Mozambique - Local Government Reform and Engineering Project

Doemmut of The World Bank MOR OFFCUAL USE ONLy MICROFICHE COPY Report No.:P- 6049-MOZ Types (PR) ReportNo.P60MOZ Title: LOCAL GOVERNMENT REFORM AND ENI Author: ROBOTHAM, K Ext.:34489 Room:J11139 Dept.:AF61N MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EKECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 16.4 MILLION EQUIVALENT TO THE REPUBLIC OF MOZAMBIQUE FOR A LOCAL GOVERNMENT REFORM AND ENGINEERING PROJECT May 23, 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 EQUIVALENTS Currency Unit = Metical (plural Meticals [Mts]) US$1 = 2910 Meticals (As of January 1, 1993) FISCAL EAR Goverment of Mozmbiqu January 1 to December 31 GLOSSARY OF ABBREVIATIONS CEC City Executive Council (Conselho Executivo da Cidade) CG Inter-Ministerial Coordinating Group CNA National Commission for the Environment (Commissao Nacional do Meio Amblente) CNP National Planning Commission (Comissao Nacional do Plano) COM Council of Ministers DNA National Water Department (Direccao Nacional de Aguas) DNAL = National Director for Local Government Administration (Direccao Nacional da Administracao Local) ERP = Economic Recovery Program ESRP Economic and Social Rehabilitation Program FINNIDA Finnish International Development Agency GDP Gross Domestic Product GOM Government of Mozambique IDA = International Development Association IMC Inter-Ministerial Committee INPF National Institute for Physical Planning (Instituto Nacional de Planeamento Fisico) LCB Local Competitive Bidding LSG Local Support Group LG Local Government MAE Ministry of State Administration (Ministero da Administracao Estatal) MCA Ministry of Construction and Water (Ministerio da Construcao e Aguas) MDP Municipal Development Program MOF = Ministry of Finance MOJ Ministry of Justice MOL Ministry of Local Government MT Meticais NGO = Non Governmental Organization PROL = Local Agencies Reform Program (Programa de Reforma dos Orgaos Locals) SIDA/ASDI Swedish International Development Authority SOE Statement of Expenditures TSU = Technical Support Unit WO = Working Group FOR OFFICIAL USE ONLY REPUBLIC OF MOZAMBIQUE LOCAL GOVERMENT REFORM AND ENGINEERING PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Mozambique Beneficiaries: Ministries of State Administration (MAE), Construction and Water (MCA), National Commission for 'he Environment (CNA), and five project cities: Maputo, Beira, Pemba, Quelimane, and Nampula Credit Amount: SDR 16.4 million (US$23.2 million equivalent) Terms: Standard IDA terms with 40 years maturity Financing Plan: US$ Millions IDA US$23.2 Government US$1.3 Total US$24.5 Economic Rate of Return: Not Applicable Staff Appraisal Report: None ]M1M. IBRD No. 24610 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. MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MOZAMBIQUE FOR THE LOCAL GOVERNMENT REFORM AND ENGINEERING PROJECT 1. I submit the following memorandum and recommendation on a proposed credit to the Republic of Mozambique in the amount of SDR 16.4 million (US$23.2 million equivalent) for approval. The proposed credit would be on standard IDA terms, with 40 years maturity, including 10 years grace, to assist with the financing of the Local Government Reform and Engineering Project (PROL). 2. Country and Sector Background: Mozambique, with an annual per capita income estimated at US$70, is one of the poorest countries in the world. Its problems have been exacerbated by a seventeen year period of civil war. Beginning just after independpnce in 1975, the war uprooted people, devastated aleady poor infrastructure, and further weakened declining institutions. For the first twelve yc.:s following Independence, per capita Gross Domestic Product (GDP) fell continuously. To reverse this decline, the Government of Mozambique (GOM), with IDA assistant., introduced two reform initiatives. The first, the Economic Recovery Program (ERP), was adopted in January 1987 and sought to promote macroeconomic and fiscal stability, and establish appropriate growth incentives. It was followed by the Economic and Social Rehabilitation Program (ESRP) of 1989-90 which pursued the same economic objectives but brought a greater focus on poverty alleviation and distribution of benefits. In support of ERP and ESRP, IDA began assisting GOM to rehabilitate basic urban infrastructure and services in Maputo and Beira through the on-going and successful Urban Infrastructure Rehabilitation project (PRU, Cr. 1949-MOZ). Further support for infrastructure rehabilitation and/or capacity building is being provided through the following IDA-financed projects: Roads and Coastal Shipping (Cr. 2374- MOZ), Maputo Corridor Revitalization (Cr. 2454-MOZ), Capacity Building (Cr. 2436-MOZ), Legal and Public Sector (Cr. 2437-MOZ), Rural Rehabilitation (Cr. No. 2479-MOZ), and Food Security Capacity Building (Cr. 2487-MOZ). 3. The impact of the prolonged civil war and the deteriorating economy has been particularly severe on the urban areas, with a significant proportion of the rural population having fled to the cities. As a result, the urban population nearly doubled between 1965 and 1991, increasing by close to two million people and currently comprising 26% of the total population of 15 million people - a growth rate estimated at almost 8% per annum. Three cities-Maputo/Matola (the capital city), Beira, and Nampula- dominate, but many cities, towns and villages have doubled and tripled in size in less than two decades. This rapid urbanization has placed a tremendous burden on urban institutions, infrastructure and services. Slums and illegal squatter settlements now represent a major part of the urban landscape, and are anticipated to continue to grow despite the advent of peace. The extensive urban service deficiencies that have resulted include badly deteriorated roads and inadequate supplies of potable water, poor drainage and domestic sanitation resulting in widespread water-borne diseases (child mortality is 200 per thousand largely due to diarrheal diseases and malnutrition). Until quite recently, liquid and solid waste management has been neglected: only 28% of waste is collected in Beira, and in Maputo and Matola industrial liquid wastes are generally channeled through municipal sewerage systems into Maputo Bay. More than 70% of the urban population depend on fuelwood and charcoal to meet basic energy requirements, resulting in substantial urban and peri-urban deforestation, and the denuding of mangrove near coastal