - this phase, the Government will have a better idea of whether these agencies need to be strengthened to meet the common goal of improving and lowering malnutrition rates in the country. D. Donor ai'd World Bank Experience EC's Microprojects Programme 2.29 For the past four years, the EC has financed a Microprojects Programme administered by the MPU in the MOF. Reporting to the Permanent Secretary for Economic Cooperation, the MPU evaluates and funds small projects that communities propose and implement. Particularly in the last two years, the MPU has successfully supported community initiatives that meet the poor's urgent needs. 2.30 The MPU operates a system to support small, simple projects that local communities and NGOs design and implement. In the most recent project approval cycle, the MPU received approximately 1,000 requests for funding of which it judged about 300 technically viable. The MPU approved funding for 175 microprojects distributed across all provinces with average MPU disbursements per project of US$30,000. Over a hundred different community groups and 21 NGOs81 are currently involved in the program. It is now disbursing a total of US$5.5 million in an 18 month period. 2.31 Launching the program's current phase, the MPU organized a promotion campaign aimed at encouraging communities to submit ideas to be funded. The MPU presented the program to parliament, district and provincial councils, international technical assistance programs, and networks of NGOs, volunteer services, and church missions. The program is demand driven. Local groups, which organize themselves into Project Committees (PCs), prepare a brief proposal describing how they will spend potential funding from the MPU. The PC is responsible for microproject implementation and must have a legal status sufficient to open a bank account in its name. Under the existing program, most of the groups involved in the program are local Parent Teacher Associations, NGOs, and church mission groups. 2.32 District Councils (DCs) and Provincial Planning Units (PPUs) review proposals to insure that the proposed microprojects will be in line with district and provincial priorities, will not duplicate existing activities, and will not entail unsustainable recurrent costs. Based on project quality, sectoral priorities, and ease of supervision, the MPU puts together a package of microprojects. It presents this package to the Microprojects Programme Steering Committee, which is chaired by the Permanent Secretary for Economic Cooperation in MOF and which consists of representatives from the MOH, MGEYS, the National Commission for Developmnent Planning, and the EC Delegate. In 1990, the The NGOs involved include both local institutions and local branches of international NGOs. A majority of the NGOs have a religious affiliation.  - 14 - committee approved most of the microprojects (approximately 150) at one meeting in June, so that it will complement the Government budget cycle. A supplementary package was prepared and approved in September. 2.33 Once projects have been approved, the MPU disburses funds directly to accounts that PCs have created exclusively for their microproject. The PCs then use these funds to purchase needed materials, the vast majority of which are local items such as cement, windows and doors. The MPU has established an innovative procurement process to obtain lower prices for widely-used materials. It has a contract for a large number of roofing sheets with a Zambian company that distributes throughout the country. To those microprojects needing roofing sheets, the MPU allocates vouchers that the PCs bring to local suppliers in exchange for roofing sheets. 2.34 PCs prepare monthly progress reports for the MPU. Once they have used up the initial 25 percent of project costs disbursed to their accounts, they must submit detailed financial justifications to receive further disbursements. Whenever possible, MPU staff visit project sites to verify implementation. Although current staff resources do not allow the MPU to make many site visits, those they have visited generally show good progress and effective resource use. 2.35 Lessons Learned. Given very limited staff--it employs three professionals--the MPU has been remarkably successful in supporting small-scale community initiatives. A mid-term review that the EC conducted in October 1990 was positive, although it did suggest some changes to make the program more effective. Namely, it recommended that the MPU: (a) use more refined eva'.uation criteria, particularly when evaluating more complex projects; (b) install a computer-based accounting system to help justity the PCs' use of funds more carefully before disbursing additional funds; and (c) improve procurement procedures to allow for more large supply contracts similar to that used for roofing sheets. Besides these EC recommendations, IDA's assessment is that the MPU will benefit from additional staff enabling it to visit communities more frequently during microproject identification, appraisal, and implementation. Given the current limited staff at the MPU, it has been possible for staff to make supervision site visits only once during implementation. Frequently this one site visit had to be assigned to staff from PPUs or NGOs in the area. The MPU has also not had an opportunity to monitor closely the impact of its projects. Bank Group Experience and Lessons Learned 2.36 Social projects in Zambia. The Bank Group has financed five projects in education. The first health project was under preparation in 1987 when the relationship between Zambia and the Bank broke down.  - 15 - The early education projects (in the 1970s) focussed on higher and middle level manpower training. Later, the focus was on adult education and training for health and agriculture. The fifth project was to have financed eight junior secondary schools and a maintenance program. This project was suspended along with other projects in 1987, and subsequently closed in 1988. Since the projects were conceived while copper prices were high, the standards followed for the infrastructure is high cost; for instance, a recent estimate for the completion of one school (45 percent completed) is US$5 million. 2.37 Similar proiects from other countries. In terms of the social dimensions of adjustment, several Project Completion Reports and Project Performance Audit Reports for adjustment lending discuss this topic. The consensus of the Reports is that the Bank ought to establish a presence in the social areas quickly to show our concern for social development and poverty alleviation during a structural adjustment program. This realization has encouraged several projects intended to help the poor while the adjustment process takes place. Several of these projects have taken the route of funding small-scale community- based sub-projects. The only such project for which an audit report exists is the Emergency Social Fund Project in Bolivia.9/ The assessment is positive, specifying the conditions that led to this success. Lessons learned, which have influenced the preparation of this Project, include: (a) the desirability of financing small, technologically simple projects with a substantial community involvement; (b) the involvement of both government agencies and NGOs in sub-project implementation; (c) the need to attract high caliber staff; and (d) the need to protect the program as far as possible from political interference. Key staff involved in the Bolivian project from both IDA and Bolivia have been involved in the preparation of this project, and reviewers have included staff with experience from similar projects. 2.38 Africa-wide Bank experience. The 1990 Annual Review of Implementation and Supervision generated several key recommendations for implementation of projects in the Africa Region. It recommended that projects: (a) be simple in design and fund technologically simple infrastructure; (b) use an existing unit within the Government structure for implementation; and (c) encourage a participatory process. These recommendations have been considered in the design of this Project. v Bolivia Emergency Social Fund Project (Credit No. 1829-BO), Project Performance Audit Report (Report no. 8449), March 20, 1990  - 16 - III. THE PROPOSED PROJECT A. Objectives and Summary Description 3.1 The main objective of the Project will be to finance community initiatives to help protect the poor during the structural adjustment program. To this end the Project will support the rehabil- itation and improvement of existing infrastructure and service delivery through the MPU. Through involvement of communities in the planning, design and implementation of sub-projects, the Project will strengthen communities and rekindle the spirit of self-help. Furthermore, the sub- projects will serve as pilot prujects allowing the Government, donors, NGOs and communities to test which interventions are most effective and equitable. The Project's Analysis and Monitoring Component will improve the information base and provide analyses to enhance the Government's planning and policy making in the social sectors. 3.2 The Project will support the MPU, which will fund a series of community initiatives on a grant basis. Sub-projects Rupported by the MPU will be small, simp'^ and locally-generated and will cover a variety of sectors including health, nutrition, education and economic infrastructure. To ensure the sub-projects' sustainability and community involvement, communities will be required to contribute to sub-project cost with labor, materials or cash. The sub-projects are expected to average around US$40,000 each (including community contributions). The maximum contribution from the MPU to any one sub- project is US$400,000 (equivalent to about US$520,000 total sub-project cost). 3.3 The Project will be administered by the existing MPU in the MOF. The MPU presently administers the EC's Microprojects Programme (para. 2.29). The EC-funded microprojects and the sub-projects financed under this project will be administered using the same procedures by the jointly financed unit. The proposed Project will approximately double the size of the present program. The Project will support the necessary expansion of the MPU through institutional strengthening. 3.4 Through funding and monitoring of sub-projects, the Project will generate information about existing social services in disparate communities and about the effectiveness and equity of various interventions. To analyze this experience and monitor progress under the Project and the SAP, support will be provided for a Monitoring and Analysis Component. This component, funded by the Government of Norway, will finance: (a) national statistical surveys; (b) a beneficiary assessment; and (c) a study fund, which will finance a series of small studies related to poverty, the SAP and the adjustment program. B. Detailed ProJect Description The Community Initiatives Component 3.5 Sub-Project Parameters and Sectoral Distribution. Sub- projects approved for funding by the MPU will be consistent with the Government's strategy as stated in the SAP. The Project will only support sub-projects that are small, simple and locally-generated. The  - 17 - sub-projects should meet some urgent need, and local PCs should be able to complete the sub-projects quickly, effectively and efficiently. 