Zambia - Financial and Legal Management Upgrading Project (FILMUP)

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 1181 7-ZA. STAFF APPRAISAL REPORT ZAMBIA FINANCIAL AND LEGAL MANAGEMENT UPGRADING PROJECT (FILMUP) June 22,1993 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.  CURRENCY EQUIVALENT Currency Unit = Zambian Kwacha (K) US$1 = K400 at time of appraisal (February 28, 1993) US$1 = K500 (April 1993) FISCAL YEAR January 1 to December 31 MEASURES Metric System ACRONYMS ATC - Accountancy Training College, Chingola CBU - Copperbelt University FCC - Financial Component Coordinator IRC - Industrial Relations Court LCC - Legal Component Co-ordinator LPI - Law Practice Institute MOLA - Ministry of Legal Affairs NIEC - National Import and Export Corporation NSBM - NIEC School of Business Management OED - Operations Evaluation Department (of the World Bank) PMU - Project Management Unit ZICA - Zambia Institute of Certified Accountants ZNTB - Zambia National Tender Board  FOR OMCAL USE ONLY ZAMBIA FINANCIAL AND LEGAL MANAGEMENT UPGRADING PROJECT IFILMUP) STAFF APPRAISAL REPORT Table of Contents CREDIT AND PROJECT SUMMARY ...............................- i - -iii L. BACKGROUND A. Introduction . ............................................. 1 B. The Accountancy Profession ........................................ 2 C. Issues in the Accountancy Profession .................................. 5 D. Public Sector Procurement ......................................... 7 E. Issues in Public Sector Procurement ................................... 7 F. The Legal Framework and the Administration of Justice ..................... 9 G. Issues in the Legal Framework and the Administrative of Justice .... ......... 12 H. Experience in Previous Projects ..................................... 14 11. THE PROJECT A. Rationale and Objectives ......................................... 14 B. Project Description ............................................. 15 General Description .......................................... 15 Detailed Description ......................................... 16 (a) Financial Management Upgrading .............................. 16 Improving Accounting and Auditing Standards .................. 16 Improving Procurement Standards and Practices ................. 17 (b) Legal Management Upgrading ............................. 17 (c) Project Co-ordination and Management ....................... 18 (d) Studies and Computer Software ............................ 18 C. Cost Estimates ............................................. 20 D. Financing ............................................. 20 E. Procurement ............................................. 21 F. Disbursements . ............................................ 23 G. Accounts and Audit ............................................. 24 Ill. PROJECT IMPLEMENTATION ................................... . 26 A. Organization and Management ..................................... 26 B. Monitoring, Evaluation and Reporting ................................. 27 C. Mid-term Review ............................................. 27 This report is based on the findings of an appraisal mission which visited Zambia in Febnuary 1993. The mission consisted of Mr. Uche Mbanefo (Mission Leader and Senior Financial Analyst), Ms. Minneh Kane (Senior Counsel), and Ms. Sonia Johnson (Consultant). The peer reviewers were Messrs. Colin Lyle for the accountancy improvement component, R. Gopallrishnan and Arhur Fields for the procurement improvement component, and Salmon Salman for the legal services improvement component. Ms. Dotilda Sidibe typed the reports. Mr. David Cook is the managing Division Chief, and Mr. Stephen Denning is the Department Director for the operation. This document has a restricted distribution and may be used by recipients only in the performance I of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  IV. BENEFITS, RISKS AND SUSTAINABILITY ............................. 28 A. Benefits . ............................................ 28 B. Impact on the Economic Reform Program and the Environment .... ........... 28 C. Sustainability . ............................................ 29 D. Risks and Uncertainties .......................................... 29 V. ASSURANCES AND RECOMMENDATIONS ........ .. . .. . .. . . .. . .. . . . . 29 LIST OF TEXT TABLES Table 1: Project Cost Summary Table 2: Project Financing Plan Table 3: Summary of Proposed Procurement Arrangements LIST OF ANNEXES Annex 1: Terms of Reference for the Financial Component Co-ordinstor Annex 2: Terms of Reference for the Legal Component Co-ordinator Annex 3: Terms of Reference for the Education Secretary of ZICA Annex 4: Project Cost Tables Annex 5: Implementation Schedule and Estimated Annual Disbursements Annex 6: Disbursement Schedule Annex 7: Project Supervision Plan Annex 8: Documents in the Project File Annex 9: Terms of Reference for a Procurement Specialist Annex 10: Monitorable Indicators  ZAMBIA FINANCIAL AND LEGAL MANAGEMENT UPGRADING PROJECT (FILMUP) CREDIT AND PROJECT SUMMARY Borrower: Government of the Republic of Zambia Benejidares: Zambia Institute of Certified Accountants (ZICA), Copperbelt University (CBU), Accountancy Training College (ATC), NIEC School of Business Management (NSBM), Zambia National Tender Board (ZNTB), Ministry of Legal Affairs (MOLA), Law Practice Institute (LPI), Industrial Relations Court (IRC), the Judiciary, and the Registrar of Companies Amount: SDR 12.8 million (US$18.0 million equivalent) Tenns: Standard IDA, with 40 years maturity Objectives: The objectives of the project are to improve the flow of government business, improve the implementation of development programs, and facilitate reform, by removing identified obstacles through capacity building and institutional development in the areas of accounting and auditing, public sector procurement, legal drafting, the administration of justice, and the provision of business information. The project is expected to result in: - improved accounting and auditing standards; - a stronger ZICA, capable of better regulating the accountancy profession, and of introducing a national accounting technicians qualification; - more trained accountants, particularly at the technician and intermediate levels; - faster and more efficient procurement practices and standardized documentation that meet international standards, and are acceptable to most donors; - faster legal drafting; - a faster and more efficient Industrial Relations Court, and improved administration of justice; and - better accessibility to company information for investors.  - ii - Project Description: The project is divided into two main parts: financial management upgrading, comprising improvements to accounting and procurement services, and legal management upgrading, which consists of improvements to legal services. Extimated to cost about US$19.6 million over a five-year period, the project would provide assistance for: (a) Flnandal Management Improvement through (i) accountancy development and training (US$2.5 million) by providing training, equipment, library support and technical assistance for the main professional accountancy organization, ZICA, and three major accountancy training institutions, namely, the Accountancy Training College (ATC), the NIEC School of Business Management (NSBM), and the Accountancy Department of Copperbelt University; and (ii) procurement improvement (US$2.1 million) by providing training, equipment, and technical assistance to the Zambia National Tender Board (ZNTB); (b) Legal Management Upgrading (US$12.5 million) through the provision of training, equipment, minor building rehabilitation works, and essential publications for the Ministry of Legal Affairs (MOLA) and its major agencies including the Judiciary, the Industrial Relations Court (IRC) and the Law Practice Insdtute (LPI) as well as for the Registrar of Companies and legal services of a few key Ministries (e.g., Finance, Agriculture, Lands, Industry and Trade); (c) PrJect Co-ordination and Management (US$2.5 million) to pay for the office costs and salaries of two project coordinators: one for the financial management component, who will also serve as the project accountant, and the other for the legal management component, the costs of a procurement specialist, a supervising architect, the costs of the project launch workshop, the independent audit of project accounts, studies and computer software, and the incremental operating costs of project institutions (to be financed by the government). Benefits: The project is expected to result in both quantitative and qualitative benefits. Although the capacity building nature of the project precludes the normal calculations of rates of return, several project benefits can be quantified, and will be closely monitored. These include, for example, the number accountancy students graduating from the CBU, ATC and the NSBM; the number of legal draftmen trained, and the number of cases brought before the Industrial Relations Courts during a specified period (e.g., one year). Qualitative benefits (also to be closely monitored during project implementation) include ZICA's ability to evolve a unified and generally-accepted system of accountancy qualifications; ZNTB's ability to introduce standardized and widely accepted procurement standards and procedures; and the quality of service received by investors and members of the public seeking information on existing companies at the Registrar of Companies. Risks: The greatest risk to the project is the possible transfer to other duties of the dedicated civil servants and others who prepared it, and are committed to its successful implementation. The second risk is inadequate Government funding. Provisions in the Development Credit Agreement would seek to deal with both risks.  - i,, - 1. ESTIMATED COSTS AND FINANCING Project Cost Summary % of LocaI Foreign Total Total Financial Management Upgrading 0.7 3.3 4.0 23 Legal Management Upgrading 0.9 10.0 10.9 64 Studies and Computer Software - 0.4 0.4 2 Project Coordination and Management 0.6 0.3 0.9 5 Incremental Operating Costs 1.0 - 1.0 6 Total Base Costs 3.2 14.0 17.2 100 Physical Contingencies .0 0.5 0.5 3 Price Contingencies 0 3 E6 1.9 11 Total Project Costs 3.5 16.1 19.6 114 Financing Plan USS Million local Foreign Toa IDA 1.9 16.1 18.0 Government 1.6 .0 E6 TOTAL 35 16.1 196 2. Estimated IDA Disbursements in US$ Thousands Fiscal Year 1994 1995 1996 1997 1998 1999 Annual 2,580 8,669 2,028 1,704 1,636 1,383 Cumulative 2,580 11,249 13,277 14,981 16,617 18,000   1. BACKGROUND A. Inboduction 1.01 This report describes the first World Bank-financed project devoted to capacity building in legal, accounting, and procurement services in Zambia. 