cities. Finally, the lack of land information and the limited resources of local authorities make it difficult to plan or manage growth. Current cadastral records are outdated (pre-independence) and usually only available for the inner city, and land titles are not adequately registered. -2- 4. The inability of the local government system to effectivety respond to the service demands placed on it is exacerbated by a highly centralized structure in which the heads of each level cf sub-national government are appointed by the center. The Ministry of State Administration (MAE) has a special role vis-a-vis sub-national governments. It is responsible for developing local administration, appointing all directors, and generally overseeing public employment and performance of local authorities. Deconcentrated national offices are nominally responsible to the appropriate level of sub-national government. However, sub-national entities lack both technical capacity and independent sources of financing. As a result, decision making most often flows from the national levels offices to the local government. Fiscally, cities are heavily dependent on the national budget for between 40% and 60% of their recurrent expenditures; capital expenditures are almost entirely funded by transfers from the Central Government. Transfers, generally, are determined through an unpredictable budget process which makes local planning difficult; and they are calculated on a basis which provices little incentive for efficiency or local resource mobilization. These problems are all aggravated by the pervasive shortage of educated and trained Mozambicans, especially in the public sector, and weak incentive systems. Consequently, the uresent, highly centralized adtrinistrative system is ineffective, inefficient, and unsustainable. Moreover, the direct costs to the economy of the poorly functioning urban infrastructure systems, combined with the loss of assets resulting from their accelerating deterioration, are substantial and increasingly becoming an impediment to economic reforms. 5. With the prospect of peace, Mozambique is preparing to embark on an ambitious program of national reconstruction. In the context of decentralization, which GOM considers a key element of its reform strategy, the government attaches great urgency to the local government reform program, seeing it as a possible means of contributing to cementing the peace and building a sound political, economic, and institutional foundation for the future. As an indication of GOM's commitment, a new Constitution has been promulgated (November 1990); a hierarchical classification of cities and administrative jurisdictions has been established; the Minister of MAE has been given the responsibility for leading the reform process; and five important cities (Maputo, Beira, Pemba, Quelimane, and Nampula) have been designated as special cities for reform. In pursuing the reform program, MAE established a number of inter-ministerial working groups and held a successful and widely attended workshop in November 1991, out of which the decision to proceed with the program of municipal reform evolved. An equally successful follow-up workshop was held in April 1993, and MAE and the Swedish International Development Authority (SIDA) have recently agreed to study the possibility of extending the reforms to include five districts, i.e., tural local governments, located in close proximity to the designated cities. With these initiatives, GOM is setting the stage to begin formulating urban policies and a program for their implementation, with the assistance of IDA, which addresses the following: (i) the rationalization of the structure of local government and the establishment of a legal framework for assigning responsibilities and functions among the different tiers of government; (ii) the devolution of responsibility and accountability to urban local authorities for the planning, supply, operation and maintenance of iirastructure and services; and (iii) the strengthening of the financial independence and viability of urban councils, including the substitution of local for central government funding. 6. Project Objectives. The overall objective of the project is to support GOM's decentralization program by assisting with its municipal reform and capacity building initiatives. The reforms will be focussed on the legal, institutional and fiscal framework of local government in order to create a suiiable structure for self-sufficient and accountable local authorities, and will be implemented on a pilot basis in five urban areas designated as the project cities. Complementary objectives include assisting GOM to: create an appropriate policy framework for investments in the urban sector; prepare urban investment plans for the five project eities, including plans for the efficient management, rehabilitation, and financing of essential urban infrastructure and services; test specific, replicable approaches to solving entrenched urban problems (including absorption of rural migrants, environmental degradation, low cost -3- transportation); and coordinate the work of donor agencies, multilateral and non-governmental organizations (NGOs) in the urban/local government sector. 7. Project Description. The project will finance technical assistance and studies, and will provide for the selective implementation of the findings of these studies, including some modest pilot investments in the five project cities, which include Maputo, Beira, Pemba, Quelimane and Nampula. The project comprises the following components: (a) Legal and Institutional Reform (US$1.3 militon; 5% of total project costs), which includes: (i) reviewing the present legal, functional and administrative fr.mework of local government; and (ii) formulating and implementing an efficient institutional reform program to improve the capacity of municipalities to plan, manage and maintain efficient urban infrastructure and services; (b) Fiscal. Financil and OMnigational Re(9rM (US$2.3 million; 9% of total costs), which includes: (i) evaluating the present fiscal, financial and organizational performance of local government including: inter-governmental responsibilities for financial management; inter-governmental fiscal transfers; existing and potential sources of revenues; experience with and constraints to revenue generation; the efficiency and equity of existing and alternative revenue instruments and pricing policies, the efficiency of existing organizational and