3.6 All sub-projects must have the following characteristics: (a) include a substantial community contribution; (b) be simple enough to be implemented without significant technical assistance from outside the community; and (c) serve beneficiaries that are be poor or belong to vulnerable groups. 3.7 The MPU will establish general programming guidelines by sector and by urban and rural areas. The goal will be to distribute sub-project funds about equally between urban and rural areas. The distribution of IDA funds among sectors will be as in Figure 3.1. These targets are indicative and will be monitored continuously. The MPU will make adjustments in its outreach activities or in its funding targets as the operations develop. For comparison, Figure 3.1 also shows the dis- tribution under the present EC funding." Figure 3.1: Distribution of Funds Distribution of Funds IDA Funds and EC 1990-91 Program 55% 38% XHeaithl and Nutrition - 25% 51% 3Economic Intrastruc. IDA Funds EC 1990-91 NOTE: Health Includes water and siknitatlon 3.8 Within health and nutrition the MPU will finance: ta) expansion, repair and a few new constructions of health posts, childcare centers and shelters; (b) community child care programs; (c) assistance in food production; (d) development of weaning foods; and (e) specific supplemental feeding schemes. As water-borne diseases are becoming increasingly serious and are threatening the health and nutrition status of households in Zambia, the Project will also support simple water supply and sanitation schemes, especially in peri-urban areas. Such Annex II contains a list of EC-funded microprojects in the 1990-91 Microprojects Programme cycle.  - 18 - sub-orojects could include tandpipes, shallow wells, boreholes, drainage ditches, and pit latrines. 3.9 Within education and training the SRF will fund: (a) rehabilitation and expansion of primary and secondary schools; and (b) training in skills development. Economic infrastructure and production support is a broad category that includes upgrading and rehabilitation of: (a) feeder roads; (b) drainage works; (c) small irrigation schemes; and (d) market places. This category also includes support for existing NGO credit schemes. 3.10 On a case-by-case basis the SRF could fund consumable items such as supplies or materials for renovated health posts and schools. Such financing will be an extra incentive for successful and timely completion of the construction phase of specific sub-projects. 3.11 For the purpose of screening, sub-project categories are assigned a priority from one (highest priority) to foux (lowest priority). Based on this priority, sub-project proposals will be selected for appraisal (para. 3.16). Within each sub-project category the highest priority will be given to projects that benefit women and small children. The sub-projects with highest priority are: - rer,abilitation of health centers; - rehabilitation of childcare centers or shelters; - preventive health and nutrition programs; - equipment and inputs for rehabilitated health centers; - health and nutritional training; - community vegetable gardens; - rehabilitation of water supply systems; - expansion of water supply systems; - latrines and other simple sanitation; - rehabilitation of primary schools; - expansion of primary schools; - furniture and materials for rehabilitated primary schools; and - skills development training. Annex III gives the complete list of the priority ranking of sub-project types. Development and Approval of Sub-projects 3.12 The MPU will follow a project cycle based on the experience of its management of the EC's Microprojects Programme (para. 2.29). This cycle has the advantage of working through the budget process of the DCs and the PPUs without having the sub-projects delayed at either level. Both the Government and the EC view coordination with local governments as essential, and the MPU will continue this in order to support the Governmpnt's efforts in decentralization. 3.13 The first step in the project cycle will be outreach activities to introduce the program to the communities of Zambi6. MPU staff will hold workshops in each province inviting representatives from  - 19 - the DCs, PPUs, and NGOs to participate. These workshops will explain the purposo of the MPU and its procedures, as well as train the community representatives in how to work with their communities to identify priorities and complete the sub-project request form. Cu'treach activities will be targeted to areas and sectors from which few or poor- quality proposals are forthcoming. 3.14 The communities must establish a PC that will be responsible for implementiing the sub-project. These committees frequently are drawn from existing women's groups or Parent-Teacher Associations. When the communities are ready to submit sub-projects, they will initiate the project cycle by sending a completed sub-project request form to the DC. The request form (Annex IV) includes information on the beneficiaries, a description of the sub-project and its costs. The DC will then clear the sub-project proposal, indicating its consistency with district plans, and send it on to the PPU. The PPU will also indicate whether the proposal is consistent with the province's priorities. The PPU must also give a letter of commitment for any facilities requiring staffing, as the PPU manage the budget for recurrent costs in primary health and education. The MPU has not experienced any delays in this process since the DCs and the PPUs meet every quarter and come under significant pressure from their communities if they hold up the sub-projects. 