1.02 In early 1992 the Government reached agreement with the World Bank and the IMF on a Policy Framework Paper (PFP) which sets our clearly Zambia's objective of moving the economy to one that is based on private initiative and free market principles. The PFP outlined also the extensive reforms deemed necessary to achieve that end. Zambia's progress along this path of reform has been quite impressive. Agricultural marketing has been liberalized. The budget deficit has been reduced from 7% to 2% of GDP. Interest rates have been completely de-controlled, and the Kwacha has been aligned to the marcet rate. A major privatization program designed to improve the efficiency of public enterprises is underway. 1.03 Government strategy aims at providing a less intrusive and more supportive framework for private investment, rehabilitation of the physical and social infrastructure, improvement of social services, alleviation of poverty, implementation of environmental policies, and enhancement of the efficiency of public institutions. This last element of the strategy (improvement of the efficiency of public institutions, including the civil service), as well as improvement of accountability and legal services key to the privatization effort, are the focus of the project described in this report. 1.04 The Government has embarked on a comprehensive public sector reform program. The program is essentially home-grown, and has been the subject of several government-organized workshops and seminars designed to explore the issues and to build a national consensus towards reform. The program, as well as the overall structural adjustment program of which it is part, is also supported by the World Bank, IMF, and bilateral donors. The Bank's analysis of the underlying public sector management problems is contained in the two-volume report, "Republic of Zambia: Public Sector Management Review," Vol. 1, Main Report; Vol.II Technical Annexes (Report No.9827-ZA). The program has also been highlighted in the Policy Framework Paper (PFP), and is expected to extend over a number of years, during which the Government and IDA are expected to agree on a series of IDA-financed operations to support the process. Two recent major operations in the series were the Privatization and Industrial Reform Credit (PIRC) and its associated Technical Assistance (PIRCTA) project, approved by IDA in FY92. A Second Privatization and Industrial Reform Credit (PIRC II) is scheduled for IDA Board consideration in June 1993. The project described in this document is next in the series. It is designed to create, on a permanent basis, the indigenous skills necessary to assure the successful implementation of the PIRC. It will be followed by others currently under preparation. Some of these future operations would introduce systemic reforms involving the entire civil service. Others would focus on reforms in one particular sector of the economy (e.g. agriculture). Yet others may combine elements of these two approaches. 1.05 The Financial and Legal Management Upgrading Project (FILMUP) described in this report is targeted at certain obvious but key bottlenecks, such as inadequate accounting and auditing, poor procurement, slow disbursement, inadequate legal drafting capability, weak administration of justice, and inadequate investor information services, all of which are seriously hindering development in other areas. For example, under the PIRC and PIRCTA projects cited above government has agreed to revise a long list of laws dealing with the business, e.g. the Banking Act and the Companies Act. However, Government has made it clear that it lacks permanent capacity to draft necessary legislation. This project  - 2 - will address that need. It has also been possible to identify within these functions a core of dedicated civil servants who, regardless of their poor salaries and incentives (being addressed in the context of a wider civil service reform program), are soldiering on in these functions with inadequate human and material resources. The Government has indicated to IDA a strong need to provide sharply targeted training and equipment to such dedicated civil servants and others to enable them to remove the serious obstacles to development in the areas discussed in this paragraph. B. 7he Accountancy Professlow 1.06 The accountancy profession in Zambia is relatively young. During the 1960s and 1970s professional accountants were represented by the Zambia Association of Accountants. This Association was predominantly expatriate and served as a forum to exchange ideas and bring together the accountants that were working in Zambia. Because it was an expatriate organization, it was not able to secure Government recognition and therefore could not develop in any real sense of the word. The Association did, however, stay in existence until its role was subsumed into the Zambia Institute of Certified Accountants (ZICA), with the enactment of the Accountants Act of 1982. Even then, various administrative and other difficulties intervened, which meant that ZICA did not really act as a professional body until the beginning of 1985. 1.07 The Accountants Act has given to ZICA all the normal functions of a professional body covering: education, training and examining, registration and licensing; professional standards, ethics and discipline; research, publications and support services, and liaison with the International Federation of Accountants (IFAC) and other international accountancy bodies. ZICA has been constrained in its development. Originally, it was not allowed to determine which accountants, belonging to professional bodies in other countries, should be allowed to have the benefit of ZICA membership. The granting of membership was, in effect, the prerogative of the Government (really the Ministry of Finance) and was awarded through the passing of a statutory instrument. Any plans that ZICA produced for developing the profession had to be approved by the relevant authorities first, often a lengthy and time consuming process. This type of control inhibited the growth and development of ZICA and its ability to react in a dynamic manner to the changing environment. 1.08 The new Government has shown a willingness to allow the profession to determine and regulate its own future. From its inception ZICA has maintained a policy of establishing and maintaining the highest professional standards and ethics that are commensurate with a professional accountancy body that belongs to the International Federation of Accountants (IFAC). The Institute has watched, with interest, the developments that have taken place in countries in the sub-region, in particular the experiences of Tanzania and Kenya in localizing their examinations. The information gained has been used in developing the new examination structures and the three tier profession that is now being implemented. 1.09 In 1991 ZICA prepared a report entitled: "Proposals on the future structure, training and development of the accountancy profession in Zambia." This document is preparing the accountancy profession in Zambia for the twenty first century. It provides a structure that would enable the profession to meet the industrial and commercial needs of Zambia. Contained in the document are plans to assist the localization of the examinations. This will ensure that they are more relevant to the needs of Zambia and the sub-region, especially in the law and taxation areas. The report also proposes a rationalization of the educational sector in an attempt to use the scarce resources that are available more effectively.  -3- This should assist the country in becoming self sufficient in accountants and thereby reduce the country's dependency on expatriates which is very expensive in foreign exchange terms. 1.10 The report establishes a number of objectives for ZICA which are: Professional Objectives - designation of ZICA as the sole professional accountancy body in Zambia responsible for all professional, sub-professional and accountant technicians who are to be registered within the country; - statutory restriction of the use of the words "Accountant' and 'Auditor' to registered members of ZICA; - streamlining and improvement of the co-ordination of the Zambian accountancy profession in its broad sense; - increase in the number of qualified accountants at all levels in Zambia; and - utilization of the resources available in the most economic and efficient manner. Educational Objectives p rogressive localization of the examinations; moderation of examination of accounting technician courses in Zambia by the council of ZICA or its nominees; streamlining of courses that are currently available in accountancy in Zambia, to ensure that each course maintains the required standard for the type of graduate that it produces. Regulatory Objectives - Strengthening of legislation to ensure that the standard of accountancy reports is maintained at international levels and meets the needs of the Zambian business and industrial environment; development of company law and other legislation that is necessary to ensure that all commercial and non commercial organizations act in a responsible manner and report accordingly; and development of accountancy standards appropriate to the business environment in Zambia.  -4- 1.11 There is a serious shortage in Zambia of accounting personnel in general, and of qualified Zambian nationals in particular. The most recent studies indicate that the present requirement for accounting personnel and the current availability are:- Levl Reuired Available Professionally Qualified 420 150 Sub professional 1680 500 Technicians 6000 2000 Source: ZICA Report, November 1992. With the current economic liberalization and privatization, it is anticipated that the demand for all types of accountants will increase sharply over the coming few years and by the year 2000 there could be a need for up to 650 professional, 2,500 sub-professional, and 9,500 technician level accountants. 