staffing arrangements; (ii) designing an action plan for effective implementation of recommended financial and organizational reforms; and (iii) ensuring coordination of these reforms with those proposed for the legal and institutional aspects of local government; (c) Urban/Environmental Management (US'7.8 million; 32% of total costs), which includes: (i) formulating affordable, high priority, demand-based municipal development programs (MDPs) for each of the project cities; and (ii) in order to test cost effective approaches to urban and environmental management, formulating and implementing replicable pilot sub-projects in individual cities, as follows: upgrading in Pemba; environmental rehabilitation in Nampula; non-motorized (bicycle) transport in Beira; land information systems in Maputo; and mapping in all five cities; and (d) Canity Building. Institutional Support and Project Management (US$13.1 million; 54% of total project costs), which includes incremental operating costs and the provision of vehicles and equipment, and covers institutional support and technical assistance: (i) to MAE for providing advisory services, process consultation and training for the implementation of the recommendations of the institutional and fiscal reform programs at the central provincial and local authority levels; (ii) to the Technical Support Unit (TSU) in MAE for project administration, coordination, monitoring and reporting; and (iii) to the Ministry of Construction and Water (MCA) for incremental staffing of and maintaining HABITAR, an existing project management unit. 8. The total cost of the project is estimated at US$24.5 million, with a foreign exchange componen' of about US$14.2 million (58%). A breakdown of project costs and the financing plan are shown in Schedule A. Due to serious domestic resource constraints, the Government contribution to the project would be limited to US$1.3 million (about 5% of the total costs), with IDA financing US$23.2 million (95% of total project costs). Amounts and methods of procurement, and the categories and schedule of disbursements are shown in Schedule B. In order to facilitate disbursements and ensure timely provision of funds, the Government will establish a Special Account in the amount of US$1.0 million. Disbursements are expected to take place over a period of four years. To ensure the timely availability of local counterpart funds, GOM will also open and maintain a Project Account in local currency in a commercial bank on terms and conditions satisfactory to IDA for GOM's share of local project financing. GOM will make an initial deposit in local currency equivalent of US$60,000 into the Project Account, and will replenish the account every four months. A timetable of key processing events is shown in Schedule C. The status of Bank Group operations in Mozambique is presented in Schedule D. Further details on the project components and financing arrangements are provided in the technical annex which includes the project monitoring indicators, implementation schedule and the supervision plan. A map (IBRD No. 24610) is also attached. -4- 9. Project Implementation. Overall policy guidance and coordination will be provided by an Inter- Ministerial Committee (IMC) chaired by the Minister of MAE. Establishment of the IMC was a condition of Board presentation. Ir.p!ementation of the project will be the responsibility of MAE, assisted by three Working Groups (WGs) which have already been established (WGI: Legal and Institutional; WGII: Fiscal and Financial; WGIII: Urban/Environmental Management). In order to ensure effective linkages between the work of each of the WGs, an inter-ministerial Coordinating Group (CG) has also being established and is chaired by the National Director for Local Government Administration (DNAL) in MAE. The CG includes representatives from the Ministries of Finance (MOF), Justice (MOJ), MCA, the National Commission for the Environment (CNA), the National Institute for Physical Planning (INPF) and the Executive Councils (CECs) of the five project cities. Day to day operations, monitoring of the work programs of the implementing agencies, and reporting on progress, will be facilitated by the TSU under the leadership of a Project Director who will report to the DNAL. Due to the specialized requirements of the MDPs and the pilot sub-projects, HABITAR an existing unit, will assume printary responsibility on behalf of MAE, for assisting the cities in the preparation and implementation of these sub-components. The establishment and adequate staffing of the TSU and HABITAR are conditions of effectiveness. 10. Each proiect city will be required to enter into an Implementation Agreement with MAE in order to be eligible for technical support, training, vehicles and equipment, and pilot sub-project works under the project (para 15). This Implementation Agreement will describe the measures that project cities will undertake to implement the proposed legal, institutional and fiscal reforms, to prepare and then adopt a satisfactory MDP and to prepare and implement pilot sub-projects. The signing of the Agreements between MAE and each city is a condition of effectiveness. CNA will have special pro,aratory and oversight responsibilities for the Nampula environmental pilot sub-project and will liaise closely with HABITAR for this purpose. The non-motorized transport pilot sub-component in Beira will be implemented by an NGO selected on the basis of competitive procedures acceptable to IDA. In order to ensure effective local coordination, Local Support Groups (LSGs) will be jointly established by MAE, MCA, CNA, INPF and the respective CEC in each of the project cities. 11. A set of project monitoring indicators were developed, discussed and agreed. Training and process consultation programs have also been designed for implementation at all levels and at strategic times during the project so that project objectives are understood, accepted, and, where necessary, appropriately modified in consultation with the Association. The implementation arrangements, monitoring indicators, and training and process consultation programs were discussed at negotiations. 