3.15 The cleared sub-projects will be sent from the PPUs to the MPU for evaluation. At each review (by DCs and PPUs) a copy of the request will also be submitted to the MPU, enabling the MPU to monitor the review process. NGOs submitting sub-projects will not have to go through the DCs and PPUs formally. Nonetheless, they must get a letter from the PPU stating that the sub-project is consistent with provincial plans and that any extra staff that the NGOs' sub-project required will be made available. Once they have this, the NGOs will send their sub- project proposals directly to the MPU. 3.16 The MPU is likely to continue receiving more sub-projects than it can properly appraise, making a system for establishing priorities essential. Projects received by the MPU will be registered by a code that will allow them to be sorted according to well-defined criteria (Annex III). 3.17 First, sub-project proposals will be divided into economic infrastructure and others. After sorting by type of project, the sub- projects with the highest priorities will be examined by province in order to provide the MPU with an overview of -ts activities in each part if the country. Among the projects with equal priority in any given province, those that assist young children and pregnant or lactating mothers will be given the highest priority.2' a' The coding will also allow the projects to be sorted by type of sponsoring agency, whether it is an NGO or a Community. This will be used for monitoring and not for establishing funding priorities.  - 20 - 3.18 MPU staff will then fully appraise as many of these sub- projects as possible (for example, the MPU received 1000 sub-projects in its last cycle and appraised about 200, approving 175). The MPU will begin by evaluating those assigned the highest priority following the procedure described above. The MPU will appraise sub-projects by sending a staff member for a site visit. The staff member will be responsible for gathering any information not included in the request form regarding the sub-project's impact and costs. He or she will also assess the implementation capacity of the executing agency. An appraisal form will be completed (available in project files), which, if MPU staff clear the sub-project, will be the format in which it is presented to the Steering Committee. 3.19 The Steering Committee for the Project will meet every quarter to review sub-project proposals. This Committee will consist of the Project Coordinator and Deputy Coordinator, the Permanent Secretary for Economic Cooperation in the MOF, the Director of Regional Planning from the National Commission for Development Planning, representatives from the planning units of the MOH and MGEYS, and an NGO representative appointed by the NGO Forum. The EC Delegate and the World Bank Resident Representative will be non-voting members of the Board. For sub-projects that are approved, a contract will be signed between the PC (or NGO) and the MPU. Approved sub-projects will be sent to the SAP Coordinator for information. 3.20 Whenever possible the MPU will hold a sub-project laun~ch workshop in the community to teach the PC to keep the accounts of the sub-project and inform it about its other responsibilities in implementing the sub-project. Afte the sub-project contract is signed, an initial mobilization grant of ba(ut 20Z of MPU contribution to the sub-project will be paid into an &c ount established by the PC. Such advances will be of an average size of about US$6,000. Later payments to the PC will be made based on work completed or goods and services purchased. Each disbursement request must be countersigned by the MPU staff member supervising the sub-pro('ect and the relevant DC. Such subsequent disbursements to the PC 2.1 be for less than the money spent to take the mobilization grant into v,'count. On average, MPU will make three supervision visits per sub-prcjec,t. Six months after sub-project completion, a follow-up visit will be wade to assess the impact of the sub-project. 3.21 Extensive use will be made of beneficiary assessments in the monitoring of SRF sub-projects (Annex V). This methodology will be used to assess communities' needs and interests before the sub-projects begin, during implementation and following completion. This monitoring will provide an operationally useful feedback to the MPU. Through beneficiary assessment, the MPU could gauge which sub-projecL4 are most effective in serving the needs of poor and vulnerable groups. Furthermore, specific studies and the results of the planned national surveys (sec next section) will help assess the impact of the Project.  - 21 - The Institutional Support Component 3.22 The MPU will be given institutional in the form of financing long-term consultants to enlarge the MPU's staff, support to open a field office, and purchase of equipment and vehicles. To ensure proper project implementation, the Government will appoint and retain HPU staff with qualifications acceptable lo IDA and the EC throughout the project period. 