Mozambique - Capacity building study

Report No. 10001 MOZ Mozambique Capacity Building Study June 30, 1993 Population and Human Resources Division Southern Africa Department Africa Regional Office MICROGR ICS FOR OFFICIAL USE ONLY Report Nio: 10001MOZ Type: SEC j~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C ., ~ ~ ~~~~~' . , - I.. ... - ,n i Worl a.nV * Ti \ men distibtio-; ' "b;' !us6d--b'. ; ;ikt Thi do' has;" ' . . ,r '-.d , an'd- 'm.',a..:y.. , .. : - *tl -h the,pr, . on jp ,b ... ~~~~~rac~fii1ofca, dte. -1't F'.ay:....., t Jo', .. . ' 's ', ' , '' ' 't ''' ';a" ',, uh d 'i "'n: '''", ( 7' ''S ' be disc ,se - w*h u W ,( a -, - - , x ,, , - - *, ...o..................  SL~~~~~~~~. 7e CURENCY EQUI VALENTS (May, 1991) Currency Unit = Metical (pl. Meticais) 1000 Meticais = One Conto USD 1.00 = MZM 1,904 (Secondary Market Exchange Rate) FISCAL YEAR Govemment Fiscal Year: January 1 - December 31 School Year: February 1 - December 31 University Year: August 1 - June 30 ABBREVIATIONS AND ACRONIYMS CFA Centro de Formacao Agraria (Agricultural Training Center) CFI Centro de Formacao Industrial (Industrial Training Center) CNP Commisao Nacional do Plano CSP Country Strategy Paper DANIDA Danish International Development Agency EEC European E-onomic Community EPU Pre-University Education ESG General Secor.dary Education ESRP Economic and Social Rehabilitation Program GPA General Plan of Accounts ICM Commercial Institute of Maputo INAJ Instituto Nacional de Assistencia Juridica MAE Ministry of State Administration MDIs Management Development Institutes MULEIDE Women's Association for Law and Development NatCAP National Technical Cooperation Assessment and Programmes NGO Non-Govermnental Organization NORAD Norwegian Agency for International Development PNCT National Technical Cooperation Program QTSD Quadros dos Tecnico Superiores e de Direccao SIDA Swedish International Development Authority SOAS School of Oriental and African Studies, University of London TCPFP Policy Paper on Technical Cooperation UEM Eduardo Mondlane University UNDP United Nations Development Project UNICEF United Nations Children's Fund UNIDO United Nations Industrial Development Organization This report is based on a sector mission in May 1991 and a follow-up visit to Mozambique in September 1991. The team that prepared the report consisted of, Mr. R. Hecht (Leader), Ms. R. Deutsch (Economist), Mr. W. Saint (Higher Education Specialist), Ms. J. Huddart (Consultant- Training), Mr. J. Negrao (Consultant-Higher Education), Mr. A. Pessoa (Consultant-Management), Mr. T. Davis (Consultant-Public Sector), Mr. C. da Cunlha (Consultant-Secondary Education), Mr. Q. Junqueira (Consultant-Public Sector), Mr. G. Linde (SIDA Education Advisor), Mr. M. Mungaumbe (SIDA Consultant-Legal Training), and Ms. M. dos Santos (SIDA Consultant-Training). Further contributions were provided by A.Disch (Consultant) and Ms. R. Deutsch updated the report in November, 1992. Secretarial support was provided by Ms. R. Mendoza and Mr. C. Bostic.  FOR OFFICUIL USE ONLY MQZAYML Table Conti EXECUTIVE SUNW Y ........................................... i 1. 'STUDY BACKGROUND, OBJECTIVES, AND MAIN ISSUES ..... ........ 1 A. Introducdon .......................................... 1 B. Background ...................1....................... C. Study Objectives, Scope, and Methodology ............. . 4 D. Issues to be Addressed ................... 7 II. PUBLIC SECTOR INCENTIV................................ 14 A. Introduction ........... .................... 14 B. The Civil Service in Mozambique ............. .............. 14 C. The Senior Civil Service ................................. 25 D. Summary of Capacity Constraining Issues ........ .............. 31 E. Recommendations ....................... ..... i ..... 33 11I. EDUARDO MONDLANE UNIVERSY .......................... 42 A. Introduction ............................ 42 B. Effectiveness ............................ 45 C. Efficiency ............................ 55 D. Structural Flexibility ................................ 65 IV. GENERAL SECONDARY AND PRE-UNIVERSITY EDUCATION ........ 69 A. Introduction .......................................... 69 B. Secondary Education in Mozmbique ......................... 69 C. Problems and Constraints ........... ...................... 73 D. Major Issues in Secondary Education ......................... 78 E. Recommendations ............ ......................... 80 V. TRAINING .............................................. 83 A. Introduction ......................................... 83 B. Overview of the Training Situation ........................... 83 C. Economics Training .......... .......................... 93 D. Accountancy Training .......... ......................... 95 E Legal Training ............. .......................... 98 F. Training in Management and Administration ..................... 105 VI. MANAGEMENT OF TECHNICAL ASSISTANCE ........ ... ........ 112 A. Introduction ......................................... 112 B. Profile of Technical Assistance in Mozanbique .................... 113 C. Government Policy for Better TA Management ................... 116 D. TA Management Practices in Mozambique ...................... 120 E. Conclusions and Recommendations ........................... 123 This document has a restricted distribution and may be used by recipients only in the performance of their offlcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  VU. GOVERNMENT-DONOR WORKING GROUPS ...... ............. 125 A. btroduction ......................................... 125 B. Agenda/WorkProgrammeforthe WorkingGroups ................. 126 C. StructureofWorkingGroups .. ............................ 127 D. CoordinationofWorkingGroups . . . ..... 128 E. Conclusions ......................................... 129  Ann Eagg No. Annex 2-1 Salary Increments for Education and Health Sector ........ 130 Annex 2-2 Geographic Distribution of Senior Civil Service by Level of Educational Achievement ........ ............... 131 Annex 2-3 Geographic Distribution of Total Higher Level Staff ..... ......... 132 Annex 2-4 Senior Civil Service: Age and Sex Structure ...... ............ 136 Annex 2-5 Senior Civil Service by Length of Service .................... 137 Annex 2.6 Higher Level Staff by Level of Educational Achievement .... ....... 138 Annex s-7 Qualifications for Senior Civil Service Posts ...... ............. 139 Annex 2-8 Estimated Budgetary Impact of Staff Retrenchment ..... ......... 140 Annex 2-9 Performance Evaluation Format Currendy Being Introduced in Ghana ............................. 141 Annex 2-10 Note on Selection Strategy for Housing Scheme .... 147 Annex 4-1 Ministry of Education: Directorate of Planning Enrollments, by Province, Level and Sex .150 Annex 4-2 General Secondary Education: Breakdown of Students by Province, Grade and Sex .151 Annex 4-3 Enrollments and Vocational Education by Grade and Specialty .......... .............. 154 Annex 4-4 Teacher Training Subsystem ....................... . 157 Annex 4-5 Public Education Expenditure ....................... . 158 Annex 4-6 Recruitment Budget: Education Sector ...................... 159 Annex 4-7 Distribution of Recurrent Expenditures by Level and Type of Education .................. 160 Annex 4-8 Teacher Training .................. 161 Annex 5-1 Total Numbers of Graduates from Basic and Medium Professional and Technical Schools .165 Annex 5-2 Studetit Drop-Out and Failure Rates from Technical and Professional Training ....... ................. 166 Annex 5-3 Vocational Training Centers in Mozambique ..... ............. 167 Annex 5-4 Course Outlines: Economics and Management Degrees at UEM ...... 169  MOZAMBIQUE CAPACITY BULDING STUY Basic h4dicators (most recent year available) Sub-Saharan M_giambhm _A0dca_ A. CixiSrvii 1. Civil Servants per 1000 Inhabitants 6 14.4 2. Wage Compression Ratio 20:1 12:1 B. ecnayEducationl 3. Gross Enrollment Ratio 7% 23% 4. Share of Recurrent Education Budget 6.6% 29.1% 5. Percent Female Students 33.7% 37.0% 6. Repeaters as % of Total Enrollment, 1986 26% 17% 7. Student-Teacher Ratio, 1986 33 30 8. Unit Recurrent Costs $113 $365 C. Wz Eduatimon 9. Enrollment as Share of 20-24 year Age Group 0.2% 2.4% 10. Share of Recurrent Education Budget 19.3% 17.6% 11. Unit Recunrent Costs $1,423 $1,233 12. Percent Women Students 25% 24.1% 13. Faculty/Student Ratio 1:8.4 1:14.4 14. Percent Foreign Faculty 16% 19.4% 15. Percent Studying Sciences/Engineering 38% 25.7% Sources: UNESCO, World Bank, Association of African Universities Data  -I- intreduetlon i. Mozambique's myriad problems of underdevelopment (extreme poverty, human suffering caused by internal civil strife, malnutrltion, disease, inadequate shelter, etc.) are compounded by the severe lack of local capacity to formulate development policies and to plan and manage development activities. Indeed, lack of capacity is not only a symptom of underdevelopment, but is also a fundamental constraint to Mozambique's current and future efforts to solve the basic problems of underdevelopment. ii. Mozambique's major development objectives are to: (a) achieve rapid sustained economic growth by making an effective and smooth transition from a command economy to a market economy, and (b) put in place as quickly as possible effective poverty reduction measures supported by this economic growth. To achieve these objectives, one of Mozambique's priority needs is medium and high-level manpower which Is well-trained, motivated, and skilled in planning and managing programs and projects that stimulate economic growth and alleviate poverty. Mozambique's severe capacity deficiencies present a critical barrier to the successful implementation of post-war national reconstruction and of the Government's economic and social recovery program. Both demand and supply aspects contribute to the current scareity of administrative, technical, and managerial skills and institutional capabilities. Changes on the idmaW side are essential in the short run, particularly reforms in public setor pay and employment conditions and changes in public institutions. On the sp& side, capacity building will require new initiatives in education and training, including secondary and post-secondary education and technical, vocational and professional training. By focusing simultaneously on both demand and supply factors, capacity-building can help to increase the number of skilled administrators, managers, and technicians, and also ensure that the public and private institutions employing these people recognize their importance, provide adequate incentives to attract and retain them, and create a work environment that taps their energies and talents. iii. The report which follows attempts to analyze the current crisis of capacity in Mozambique, as well as its origins and causes; to document recent and ongoing efforts to build capacity; and to consider a wide range of options and make recommendations for increasing capacity in both the short-term and over the coming decades. The report grows out of a Government request to the World Bank in December 1990 to assess the prevailing lack of capacity and propose solutions. In response, the Bank and SIDA have worked closely with the Government and the rest of the donor community in preparing this report and a shorter "Capacity Building Policy Framework Paper", presented at the 1991 Mozambique Consultative Group. It is also hoped that this report and any follow-up actions will dovetail with the emerging program of the newly-created African Capacity Building Foundation. The Crisis of Cnacity iv. Among the world's developing countries, Mozambique suffers from the effects of having one of the weakest human resource bases. The shortage of trained manpower at all levels, from the most basic workers to senior technicians and managers, is extremely acute. Out of a total estimated population of 16 million, Mozambique has fewer than 3,000  -ii- university-trained people. Less than 15% of senior civil service personnel have university training, and a sutprising one-third of senior clvil servants have completed only primary education. Substantial gains in management and technical capacities will be required if Mozambique Is to steer a successful traz.