12. Project Sustainability. The decentralization and local government reform program which this project supports is an important part of GOM's strategy for public sector reform, including building capacity at the local level, improving participation and governance, and increasing urban efficiency. Government is therefore strongly committed to the project and has presented a letter of local government sector policy to IDA reflecting this commitment. Receipt by IDA of the signed Letter of Sector Policy was a condition of Board presentation. Given that institutional capacity in Mozambique is severely constrained, and in order for the restructuring exercise to be sustainable, this project is designed to: (i) identify the constraints as they apply to the local government system; (ii) assess the capacity of the system to absorb institutional reforms; and (iii) propose a program of restructuring that is consistent with the rate at which the reforms could be introduced. The project is thus limited primarily to the technical assistance and training needed to design the institutional strengthening program and to develop capacity to implement and maintain the reforms. Investments are held to small pilot sub-projects intended to test the effectiveness of the capacity building initiatives. To further facilitate sustainability, particularly with reference to appropriate incentive structures, administrative reforms under the project, including compensation systems for local as well as central government personnel, would be closely coordinated -5- with GOM's overall administrative and compensation reforms, including the transitional incentive fund program sponsored by the donor community. 13. Lassons Learned from Previous Bank/IDA Involvement. The experience gained in implementing the Urban Infrastructure Rehabilitation project (para i) and recent Bank sector work have confirmed that local government reform is essential for promoting urban efficiency and building sustainable urban institutional and infrastructural capacity. Other lessons from Bank Group experience with similar initiatives are that: (i) a prerequisite for success of reform programs is the commitment of all of the major stakeholders; (ii) careful timing and phasing are important factors in project success; (iii) strengthening local governments requires reform of central-local government fiscal relationships in ways which bring responsibility for and authority over municipal services closer to the end users of the services, increasing the accountability of local governments to their constituencies and taking into account local political realities and interests; (iv) success in implementing the recommendations of consultants is enhanced by project objectives that are consistent with government policies and concerns, and by close involvement of the government and key agencies in project design; and (v) training is essential, but is likely to be more effective when training responsibilities are clearly allocated, needs are well defined, adequate resources are provided, the program balances the need for specific on-the-job training with focussed, short-term, off-site, practical and academic training, and an incentive and institutional framework is established that rewards performance. These factors have been taken into account in the design of the project. 14. Rationale for IDA Involvement. Government sees the project as a key element in its decentralization and public sector management reform program, its fiscal and budgetary performance improvement objectives, and its focus on poverty reduction, all important aspects of ESRP. These are also key themes in IDA's country assistance strategy which the project supports through such initiatives as: improving institutional capacity to manage urban infrastructure assets to complement similar changes in the national networks under ESRP; reducing the need for central government resource transfers to local government by introducing more effective local revenue sources and improved local financial management; and developing priority investment programs targeted on the urban poor. In addition to its linkages to the country assistance strategy, the project is also coordinated with and complementary to Bank projects being executed or planned in other sectors-particularly the Capacity Building, Legal and Public Sector, and Rural Rehabilitation Projects (para 1)-as well as initiatives being undertaken by other donors - particularly SIDA. In addition, IDA involvement would help ensure that the policy reforms and subsequent investments proposed for the urban sector would be implemented efficiently, would contribute to creating the confidence needed for cofinancing in the sector during the later investment programs, and would safeguard environmental and social aspects. 15. Agreements Reached. During project appraisal, post-appraisal, and subsequent technical discussions, understandings were reached on: implementation procedures at central, provincial and local levels; terms of reference, arrangements and monitoring indicators for undertaking and managing technical assistance, studies and training; and the training and process consultation program, including criteria and mechanisms for evaluation. During negotiations, agreements were reached on the following: (i) detailed reporting and monitoring arrangements, including progress monitoring indicators and annual and mid-term implementation reviews (the latter to be carried out by September 30, 1995) to cover inter alia progress achieved in the reform program and the proposed budgetary allocations for the next year and measures taken to ensure timely provision of counterpart funds; (ii) the carrying out of agreed recommendations arising out of the annual and mid-term reviews; (iii) the preparation and implementation, if necessary, of resettlement plans in accordance with criteria, terms, and timetables agreed with IDA; (iv) auditing and procurement procedures, including the use of standard Uidding documents, appropriately modified; (v) detailed institutional arrangements, including Inter ala the -6- satisfactory establishment, staffing and operation of the TSU and HABITAR; (vi) appointment of qualified local counterpart staff to work with and receive training from consultants; (vii) the timely implementation and content of the Implementation Agreements to be entered into between MAE and the project cities, and of the MDPs, for which preparation would be started by January 31, 1995; (viii) the satisfactory maintenance and replenishment every four months of a Project Account to finance the Government's project contribution; (ix) the taking of all necessary steps to start the legal and institutional reform no later than June 30, 1994, and the financial reform no later than August 31, 1994; (x) by December 31, 1995, agreement with IDA