3.23 IDA proposes to fund one international, long-term consultant as deputy project coordinator, three local consultants, and three support staff (Annex I for details). The local consultants will be a project accountant, an engineer or architect to assist in appraisal and supervision of more complex civil works sub-projects, and one regional representative. The regional office will be opened in Northern Province with its own vehicle, office space and other logistic support. The regional representative will be most heavily involved in outreach and supervision activities. If the need arose and the experience in Northern Province were successful, IDA will consider funding more regional offices. The Analysis and Monitoring Component 3.24 The Analysis and Monitoring Component has two sub- components: (a) a survey sub-component assisting the Central Statistical Office (CSO) in the collection of social statistics, and (b) a studies sub-component financing analyses and studies related to the SAP and poverty in general. The studies will provide analyses of the data generated under the survey sub-component. 3.25 The Survey Sub-componc-nt. This sub-component will support the Government's efforts to gather information on social conditions. By gathering baseline and monitoring data, it will help identify the poor, their location, and how they are being affected by Government policies. Community level information will establish the link between the general analysis and monitoring, including the beneficiary assessment. The surveys will also provide information on general social conditions such as the status of health, education and food security. 3.26 The Sub-component will support a data-user/data-producer committee on social statistics. This cormittee will ensure coordination among the various institutions that play a role in either generating or using survey data.3/ The committee will be chaired by a data-user while the CSO will serve as the secretariat. It is assumed that the tasks of the committee will be integrated into the Social Statistical Sub-committee (SSS) of the soon-to-be established National Statistical Committee. Such as the CSO, the National Commission for Development Planning, the research community and donors.  - 22 - 3.27 Through guidance from the SSS and with support from the Survey Sub-component, the CSO will carry out a survey program to collect necessary social statistics at household and community levels. The survey program will support one survey each year for a total of four years. Subject to modifications by the SSS, the survey program will be comprised of the following activitiess (a) The 1991 Priority Survey (PS). The PS is a multi-sector indicator survey that will use an extensive, nationwide sample in urban and rural areas. The 1991 PS will provide policy makers with rapid, multi-sectoral information on the status of each major socio-economic group. Second, it will provide information for the design and targeting of the SAP and the SRF. The CSO will conduct the survey in July - August, 1991 on a sample of approximately 9,000 households. It will release a tabulation report by December 1991. (b) The 1992 PS Module in the Agricultural Census. The information collected in 1991 will be repeated in rural areas in 1992, allowing for monitoring of the development across time. To save resources, the PS will be included as a module of the Agricultural Census. It is envisaged that the PS module will be carried out in June-July 1992, between the Pre-Harvest and the Post-Harvest questionnaire of the Agricultural Census and during the same season that the previous year's information was collected. This combination of a PS and an Agricultural Census will also yield a unique set of information about the gender specific impact of agricultural farming systems. crop patterns, etc., on household food security or nutrition. Although the sample will only include farming households, it will be larger than that of the previous year's survey, allowing analysis of smaller socio-economic groups. 3.28 After 1992 the detailed programming depends on the decisions of the SSS. The tentative program is as followq: (a) The 1993 Household Survey. The Government's current priority is to collect household budget and PS-type information. (b) The 1994 PS. In 1994 support will be given for another PS, either as a self-standing survey or as a module. 3.29 The need for community level information both for statistical monitoring and analysis as well as to provide information for the community development programs to be financed under the Project is recognized. Due to time constraint, it will be difficult to include a community module in the 1991 PS, but it will be included as a component of the 1991/92 Agricultural Census and will be considered for social statistical surveys to come. 3.30 Support to CSO will include: (a) technical assistance based on a twinning arrangement between an external statistical institution  - 23 - and CSO; (b) salaries for temporary staff; (c) per diems for field work; (d) equipment and supplies (including vehicles and computers with printers); and (e) training (Annex VI contains detailed cost estimates). 3.31 The Studies Sub-component. This sub-component will support (a) studies in five already-identified priority areas, (b) a study fund for small and medium size studies, and (c) in-country training in computer familiarization and basic tabulation. 