- 'tion from war to peace and a productive development course In the years ahead. v. The colonial legacy of severely underdeveloped human resources lies at the origln of Mozambique's current capacity problems. At the time of independence in 1975, the overall literacy rate was only about 8%, a result of the Portuguese colonial policy of making formal education inaccessible to the bulk of the local population. Even though a university campus was established in the capital of Lorenco Marques (now Maputo), most of the students were Portuguese nationals, not native-born Mozambicans. At the time of independence, the vast majority of experienced administrators, technicians, small businessmen, professionals, skilled workers, and artisans abandoned the country as part of the Portuguese exodus. From a management staadpoint, the country was decapitated. vi. Since that time, the Mozambican Government has made important strides in rebuilding its human resource base, by improving access to education at all levels and promoting adult literacy. Between 1975 and 1986, primary enrollments more than tripled, and secondary enrollments increased four-fold. The literacy rate of the 15-24 age cohort grew to over 40%. Despite this significant progress, Mozambique's population remains one of the least educated in the world, according to the standard indicators. The decline in primary and secondary enrollments in the last few years (combined with a likely deterioration in the quality of learning), due to war-related insecurity and insufficient budgetary resources for the education sector, have clearly exacerbated the situation. vii. The number and quality of secondary and university graduates is seriously insufficient to meet Mozambique's needs for high-level manpower. The gross enrollment ratios for tertiary and secondary education (0.2% and 7%) are only a fraction of the corresponding average enrollment ratios for the rest of Africa (see Basic Indicators Table at the front of this report). Low output at these levels of the education system is also apparent in the educational profiles of public and private sector employees. According to a 1990 survey of the top levels of the civil service, only slightly more than half of the 247 Central Government department heads surveyed had completed secondary school. For local governments, the situation was worse: of the 206 district directors surveyed, only 74 had gone beyond primary level, and none had attended the University. These shortages of skilled staff thus hamper the Government at all levels in responding to the needs of its citizens. The private sector is similarly afflicted. Ministry of Labor data for 1987 indicate that within the private sector, about 40% of Mozambicans in technical and management positions had less than a 9th grade education. Less than 1% of the private sector work force, or 355 persons out of 168,800 surveyed, were University graduates. viii. The severe shortage of trained Mozambicans is compounded by the problem of inadequate pay and other incentives offered to civil servants, especially in the higher echelons of Government. Within Government, while the ratio of pay for senior staff as compared to workers in the lowest grades has been somewhat de-compressed in recent years, wage differentials between the public and private sector remain quite wide, and Increasing competition for scarce resources continv@s to bid up the price of skilled Mozambicans in the private sector. In addition, low salaries for mid-level managerial and technical staff and barriers to promotion are a serious disincentive to these civil servants. As a result, there is  - ill - sigifct staff dmoraliation ad absenteeism, and numbers of key senior officials ar loving public ervice for the expanding local privae sector, employment with an Intational agency, or for employment abroad. ix. Another symptom of the current crisis of local capacity, especially in Govemment, is that Mozambique has turned to increasing numbers of foregn asistance personnel to help make the public sector, and indeed the entire economy, function. A UNDP NATCAP study estimates that in 1987, a total of 3,000 technical assistants CrA) were working in the country at a cost of about llS$168 million, equivalent to about 10% of Mozambique's GDP. This technical assistance is not well managed. In some cases, expatriates are being employed to do work Which could be performed by trained Mozambicans. In many other cases, the expatriates canry out needed technical or managerial tasks but do not transfer their skills or knowleage to local Mozambican counterparts. This costly dependence on foreip technical assistance is not declining, and in fact bas actually increased in recent yeas. x. While the donor community is fully committed to assisting Mozambique's development and, in particular, to building up local capacity to do so, many past actions by donors have actually had the paradoxical effect of weakening capacity, especially of public sector institzitions. lhe widespread practice of "topping-up" project managers' salaries; the recruitment of Mozambican to work directly for the do*r"s at slary levels far above those prevailing in the local market; the casual hiring of donor-funded TA, without considering careflly the associated trainig of local counterparts; the establishment of autonomous project units within Government ministries, staffed largely by local "consultants"; the creation of project-specific training courses that bypass local training institutions - while intended to acceerate project implementation, have in a number of cases undermined the capacity of important institutions. Since the donors have thus in a sense contributed to the current crisis of local capacity, it should be incumbent upon them to be actively involved in the search for solutions. xl. While many factors acting simultaneously help to explain Mozambique's capacity wealmesses, constraints in five main areas appear to account for much of the present imasse. These constraints include: (a) the lack of adequate pal d ot incentives to middle and senior-level civil servants, inorder to recruit, retain, and motivae these cadres; (b) the insufficient output of qualified graduates of thelrs:it (c) the low numbers and poor quality of =er soda school gduates; (d) the ineffectiveness - and in some cases, absence - of high-quality local training zMg= in key professional areas (e.g., accountancy, law, economics) and in public management and administration; and (e) poor Use of sh Ai in building local institutions and transferring skills to Mozambicaus. xii. The first of the above factors is critical in creati 'demand" for skilled individuals and strong institutions, while the other four factors are vitally important in  - iv - enhancing the "supply" of middle and upper-level policy analysts, technicians, and managers. Ibe Govanmeet, with support from the donor community, Is committed to addressing all five of these facto tbrough an Integrated Capacity Building Strategy (presented August, 1992), in its goal to build up local capaoity in Mozambique over the coming decade. Strengthening the pipeline of skilled entrants into the civil service, parastatals, and private sector by investing more in secondary and tertiary education and special management training programs is a fundamental step, but Is clearly not enough. If adequate incentives are not provided and the work environment Is not conducive, senior staff will continue to flee Government agencies for private employment or even for professional opportunities outside of Mozambique. xiii. While measures to Improve capacity in the private sector through Improvements in secondary and tertiary education and in many technical and professional skllls areas (e.g., accountancy, law, etc.) are vitally needed, an effective use of capacity in the private sector also depends on a series of changes in the macroeconomic sphere and in the legal/institutIonal framework of Mozambique. Some of these changes which are currently being pursued include: reforms of the enterprise, banking, and land ownership laws, creation of viable financial markets, and the ongoing privatization of state enterprises. xiv. In Its broadest sense, the challenge of capacity building in Mozambique extends to both the public and private sectors, and to all skill levels of the labor market. Since the present report focuses mainly on building capacity to plan and manage economic development, it concentrates on skilled workers in the upper and middle-levels of Government and private institutions. At the same time, however, the importance of improving the general literacy of the population and the skills of lower-level workers (artisans, administrative/clerical staff, extension workers) is fully recognized. The Government, with support from the donor community, is currently engaged in efforts to build capacity at these levels, through programs for adult literacy, primary education, extension worker training, etc. These efforts will prove a key element of National Reconstruction, and need to be intensified in a post-war Mozambique. xv. The Government and donors are acutely aware of the crisis of capacity besetting Mozambique, and have begun over the past few years to take steps to resolve the crisis. In the area of civil service reform, for example, the Government in late 1990, with revisions in April, 1991 adopted a new salary scale which: (a) reduces dramatically the number of job classifications in the civil service from about 6,000 to fewer than 1,000; (b) creates a common salary scale for employees of all Government departnents, who previously had been paid according to a number of disparate scales; (c) increases in absolute terms total compensation paid to most civil servants, especially those in the middle and upper cadres; and (d) decompresses the ratio of wages for the highest to lowest categories of Government works from 8:1 to about 17:1. Subsequendy, in May, 1991, additional technical subsidies were provided for university professors, teachers and nurses, together with bonuses for the holders of advanced academic qualifications, ranging from 20% to 50% of basic salary. More recentdy, a joint Government-donor task force was formed in October, 1991 to explore a range of options for improving incentives for senior Government officials. Their efforts resulted in a government approved proposal for a Salary Incentive Fund for top-level civil servants, for which support has already been pledged by several members of the donor community.  -V.. xvi. The University has begun to take the lead in confronting Its own problems and managing its relations with the donors. It has organized two consultative meatinigs-n May 1991 and November 1992-for donors, representatives from other African Institutions of higher learning, and Mozambicans drawn from a wide range of Govermnent, academic, and private sector organizations. During the first meeting UEM presented a we'll-conceived institutional stabilization plan for the coming decade, and asked for greater donor flexibility In assisting the plan's implementation. Specific proposals Included small un-tied donor contributions to general university funds for purposes of staff development, technical assistance and library acquisitions. The need to earmark a limited portion of project funds for maintenance of UEM's Institutional infrastructure was highlighted. At the second meeting the University presented its first annual report, a yearly work plan based on a program budgeting approach, a proposal to establish a representative University Council, the University's first independent audit, and a set of Indicators for monitoring institutional performance. xvii. In secondary education, modest but encouraging initiatives include a project to enrich school libraries and provide individual schools with small flexible funds, the revision of the 11th and 12th grade curriculum, and the start-up of the first private secondary institution since independence. Similarly, In the area of vocational training, there are several promising programs which have been launched in recent years In the areas of business management, accountancy, and local government administration. A comprehensive vocational training strategy Is expected by Government during the first half of 1993. Among the professional education programs, the faculties of economics and law are currently striving to put in place sensible medium-term plans for stabilization and expansion, including rationalization of their use of foreign assistance from a multiplicity of sources. xviii. Finally, over the past three years, the Government has taken some important steps to contain the numbers -and cost of TA and Improve its effectiveness. In conjunction with the UNDP's NATCAP, it approved in May I .nO a national policy on technical cooperation which established a series of guidelines on TA management, covering (a) training, (b) rationalization of TA and reorientation toward priority sectors, (c) donor coordination, and (d) more systematic evaluation of the costs and benefits of technical aissistance. In December, 1990 the Government Issued a new regulation stipulating that foreigners working in Mozambique and Mozambicans employed by international agencies would be subject to a tax of 30% of their incomes earned in Mozambique. The imposition of this tax was intended not only to yield increased revenues for the Government, but also to provide a financial incentive to donors funding TA an Mo.-Ambican agencies receiving TA, to ensure that the technical assistance is vitally required and is being effectively utilized. Current efforts by both donors and Government are being directed towards increasing the transparency and reducing donor- driven distortions in the market for local consultants. Also being discussed is the development of clear guidelines for compensating civil servants who provide a form of "local TA" through their work on project-related activities. xix. While the measures listed above are encouraging, the Government and donor community must do much more if significant capacity is to be built in Mozambique over the next few years. This report contains a number of recommended actions in each of the chapters which follows. Some of the most important recommendations which, if implemented, would have a profound positive impact on Mozambique's development capacity, are given below.  - vi - xX. lhes recommendations together contituto a conservative "core" program to build capacity, under Mozambique's cureent conditions of transition to peace and its weak public fiscal position. If ceain key parameters change sigflcantly over the next few years, however, offorts to bufld capacity along the lines recommended in this report would need to be gready Intenified. These potential changes include: A fidl return to peace and security throughout Mozambique, given the signing of a peace accord ora October 4, 1992, leading to the reinstatement of clvil administration at all levels, rehabilitation of physical and social infrastructure, aed rapid expansion of rural and aricultural production. Implementation of demobilize- resettlement, and the planned national reconstruction would result in a dramatic w..-.ase In the demand for technical and managerial skills; - A related improvement in the Government's overall flscal position (resulting from accelerated economic growth) that, in the long-run, would more than off-set the costs of demobilization and repatriation, and would allow the Government to invest more in education and training; A major increase in HIV infection and AIDS, which has tended in many other Africa countries to take a major toll on the educated and skilled segments of the population; and - An opening of the post-apartheid South African labor market which could drain skilled labor from Mozambique. >.ecnunended AWg xxi. t=nge PubHi Sector Incentyves Tems and conditions of service should be improved by ensuring that taxation of personal incomes is applied uniformly across all sectors of the economy, and the current advantage of foreign exchange payments by private and parastal entities is eliminated (para 2.49); Career structures shoule. be reformed, de-emphasizing formal academic qualifications in career progressions for the technical cadre, and providing alternatives to formal educational qualification for specific positions and emoluments (para. 2.63); Capacity must be built urgently at district and provincial levels, by upgrading the seniority of posts and emoluments payable to officers serving outside of the capital, and by launching a multi-year program of facilities and housing construction (para. 2.67); To enhance further incentives for the senior civil service, the highest priority for salary increments should be attached to the entry levels for top managerial and technical cadres and to the Tecnico C and Tecnico D categories, who are badly underpaid. In addition, other non-salary incentives are required, including an enriched pension for long-serving officers, and programs that facilitate the purchase of  - vii - housing (including Government-owned housing for which privatization began in October, 1992) through special loan schemes (para 2.78). Restructring of the civil service may need to be cartied out, based on job inspections and functional reviews. If there urns out to be excessive staffing (and it appears that this may be the case for unskilled workers in pay grades V-Z at least), and the wage savings more than off-set the political costs associated with retrenchment, staff reductions may be justified. If so, related programs to facilitate the transition of retrenched staff to alternative employment would need to be put in place. Another approach to civil service restructuring which should be p,rsued would be to privatize civil service activities which are essentially commercial in orientation (e.g., food services, civil constwuction, building cleaning and maintenance, etc.; para. 2.57-2.62); xxii. The Univmht To maintain the quality and relevance of UEM trWaining, a number of measures should be adopted, including (a) moving to a degree-granting system based on academic course credits, (b) administering distance education courses in selected areas of high demand, (c) carrying out a thorough curriculum review before 1995, and (d) establishing informal advisory committees to UEM faculties, composed of representatives of public and private employers. At the same time, UEM should continue its policy of refraining from initiating new academic programs until existing ones have been consolidated (para. 3.23-3.28); UEM programs for research and contractual services need to be strengthened in ways that reinforce the University's teaching mandate and do not detract from it (para. 3.34); To maintain regional diversity within the student body, the pre-universitj secondary schools in the provinces need to be improved (see Chapter 4, too). Simultaneously, UEM should assess the possible need for means-ested financial assistance (bolsaa) for some provincial students, and should embark on a vigorous program to increase the number of dormitory beds at the University. UEM should avoid setting explicit regional quotas, but should establish 3-5 year diversity goals and monitor these actively (para. 3.43-3.45); To enhance efficiency at the University, higher student:faculty and support staff:faculty ratios need to be vigorously pursued, and ways of better managing student residences and cafeterias (including sub-contracting with private firms) should be explored. At the same time, the UEM staff development prograam to increase the number of Mozambican faculty should be accelerated, and a package of greater incentives (including salary and benefits, and especially faculty housing) should be developed and implemented (para. 3.65-3.68); To reduce the current high rates of drop-out and repetition and to improve the effectiveness of classroom teaching, the supply of textbooks, teaching materials, etc., must be expanded, and student living and study facilities should be significantly upgraded (para. 3.78-3.79);  - viii - The University's review of its overall management and governance structure and follow-up actions are strongly supported. Further efforts should be made to ensure that levels of decision-making and accountability coincide, especially at faculty level. The University should also begin to plan for the transfer of central administration, including personnel and student affairs, to the main campus (para. 3.91); The University's present degree of autonomy needs to be maintained. In this regard, the feasibility of establishing the University as a more autonomous public institution should be seriously explored. Finally, the donor community should respond positively to the University's proposal for greater flexibility in the structuring and management of donor-funded projects (para. 3.101). xxiii. Secondary Education The Government should give serious consideration to increasing the share of the education budget going to general secondary education from its 1991 level of just 6.7% to at least 12-15%. Implementation of many other recommendations for secondary schools depend