1.12 The Department of Technical Education and Vocational Training (DTEVT) in the Ministry of Higher Education, Science and Technology has been very active, with Irish aid, in developing accountancy qualifications and training at the technician level. It owns and operates the Evelyn Hone College and the National Institute of Public Administration (NIPA) (see below). However, its cooperation with ZICA in the past has left a lot to be desired. A warmer relationship has developed recently and would be further encouraged under this project particularly through the terms of reference of the proposed education secretary for ZICA. 1.13 There are many private accounting firms in Zambia, including representative offices of four of the large international firms. As in most former British colonies, the Accountant-General is responsible for all civil service accounting, and the Auditor-General for all its auditing. However, Zambia, like practically all other African countries, has difficulty in retaining highly-qualified or experienced staff in government, because of the poor salaries in the civil service compared with the private and parastatal sectors. 1.14 There are eight recognized accountancy training institutions in Zambia, of which only the Zambia Center for Accountancy Studies (ZCAS) trains accountants to the highest internationally-recognized professional level. ZCAS was established with the support of the European Community (EC) in July 1988. It is a professional accountancy college providing full-time tuition for the final two levels of the Chartered Association of Certified Accountants and the Chartered Institute of Management Accountants, both UK-based accounting bodies. The success rate of students at ZCAS, in competitive, externally-set and moderated examinations, has been very high, with an average pass rate of over 65% compared to a worldwide average of less than 35 %. At present there are approximately 220 students attending ZCAS' courses each year. The other institutions are the Copperbelt University (CBU), the Accountancy Training College (ATC), the NIEC School of Business Management (NSBM), the Zambia Institute of Management (ZIM), Evelyn Hone College, the NIPA (see above), and the Zambia Insurance Business College. 1.15 The Copperbelt Univesity (CBU) is an amalgam of the Ndola campus of the University of Zambia and the Zambian Institute of technology (ZIIT), both of which used to share the same campus. The university provides the only degree course in accountancy in the country and has an expected output of approximately 40 graduates per annum from this program. CBU has received some foreign assistance  in the past from the European Community (1981 to 1992, now terminated), Irish Aid (1983-89), and the British Overseas Administration (ODA). As part of the Zambianization program, all of the donors provided a number of scholarships to allow Zambian lecturers to train abroad. The Department of Accounting numerically is quite strong with 11 lecturers/staff development fellows. The problem is that none of these lecturers is professionally qualified (i.e. they all have academic rather than professional training and qualifications), and they tend to be relatively young and inexperienced. If further assistance is not given in the near future, it is feasible that the high standards that have been achieved in the past few years will not be maintained. This could have serious consequences for the Zambian economy, as the supply of well qualified graduates who can train as professional accountants, will dry up. 1.16 The NIEC School of Business Management (NSBM) was founded to train staff of the National Import and Export Corporation (NIEC). In 1986 it introduced courses for the Association of Accounting Technicians (AAT) and Stages II and III of the Chartered Institute of Management Accountants (both British Qualifications). Its location near Ndola - Zambia's major industrial town - makes it a ready source of accounting technicians for Zambian industry. NIEC is being privatized, but the school will in future operate as a private trust whose recurrent budget will continue to be financed by the nine surviving retail subsidiaries of NIEC. The Accountancy Ihining CoUlege (ATC) in Chingola was founded by the copper mines in the 1960s to ensure for themselves a steady supply of trained accountants. Many of these later find employment elsewhere in the economy. ATC offers a College Certificate in Accountancy (technician level) with an enrollment of about 50 students a year. Graduates from that level may enrol for ATC's course for the Association of Accounting Technicians Stage III, whose graduates in turn may enrol for courses for the Chartered Institute of Management accountants, also provided by ATC. 1.17 Almost all the training institutions described above have received some external donor support, even though most of it has expired, or is about to expire. One exception is ZCAS whose project support from the European Community has recently been renewed for another four years. Unfortunately, there has been little or no co-ordination of the considerable external assistance Zambia has received for accountancy education in the past. This lack of co-ordination has considerably reduced the effectiveness of much of the aid that has been received. 1.18 Civil service accounting has also received (and is still receiving) considerable external support, particularly from ODA and from the IDA-financed Second Technical Assistance project. The one area that has never received external support is ZICA itself, which has the duty to organize and regulate the profession, and coordinate its development. C. Isues in the Accountancy Profession 1.19 The main issues in the accountancy profession include: * the severe shortage of qualified nationals; * the weakness of ZICA as a professional body; * the absence of Zambian qualifications in accountancy; * the proliferation of qualifications at the technician level; and  - 6- * the poor coordination of past external assistance for accountancy training. 1.20 There is a chronic shortage of qualified accountants in Zambia, and, with the current liberalization of the economy, that shortage is likely to get worse. Furthermore, the majority of the fully-qualified accountants in the country are expatriates whose employment costs the country a great deal of foreign exchange. There is, therefore, an acute need to train more Zambians to the highest professional levels. The European Community (EC) - financed ZCAS is catering for training at the highest level, but is running out of 'raw material", i.e., middle level accountants or university graduates to train in ZCAS. 1.21 Partly as a result of its late start, ZICA is a relatively weak professional organization. Its enabling Act was only passed in 1982, and it only began to function as a professional body in 1985. Most other African countries which gained independence in the 1960s already had active accountancy professional bodies by the early 1970s. They, therefore, had a 10 to 15 years head start compared with Zambia. Today ZICA does not publish an up-to-date list of its members; it does not set any local examinations; and it does not perform many of the functions which accountancy institutes in other African countries take for granted, and which are authorized by its enabling Act. 1.22 Zambia does not have an indigenous professional level accountancy qualification. The Zambia Diploma in Accountancy is a technician level qualification with very limited recognition outside the country. Unlike accountancy students in many other African countries, most of Zambia's aspiring accountants train for foreign qualifications, many of them even at the technician level. This state of affairs is largely explained by the weakness of ZICA, noted earlier. The creation of an indigenous accountancy qualification is not just a matter of national pride or loyalty. A qualified accountant should be thoroughly conversant with the specific business, company, and taxation laws and practices of the country in which he or she is to practice. Foreign qualifications cover these matters with specific reference to the particular foreign country in which and for which the qualification was originally designed. No foreign examination tests the candidates' knowledge of the laws, taxation, or business practices of Zambia, particularly the body of case law which has built up during nearly 30 years of independence. It is necessary for ZICA to gear up to deal with this issue. 1.23 There is an unhealthy proliferation of technician level accountancy qualifications which confuses students, employers, and the public alike. This situation is due in large measure to the past cool relationship between ZICA and DTEVT. As noted above, a thaw has recently set in, and one of the aims of this project would be to promote this improvement in relationship with a view to harmonizing accountancy qualifications. 1.24 In response to the chronic shortage of accountants noted earlier, large amounts of foreign assistance have been applied in the training of accounting personnel at different levels. Unfortunately, most of this assistance has been neither properly focussed, nor adequately co-ordinated. ZICA would be the natural institution to provide the right focus and provide the badly-needed leadership in this area. However, its wealness, noted earlier, has not allowed this. It is now necessary to assist ZICA, firstly, to decide (in collaboration with the DTEVT) on a limited number of officially-recognized levels of accounting qualification for the country, and secondly to encourage training institutions and their donors to prepare candidates for only those qualifications.  D. Pubic Sector Procuemwt 1.25 Public sector procurement in Zambia is governed primarily by the Zambia National Tender Board Act, 1982, setting up the Zambia National Tender Board (ZNTB), and the Tender Regulations, 1990, setting up the Committees of the Board and establishing their procurement approval limits. The Board consists of a chairman and twelve other members, seven of them 'ex officio." All but the "ex officio' members are appointed by the President. Government procurement up to certain limits prescribed in the Regulations are handled by three types of committees: - Provincial Tender Committees set up in each province to handle all Government procurements other than for district councils and parastatal organizations: such procurements are described in the regulations as 'Government purchases"; - Parastatal Tender Committees set up in each District Council (District councils are described as "parastatals" in the regulations) and each parastatal other than a district Council; and Central Tender Committee which authorizes procurements above the limits set for the other two types of committees. The membership of all the committees is specified in the regulations. The Chairman of the Central Tender Committee is the Permanent Secretary for Finance. 