on a further program of action and updating of the Letter of Sector Policy. The following are conditions of effectiveness: (i) the establisiment of TSU, the designation of HABITAR as a project agency, and the staffing of TSU and HABITAR on satisfactory terms (para 9); (ii) the signing of satisfactory implementation agreements between MAE and the five project cities (para 10); (iii) the contracting of independent auditors, on terms satisfactory to IDA (para 8); (iv) ti' initial deposit of US$60,000 equivalent into the Project Account (para 8); and (v) the contracting of consultants for the fiscal, financial and organizational reform studies (para 7). The following are conditions of disbursement: (i) for all subproject works, if relocation of any households is necessary as a result of sub-project investments, preparation of ,. satisfactory resettlement plan (para 16); and (ii) for civil works under each subproject, the submission of satisfactory evidence certifying GOM's legal ownership of the land where civil works will be carried out (para 3). 16. Environmental Aspects. The project is largely dedicated to technical assistance and training, and aims, Inter alia, to improve local government capability for environmental planning and management. Three components have direct environmental improvement objectives. The Nampula environmental pilot sub-project specifically includes the development and dissemination of cost-effective approaches to urban environmental management (deforestation, pollution and erosion), for subsequent replication throughout the local government system. The Pemba urban upgrading pilot sub-project is intended to improve environmental sanitation and services. The MDP, which will be undertaken for all five cities, includes provisions for preparing environmental management programs. However, it is possible that following completion of feasibility and design work under the Nampula and Pemba sub- projects, the need for some resettlement may be identified. In such an event, the submission to IDA of a satisfactory resettlement plan is a condition for disbursement on all works relating to sub-projects. 17. Program Objective Categories. The project will support the Government's program to improve public sector management, create an enabling environment for private sector development, and contribute to poverty alleviation through employment creation by promoting labor-based construction techniques for infrastructure works. 18. Project Benefits. The reform of the local government system in the context of decentralization is justified by its potential contributions at the macro level to national stability, more efficient resource allocation and utilization, reduced fiscal expenditures; and improved public sector management. At the sector level, the project would potentially coputibute to: enabling and facilitating essential urban investment; improving urban efficiency and management capacity; promoting greater local resource mobilization and cost recovery; improving urban infrastructure maintenance; increasing accountability for infrastructure service provision; and improving urban transportation and reducing transport costs. 19. I'roject Risks. The political risks associated with this project include: the uncertain civil climate; and the current status of political transition that may affect the ability of GOM to initiate effective devolution of authority and resources to the local level. These risks, although still present, are minimized by (i) the submission by GOM of a letter of local government sector policy, acceptable to IDA, confirming the Government's strong commitment to the local government reform program; and (ii) continuing sector and program dialogue between GOM and the Association focussed around an agreed -7- set of objectives. The policy risks include: the inability of the project cities to effectively discharge the new responsibilities and utilize their new powers; and constraints to GOM and the local governments concerned providing adequate incentives, training, and a suitable institutional environment for the effective execution of tasks and the retention/reruitment of the key staff required for successful project implementation. These risks are minimized by (i) the provision of appropriate technical assistance; (ii) the development of a program of legal, institutional and fiscal reform carefully calibrated to the absorptive capacity of both central and local institutions; (iii) the development of a training and process consultation program, reinforced by an agreed schedule and set of monitoring indicators; and (iv) the linkage of funding for the project cities to the adoption of satisfactory implementation agreements. The operational risks are primarily: the budgetary constraints on GOM providing counterpart funding on a timely basis; and institdtional capacity limitations on managing the implementation of the project. These risks are addressed by: (i) GOM committing adequate annual provisions in its capital and operating budget for the timely financing of all key project staff and activities; (ii) limiting GOM's share of project costs to about 5%; (iii) requiring GOM to open and maintain a project accoun .: local currency; and (iv) GOM's undertaking to adequately staff TSU and HABITAR as a condition oi tectiveness. 20. Recommendation. I am satisfied that the proposed credit will comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Lewis T. Preston President Washington D.C. May 28, 1993 Attachments -8- Schedule A REPUBLIC OF MOZAMBIOUE LOCAL GOVERNMENT REFORM AND ENGINEERING PROJECT Estimated Costs and Financinz Plan A. Estimated Costs: / Lag Egtuign ]tal (US$ million) h1 Legal and Institutional Reforms 0.3 0.8 1.1 Fiscal and Financial Reforms 0.2 1.7 1.9 Urban/Environmental Management * Preparation of Municipal Development Plans 0.0 1.8 1.8 * Preparation & Implementation of Pilot Sub-Projects 2.3 2.4 4.7 Capacity Building, Institutional Support and Project Management Support to MAE * Technical Advice and Support 1.0 1.1 2.1 * Training 0.9 0.2 1.1 * Staff (TSU) 0.6 0.0 0.6 * Project Administration (TSU) 2.1 0.5 2.6 Support to MCA (HABITAR) & CNA * Staff (HABITAR/CNA) 0.6 1.3 1.9 * Project Administration' 0.4 0.1 0.5 Vehicles and Equipment Q. 19 L.II Base Cost: 8.6 11.8 20.4 Contingencies Physical Contingencies 0.8 1.2 2.0 Price Contingencies 03 12 2.1 Total Project Cost: W B. Financing Plan: Loca Foreign I91I (US$ million) IDA 9.0 14.2 23.2 Government 1.3 0.0 1.3 Total: M 2 W Al Net of taxes and duties. h/ Figures have been rounded. -9- Schedule B Page 1 of 2 REPUBLIC OF MOZAMBLOUE LO(AL GOVERNMENT REFORM AND ENGINEERING PROJECT Procurement Methods and Disbursements A. Procurement (US$ million) 1/ Procurement Method Total Project Elements ICB LCB Other Cost h/ Studies and Audits 4.4 4.4 (4.4) (4.4) Consulting Services r/1 8.6 8.6 ,8.6) (8.6) Training d/ 2.9 2.9 (2.9) (2.9) Works gl 1.2 0.5 1.7 (1.1) (0.3) (1.4) Vehicles and Equipment 2.5 0.7 3.2 (2.5) (0.6) (3.1) Incremental Operating Expenses / 3.7 3.7 (2.8) (2.8) Total: 2.5 1.2 20.8 24.5 (2.5) (1.1) (19.6) (23.2) ./ Figures have been rounded. h/ IDA contribution shown in parenthesis. g/ Includes cost of preparing resettlement plan & technical assistance to TSU and HABITAR; excludes consulting services for training. 