on this increase, which would bring Mozambique into line with, other develcing countries (para. 4.34); The existing physical infrastructure needs to be significantly upgraded, including renovation of the five EPUs and their attached dormitories, cafeterias, study halls, etc. (para. 4.43); The pedagogical infrastructure is also gravely inadequate and requires urgent rehabilitation. This means re-equipping science laboratories, modernizing school libraries, and increasing the availability of basic textbooks (para. 4.44); To strengthen the effectiveness of teaching and learning, a series of organizational and management reforms should be carried out, covering enhanced teacher participation in curriculum design and setting of examinations, delegation of financial authority to individual schools, and promotion of Parents Councils and other forms of community involvement in school activities (para. 4.454.46); and Basic education policies for the secondary system should be re-evaluated, including those affecting teachers' incentives and career opportunities, use of distance education, and procedures for accreditation of private secondary schools (para. 4.47). xxiv. Technical. Vocational, and Professional Training An in-depth analysis of vocational courses currently offered should be conducted, linked to an assessment of the labor market. Based on this analysis, it is likely that the number of vocational institutions can be reduced and efficiency greatly enhanced. This should be accompanied by the establishment of a mechanism for continuing links between the training institutions and employers, for example by the establishment of advisory boards (para. 5.40); Instead of trying to provide full in-house capacity for practical training at vocational training centers, with all the corresponding equipment and material requirements,  - ix - apprenticeship schemes with local employers should be developed wherever possible (para. 5.43); Increasing operational autonomy of the professional training institutions should be accompanied by the establishment of professional certification standards for defined professions such as accounting, computing, paralegal studies, administration anid management, secretarial, etc. (para. 5.44); To strengthen accountancy training, the Technical Commission on Accounting should be supported in its efforts to define the levels of professional qualification and practice. Once this is done, the accountancy training set-up will need to be revised, including the structure of training institutions, curricula and learning materials, and teacher training (para. 5.67); To develop the required legal skills, the UEM Law Faculty must be stabilized tlhrough a program to retain existing staff and employ more teachers, furnish adequate teaching materials to students, and make faculty administration more efficient. Once the Law Faculty is stabilized, steps should be taken to increase enrollment, with a target of doubling the current student intake in the next five years. Short courses or seminars to upgrade the skills of practicing lawyers should also be a priority (paras. 5.93-5.96); ad The feasibility of developing a national college of administration and management should be explored. Both Government and donors should continue to encourage the practice of having lead ministries (MAE, Ministry of Finance, NPC, etc.) develop improved management systems and related training for the entire civil service. However, attention should be given to institutionalizing these efforts, both at central and provincial/ district levels, for example, by involving the School of Local Government Training (para. 5.119). xxv. Management of Technical Assistanc The National Program of Technical Cooperation should continue its efforts to develop a comprehensive data base on technical assistance that would facilitate monitoring of trends and formulation of related policies on TA. Sectoral Government-Donor Working Groups can also aid in the collection of this information. (para. 6.43); Government and donors should strive to develop mechanisms for expanded Grovernment control over and direct involvement in the recruitment, supervision, and payment of TA. At the same time, they should develop standard recruitment and contracting procedures that include well-defined terms of reference and detailed training and institutional strengthening plans (paras. 6.37-6.39); and Donors should consider increasing their financial support to the Personnel Fund, concomitant with Government measures to improve its administration, reporting, and audit functions (para. 6.44).  Sequtenng and FeBlbltl of RecommenMe Act3Qns xxvi. AlI of the recommendations listed above, as well as others which are contained in the various chapters of the report, can be expected to make an important contribution to building capacity in Mozambique. However, in view of the serious financial constraints facing the country, and - paradoxically - the limited capacity to implement reforms, it will be necessary to set priorities rigorously and thus develop a realistic, implementable program for capacity building. xxvii. On the financial side, it is essential that the education sector's share of th tota Gonme recurrent budget increase from 12-14% in the late 1980s to a level of 18- 22%. This appears to be happening already: preliminary figures suggest that education received over 16% of the recurrent budget in 1990 and is slated to receive about 17% in 1991. Even under these circumstances, however, the intra-sectoral trade-offs will be difficult ones. While primary education needs to continue to receive 40% of recurrent financing available to the sector, the University must at least maintain its current share of 20% and secondary education must obtain a significantly larger budget slice if capacity building is to be carried out effectively. xxviii. Regarding the investment budget, the capacity building actions proposed in the report appear to be ones that can be accommodated within the limits of planned Goverment spending for the next three years - especially when projected salaries for foreign teachers at UEM are correctly reclassified as a recurrent expense and not a capital item. However, as a more detailed capacity building program gets underway, the Government and donors will need to analyze its affordability carefully, both in terms of investment resources required and Implied incremental recurrent expenditues. If the program's affordability seems questionable, it may be necessary to consider reallocating resources from other sectors to this important capacity-building endeavor, or scaling back or deferring some capacity building actions until a later stage. xxix. In formulating an "action plan" for capacity building in Mozambique, one approach for the Government would be to select those actions that can be implemented immediately or in the near term, are teckh ally feasible, and can have a major impact in building capacity. Using this approach, thw main elements of the "action plan" should be: Reform of civil service career structures and improved working/living conditions at provincial and district levels, and a major enhancement in salaries and other incentives for senior public officials; Stabilization and expansion of UEM through staff incentive and staff development schemes, and enhanced quality of learning at the University through targeted improvements (e.g., textbooks, library resources, and student housing); Crash programs to rebuild the UEM economics faculty, expand the law faculty, and firmly establish the accountancy profession and related training institutions, and create a solid program of public administration or civil service training; and A major overhaul of the current system of technical assistance to Mozambique, including the untying of donor funds for TA, widespread adoption of improved  - xi - practices for recruitment, selection, and supervision of TA, and standardization of donor policies on hiring and payment of local employees. xxx. To implement an action plan for capacity building, a glose partrh between Government and the dinor community is u;gently required. Several encouraging steps in this direction have already been taken, including the formation of the joint Government-donor task force on public sector incentives and the formation of an inter- ministerial Government committee on capacity building, chaired by the Ministry of State Administration. In view of the pivotal role that MAE can be expected to play in capacity- building, a Planning Unit was created within the Ministry in October, 1992, which wUl provide technical support in the design of key policies and strategies undertaken in as part of an overall Capacity Building Program, and act as a secretariat for the Inter-Ministerial Committee. xxxi. On a sectoral level, Government-Donor-r-. orking groups can play a crucial role in implementing capacity building activities. Providing an effective forum for information exchange, policy discussion, and cooperative problem-solving, these working groups represent an extremely efficient means of donor coordination. They can aid in making the most of existing capacity at the sectoral level through substantially reducing the administrative burden on government. xxxii. In its efforts to build capacity over the next few years, MQanbinue should also take full advanta?e of a number of imnortant reeional initiatives currently under way. Among the more promising of these are the African Capacity Building Foundation, which is expected to provide both analytical and financial resources for capacity-building activities; the UNEDIL program for strengthening managemeAt training institutions in Africa; the PALOP program to coordinate training activities in the Portuguese-speaking countries of Africa; and the SADCC human resources development program, led by its Regional Training Center based in Swaziland. All of these regional initiatives present Mozambique with opportunities to benefit from the experience and expertise of other African countries in the area of capacity building.  I. SIUDY BACKGROUND. OBJECTIS AMD MM ISE A. introduction 1.1 Mozambican Government officials, the World Bank, and donor representatives agreed during the December 1990 Consultative Group meeting in Paris that a major new initiative to build capacity was essential to ensure the successful implementation of the Economic and Social Recovery Program (ESRP), the realization of the Priority Districts Program and the fight against poverty. To this end, it was agreed that the Bank, working in partnership with the Swedish International Development Authority (SIDA), would assist the Government in developing a framework for analyzing the existing capacity problems in Mozambique and proposing measures to expand capacity in both the short and long term. This resulted in the 'Capacity Building Policy Framework Paper" which was presented at the CG Meeting in December 1991. 