1.26 The last World Bank Country Procurement Assessment in Zambia was in 1984. At that time the ZNTB Act, although approved by Parliament, had not become effective, and the Tender Regulations, 1990, were still in draft. The assessment was therefore based on these drafts or not-yet-effective documents. There is no certainty that the draft reviewed in that assessment was adopted without alteration. A new country Procurement Assessment is clearly overdue, and would either be undertaken during the course of this project, or replaced by the diagnostic study proposed in the project. 1.27 Meanwhile, experience of implementing Government's own, as well as IDA and other donor financed, operations suggests that there are serious procurement problems which have the effect of delaying project implementation in several sectors. At the end of 1991 the Swedish International Development Authority (SIDA) approved a US$1.8 million project to provide technical assistance and training in import management to selected Zambian officials (including those from ZNTB). However, the principal focus of the project was the group of Ministries (Agriculture, Health, General Education and Science and Technology) that have been the focus of SIDA assistance in Zambia. Two things that are still needed are to bring all Zambian procurement practices Oocal and foreign), including the government's own procurement, up to the best international practices, and to standardize and harmonize such practices and their documentation in a way that satisfies the requirements of the majority of Zambia's financiers and donors. E. svues In Pubic Sector Procurwemn 1.28 As explained in Chapter 1, the legislation on Zambian government procurement is clear. The main issues have to do with matters not covered in the legislation, such as:  * the need to harmonize donor requirements and evolve one standard set of procurement practices and documentation acceptable to most donors; * the need to bring Zambian government procurement skills and practices (for its own normal domestic procurements) up to modem international levels; * clarification of the relationships between the Zambia National Tender Board, its Committees, and its clients; and * the need to revise Tender Committee limits regularly to take account of inflation. 1.29 A major source of frustration for Government officials and donors is the delay in project implementation due to the multiplicity of procurement rules applying to the numerous donor projects in the country. Every donor has tended to set up its own project implementation unit (PMU) within major Ministries (e.g. agriculture). Even when one PMU tries to manage all externally-financed projects, it needs to apply different sets of procurement guidelines to meet the requirements of different donors. This overstretches the available institutional capacity and dilutes accountability. There is therefore an urgent need to harmonize donor procurement requirements, and evolve one standard set of procurement regulations and documentation that should satisfy as many donors as possible. 1.30 The kind of harmonization advocated above should result in Zambian standard procurement practices that are up to the highest international standards. This in not the case now, partly because of the multiplicity noted above, partly because of inadequate procurement skills (which can be remedied by the training proposed in this project), and partly because much of the limited training proposed so far has been focused on import procurement . There is a need to raise the national level of procurement skills in the country so as to apply efficient procurement practices, not only to imports, but also to local contracts for civil works, goods, and services; and not only to externally-financed items, but also to purchases financed by the Government itself. 1.31 Since the introduction of the Tender Regulations, 1990, the Zambia National Tender Board (ZNTB) which has the overall responsibility for all government procurements has been trying to work out exactly how the Tender Committees set up by the Regulations should operate and how they should interact with the Ministries, parastatals, and local authorities. The project would assist in clarifying these relationships and smoothening the interaction between ZNTB and its clients. 1.32 In 1990 when the regulations were issued by the Minister of Finance one US$ exchanged for about K50. As of April 1993, one US$ exchanged for about K500. This means that the K2.5 million limit set in 1990 as the trigger point at which a procurement contract should be referred to the Central Tender Committee (CTC) has decreased in US$terms from US$50,000 to $5,000 (barely enough to import one desk-top computer and its peripherals). If such relatively minor contracts from all Ministries, all projects, all district councils, and more than 100 parastatal organizations have to be submitted to the CTC, its work load would be so enormous that the backlog of procurement approvals would bring many projects to a halt. It is therefore critically important that this limit be reviewed frequently to take account of local inflation and other changing circumstances. This fact was recognized by a recent upward review of the limit. However, it is necessary to introduce machinery for the automatic review of the limit at regular intervals.  - 9- 1.33 It is also necessary to examine the possibility of delegating responsibility for procurement to those parastatal institutions that are judged capable or handling it independently of the CTC. This is not allowed under present legislation, but if it was found feasible, and necessary legislative changes were introduced, procurement could be considerably speeded up. This possibility would be examined under the project. F. The Legaf Framwork and the Adins on of Justico 1.34 Like all the Commonwealth African countries, Zambia inherited an intricate mix of common law and customary laws for its legal system. The British instituted common law to govern the relationships involving Europeans in Zambia. They left land tenure, marriage and other personal laws that involved relations between native Zambians in the domain of customary law. Today, the Zambian legal system is a mixture of the two types of law. The set of the Laws of Zambia represents the legislative texts adopted formally by parliament since independence. In addition, customary laws continue to govern the majority of Zambians in their dealings with each other in certain aspects of their lives. The Ainisy of Legal Affais (MOLA) 1.35 The central coordinating institution in the government on legal matters is the Ministry of Legal Affairs (MOLA). The Ministry has two top executives: the Minister, and the Attorney General (AG). Traditionally in Commonwealth African countries, the Attorney General was the chief government lawyer. The introduction of a Minister of Legal Affairs, also a lawyer by profession, is an innovation that has occurred not only in Zambia. The set up can lead to a duplication, or even confusion, of functions as it means that the staff report on professional matters to both executives. Under the AG is the Solicitor General who deals with all civil matters, and the Director of Public Prosecutions who deals with criminal matters. The State Advocates who perform the day to day functions of the Ministry are organized into Departments and Sections. The Administration Section, headed by the Permanent Secretary, deals with the administration of the Ministry. 1.36 The Civil Section defends and institutes civil cases for and on behalf of the State while the International Section is responsible for negotiating and drafting international treaties and agreements. The Depawtnent of Legislatve Drafing coordinates domestic law reform and prepares final drafts of all Bills which are presented to parliament by the Attorney General. When a Government ministry requires a policy change reflected in law reform, the Ministry should prepare a Cabinet memorandum seeking approval of the law. The memorandum should explain in narrative form the nature of the proposed law and why it is required. Once Cabinet approval is granted, the Ministry should send drafting instructions to the Department of Legislative Drafting (in MOLA) narrating in prose the nature of the proposed law. The Departmnent of Legislative Drafting should then use these instructions to draft the Bill. These procedures are not always followed. Line ministries sometimes attempt to gain time by producing 'layman's drafts' of Bills and sending these to the Department of Legislative Drafting. This leads to serious delays in the passing of laws, as the line ministry first spends inordinate and unnecessary time in drafting laws, and then the work is often redone in the Department of Legislative Drafting - a process which takes the Department more time than if they just had a clear narrative to work from. 1.37 The Law Revision Commission. The Law Revision Commissioner reports to the Chief Parliamentary Draftsman. His function is to systematically revise laws as needed. He has just completed  - 10- updating the Laws of Zambia which now need to be published, and IDA financial assistance has been requested for this task. 1.38 The Office of the Dirdctor of Public Prosecutions. The Director of Public Prosecutions (the DPP) heads the department that advises the govermnent on criminal law matters and prosecutes criminal cases in the High and Supreme courts on behalf of the Republic. The DPP runs a semi autonomous department although he reports to the Attorney-General. The DPP also supervises the work of several law enforcement agencies, including the Police. In the subordinate courts where they have right of audience, the police prosecutors actually take the cases to court themselves, under the supervision of the DPP who is ultimately responsible for their actions. This relationship is uneasy as the police do not report to the DPP administratively. In addition to the police, specialized law enforcement agencies have been set up to deal with the increase in legal work that is expected with privatization. Examples are The National Park awd WVef4 Commission, the Economic Crime Unit, the Drug Evforcent Unit, the Ant Cornqlon Commission and The National Environmental Council. Lay investigators, appointed to these entities, identify violations of the laws and make decisions as to pursuit of the cases, rather like the Police Prosecutors. There is an urgent need to train these prosecutors to ensure that they understand the newly enacted laws. 1.39 The Law Pmeie Institute (LPI). This is the body that prepares lawyers for practice in Zambia through professional training. It administers the Bar examinations and determines entry to the practising legal profession. The institute is administered by the Council of Legal Education. It has one full time administrator and no permanent teaching staff. The Institute needs better facilities, and is in the process of moving to larger quarters. It should be assisted to improve the quality of teaching. 