4/ Includes consulting services for training and training program delivery costs. g/ Includes pilot sub-projects. f/ Includes incremental expenses of project implementation including costs of process consultation, beneficiary assessments, and general administrative expenses of TSU and PIU. - 10 - Schedule B Page 2 of 2 REPUBIJC OF MOZAMBIOUE LOCAL GOVERNM REEOR AND ENGINERIN PROJECT B. Disbursement Amount of Credit Percent of Expenditures C a (US million) at to be Financed 1. Studies and Audits 4.4 100% of expenditures 2. Consulting Services, Studies & Audits 6.7 100% of expenditures 3. Training 2.6 100% of expenditures 4. Pilot Subproject Works 1.3 100% of foreign expenditures 70% of local expenditures 5. Vehicles, Equipment, Spares & Supplies h/ 2.8 100% of foreign expenditures 70% of local expenditures 6. Incremental Operating Expenses 2.5 100% of foreign expenditures 70% of local expenditures 7. Services, Preparation of Resettlement Plan S1 0.1 100% of expenditures 8. Project Preparation Advance (PPF) 0.8 Amount due 9. Unallocated TOTAL CREDIT AMOUNT: Estimated IDA Disbursments IDA Fiscal Y 2H .25 9.26 2 Annual 1.7 2.9 5.2 9.9 3.5 Cumulative 1.7 4.6 9.8 19.7 23.2 j/ Figures have been rounded. k/ Required by central agencies (MAE, MCA, CNA) and project cities for undertaking studies, training and project admin., and for implementing reforms at local level. g/ Services for the preparation of resettlement plans for families who could be affected by the implementation of pilot sub- project works. g Including US$1.0 initial deposit into the Special Account. -11- Schedule C IURK DE MQO LOCAL GOVERNMEnREPORM AND ENGINEERIN PROJEC Timetable dKe Loan Processing Evnt Time taken to prepare: Seven months Prepared by: Ministries of State Administration (MAE), Construction and Water (MCA), with IDA assistance.* First IDA mission: November, 1991 Appraisal Mission Departure: June 8, 1992, Post-Appraisal October 30, 1992 Date of Negotiations: May 4, 1993 Planned Date of Effectiveness: October 1, 1993 * This Draft Memorandum and Recommendation of the President (MOP) was prepared on the basis of a post-appraisal mission that visited Mozambique in November, 1992. The mission consisted of Messrs./Mmes. K. Robotham (Mission Leader), H. Garzon (Public Finance Specialist), M. Lara- Resende (Ecological Planner), J. Fitz Ford (Sr. Urban Economist), C. Mdaka (Urban Planner), and L. Iacono (Sr. Staff Assistant). It is also based on the work of an appraisal mission that visited Mozambique in June, 1992. That mission consisted of R. Chavez (Mission Leader), E. Echeverria (Senior Engineer), M. Lara-Resende (Ecological Planner), H. Garzon (Public Finance Specialist), J. Wright (GIS Specialist), C. de Voest (Financial Analyst), V. Canas (Legal Specialist), K. Cuenco (Urban Planner), and M. Franssen (Land Information Specialist). The report was reviewed by by two peer reviewers, Messrs. W. Dillinger (IWURD) and T. Campbell (LATAD). The Division Chief is Ms. P. Pomerantz, and the Director of the Department is Mr. S. Denning. - 12 - Schedule D Page 1 of3 REPUBLIC OF MOZAMBIU LOCAL GOVERNMENT REPORM AND ENGINEERING PROJECT Status of Dank Group Oerations in Mozambique A. Statement of IDA Csedits (as at March 30. 1993) Amount in US$ million Loan or Credit PacalY fless cancellation) No. Borrower Purpose Dank IDA Undis- Closing bursed Date Credits 2 Credits closed 114.55 18060-MOZ 1987 MOZAMBIQUE ENERGY TA & 20.00 4.82 06/30/1993 A0330-MOZ(S) 1988 MOZAMBIQUE REHABILITATION 11 18.60 .16 06/30/1991 19070-MOZ 1988 MOZAMBIQUE EDUCATION I 15.90 6.76 12/31/1995 19490-MOZ 1989 MOZAMBIQUE URBAN REHABILJTATION 60.00 20.74 12/31/1995 19890-MOZ 1989 MOZAMBIQUE HEALTH & NUTRITION 27.00 23.13 12/3111994 20210-MOZ(S) 1989 MOZAMBIQUE REHABILITATION III 90.00 1.91 08/3111993 20330-MOZ 1989 MOZAMBIQUE HOUSEHOLD ENERGY CREDIT 22.00 16.93 12/31/1996 20650-MOZ 1990 MOZAMBIQUE TRANS. REH. (BEL CORRIDOR) 40.00 25.59 06/30/1996 20660MOZ 1990 MOZAMBIQUE ECON. & FIN. MANAGEMENT 21.00 18.49 12/31/1997 20810-MOZ 1990 MOZAMBIQUE INDUSTRIAL ENTERPRISE 50.10 51.40 12/31/1997 208204AOZ 1990 MOZAMBIQUE SMALL AND MEDIUM-SCALE 32.00 28.36 12/31/1996 217504IOZ 1991 MOZAMBIQUE AGRI. REHAB. & DEV. 15.40 13.97 06/3011999 22000-MOZ 1991 MOZAMBIQUE EDUCATION I $3.70 51.30 04/30/1997 23370-MOZ 1992 MOZAMBIQUE AGRI. SERVICES REHAB. 35.00. 34.53 23740-MOZ 1992 MOZAMBIQUE FIRST ROAD & COASTAL 74.30 68.75 06/30/1998 23840MOZ(S) 1992 MOZAMBIQUE ECONOMIC RECOVERY CREDIT 180.00 116.85 06/30/1995 243604OZ 1993 MOZAMBIQUE CAPACITY BUILDING (HU)* 48.60 47.33 06/30/1999 24370-MOZ 1993 MOZAMBIQUE LEG & PUB SEC. CAPAC. * 15.50 15.13 06130/1999 24540-MOZ 1993 MOZAMBIQUE MAPUTO CORRIDOR * 9.30 9.16 12/31/1998 24790-MOZ 1993 MOZAMBIQUE RURAL RESTRUCTURING * 20.00 20.13 12/31/1998 24870*MOZ 1993 MOZAMBIQUE FOOD SECURITY * 6.30 630 TOTAL number 854.70 581.74 of Credits I21 TOTAL* of which repaid 969.25 TOTAL held by IDA 969.25 Amount sold of which tepaid TOTAL Undisbursed 8.14 Notes: * Not yet effootive ** Total Approved, Repayments, and Outstanding balance represent both active and inactive Loans and Credits. (R) indicates formally revised Closing Date. (s) indicates SAIJSECAL Loans and Credits. The Net Approved and Bank Repayments are historical value, all others are market value. The Signing. Effective, and Closing dates are based upon the Loan Department official data and are not taken from the Task Budget file. * 13-. Schedule D Page 2 of 3 REPUBLIC OF MOZAMBIQUE LOCAL GOVERNMENT REFORM AND ENGINEERING PROJECT List of Closed SALa and SECALs in Mozapabicue (as of March 30, 1993) Loan or Credit Flscal Borrower Purpose Amount in US$ million Closing No. Year (les cancellation) Date Bank IDA Undia- bursed C18410.MOZ 1988 MOZAMBIQUE REAAB. II 