1.2 In addition, it was agreed that the Bank and SIDA would collaborate with the Government in a Capacity Building Sector Study that would go beyond the Framework Paper by examining in greater depth the current lack of capacity, especially in Government; pinpointing the major constraints to increasing such capacity; and identifying a series of priority actions to overcome these constraints. The study would look at systemic factors affecting the public sector and the Mozambican economy as a whole, rather than focusing on the shortage of skllled manpower and weak organizational structures in any one sector. The study would aim to combine 'supply' side issues, i.e., barriers to the increased supply of skilled labor (in higher education, secondary schools, and local training programs) with 'demand' issues, i.e., lack of incentives and other factors impeding the Government's ability to attract and retain high-level manpower. The study would also assess options for improving the use of foreign technical assistance in building capacity, the potential role of regional training and research institutions, and ways in which donor policies and actions in this field can be better coordinated. B. BaXonmd 1.3 Among the world's developing countries, Mozambique suffers from the effects of having one of the weakest human resource bases. The shortage of trained manpower is extremely acute at all levels, from the most basic workers to senior technicians and managers. Out of a total estimated population of 16 million, Mozambique has less than 3,000 university- trained people, and only 25 of these have doctoral degrees. Less than 15% of senior civil service personnel have university training, and a surprising one-third of senior civil servants have only completed primary education. Substantial gains in management and technical capacities will be required if Mozambique is to steer a productive development course in the years ahead. 1.4 The colonial legacy of severely underdeveloped human resources lies at the origin of Mozambique's current capacity problems. At the time of Independence In 1975, the overall literacy rate was only about 8%, a result of the Portuguese colonial policy of making formal education inaccessible to the bulk of the local population. Even though a university campus was established in the capital of Lorenco Marques (now Maputo), most of the students  -2- were Portuguese nationals, not native Mozambicans. At the time of independence, the vast majority of experienced administrators, technicians, small businessmen, professionals, skllled workers, and artisans abandoned the country as part of the Portuguese exodus. From a policy-analysis and management standpoint, the country was decapitated. 1.5 Since that time, the Mozambican G;overnment has made important strides In rebuilding Its human resource base, by improving access to education at all levels and promoting adult literacy. Between 1975 and 1986, primary enrollments more than tripled, and secondary enrollments Increased four-fold. The literacy rate of the 15-24 age cohort grew to over 40%1/. Despite thisi significant progress, Mozambique's population remains one of the least educated in the world, according to the standard indicators. The decline in primary and secondary enrollments in the last few years (combined with a likely deterioration in the quality of learning), because of war-related Insecurity and insufficient budgetary resources for the education sector, has clearly exacerbated the situation. 1.6 The number and quality of secondary and university graduates is gravely insufficient to meet Mozambique's needs for high-level manpower. The country's gross enrollment ratios for tertiary and secondary education (0.2% and 7%) lag far behind the regional averages for Africa (2.4% and 23%). Low output at these levels of the education system is also apparent in the educational profiles of public and private sector employees. According to a 1991 survey of the top levels of the civil service, only slightly more than half of the 247 Central Government department heads surveyed had completed secondary school. For local governments, the situation is worse: of the 206 district directors surveyed, only 74 had gone beyond primary level, and none had attended the university. Ministry of Labor data for 1987 indicate that within the private sector, about 40% of Mozambicans in technical and management positions had less than a 9th grade education. Less than 1% of the private sector work force, or 355 persons out of 168,800 surveyed, were university graduates. 1.7 For the Government, the severe shortage of trained Mozambicans is compounded by the problem of inadequate pay and other incentives offered to civil servants, especially in the higher echelons of Government. While the ratio of pay for senior staff as compared to workers in the lowest grades has been somewhat de-compressed In recent years, wage differentials between the public and private sector remain quite wide. In addition, low salaries for mid-level managerial and technical staff and barriers to promotion are a serious disincentive to these civil servants. As a result, there is significant staff demoralization and absenteeism, and a numbers of key senior officials are leaving public service for the local private sector or for employment abroad. 1.8 Another symptom of the current crisis of local capacity, especially in Government, is that Mozambique has turned to increasing numbers of foreign assistance personnel to help make the public sector, and indeed the entire economy, function. A UNDP National Technical Cooperation Assessment and Programmes (NATCAP) study estimates that in 1987, a total of 3,000 technical assistants were working in the country at a cost of about US$168 million, equivalent to about 10% of Mozambique's GDP. This technical assistance is not well managed. In some cases, expatriates are being employed to do work which could be performed by trained Mozambicans. In many other cases, the expatriates carry out needed If Information in this section is drawn from Mozambique: Education and ower DgWgament EMI , Staff Appraisal Report No. 7084-MOZ, April 1988.  -3- technical or managerial tasks but do not transfer their skills or knowledge to local Mozambican counterparts. It is widely recognized that this costly dependence on foreign technical assistance is not declining, and in fact has actually increased in recent years (Informal estimates reach as high as 5000 technical assistants working at mid- and high-level jobs in 1992). 1.9 Government has expressed a strong interest in building development management capacity in Mozambique, through the formal adoption in August, 1992 of a Capacity Building Strategy, targeted support to the education sector, design of more effective public sector incentives, and improved use of technical assistance. Consistent with this emerging policy for capacity building, the Government is now taking a number of actions, including: (a) implementation of two IDA-funded education projects that aim to improve both the quality and quantity of instruction in primary schools and at the Eduardo Mondlane University (UEM); (b) completed with the World Bank a study of "Public Pay and Employment"Z/. In this area, the Government published a new salary scale, effective April 1, 1991, which unifies salaries across the civil service, and decompresses the ratio of the highest to lowest salaries from 8:1 to 17:1; (c) with the support of the NatCAP program, the implementation of a national policy on technical cooperation adopted by the Council of Ministers in May 1991; (d) as its own initiative, UEM in May, 1991, presented to the donor community a proposal for meeting the University's "basic minimum needs", designed to first halt and then reverse the institutional deterioration that has occurred in the last few years. Progress made on these fronts and a continuing work program were presented in a second donors' meeting in November, 1992; (e) approval of two IDA-funded capacity building projects the first of which aims to support and stabilize university and upper secondary education, while the second, and linked, project, builds MAE's capacity to improve public administration and development management and strengthens legal institutions; and (f) endorsement of the Government-Donor Working Group process at the sectoral level as a means of improving donor coordination, reducing the administrative burden on Government, lowering information costs, and providing common solutions to implementation problems faced by a variety of external agencies. 1.10 The World Bank's overall strategy for Mozambique, as expressed in the 1990 Country Strategy Paper (CSP), identifies capacity building as a major focus of economic and Z/ World Bank, Mozambique: Public Sector Pay and Employment Review, Report No. 9815-MOZ, December, 1991.  -4- sector work, as well as policy reform and project investment. The CSP proposes that specific attention be paid to public sector incentives, local skills development, Improved use of technical assistance, and increased donor coordination - all areas examined in this study. Some of this study's recommendations have been incorporated in the design of several IDA- funded proJects, including the Capacity Building Projects and Roads and Coastal Shipping Project and in the Economic Recovery Credit, as well as in other donor-ffnanced projects in Mozambique. 1.11 The sector study is also consistent with SIDA's increasing emphasis on education and public sector management in Mozambique. Sweden's long-standing support for education covers primary education, textbook development, adult education, and technical- vocational training. The three-year program, which started on July 1, 1991 and has quality improvement as ita overall objective, includes SIDA assistance to higher education and support for research and evaluation and development of other didactic materials. At the same time, Sweden continued its broad-based support to public sector management, including assistance to budgeting and financial management (mainly through the Ministry of Finance) and to manpower development and personnel management (through the Ministry of State Administration). C. Study Objectives, Scope, and Methodology 1.12 QIbivtes The overall objective of the study is to formulate practical options/recommendations for improving Mozambique's capacity to plan and manage development activities, with an emphasis on increasing the number of local skilled personnel in the civil service. To that end, the study attempts to: (a) Review existing incentive mechanisms for the civil service, in ordir to identify ways of improving the recruitment and retention of qualified senior personnel; (b) Assess the pipeline of skilled personnel and related training programs at UEM, the pre-university secondary schools, and local in-service courses, and propose related improvements in this local system of education and training, and in Mozambique's use of external training institutions, especially those located in East and Southem Africa; (c) Analyze the effectiveness of technical assistance in increasing local capacity, and recommend measures to improve such effectiveness; and (d) Evaluate critically past donor performance in building capacity, in order to pinpoint ways of better harmonizing donor policies (e.g., on recruitment of technical assistance, topping-up project staff salaries, etc.) and investments (e.g., in education and training projects) that affect capacity building. 