1.40 The Insdtute of Legal Drafing (ILD). This was created to teach parliamentary drafting. It used to be a dynamic institute enrolling students from all over Southern and Eastern Africa. Unfortunately, it lost its Director, who has not yet been replaced. The Government is therefore currently forced to send its draftsmen abroad for training. The institute is potentially a useful vehicle for local taining of lawyers in drafting and its revitalization should be considered, several Zambians have suggested a merger of ILD with LPI, as an economical means of strengthening both institutions. The physical merger would be achieved through this project, even though the different missions of the two institutions would still call for some separate as well as some shared staffing. 1.41 The Law Development Commission (LDC). When working properly, the Law Development Commission would be made up of seasoned and highly respected jurists, e.g. retired judges and other nationally recognized lawyers who study areas of law on their own initiative and make recommendations for reform. It should thus provide direction in legal reform. Unforunately, the present Law Development Commission is severely understaffed and incapable of playing this role, and it would be assisted under this project. 1.42 The Legal Aid Clnc. This provides free legal services to indigent citizens. It is working reasonable well, even though it is understaffed, and the increase in cases arising out of the privatization process may swamp the clinic. The Administrator General administrates estates in cases of intestate succession, or in any other case where an administrator was not appointed by the deceased. The work of this office is expected to increase dramatically with the land registration drive that will lead to increased contests over inheritance of land. The Legal Services Corporation. This body used to provide legal services for all the parastatals. It has been abolished. Its lawyers are to be reintegrated into other functions in the Ministry of Legal Affairs (MOLA).  - 1 1 - The Judiiy 1.43 The Supreme Couwt. The Head of the Judiciary is the Chief Justice, who heads the Supreme Court, the court of final appeal. There are nine Supreme Court judges, including the Chief Justice. The High Court is the first court of general jurisdiction hearing at first instance civil and criminal matters whose importance puts them outside the jurisdiction of the subordinate courts. It also hears appeals from the Subordinate Courts. In addition to Lusaka and Kitwe, the High court sits in all the provincial capitals except Mansa and Solwezi. The Magistrates Couts and the Local Courts (the Subordinate Courts) consist of the Resident Magistrates Courts and the Local Courts. The magistrates courts (54 in all) deal with matters involving received or 'English' law, while the Local Courts (numbering about 435) only deal with matters involving customary law. Thus, for instance, intestate succession would be dealt with by the Local Courts while succession cases where a will was left would fall within the jurisdiction of the magistrates courts. Similarly, disputes involving unregistered land would fall within the jurisdiction of the Local Courts while those involving registered land would have to be taken to the Magistrates Courts. The Local Courts are not bound by English rules of civil or criminal procedure, and lawyers are not permitted to appear before them. 1.44 The Industrial Relatons Couwl (IRC). This court was established to deal with all labor disputes in the private sector. The Chairman of the IRC is a lawyer with the same rank and conditions of service as a judge. Appeals from the IRC are directly to the Supreme Court. There is currently one Chairman and one Vice Chairman who are both based in Lusaka, and spend two weeks at a time sitting in Ndola, in order to deal with cases arising there. It is important to create a court in Ndola, as there are more industries based in the Copperbelt than around Lusaka. In Ndola, the Industrial Relations Court is granted the use of a room by the High Court, because it has no facilities of its own. As the court has no official car, the Chairman and Vice Chairman are forced to use their personal cars or public transport, which is hazardous and awkward as they need to transport confidential case information, as well as typewriters and other office equipment and supplies that are not available for them in Ndola. In Lusaka the Industrial Relations Court is housed independently from the rest of the judiciary. The building has only one court room, and so if the Chairman and Vice Chairman sit at the same time, the Vice Chairman is forced to hear his cases in his office. 1.45 It takes the court an average of six months to schedule a case, and twelve months on average to resolve one. This should be reduced to allow the court to play a dynamic role in conflict resolution. With privatization and the increase in private sector activity, the work of this Court will become increasingly crucial, and it will be important to ensure that it can meet the challenge of its new role. The Industrial Relations Court needs materials, including reference books, office equipment, and vehicles. There is also a need to expand the Court by appointing two Vice Chairmen for the Court in Ndola, increasing the staff in Lusaka, and expanding the court space in both cities. Comrmercal Laws and Prvate sector Deveopment 1.46 Under the Privatization and Industrial Reform Adjustment Credit (PIRC) the government has undertaken (and requested technical assistance) to amend the laws dealing with banking, companies, business licensing, insurance, and the Stock Exchange, and to enact anti-monopolies legislation. As a start, three foreign consultants have been identified and the PIRC Technical Assistance Project has earmarked some funds for the exercise. Zambian contract law is currently governed by the English law in effect on August 17, 1911. It is necessary to either draft a Law of Contracts for Zambia, or, if the government decides to retain the English law, at least to apply the current English law to Zambia. The  - 12 - existing laws that make up the Laws of Zambia (30 volumes) have been kept current by the Attorney-General's Chambers, but the Government has lacked the funds to publish and distribute them. It was calculated in 1991 that it would cost about two million US dollars to complete this task. The government of Canada has already donated C$45,000 and pledged another C$45,000. The Government of Zambia has requested IDA assistance with the balance. Tho Lkw A 5nisOle. 1.47 Each Ministry has its in house lawyers who advise it on legal and policy issues in its everyday work. The coordination of the work of these lawyers with that of the Attorney General's Chambers needs to be improved. As discussed above, law reform has been needlessly delayed because the ministries have attempted to draft laws themselves instead of producing clear narrative instructions for the Attorney General's Chambers to enable the latter to draft the laws as quicldy as possible. In order to accelerate the process of law revision, there is a need to bring these Ministries together formally with MOLA to agree on implementation of the correct legal drafting procedure. The ministries that have most become involved in law reform due to the privatization process in Zambia include the Ministry of FYnance, the Ministry of Commerce, Industry and Trade, Ministry of Lands, and the Ministry of Infornation and Broadcasting. The Regstar of Comppanies 1.48 Although it is located in the Ministry of Commerce, Industry and Trade rather than in MOLA, the Registrar of Companies (formally the Registrar of Companies, Business Names, Patents, Trademarks and Registered Designs) is one of the key providers of business-related legal services in the country. The registrar, his deputy, and their principal assistants are all lawyers. The department is divided into two sections: The Industrial Property Section which deals with patents, trademarks, and registered designs; and the Commercial Section which deals with incorporated companies and business names. The latter section which registers and provides information on businesses is particularly important to the business community, and this importance is sure to increase with privatization and efforts to promote new investment. Its office equipment, particularly information storage and retrieval capabilities need considerable improvement, to enable the department to cope with the anticipated increase in its activities. G. isue In te Legal Framework and Administraion of Justice 1.49 The main issues impeding the administration of justice include the following: * the inadequate legal drafting capability in the country and the difficulty of retaining qualified staff; * failure of line ministries to follow established procedures regarding law revision and drafting of new laws; * the inadequate training available at all levels of the judicial system; * the very poor physical working conditions in the law courts and  - 13- * the poor system of legal information, including company information. 1.50 The Attorney General's office has only two qualified draftsmen. Others who have previously been trained have left for the private sector. There is a world-wide shortage of draftsmen, as it is an exceedingly specialized activity. It is therefore necessary to train draftsmen for the government, and to devise strategies to retain them. The Ministry of Legal affairs (MOLA) should also develop a strategy to retain the staff that it trains and to attract and keep quality Zambian lawyers. This inability to hold on to good staff is a fundamental problem. This is also, however, a civil service reform issue, likely to be dealt with in the context of the proposed public sector management reform project. 