69.89 .00 613011991(R) Total Mozambique 69.89 .00 Romarkh on Inmomeationm oe MoEambique'sportfollo of IDA-supported projects Is a relatively now one, with the first operation dating to FY87. Although progress in implementation has been Ia general satisfactory, the performance of disbursements has been less so. For example, the first mid-term review for an investment project recently showed that while civil works were about 2/3 complete, disbursements were only 35% of the projected estimates. A large part of the problem has to do with the fact that while the governmenthas moved quickly towards a market-based economy, government agencies and administrative procedures remain largely unchanged. Thus, all IDA-supported projects were managed financially by the central bank, Bank of Mozambique (BdM), which needs to be strengthened. The CIR last year determined that this was the main bottleneck to improving disbursements. The Bank has taking steps to decentralize the financial management of projects to the implementing agencies through discussions with BdM and conditions for the ongoing Economic Recovery Credit. Three operations are moving slower than the average due to specific problems: Economic and Financial Manazement (FY90). Delays in disbursements resulted from unfamiliarity of the implementing unit with procurement procedures necessary for fairly large consultant contracts and lots of equipment. A recent supervision mission has addressed this problem and disbursements are expected to improve soon. Industrial Enterprise Rstructurin, (FY90). Delays in this project have had to do with processing of large subloans for selected enterprises. The implementing unit is in the Ministry of Finance, and therefore delays encountered by other projects should not occur in this case. A number of applications have been approved and disbursements are expected to increase substantially in the next six months. Small and Medium Scale Enterpris (FY90). Again, the delays in this case are connected to up front processing of on lending applications for small scale enterprises. About fourteen credit applications have been approved for about US$ million equivalent, and another 70 applications are in the pipeline. Disbursements will show a significant increase in the near term. * 14. Schedule D Page 3 of 3 REPUBLIC Q MOZAMBIQUE LOCAL GOVERNMENT REFORM AND ENGINEERING PROJECT B. Statement of IFC Investments (as of April 30, 1993) invefinnt " iscal Loan Equity Total .s m O . fsinel (us$ adilion 864-MOZ 1987 LOMACO Agri-business 2.5 .00 2.5 3157-MOZ 1993 POLANA HOTEL Restaurant & Hotels 3.5 .00 3.5 978-MOZ 1988 Xai Xai Oil ChemicallPetrooemical 7.8 7.8 Total Gross Commitments 6.0 7.8 13.8 Les: Cannellations, terminations, sxchage adjustments. repayments, write-offs and sales 1.5 7.8 9.3 Total Commitments held by IFC 4.5 0.0 4.5 Total Undisbursed 3.S 0.0 3.5 Total Disbursed 1.0 0.0 1.0 - 15 - REPUBLIC OF MOZAMBIOUE LOCAL GOVERNMENT REFORM AND ENGINEERING PROJECT TECHNICAL ANNEX TO THE MEMORANDUM AND RECOMMENDATIONS OF THE PRESIDENT Table of Contents PaMe No. SECTION A: Detailed Project Description 16 SECTION B: Project Costs, Financing, Procurement, 23 Disbursement, Reporting and Agreements Reached SECTION C: Project Organization, Monitoring Indicators, 27 Implementation Schedule, Capacity Building, User Demand Assessment, Letter of Sector Policy Criteria for the Preparation of Resettlement Plans Appendix A: Organizational Arrangements 28 Appendix B: Project Monitoring Indicators 31 Appendix C: Implementation Schedule 37 Appendix D: Consultant's Matrix 39 Appendix E: Capacity Building: Process 43 Consultation and Training Appendix F: User Demand Assessment Note 46 Appendix G: Letter of Sector Policy 48 Appendix H: Criteria for the Preparation 52 of Resettlement Plans SECTION D: Supervision Plan 53 - 16- TECHNICAL ANNEX TO THE MEMORANDUM AND RECOMMENDATIONS OF THE PRESIDENT FOR A LOCAL GOVERNMENT REFORM AND ENGINEERING PROJECT Section A: Detailed Project Description I. Sector Issues and Strategy 1. Three issues have been identified from IDA project and sector work as requiring urgent attention if infrastructure investments are to be sustained and the cities are to make an effective contribution to the reconstruction effort: (a) increasing local institutional autonomy and capacity; (b) increasing fiscal and financial management capacity; (c) improving urban infrastructure services delivery and maintenance, and environmental management. These issues are interrelated and must thus be tackled together. The poor state of Mozambique's urban infrastructure and the current degradation of urban environmental conditions result in high economic and social costs, particularly affecting the poor. Institutional and legal dysfunctions and limited technical skills and finances constrain effective responses to these conditions. To increase the likelihood that services will be reliable and sustainable, they need to be tailored to the effective demand of users, and to the maximum extent possible, financed from locally generated revenues. The rate at which services may be expanded and improved also will be dependent on how service delivery is organized and managed. 2. The proposed Credit represents the first phase of a medium-term urban sector strategy which envisages a carefully sequenced and prepared series of policy and institutional reforms followed by investments geared to rebuilding basic uzban systems and services; making the cities efficient contributors to reconstruction and economic development; raising their level of fiscal and institutional capacity, accountability and responsiveness to the needs and priorities of the citizenry; and promoting to the fullest extent possible private sector participation in the maintenance and delivery of urban services. The sector strategy builds on the country strategy which aims, inter alia, to improve basic infrastuctural services and public sector management, and to encourage private sector participation. It is also closely coordinated with, and complementary, to projects being executed or planned in other sectors (particularly the Capacity Building, Legal and Public Sector, and Rural Rehabilitation Projects), and initiatives being undertaken by donors. II. Detailed Description of Project Components 3. The proposed Credit will help finance: (a) Legal and Institutional Reform; (b) Fiscal, Financial and Organizational Reform; (c) Urban/Environmental Management; and (d) Capacity Building, Institutional Support, and Project