1.13 Scp. The study chapters that follow are organized to deal with six major topics in capacity building:  I . -5- (a) :: profiles of the senior civil service (age, educational level, tenure, turnover rates, rate of promotion, in-service training); the current structure of incentives (pay, fringe benefits, promotion) and disincentives; key issues in the organizational environment that impede capacity-building (degree of centralization/delegation of authority, administratlve procedures and information systems, office technology and support services, work culture); and potential measures to improve the recruitment and retention of senior staff; (b) Ie Universit: examination of its current and future mandate in promoting national reconstruction and development; UEM's overall accomplishments and shortcomings (financial, staff, research, conditions for study, access, management systems) in seeking to fulfill that mandate; immediate and pressing constraints to expansion of and improver ant in the quality of learning, with special emphasis on selected priority disciplines (e.g., economics, law, and engineering); and preparation of a strategic institutional development plan for UEM; (;) Secondary Education: status and trends in pre-university secondary education (enrollments, teaching staff, expenditures, maintenance of physical assets, curricula); critical bottlenecks to expanding enrollments and improving the quality of learning (shortages of teaching materials and equipment, lack of managerial autonomy at school level, etc.); the relationship between pre- university secondary schools and other medium-level education programs (technical training, teacher training, adult education); and strategies for institutional development to bring secondary education into line with the requirements of University and the needs of the economy; (d) LocJcal ining: the extent of shortages of trained Mozambicans in key skill areas for planning and managing economic development: (i) accounting and auditing, (ii) management and public administration, (iii) economics, and (iv) law; the availability and effectiveness of ongoing local training programs in these areas, including innovative approaches (part-time, link institutions, distance learning); and the organization and management of technical- professional training in Mozambique; (e) Technical Assistance: the magnitude of technical assistance throughout Government and its performance in transferring skills and developing local institutions; typologies of TA by types of contract and function; and options (including guidelines recently proposed by the Government, expanded use of untied TA, etc.) for improving the utilization of technical assistance; and (f) Dlnor Coordination: the abundance of donor-funded projects in Mozambique; experiences with flexible funding, untied assistance, and Government-Donor Working Groups; external assistance as cause of existing lack of capacity labor market effects, strain on government personnel) and solution (investment in education and training, more effective management of technical assistance, program rather than project support, support to public sector incentives).  -6- 1.14 While measures to Improve capacity in the private sector through improvements in secondary and tertiary educaton and In many technical and profesional skills areas (e.g., accountancy, law, etc.) are vitally needed, capacity creation in the private sector also depends on a series of ongoing changes in the macroeconomic sphere and in the legal/institutional framework of Mozambique. Some of these changes which are currently being pursued include: reforms of the corporate, banking, and land ownership laws, creation of viable financial markets, and the privatization of state enterprises. These changes, while essential for capacity building, are not analyzed in this report, since they have already been covered in other Government, World Bank, and donor reports. For the same reason, ongoing donor-supported initiatives to strengthen the private consulting industry in Mozambique are not discussed further in the present report. 1.15 In its broadest sense, the challenge of capacity building in Mozambique extends to both the public and private sectors, and to all skill levels of the labor market. Since the present report focuses mainly on building capacity to plan and manage economic development, it concentrates on skilled workers in the upper and middle-levels of Government and private institutions. At the same time, however, the importance of improving the general literacy of the population and the skills of lower-level workers (artisans, administrative/clerical staff, extension workers) is fWlly recognized. The Government, with support from the donor community, is currently engaged In efforts to build capacity at these levels, through programs for adult literacy, primary education, extension worker baidning, etc. These efforts need to be maintained in the coming years, and as part of the National Reconstruction process, further intensified. 1.16 Conltual F tagmerk and MethodolgE There is at present no agreed methodology for analyzing a country's capacity strengths and weaknesses. The analytical framework employed in this study defines 'capacity' as: the high-level skills, systems, and institutional structures required for a government to act effectively in policy formulation, planning, and management. The analysis concentrates on the linkages between the "supply" and "demand" factors that increase or inhibit the building of such capacity. The linkage among these factors can be expressed through a simple paradigm: In order to build the capacity of the civil service in Mozambique, strengthening the pipeline of skilled entrants by investing in secondary and university education is a fundamental step. However, it is clearly not enough. AdeqWe incentives must be provided to attract and retain skilled employees. The appropriate organizational structures and institutional environment for policy formulation, planning, and implementation need to be established. Technical assistance, where necessary, must be encouraged to contribute to local training and skills development. Local in-service and on-the-job training efforts should be supported. And where local education and training is not cost-effective, Mozambique should exploit regional training opporunities. An underlying assumption is that in the future, Government programs as well as donor-funded operations must address a number of these factors simultaneously for a capacity building initiative and the planned post-war reconstruction to be successful. Otherwise, a situation will arise where, for example, Government officials will complete costly training programs, only to leave the civil service shortly thereafter because of poor incentives.  - 7 - D. Issues to be Addresed Public -ervice Inrentlyes (Chapter 2) 1.17 Chapter 2 addresses one of the most serious constraints to building capacity in the public sector: lagk of inlcentives fr public sector employees. While Government has begun to address this problem with the publication of a new salary scale in April, 1991, and the provision of technical subsidies the following month, much work remains to be done. The gap between public sector pay levels and those offered by the private sector and by international donors is large. In the absence of public pay reform and improved coordination among donors on direct hirlng or topping-up of Mozambican officials' salaries, skilled labor will continue to be bid away from the public sector. 1.18 The Government has improved public sector incentives somewhat, by decompressing wage differentials and increasing pay levels across the board. The ratio of the highest to the lowest salary was increased to about 17:1, effective April 1, 1991, as compared to a previous ratio of 8:1. This revision of the salary scale was followed the subsequent month by additional salary improvements for teachers, nurses, and university staff. In the second half of 1992, the Government formally approved an incentives program for senior staff, and is now raising funding from the donor community, with implementation intended prior to the close of 1993. The Government has made important progress in pay reform and the design of an incentive program for senior staff, but more needs to be done to implement and monitor these incentive programs targeted to senior staff, and to develop a long-term budgetary program which would incorporate further pay increases into the regular Government budget. More work must also be done on changes in the composition of fringe benefit packages, the implementation of career development programs and rewards to experience, and other possible measures such as a Government subsidized housing finance scheme which would enable civil servants who are tenants to purchase Government owned housing. 1.19 Weaknesses in the organizational structure and work environment of many Government institutions also act as a disincentive to senior staff. Much of the analysis of these institutional shortcomings has been carried out in the context of sector-by-sector studies (e.g., of the Ministries of Agriculture, Education, Health, Bank of Mozambique, CNP, and of certain state enterprises). While many shortcomings are institution-specific, others are more generic: poor delegation of authority, weak personnel management practices, inadequate office technology, poorly-trained support staff, etc. 1.20 For each of the Government institutions that is expected to play a major role in national reconstruction and development over the coming decade, it will be essential to elaborate and implement a strategic institutional development plan. Most of this institutional development effort can best be supported through focused sector-specific projects, many of which are already receiving substantial donor support. The intention of this study will be simply to illustrate common constraints to institutional development, and to focus particularly on the salary and non-salary benefits and career development incentives that need urgently to be enhanced, if the senior civil service is to grow and operate effectively during t.e 1990s and beyond. 