1.51 The line ministries are supposed to produce statements of policy change and drafting instructions for the Attorney General's Chambers. A needs assessment should be undertaken to determine the legal needs (technical assistance and training) of the line ministries and other government agencies involved in the privatization process (i.e. the Ministries of Commerce, Industry and Trade, and Lands, the Bank of Zambia and the Zambia Privatization Agency). 1.52 Zambia lacks the funds to provide quality on-the-job training in local schools or to send judges and magistrates abroad for training. At the same time, the rapid changes in the legal environment brought about by privatization initiatives, and by the increasing internationalization of trade relations in Zambia, require constant renewal and widening of skills. Training of judges boosts their morale, and increases public confidence in the judiciary, especially if it is accompanied by the introduction of conditions of service that allow judges to decide cases without undue pressure from the executive or legislative branches. Process servers, court clerks and transcribers and executors of judgements are people who perform very specialized tasks that are essential to the efficient workings of the judiciary. In Zambia, while there do exist many well motivated individuals who are producing excellent work in hard circumstances, there is an overall need for more training, and in particular for training in computerized word processing. A training program would be included in this project for the judiciary, the Ministry of Legal Affairs and other bodies involved in providing legal or paralegal services to the Government (e.g., the specialized law enforcement agencies) as well as a program to restore the Law Practice Institute and the Institute of Legal Drafting to the status of dynamic centers of legal training. 1.53 The physical working conditions of the judiciary reflect three decades of benign neglect. With the exception of the Supreme Courts, the courts are housed in old buildings some with leaking roofs and broken doors and windows. There is often inadequate space to accommodate the staff. Security of documents is compromised by inadequate storage facilities, including unlockable filing cabinets leading to theft of court records. Word processing is greatly hindered by the lack of modern equipment. To remedy this, Government has requested World Bank assistance with the renovation of court buildings (including the Industrial Relations court (RC) in Lusaka), establishment of a new IRC court in Ndola, and the purchase of document processing, transportation, and office equipment. 1.54 Another major weakness of the judicial system is inadequate dissemination of legal information. Interested parties and their lawyers often do not know what the law is, as court judgments and legislative texts are not published due to lack of funds. Lawyers and judges are forced to rely on informal means of ascertaining what judgements have been delivered. Decisions are often contradictory as judges are unaware of what other judges have decided. This is particularly problematic in a country that is supposed to rely on precedent as the means of deciding cases. The Courts should be provided with the means to publish judgements for distribution to the legal profession and to disseminate and use legal information. In particular, Government has requested IDA assistance with the financing of  - 14 - computerization of legal information, including systems to link up with existing computers in MOLA, the judiciary, as well as for the publication of the Laws of Zambia which has become urgent. H. ExpeAenc in Previous Projects 1.55 The three year (1987-90) hiatus in relations between Zambia and the Bank, resulting in the suspension of disbursements, adversely affected the implementation of practically all IDA-financed projects in Zambia. Prior to that, implementation had been typically slow as a result of (among other factors) project designs which exceeded the available implementation capacity, slow and cumbersome procurement, and inadequate counterpart funding. Based on that experience, as well as IDA's recent experience of financing a FILMUP project in Tanzania, the design of this project has been kept simple; each participating agency actually prepared and will directly manage, its own component of the project, assisted by only a coordinator; a procurement expert (to be paid out of a Project Preparation Facility) is being recruited even before credit effectiveness to ensure that procurement needs are dealt with early and in a professional manner; and the fiscal impact of the project, both immediate and long-term, is being kept to a minimum. 11. THE PROJECT A. Rtionale and Objectves 2.01 For many years the implementation of development programs has suffered serious delays because of difficulties encountered in certain functions and activities which have an impact on many sectors of the economy. For example, inefficient procurement practices have slowed down disbursements and project implementation in several sectors. This project addresses difficulties being encountered in the areas of accounting and auditing, procurement, legal drafting, the administration of justice, and business information. With Zambia's embarkation on wide-ranging economic and social reform, including an ambitious privatization program, the need to get these services up to speed has become more acute than ever. 2.02 Many previous efforts to improve the activities described in the preceding paragraph have tended to address specific and narrow functions, often without reviewing all the key institutions involved in a particular function or addressing the total needs of the key institutions. For example, efforts were made to improve civil service accounting without regard to the capabilities of ZICA which is responsible for certifying Zambian accountants. Efforts to improve procurement tended to focus on imports, but not on local procurement; and legal drafting improvements focussed more on technical assistance to draft specific pieces of legislation, and less on building up the drafting capabilities of the Ministry of Legal Affairs on a permanent basis. The approach in this project is to identify institutions constituting a weak link in a key process (e.g. procurement, legal drafting); looking comprehensively at institutional capabilities and trying to improve the capacity of each institution as a going concern and on a permanent basis, so that it can handle most of its f&nctions properly and not just one or two of them. This is an ambitious objective, but one that is worth trying, despite the risks, to be discussed later. The emphasis in each beneficiary institution is on training of staff to do the work, with the use of technical assistance either avoided altogether, or held down to the barest minimum.  - 15- 2.03 The objectives of the project are to improve the flow of government business, improve the implementation of development programs, and facilitate reform, by removing identified obstacles through capacity building and institutional development in the areas of accounting and auditing, public sector procurement, legal drafting, the administration of justice, and the provision of business information. The project is expected to result in: - improved accounting and auditing standards; - a stronger ZICA, capable of better regulating the accountancy profession, and of introducing at least a national accounting technicians qualification; - more trained accountants, particularly at the technician and intermediate levels; - faster and more efficient procurement practices and standardized documentation that meet international standards, and are acceptable to most donors; - faster legal drafting; - a faster and more efficient Industrial Relations Court, and improved administration of justice; and - better accessibility to company information for investors. S. P,ojet Descripion Generf Desaipton 2.04 Project components could be roughly classified into two categories: financial management upgrading and legal management upgrading. The financial management upgrading component (about US$4 million) would: (a) upgrade the general level of accounting and auditing services in Zambia by providing technical support in introducing local qualifications and examinations to the premier accountancy professional organization, the Zambia Institute of Certified Accountants (ZICA) (about US$1 million); (b) increase the output of intermediate level accounting personnel through the provision of accountancy lecturers to the Copperbelt University, the Accountancy Training College (ATC), and the National Import and Export Corporation (NIEC) School of Business Management (NSBM) (about US$1 million); and (c) improve national procurement performance by clarifying relationships between the Zambia National Tender Board and line Ministries, and providing necessary training (about US$2 million). 2.05 The legal management upgrading component (about US$11 million) would: (a) build up the legal drafting, prosecution and legal aid, and other capacities of the Ministry of Legal Affairs, the Law Practice Institute (LPI) and the Institute of Legislative Drafting (ILD) through training, and equipment (about US$3 million); (b) improve the administration of justice through the provision of training, equipment and additional court space to the judiciary, including the Industrial Relations Court (IRC) (about US$5.7 million); (c) print the revised Laws of Zambia (about US$2.0 million); and (d)  - 16- improve the availability of information on corporate affairs to investors by providing training and improved equipment to the Registrar of Companies (US$0.3 million). 