3.32 The five priority studies identified are: (a) Beneficiary Assessment, which will use qualitative methods to understand the needs of communities imaplementing micro- projects supported by the MPU (para. 3.21 and Annex V). (b) Poverty Analysis, which will provide information for targeting SAP activities. This work will use the data generated in the first PS. Future PS modules will allow for continued poverty monitoring. (c) Price Mechanism Study, which will identify the magnitude and causes of price differences and the impact of these on poor and vulnerable groups. USAID has given financial support to the first phase of PIC's household expenditure survey and envisages further support. However, there is room for further data collection, descriptive and analytical work. (d) Household Food Security Under Structural Adjustmeint, which will link agricultural production, time constraints, purchasing power, auto-consumption, and health and nutritional standard. The National Food and Nutrition Commission has experience in data collection and statistical analysis on the impact of policy changes on nutritional standards. UNDP and UNICEF are already supporting activities in this area. (e) Vulnerability of Women under Structural adjustment, which will focus on the gender specific economic and social impact of economic crisis and adjustment, recommending specific interventions to alleviate any negative effects. Several activities are on-going supported by donors such as Norway and Canada. 3.33 The Study Fund. The main objective of the Study Fund is to support a broad range of local studies on poverty, the economic and social impact of economic crisis and adjustment, and the efficiency and equity of activities designed to ease the transition. To fulfill this objective, it has been agreed to facilitate a process where by Zambian policy-making institutions and the research community collaborate to ensure quality, policy-relevant studies. 3.34 The studies will be undertaken by research and other institutions within the country. The studies may require some limited field work to collect the necessary information but should be based as  - 24 - far as possible on the utilization of data that are already available. For instance, the Study Fund could support tabulation and analysis of the large amounts of information available in the MOH and the MGEYS. Other possible activities will be studies of the impact of interventions or policy undertakings. For instance, several NGOs have shown an interest in studying the impact of different types of social service delivery, and an organization of small businesses will like to study the impact of the recent liberalization measures on its members. Studies will take not more than six months and have a total cost of less than US$15,000 per study. They will be applied rather than theoretical in nature and will provide: (a) information on the inter-relationships that exist between the various socio-economic factors; (b) information for implementing, monitoring or evaluating particular programs; or (c) the necessary input to initiate new programs. 3.35 The selection of these studies will be undertaken by a special committee for which the MPU will be the secretariat. Other members of the committee will be individuals from the social research community. After initial screening by the secretariat, study proposals will be commissioned to two qualified reviewers, who will provide the committee with written comments. As assured funding is limited for this sub-component, the selection committee will also function as a clearing- house and present screened study proposals to other donors for funding. Studies could use data that the Survey Program generates. An analysis file will be produced as a regular output from each survey. Any research institution will be given access to anonymous data files within a reasonable time upon release of the tabulation reports from CSO. Workshops to initiate and support further analysis of the survey data by line-ministries and the research community will be provided for. 3.36 Training. Some training is needed to ensure that the analytical power of available micro-computers and data are taken advantage of, if only through simple tabulation. Thus, this sub-component will support a course in basic computer familiarization and basic statistical tabulation every year. The first course will be offered in early 1992. The main target group will be planners in central planning institutions and line ministries, but the research community will also have access to this training.  - 25 - IV. COSTS, FINANCING, MANAGEMENT A. Project Cost 4.1 The total cost of the Project is US$46.4 million. The three main components are: (a) Community Initiatives, (b) Institutional Support, and (c) Analysis and Monitoring (Table 4.1). Most of this amount (US$41.2 million or 88.8 percent of total project costs) will support sub-projects. The sub-projects allocation includes the IDA contribution to sub-projects, expected contributions from the EC's Microprojects Programme and community contributions. The MPU expects to commit and disburse about US$6.4 million per year to sub-projects over the next five years. Both the IDA Credit and the EC Micro-projects Programme will provide institutional support to the MPU in MOF (para 3.22). Details of institutional support are provided in Annex I. The Analysis and Monitoring allocation indicates the cost of the full program of studies as described in para 30. Price and physical contingencies are calculated only for costs of Institutional Support and Analysis and Monitoring. The number of sub-projects will be adjusted to correspond to available financing. Table 4.1: Summary Project Costs (in million US$) Z X of Local Foreign Total Foreign Total Community Initiatives 39.6 1.6 41.2 3.9? 88.8Z Institutional Support 1.1 1.6 2.7 59.2Z 5.7Z Analysis and Monitoring 1.1 0.8 1.9 41.9Z 4.2Z Total Base Costs 41.8 4.0 45.8 8.7? 98.7? Price Contingencies 0.1 0.1 0.2 54.5? 0.6? Physical Contingencies 0.2 0.2 0.4 48.3Z 0.7Z Total Project Cost 42.1 4.3 46.4 9.3? 