1.21 In light of the above, in Chapter 2 of the sector study we address the following issues:  -8- (a) What is the magnitude of the problem of exodus of senior civil servants? Attrition and vacancy rates? Age and educational profile? How has the composition of the civil service changed over the decade? What is the relevant opportunity wage for senior civil servants, and what are recent trends in public/private wage differentials? How will this situation evolve in the absence of major reforms in the next few years? (b) What are the main options open to the Government to improve such incentives? What do the senior officials themselves see as the main areas that need improvement? What level of pay increase would be required to have a signiflcant impact? What about career development programs, "high flier" schemes? Deferred pay schemes? How should fringe benefits be restructured, and how can the intended privatization of the Government-owned housing stock fit into an incentive program for senior staff? Are such options for improving incentives politically acceptable, financially affordable? How can Mozambique learn from other countries' experience (e.g., Ghana, Uganda, Bolivia) in the design of incentives schemes? (c) What is the appropriate role of various Government agencies, especially MAE, in planning, implementing, and monitoring a program of improved incentives for senior civil servants? Which personnel management functions should be centralized within MAE, and which left to the individual ministries? How can MAE's own capacity best be strengthened? HigIwk..EduiQtinn (Chapter 3) 1.22 Chapter 3 describes UEM's dual problems of low graduate output, in relation to the country's need for university graduates, and inadequate educational quality. Student intake at Eduardo Mondlane University (UEM) has increased to over 700 per year in 1991, but because of poor student performance, the University has been graduating only 150 students annually. The most serious constraints to increasing the output of graduates include the shortage of qualified secondary school candidates to enter UEM, an insufficient number of qualified national teaching staff, scarcity of textbooks, library resources, and laboratory equipment, and limited physical facilities (especially dormitory space for students from outside Maputo). As a result, a number of faculties have in the past been forced to operate at a reduced level of output: in an extreme case, the Law Faculty was forced to close for more than four years. 1.23 While the cost of university education is relatively high when technical assistance is included, the quality of learning remains low. Only half of the students who enroll at UEM actually graduate, and most of these take 20-40% longer to do so than is normally necessary. The poor learning environment is the product of a number of factors, including the shortage of qualified Mozambican teachers, deterioration of the UEM physical plant, lack of basic learning materials, and persistence of rigid academic regulations that impede student progress through the system. 1.24 The University's own capacity is currently being eroded by the same problems of staff recruitment and retention that are affecting the rest of the civil service. In recent years, opportunities in the private sector have begun to draw academics away from UEM,  -9 - especially in economics and engineering. Faculty salaries are significantly less than what comparable professionals can earn in the prlvate sector. In addition, lack of staff accommodation and poor research facilities act as important disincentives. As a result, the Faculty of Economics now has just nominal full-time Mozambican staff, and as of 1991, 16 faculty posts in economics remained unfilled. 1.25 To attack these problems, the University has prepared a long-term plan for institutional stabilization and expansion which was presented May of 1991. This plan Includes staff development for teaching and non-teaching personnel; upgrading and expansion of facilities, housing, and transport; provision of basic teaching equipment and materials; and improvements in internal management and governance. UEM and donors have also explored the idea of a flexible institutional support fund to supplement the University's currently inadequate recurrent budget, with external financing pooled (rather than earmarked, as had been past practice) and allocated under a commonly-agreed budget program. In 1991 SIDA and Norway contributed via this funding mechanism, and the Netherlands will also begin contributing in 1993. 1.26 In analyzing the constraints to capacity-building at UEM in Chapter 3, we examine the following issues: (a) How can UEM best contribute to Mozambique's future needs for skilled manpower? How can research outplt be increased? What are the prevailing access and equity issues, and how might they be addressed? How can the University interface effecthvely with other parts of the higher education system and with local training initiatives? (b) What is the magnitude of the understaffing problem (key departments affected, attrition rates, impact of salaries/incentives, work environment, exodus of East Europeans)? What sort of a staff development program needs to be launched? How can staff retention be improved? (c) What are UEM's financial needs, including short and long-term capital investment requirements, and how serious is the immediatte problem of insufficient recurrent budget? How successful has been the donor-supported flexible fund in solving this problem? Does the University have the management capacity necessary to Implement such a scheme effectively, and, if not, how can this capacity be developed?  - 10- S- ' Educat (Chapter 4) 1.27 At present, there are only five specifically designated pro-university secondary schools in Mozambique (EPtJs).2/ These schools, located in urban centex have places for only about 3,500 students (excluding night classes), and are ill-equipped to teach the established curricula. Physical plants are in disrepair, and textbooks, libraries, equipment, and laboratories are virtually nonexistent. In addition, these schools teach curricula which are excessively theoretical and force students to memorize large amounts of material for exams, with little emphasis on conceptual lnowledge and analytical skills. 1.28 Despite this unsatisfactory situation, there have bean few studies of secondary education or projects benefitting the sub-sector. The tendency has been to focus on primary education, and, to a lesser extent, the University, which is viewed as the direct supplier of high-level manpower. (Exceptions to this rule include the Ford Foundation, which has financed a project to improve library facilities at the pre-university institutions and provide a small flexible fund to each school for its own locally-identified needs, and IDA Capacity Building I project, approved in November 1992, which supports quality improvements in pre- university education). As a result of the previous neglect of secondary education, UEM is receiving large numbers of secondary school graduates who are not adequately prepared to enter the University. To deal with this problem, UEM must allocate scarce resources to a remedial course known as BUSCEP (Netherlands and EC-financed). Similarly, in the training program at Electricidade Mozambique (one of the most effective providers of in-service training in the country), the first two months are devoted to a review of secondary school curricula. In short, deficiencies in secondary education have to be made up by other institutions in the country at significant expense. 1.29 Accordingly, in Chapter 4 we examine the nature and causes of the current failure of the secondary education system to provide adequate preparation for UEM or specialized training, and address the following issues: (a) What are the main factors affecting the quality of secondary education? Shortages of qualified teachers, learning materials? Inadequate facilities and equipment? Inappropriate curricula? What needs to be done to enhance the quality of learning in these institutions? (b) Should the nuimber of pre-university schools and their total enrollments be increased? How can girls and students from rural areas have access to these schools? What would be the cost of such an initiative? (c) What is the share of the budget allocated to secondary education, and is this adequate and/or appropriate? What can be done to improve the management of these scarce resources, e.g., greater financial and administrative decentralization? Is there scope for the creation of private secondary institutions, and what is Government policy in this regard? ]/ There also exists a technical training track within the Ministry of Education, from which graduates sometimes proceed on to University, e.g., Instituto Commercial and Instituto Industrial.  - 11 - lalnl Prograins (Chapter 5) 1.30 Ihe UEM, the Commercial Institute of Maputo, and several professional training centers (centros de formacao profissional) offer basic and in-service training in economics, management, law, and accounting. In addition, local training centers and special courses operating in Mozambique provide short-term and/or in-service training in key areas for capacity building (accounting/audit, aspects of public administration, judicial process). Some of the most successful of these training activities have been organized by Government ministries for their own employees, using tailor-made curricula developed and taught by staff of an overseas "link institution". The Ministry of Finance has had notable successes with these arrangements. 1.31 Both World Bank lending and SIDA education projects in Mozambique have supported local training. The Bank's Economic and Financial Technical Assistance Credit contains a local training component for staff of the Bank of Mozambique and for public sector and parastatal financial officers. The First and Second Education projects support local management training for personnel of the Ministry of Education, as well as improved training in accounting and customs management at the Commercial Institute of Maputo. SIDA has provided major assistance to the Industrial Institutes of Maputo and Beira and the Centro de Formacao Industrial (CFI), and has sponsored the masters level distance learning program in economics for Government officials. 1.32 Despite these and other efforts to promote local training, they have yet to meet the current and projected future demand for skills or to provide the needed quality of training. With a few notable exceptions, the ingredients of successful training - good teachers, curricula, teaching materials, and facilities - are lackdng. Many courses are not certified to establish equivalence and ensure quality. t '1 of the technical and many of the vocational schools provide a combination of formal aca4emic and professional training, with the result that the quality of both technical and academic instruction is seriously diluted. Despite the recent emphasis on expanding locally-based training, Mozambique continues to depend heavily on costly and often inappropriate training o-utside the country and the Southern Africa region. 1.33 In Chapter 5, we review critically the issues related to loc&il training, including the following: (a) Which areas of local training require the most urgent expansion and upgrading? How can existing courses in these fields be improved and made more cost-effective? What is the scope for expansion of private training activities, and does Govermnent have a role to play in monitoring/regulating these? What have been the most successful training initiatives in Mozambique, and what lessons can be leaned from these experiences? (b) To what extent could Mozambique take advantage of the experience and resources of other training institutions within the region? What lessons have been learned on how such institutional linkages, including twinning arrangements, can be made most effective? Under what circumstances is external training still justified? Could better use be made of overseas scholarships?  . 12 (c) Within the civil service, how can more effective use be made of tranig opportunities? How can access to local training be tied to civil service incentive schemes? (Chapter 6) 1.34 The current system of technical assistance exhibits a number of serious weakesses. The Government has little control over the declsion to hire foreign technical assistance and limited ability to monitor services received. As a result, there are reported to be cases where foreigners are displacing qualified Mozambicans. All too frequently, little transfer of knowledge from technical assistants to local counterparts takes place: Mozambique obtains the immediate services of the technical assistant but no long-term gain in local capacity. External firms providing technical assistance have little incentive to "train themselves out of a job" by improving the skills of their local counterparts. At the same time, the Government finds it administratively difficult to cope with so many TA contracts and to identify qualified local counterparts. 1.35 The Government, with support from UNDP through the NatCAP program, is attempting to improve the management of technical assistance. To date, an overall policy on technical assistance has been formulated, and each ministry is preparing a sectoral strategy and a human resource development plan which Is supposed to integrate TA needs into the larger manpower needs of the Mozambique Government. Other donors are discussing with the Government options for Improving procedures for recruiting, contracting with, and supervising TA, and ways of expanding the use of "untied' TA which could prove to be more cost-effective than existing arrangements. The Government has also imposed a tax on the income of TA personnel, which is intended to contain and rationalize its use. 1.36 In Chapter 6, we analyze a series of issues related to the management of technical assistance, including the following: (a) What is the weight of TA in total external assistance? What are the various mechanisms for contracting TA in Mozambique? What are the functional types of TA? How effective is its use? Are there "best practice" examples of certain types of TA that have been effectively utilized to transfer skills and improve local institutions? What factors account for the extreme cases of success and failure? (b) What policy measures would help to improve the effectiveness of TA? Can counterpart training be enhanced? How feasible and effective would untying of donor funds be? How can Mozambique develop the capacity to manage TA better? How can a greater consensus be reached among donors on the recruitment of TA? 1.37 The Role of the Donor Community The lack of coordination among external donors has been a major factor contributing to Mozambique's capacity building difficulties. Competition among donors for scarce managerial talent in the Government, for example, has resulted in an escalation of salary supplements for Mozambicans managing donor-funded projects. If steps are to be taken to remedy this situation and make a concerted effort to build capacity, the donors must start to work together. Donors have been asked to help fund an improved program of Incentives for senior civil servants, for example, at least  -13 - during a transitional period aftr which the Govarment can finee the entire program; donors woud also need to agree not to undermine such a program by outbidding the Government in the local labor market. Badly-needed investments in secondary and higher education and in local in-service training wih also require close coordination of external funding. The concept of a flexible funding to help meet recurrent spending needs, in the University or in other sectors, depends on donors reaching agreement with Government counterparts on overall programs of support as opposed to project-specific activities. 1.38 One of the proposed study's objectives is to Increase awareness and forge a consensus among donors about the nature of the capacity problem and the range of possible actions to resolve them. In the concluding Chapter 7, we will explore options for increasing donor coordination in capacity-building.  -14- II. U 1C SECT INCE E A. batrmducli 2.1 It is extremely difficult for the Government to attract and retain highly skilled personnel in the current very tight labor market conditions for such individuals in Mozambique. On the supply side, fewer than 3,000 in a labor force of some 6.2 million have a university level qualification. On the demand side, other parts of the formal economy, including the parastatal sector, compete with the civil service for the relatively small number of newly qualified entrants to the labor force. In the near future, it can be expected that an expanding private sector wIll offer strong attractions to recently qualifled high level manpower and for mid-career professionals and managers. The Public Sector pay and Employment Review4l also suggests that the escalation of remuneration for workers possessing specific, higher-order technical, professional or managerial skills has been drlven in signiflcant part by increasing net inflows of foreign assistance. The aid agencies are becoming Increasingly conscious of the extent to which they are "part of the problem", and it is likely that coordinated efforts among them could result in a better balance between supply and demand in this segment of the labor market. Even so, the general context will continue to be one of intense competition for the available pool of skilled labor and for new entrants. 2.2 For the foreseeable future, therefore, the ability of Government to compete with other sectors for the services of qualified personnel will be critical to economic recovery and national development. To do this, significant measures must be adopted to attract and retain senior staff in the civil service. In addition, a concerted effort is required to enhance the productivity of this senior level staff through measures to improve the motivation and workplace environment, if sustainable improvements in capacity are to be realized. 2.3 In addition to the overall conditions of labor supply and demand alluded to above, analysis of public sector incentives and their relationship to capacity building must also take into account the existing structure of the civil service, the ongoing process of civil service reform in Mozambique, and the continuing tight fiscal constraints on the public sector wage bill under the Economic Recovery Program. ITese factors are discussed in Parts B and C below, and the various constraints to building capacity are laid out in Part D. The main elements of an incentives policy and a number of major recommendations for addressing capacity constraints are presented in Section E. B. The Civil Service in Mozambique 2.4 Civil Service Reform to Date The process of creating a national civil service in Mozambique has been ongoing since Independence in 1975. The most recent phase of civil service reform (since 1987) is taking place within a larger policy environment, in which the role of Government is shifting away from direct operation and control of the economy to the monitoring and regulation of economic activities. Concomitant with the shift, the Government is A/ World Bank, Mozambigue: Public Sector Pay and Employment Revie, Report No. 9815-MOZ, December 1991, page 5.  - 1S - increasingly concentrating its investment resources on rehabilitation of basic infrastructure and the development of human resources, especially in the rural areas. 2.5 The main objective of the April 1991 civil service reform Is to create a more integrated system for public sector management, a system in which existing differences among ministries In structure and management systems are rationalized and simplified. The basic guidelines for this reform are provided by the Esatto Geral dos Funcionarios do Estado (EGFE), approved in May 1987 but not yet fully implemented. In this statute, a system of common careers and functions applicable is defined across all ministries and from central to district levels of Government. 2.6 Among the principal accomplishments of the civil service reform to date are: (a) a sharp reduction in the number of different job and position classifications, from more than 6,000 to fewer than 1,000. As of November 1992, the process of reclassifying management and technical staff of the ministries in terms of the simplified structure was still in progress. Ministries may also define their own non-common technical careers using the same qualification standards as apply to the common technical careers; (b) the definition of several service-wide common or general career structures for technical, professional and management personnel; and (c) the consolidation of a number of different pay and grading classifications into a single table applicable across the civil service (the tabela salarial unica , to which all new job classifications are related. This structure comprises 23 pay levels (ktras), each divided into three steps corresponding to classification distinctions. 2.7 Structure and Distribution The civil service in Mozambique is not large relative to that of other African countries, numbering 105,000 according to a 1990 estimate. Of this total, more than half are attached to the Ministry of Education and Ministry of Health. Two configurations of civil service size and distribution, derived from the 1990 survey, are shown in Tables 2.1 (all civil servants) and 2.2 (civil service excluding teaching and nursing staff). Table 2.1 is organized by Ministry, and Table 2.2 by pay level. This second table is based on a detailed survey of over 83,000 civil servants; when the estimated numbers of Government teachers and nurses are removed, a residual of 52,332 persons emerges for the civil service.J/ I/ lhe actual number of civil servants in Mozambique is still to be determined. The number of 105,000 civil servants is based on two parallel estimates: the preliminary results of a 1990 census of the civil service carried out by MAE and a reconciliation of this census with the payroll carried out by the Ministry of Finance. The ongoing process of job reclassification and integration into the revised salary scale has further refined these original estimates. Initial results at the end of September 1991 suggest that about 90,000 civil servants (instead of 105,000) are in the Goverment's payroll. As of November 1992, the three-stage process of integration into the revised salary scale had been completed for some 77,000 civil servants.  awCeAACITY WIWDO sl)e Tils~~~~~,'s S.wmL Srit-tro owl .'sn .Est,r p.* Pr.v..090 I Co. C nrl Tot t Cebo I C... I n th.abs t Ic et.tO tut*ot ls I4"Gsse I5 ofs I | .. l." i.. I l .mI " o Civil pCsrI ro. C allpdo I P.0,. CI, Servants G Cow O 02 03 04 05 06 0o 1 0 1 og _ I reaidazc. 307 30? 0 0 0 0 0 0 a _ 0 0 0 0 2 rwic,uIture 3.- 1003 ISO 900 107 30 327 12 443 365 410 323 Sr llfdr.ar;icuit. 0 SO 60 00 0 0 0 0 0 0 0 0 0 0 4 Cotte 46 44 0 0 0 0 00 0 0 0 0 0 0 6Coww_ 0 - O _ _