2.06 All the training in the project is in-service in Zambia and overseas, and will benefit staff already employed in implementing agencies. Appraisal of the training component included a training needs assessment involving the identification of staff to be trained; their present jobs and qualifications; additional skills needed to perform better; where, how, when, and for how long they will be trained; who will replace them while they are in training; and what jobs they will return to afterwards. Except for one or two special cases where positions will be either unnecessary after the project, or the salary for a substantive position can easily be paid later by the already identified budget of the beneficiary institution, all proposed technical assistance (only about US$1.8 million) is short-term, and is designed to assure the sustainability of institutional performance after the project. The detailed training needs assessments are in the project files. Terms of reference for major technical assistance positions are in Annexes 1 through 3 and Annex 9. Dt ~d Description (a} F ncial Management Upgrading 2.07 Project components and their costs are detailed in Table 1. The Financial Management Upgrading Component would include improving national accounting and auditing standards by strengthening the Zambia Institute of Certified Accountants (ZICA) with staff training and equipment;the introduction by ZICA of a Zambian technician accountant level certificate; increasing the number of middle level and technician accountants by providing support to the Accountancy Department of Copperbelt University (CU) and limited support (staff training and equipment) to two technician level institutions. This component would also aim to improve public sector procurement. knprouving Accounffng and Auditing Standards 2.08 Improving national accounting and auditing standards would require that the project strengthen ZICA, currently a very weak institution (Chapter I), by financing the training of ZICA staff and the salaries for 5 years of a consultant Education Secretary to assist ZICA in the introduction and implementation of a nationally-recognized Zambian technician level certificate in accountancy. The terms of reference for the education secretary (Annex 3) would emphasize close liaison with the DTEVT in developing nationally accepted and harmonized qualifications and would be agreed during negotiations. ZICA is also hiring a Technical Director whose salary would be paid out of ZICA's own budget which will be sufficient by the end of the project to cover the Education Secretary's salary as well. 2.09 The highest professional level of accountancy training in Zambia is adequately catered for by the EC-financed Zambia College of Accountancy Studies (ZCAS). However, the technician level is neither so well catered for, nor properly coordinated. With the planned introduction of a national technician certificate (preceding paragraph) there is a need to assist key technician level institutions destined to introduce the new syllabus and prepare students for the new examinations with training and equipment. In addition, the structure of ZCAS (highest professional level training) assumes a steady flow of university graduates and other intermediate level accountants to train. There is, however, a real danger that the anticipated number of graduate inflow into ZCAS would not be forthcoming without some support at that intermediate level. The project would therefore provide some training, equipment and library support to strengthen the Accountancy Department of the Business Faculty of Copperbelt  - 17 - University, as well as the Accountancy Training College (ATC), Chingola, and the NIEC School of Business Management (NSBM), Ndola. knprovin Procurinent Standards and Practces 2.10 The second aspect of the financial management component seeks to improve public sector procurement through: a diagnostic study designed to more accurately pinpoint the problem areas in the present national procurement system;propose remedies, and lay out a plan for implementing the solutions; clarification of the respective roles and relationships of the Zambia National Tender Board (ZNTB) and its Committees and ZNTB's clients; harmonization of procurement procedures and practices of numerous local and donor agencies to evolve best practices and a set of standard procurement documents and procedures acceptable to most of the agencies, training of key Zambian Government and parastatal staff involved in procurement; and implementation of other recommendations of the diagnostic study. The main project inputs would be studies, training, and related equipment. Government brought the terms of reference (TOR) for the diagnostic study to negotiations, and Government and IDA agreed on the TOR during negotiations. The diagnostic study would be completed and its findings discussed and agreed between Government, ZNTB and IDA within twelve months following Credit effectiveness. This agreement on the recommendations would be a pre-condition for the disbursement of any other funding (i.e. other than for the study) for the ZNTB or procurement improvement component for the project. (bh Legaf Management Upgrading 2.11 Legal Management Upgrading Component would consist of improvements to the administration of justice, legal training and information, and improvement of the services provided by the Registrar of Companies. 2.12 Project improvements to the administration of justice would involve the implementation of a comprehensive training program for staff of the Ministry of Legal Affairs (MOLA) and its main training and other agencies, as well as for the judiciary; the provision of improved physical working conditions for the judiciary; the establishment of a legal data base system; and provision of training and technical assistance to line Ministries heavily involved in legal work (e.g. Finance, Lands, Information, and Commerce, Industry and Trade). 2.13 Inadequacy of professional skills, particularly in legal drafting, has been identified as the greatest obstacle to efficiency in the legal services, and this is where the strongest project support would be concentrated. Based on the recommendations of a consultant's study, the project would finance both the on-the-job training needs of the professional staff of MOLA itself, as well as those of its key agencies such as the Law Practice Institute, the Institute of Legal Drafting, the Law Development Commission. The training program would also cover on-the-job training needs of the judiciary, including not only judges and magistrates, but also paralegal staff (e.g. court reporters). 2.14 Poor accommodation, transportation and appalling document security conditions in the law courts (Chapter I) have been identified as major constraints to the efficiency of the judiciary. The project would alleviate these conditions by financing the creation of an Industrial Relations Court in Ndola by renovating an existing building, and expanding that in Lusaka, by closing off-existing car ports to form an additional court room, and provision of court and office equipment and transportation. The project would also finance the conversion of two existing houses into the combined Law Practice Institute (LPI) and Institute of Legal Drafting. This has become necessary because the LPI is being ejected from  - 18- borrowed space it has been occupying at Evelyn Hone College. Government employment of a supervising architect acceptable to IDA would be a pre-condition of disbursement for the building re- design, conversion and rehabilitation described in this paragraph. 2.15 A third constraint to judiciary efficiency is the poor availability of legal information (Chapter I) which may sometimes even jeopardize the direction of a decision due to lack of access to a judicial precedent. The project would improve this situation firstly, through the publication of the Laws of Zambia, which have been revised but could not be published due to lack of funds, and, secondly, through the introduction of a legal data base system that would link MOLA with its various agencies as well as with the judiciary. The component would link up existing computers and expand information storage and retrieval in a way that would greatly improve the capacity and effectiveness of the entire system. Another key aspect of the improvement of the legal information systems would consist of the provision of training and equipment to improve the Registrar of Company's capacity to respond to the information needs of the investing public. 2.16 The other legal system constraint which would be addressed through the project is the tendency of line Ministries to delay the national legal drafting process by trying to do the drafting or 'layman's drafts' themselves, instead of instructing MOLA to do it, as laid down by approved government procedure. The project would finance a training and technical assistance (TA) needs study, as well as the training and TA themselves, of the key line Ministries involved (mainly Finance, Agriculture, and Industry and Commerce) to ensure that they can implement the correct policy. The project would also organize one or more workshops for the concerned staff of all Ministries to ensure that the correct procedure is followed in the future. (c) Pmoect Coordnaifon and M n 2.17 In addition to the activities described above, the project would finance the incremental office costs and salaries of two project coordinators: one for the financial management component, and the other for the legal management component; the costs of the project launch workshop; the independent audit of project accounts; the architectural supervision of building renovations and rehabilitation; procurement services for the project; and the incremental operating costs of project institutions (to be financed by the government). /dJ Stuge and Comput~' Softww 2.18 The project also includes provision for about US$300,000 to provide computer software for all project-financed computers, and about US$100,000 to study and introduce possible improvements to the accounting for open general license (OGL) funds at the Bank of Zambia.  - 19 - Table 1 FILMUP PROJECT PROJECT COST SUMMARY K Million US000 S6 of Total ITEM Local For-ban Total Local Forelan Total % Foroign Bas Cost 1 Financial ianagement URgradina (a) Accountancy lmprowment - ZICA 61 343 404 152 858 1010 85 6 - Accountancy Training InstIuAons 23 432 455 57 1081 1138 95 6 (b) Procurement Improwmont - ZNTB 185 555 740 463 1387 1850 75 11 Sub-tobtl 221 1SS0 1599 672 SS28 S9 21 11 LLeal Migemont UpDrrdina (a) Admnistradon of Justce - MOLA 77 1470 1547 193 3674 3867 95 23 - Law Pracfce Institufn 88 206 294 221 514 735 70 4 - Indutial Relaton Court 51 298 349 127 745 872 90 5 - JudIciary 98 1860 1958 245 4651 4896 95 29 (b)Regidwr ofCompanies 5 100 105 13 250 263 95 1 (c) Key Une Ministries 22 89 111 55 222 277 80 2 Sub -tota S1J I2= mS8 AM 1 0056 120910 U Ill. Prolect Coordination & Maago-mont 218 128 346 544 320 864 37 5 IV. Incremental Recurront Costs 400 0 400 1000 0 1000 0 6 V. Studies & ComDutor Softwar 0 162 162 0 404 404 100 2 TOTAL BASE COST 1i2 584S U71 9M0 14106 17178 in PHYSICAL CONTINGENCIES 19 215 234 47 537 584 92 3 PRICE CONTINGENCIES 117 634 751 292 1586 1878 84 11 TOTAL COSTS INCLUDING PHYSICAL 1m S8 lfl AM 1h 222 19SS8 AND PRICE CONTINGENCIES  - 20 - C. Cost Es1imates 2.19 The project is estimated to cost about US$19.6 million (Table 1) of which about US$16.2 million (83%) would be in foreign exchange. These costs include physical contingencies of US$0.6 million (3% of base costs) calculated on the civil works and hardware components only, and price contingencies of US$1.9 million (116% of base costs). The latter have been calculated by converting all costs Oocal and foreign) to US$ as of the appraisal date, and adjusting total costs at the estimated international inflation rate from that date. Base costs have been estimated as of March 31, 1993. The first project year is assumed to run from January 1 to December 31, 1994, and the completion date is expected to be December 31, 1998. The costs exclude all taxes and duties from which the government project beneficiaries are exempt. Project costs are summarized in Table 1, shown year by year in Annex 4, where they are also further detailed (showing quantities, unit cost, etc.). and in the Project Files. D. Financing 2.20 Proposed project financing is summarized in Table 2 below: Table 2 Project Flnanding Plan (US$'000) tem 112Q~~~~~~~~~~M Governunent Total Financial Management Upgrading 4,520 110 4,630 Legal Management Upgrading 12,320 316 12,636 Project Coordination and Management 756 212 968 Incremental Operating Costs 0 1,000 1,000 Studies 404 Q 404 TOTAL 18. Lo 19,638 Percentages 92% 8% 100% 2.21 The project would be financed as to US$18 million (92%) by IDA and US$1.6 million (8%) by Government. Government financing would pay for incremental operating costs and proportions of costs of goods and civil works procured locally. IDA financing would pay for all project costs not covered by Government. IDA funds would be a credit to the Government of Zambia on standard IDA terms. All project financing (IDA and Government) would be passed on to beneficiary project institutions as grants from the Government of Zambia to those institutions. _ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ --- -_ -  - 21- E. Pt curnent 2.22 Table 3 summarizes the project elements and their estimated costs and proposed methods of procurement. Disbursement and implementation schedules, allowing sufficient time for various procurement steps, are given in Annexes 5 and 6 respectively. Smmarv of dEg1 Pcummet Angen (USSmillion including contingenciis) Proiect Elemnents Procuaent NMfihods La La ob NE I/ TOW 1. CrUL WRES 0 0.6 0 0 0.6 (0.5) (0.5) 2. 5.7 0.9 0.2 - 6.8 2.1 Vehideequipt & funitre (5.5) (0-9) (0.2) (6.6) 2.2 Larooks&pnnting 4.7 0.1 0 4.8 (4.7) (0.1) (4.8) 3. lNSIITANCJES 3. fT 0 0 3.6 0 3.6 3.2 Tochnical Assistance & Studies 0 0 i.8 0 1 (1.8) (1.8) 4.1 Prject rdination & Studies 0 0 0.9 0 0.9 4.2lncremental Operting Costs 0 0 (07) 1.1 1 (--) TOTAL COSTS 10.4 1.6 6.5 1.1 19.6 TOTAL Financed by the 1DA Credit (10.2) (1.5) (6.3) (-) (18.0) 1/ NIF = Not IDA-Fced. 2.23 The limited civil works included under the project are for expansion of the Industrial Relations Court (IRC) and rehabilitation of the Law Practice Institute, together estimated at US$0.56 million equivalent. Construction is expected to be completed in Year 2, the individual contracts are small and scattered (with Ndola more than 300 km. from Lusaka) The contracts are therefore too small to attract international bidding. Accordingly, the contracts will consist of three lots: the IRC in Lusaka (US$0.03 million equivalent), the IRC in Ndola (US$0.08 million equivalent), and the Law Practice Institute in Lusaka (US$0.45 million). Each will be procured on the basis of local competitive bidding procedures acceptable to IDA. These would include local advertisement, clearly stated evaluation criteria, public bid opening, award to the lowest evaluated responsive bidder, and foreign bidders, if interested, would not be precluded from participation. Agreement to this was obtained at negotiations.  - 22 - 2.24 Goods financed under the project would include vehicles, furniture, computers, printing of the Laws of Zambia, library books and equipment, office equipment and supplies, for a total value of about US$11.6 million equivalent including contingencies. Most of the goods would be procured in Project Years 1 and 2. They would be bulked wherever feasible, and would be procured through International Competitive Bidding (ICB), in accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits, issued in May 1992. Where ICB procedures are used, a preferential margin of 15%, or the applicable customs duty, whichever is less, over the c.i.f. prices of competing goods would be given to domestic manufacturers in accordance with the Bank's Guidelines. Contracts for goods procured through ICB would total US$10.4 million, representing more than 90% of the total value of goods financed by IDA. 2.25 Other contracts for the purchase of urgently needed items estimated to cost less than US$250,000 each, for which there is not enough time to group into packages of at least US$250,000, and which are not likely to attract foreign bidders, would be awarded through local competitive bidding (LCB), in accordance with procedures acceptable to IDA, provided that the aggregate amount of such procurement does not exceed US$1.0 million (equivalent to 9% of the total value of goods financed by IDA). 2.26 The remaining 5% of the total value of goods, mainly office supplies, journals and paper products, which cannot be grouped into bid packages of at least US$30,000 equivalent each, would be procured on the basis of prudent international and/or local shopping based on price quotations obtained from at least three reliable suppliers to ensure competitive prices, provided that the aggregate amount of such procurement does not exceed US$0.2 million equivalent. 2.27 Consultants financed by IDA, totalling US$5.4 million equivalent would be contracted in accordance with the Bank's Guidelines for the Use of Consultants issued in August 1981. The nature of these consulting services would be mostly for training activities and technical assistance, but they also include architectural services for the design and supervision of the construction program, and for procurement services. The cost estimates for consultancies are net of taxes, and are mostly either short- term, or for training services. Terms of reference for major consultant services and details of training and other consultancies (including description of services and necessary qualifications) are given in Annexes 1 to 3 and Annex 9. 2.28 Procurement status of ongoing projects in Zambia. The disbursement lag under certain ongoing IDA-funded projects is partly the result of poor procurement practices, e.g. poor planning and slow progress in civil works due to inadequate supervision, and the Government's cumbersome procurement procedures. The capacity of project units to plan and closely supervise IDA-financed procurement has been also a major constraint to the timely execution of project activities. These issues are all being addressed through the Procurement Improvement Component of this project. 2.29 A Country Procurement Assessment Report (CPAR) was last prepared for Zambia in 1984. This long delay, and the fact that the 1984 report was based on draft legislation, prompted the inclusion of a diagnostic study as the first step in the Procurement Improvement Component of this project. By the end of the project, Zambia should have standard procurement procedures and documentation of an international standard acceptable to most of its major donors and financiers. This may or may not require new enabling legislation to become effective.  - 23- 2.30 All contracts for works and goods above a threshold of US$250,000 equivalent each would be subject to IDA's prior review. For contracts for consultant services, the threshold for IDA's prior review would be $100,000. All other awarded procurements would be subject to post-review. 2.31 During negotiations, agreement was obtained on the proper monitoring of the procurement, use of the Bank's standard bidding documents, as well as the use of standard bidding documents in Zambia to be developed by this project. Assurances were also obtained at negotiations that Government would apply the procurement procedures and arrangements outlined above. The appointment of a procurement officer acceptable to IDA would be a condition of effectiveness. F. Disbursement 2.32 IDA funds would be disbursed as indicated in the table below. Govermment would finance project incremental costs (building and equipment maintenance, incremental rent for staff housing, fuel, etc.), except the operating costs of project coordinators' offices. Government financing also includes Government shares of any civil works, goods or printing procured locally. US$ Million Proposed Dls. % (a) Civil Works 0.50 100% of foreign and 85% of local costs (b) Training 3.42 100% (c) Technical Assistance & Studies 1.71 100% Cd) Library Books and Printing 4.56 100% {e) Vehicles & Equipment & Furniture 6.18 100% of foreign and 95% of local costs Cf) Project Coordination & Mangt. 0.66 100% Cg) Refunding of PPF 0.25 (h) Unallocated 0.72 Total L8.02 2.33 Disbursements for all IDA-financed expenditures would be against full documentation, except for the operating costs of the project coordinators' offices and orders with values below US$20,000 (or its equivalent in local currency), which would be based on statements of expenditure. Supporting documents for statements of expenditure should be retained by the borrower for IDA review during project supervision. Assurances were obtained at negotiations that Government would abide by the disbursement procedures described in this and the preceding paragraph. 2.34 The project activities and commitments would be undertaken within five years, but disbursements are expected to trail into the sixth year, according to the following schedule, which is detailed in Annex 6). Estimated IDA Disbursements in US$ Tbousands Ftscal Year 122 199 12= 12 2 12