100.OZ B. Financing Plan 4.2 Sources of funding for the Project are shown in Table 4.2. Zambia will support the Project through community contributions to sub- projects.1' The IDA and EC contribution will be allocated to the sub- projects and to strengthening the MPU. If in the future other donors' financing were to become available for sub-projects, the number of sub- projects will be adjusted accordingly. Because the dollar value of The MOF will provide office space and supply utilities to the MPU. These costs have not been included in these cost estimates.  - 26 - prospective cofinanciers' contributions will change as exchange rates change, adjustments will be made in the number of sub-projects to reflect available financing. Table 4.2: Protect Financing (US$ million, including contingencies) Zambia IDA EC Norway Total Sub-project, 9.1 18.2 13.9 0 41.2 Institutional Support 0 1.8 1.1 0 2.9 Analysis and Monitoring 0 0 0 2.2 2.2 Total 9.1 20.0 15.0 2.2 46.4 4.3 The Analysis and Monitoring program outlined above will have a total cost of about US$4.6 million. The component from this project is defined as that part of the program for which financing is assured. Norway will cofinance the Project with about US$2.2 million equivalent. This will cover the first two years of the program, leaving the last three years' financing to be determined (Table 4.3). Sweden has expressed an interest in cofinancing the program with an amount sufficient to cover the rest of the Survey Sub-component. Denmark and the United Kingdom have shown an interest in financing training and studies. As such financing becomes available, the financing plan would be adjusted in consultations among the Government, the cofinanciers, and IDA. C. Project Implementation 4.4 The implementation of the Project will be done by the existing MPU in the MOF. which has successfully administered the EC's Microprojects Programme in the past. IDA has appraised the MPU's procedures and overall capacity and finds it acceptable with the additional institutional support described in paragraph 3.22. A draft sub-project appraisal guide has been prepared and agreed upon between IDA, EC and the Government. Preslentation of this appraisal guide in a finalized form acceptable to IDA 2s a condition for effectiveness (para. 6.1). Institutional Capacity 4.5 Successful implementation of the Project depends heavily on the capacity of the institutions involved. Under the EC-funded program it has been possible to impiement microprojects successfully, which bodes well for this Project.  - 27 _ Table 4.3: Financing Plan for Analysis and Monitoring Program (in Thousands US$) Project Total Financed To Be Program Elements Program (Norway) Identified Studies Administrator 162 162 - Studies Fund 600 600 - Beneficiary Assessment 175 175 - Short Term Consultants 216 - 216 Micro-Computers 30 30 Training 190 - 190 Contingencies 260 104 156 _____________________________ Sub-Total Studies i,633 1,041 592 Statistics International Personnel 702 281 421 Local Personnel 792 317 475 Intnational. Training 230 92 138 Local Training 195 78 117 Equipment 261 104 157 Operations 367 147 220 Contingencies 477 191 286 Sub-Total Statistics 3,024 1,210 1,814 TOTAL 4,657 2,250 2,406 4.6 DCs and PPUs are already receiving institutional support from other dor.ors, and sub-project implementation has benefitted from such strengthened units in the past. The CSO has received substantial institutional support from, among others, the Food and Agriculture Organization and the Government of the United Kingdom, and IDA is satisfied that it will be able to implement the Studies Sub-component. 4.7 Additional steps will be taken under the Project to strengthen the institutions involved. Community-level workshops will be held before the implementation of sub-projects to train communities in sub-project implementation. The cost of sub-projects could include site visits by PC members to other MPU-sponsored projects so that successful practices can be passed on. The Project will in itself strengthen capacity as communities and DCs learn how to identify, plan and implement good sub-projects. This rebuilding of the spirit of self-help will be an important benefit of the Project. The MPU will be strengthened as outlined in para. ?, to enable it to do the launch workshop, more frequent supervision visits and an ex-post visit. The Project is process-oriented so that specific strengthening needs that emerge during implementation could be included in the project as agreed between IDA and the Government.  - 28 - Sustainability of the Sub-projects 4.8 Sustainability of the sub-projects will be ensured through several venues: (a) a community's contribution to sub-projects will indicate its involvement in the sub-project and thus increase its interest in maintaining the sub-project; (b) the appraisal criteria include an assessment of the PCs' ability to maintain and operate any facility repaired, expanded or constructed; (c) for personnel requirements that the sub-project will generate, the PPU will be required to state that any additional personnel needed will be provided; and (d) at the macro-level the Government has agreed to ensure that non-personnel recurrent budgets for health and education increase every year (pare. 6.1(d)). 4.9 Monitoring Indicators. In assessing the impact of the Project during supervision, annual implementation reviews, the mid- project review and following completion, the MPU will report, and IDA will review, inter alia, the following indicators: (a) the number of health and education facilities improved, rehabilitated and constructed; (b) the number of people trained in sub-projects that provide training; (c) the number and gender distribution of beneficiaries of sub- projects; (d) geographical distribution of sub-projects (after 1992 compared with poverty profiles developed based on the PS); (e) the share of administrative costs relative to sub-project costs; (f) ex post economic or social impact of randomly selected sub- projects (based on studies including beneficiary assessment). D. Procurement 4.10 As the exact mix of sub-projects to be financed is undetermined at this point, the procurement schedules presented below are estimates based on the EC-funded Microprojects Program. Most sub- projects will be small in size: the EC-experience indicates MPU financing averaging about US$30,000 per sub-project. PCs are responsible for procurement for their sub-projects.  - 29 - 4.11 Items to be financed by IDA will be procured in accordance with the Bank's 'Guidelines for Procurement Under IBRD Loans and IDA Credits (May, 1985)." Where feasible from a logistic and financial efficiency standpoint, civil works contracts will be combined to exceed an estimated cost of US$250,000. Any civil works contract estimated at a cost of US$250,000 or more will be procured using international competitive bidding (ICB). Local contractors will be eligible for a margin of preference of 7.5 percent for ICB. Local competitive bidding (LCB) procedures will be used for any contract estimated to cost less than US$250,000. As some sub-projects are located in very remote areas it is likely to be necessary to employ prudent local shopping (ILS) procedures acceptable to IDA. This procedure will be used for contracts with an estimated cost of less than US$30,000. 4.12 For purchase of goods and services, ICB will be used for contracts with an estimated cost of US$100,000 or more. The MPU will assist communities in the purchase of materials in bulk and, where feasible from a logistic and financial viewpoint, attempt to combine contracts to make the estimated value US$100,000 or more. For goods tenders under ICB, local suppliers will be eligible for a margin of preference of 15 percent. LCB will be used for purchases estimated between US$30,000 and US$100,000. ILS procedures acceptable to IDA will be used for purchases estimated at less than US$30,000. All LCB procurement will include local advertising, public bid opening, clarity of evaluation criteria, and non-exclusion of foreign bidders. 4.13 The MPU will assist PCs in procurement matters on a case-by- case basis. In the past, by purchasing in bulk and paying in foreign currency, the MPU has been able to lower substantially the cost and improve availability of such materials for the communities. IDA has appraised the capacity of the MPU to assist in procurement matters and found it satisfactory. Such procurement will follow the needs for purchase of goods and services. For procurement purposes, sub-projects can be divided into three categories: (a) civil works; (b) self-Uh1p; and (c) social services. For civil works, the procurement procedures outlined above will be used for self-help sub-projects where the community implements the sub-project using their own labor; and for social service delivery sub-projects implemented by NGO"s 2/ goods and services will be purchased at a reasonable price. For goods, account will be taken also of other relevant factors such as time of delivery, efficiency, and reliability of goods. In the purchase of services, factors such as quality and competence deliveries will be taken into account. 4.14 Consultants' services to be financed by IDA will be procured in accordance with "Guidelines for the Use of Consultants by World Bank Borrowers and the World Bank as an Executing Agency." 2 Such as training programs, vaccination campaigns, literacy and numeracy campaigns and nutrition surveillance.  - 30 - Table 4.4: Procurement Arranaements (US$Millions) Project Element ICB LCB Other/1 N.A.2/ Total ----------------------------------------------------------------__- 1. Sub-projects: a. Goods for Sub-projects 1.5 3.3 - - 4.8 (1.5) (0.5) (2.0) b. Civil Works for Large and 1.5 14.9 - 6.5 22.9 Other Sub-projects (1.5) (10.7) - - (12.2) c. Self-help and Social - - 11.0 2.5 13.5 Services Sub-projects - - (4.0) - (4.0) 2. Consultant Services - - 3.5 - 3.5 and Studies - - (0.8) - (0.8) 3. Vehicles and Equipment - 0.3 0.2 - 0.5 - (0.3) - - (0.3) 4. Operations and - - - 1.2 1.2 Administration _- - (0.7) (0.7) TOTAL 3.0 20.0 14.7 10.3 46.4 (3.0) (11.5) (4.8) (0.7) 20.0 Notes: i/ Includes: (a) Self-help and Social Services Sub-Projects which are implemented by the PC directly; (b) consultant services procured according to IDA Guidelines; and (c) items to be financed by the EC and procured using their procedures. 2/ Includes the community contribution to the sub-projects and Operations and Administration costs to be procured using local procedures acceptable to IDA 4.15 Operations and administrative costs for the MPU, including maintenance and operations of equipment and vehicles, salaries and per diem for support staff, and office supplies, will be procured using local practices acceptable to IDA. 4.16 Table 4.4 shows the expected distribution of procurement across the various categories. The distribution is based on IDA estimates of the future mix of sub-projects. Actual implementation experience may be different, depending on the size and type of sub- projects approved by the Project's Steering Committee. 4.17 Contract Review. Bidding packages for ICB civil works and goods and sai-