Management. The project components are outlined below. - 17- 4. Legal and Institutional Reform.' The objectives of this component are to formulate and implement an effective program of legal and institutional reform aimed at increasing the capacity of local governments in Mozambique to efficiently plan, finance, manage and maintain municipal infrastructure and services; and to implement and test the effectiveness of these reforms in the five designated project cities: Maputo, Beira, Pemba, Quelimane, Nampula. Draft terms of reference for this work have been prepared. This component includes: (a) Legislative and Administrative Reform: reviewing the existing legal and administrative framework of local government; specifying the degree of authority and responsibility to be given to central, provincial and local levels bearing in mind questions of efficiency, equity, responsiveness and accountability; defining the technical units to be created or restructured; drafting the legal framework for enabling the municipal reform process to be introduced into the country as a whole; and drafting the specific laws required to facilitate testing the reforms in the project cities; and (b) Training and Capacity Building: devising detailed training plans for, and efficiently delivering, appropriate training to the key central, provincial and local groups involved in the reform process; transmitting fundamental reform objectives and concepts; and developing basic job-related skills. It is estimated that one hundred and forty four (144) person months of consultant inputs would be required. 5. Fiscal, Financial and Organizational Reform. The objectives of this component are to reform the fiscal transfer system; facilitate appropriate local resource mobilization and cost recovery, particularly for urban services; strengthen budgeting, accounting, and data processing systems and procedures; and strengthen local financial, managerial and technical capacity. Draft terms of reference for this work have been prepared. The sub-component includes the following: (a) Reforming the Fiscal Transfer System: undertaking a comprehensive review of existing systems and options, and devising and implementing more efficient, equitable, transparent and predictable distributional criteria for central government revenue sharing and fiscal transfers; (b) Mobilizing Local Resources: undertaking a comprehensive review of the major local revenue sources and developing proposals for reform; establishing cost recovery guidelines taking into account maximum cost recovery, affordability levels and income differentials across urban and rural districts; (c) Nnancing Urban Services: reviewing the financial structure of public utilities and services, and the current policy in tariff setting; determining the relationship between tariff levels and corresponding operational and maintenance costs for specific services; examining the guidelines for investment planning; establishing the relationship between the utility authorities and representatives of the different levels of government, and with I Mozambique follows Portuguese tradition in which law and public administration are closely associated. -18- the CECs in particular; and reviewing the current experience with private sector participation in the provision of urban services in order to determine the potential for their greater involvement at the local level; (d) Strengthening Accounting, Budgeting, Financial Management and Data Systems: improving accounting, budgeting, financial planning, treasury management, and internal ,ontrols; incorporating comprehensive capital accounts as an integral part of LG's general budgets; upgrading the current reporting systems, including auditing and other control mechanisms; and introducing efficient electronic data processing and management information systems; and (e) Defining LG's New Functions, Staffing Requirements, and Training Programs: defining administrative arrangements relating to functions, staffing and training needs; developing and implementing effective programs of training for staff, encompassing specific on-the-job training as well as residential training and, where relevant, overseas study, but focussing on improving job-related skills. It is estimated that a total of two hundred and six (206) person months of consultant services will be required. The employment of consultants for this component on terms and conditions acceptable to IDA is a condition of effectiveness. 6. Urban/Environmental Management and Development. The overall objective ofthis component is to develop, test and institutionalize methodologies and programs for planning and managing urban areas with special attention to addressing environmental issues. Draft terms of reference for this work have been prepared. The sub-components include the following: (a) Municipal Development Programs (five project cities): preparing and implementing a framework and methodology for planning, financing, and managing the development of each of the five project cities, to be set out in the form of an MDP. The completion of each MDP will include, inter alia: undertaking institutional development programs user demand and environmental assessments; identifying and preparing investment programs and plans for priority infrastructure service improvement, upgrading and expansion and environmental rehabilitation and protection; and preparing preliminary ecological zoning plans, engineering designs and cost estimates for the proposed, high priority infrastructure improvements to a level of detail sufficient for technical, economic and institutional appraisal. The preparation of a MDP by each project city is mandatory, and cities would sign Implementation Agreements with GOM to that effect. The signing of Implementation Agreements, satisfactory to IDA, between MAE and the five project cities is a condition of effectiveness. (b) Preparation and Implementation of Pilot Sub-Projects: In order to test appropriate and cost effective approaches to urban and environmental management the following pilot sub-projects are included: (i) Pemba Urban Upgrading: developing and supervising the implementation of replicable, innovative and cost-effective methods for improving roads, drains, water supply, land tenure, community participation and cost recovery; (ii) Nampula Environmental Planning and Management: developing and implementing replicable, innovative and cost-effective methods for reducing environmental degradation (erosion, deforestation, and liquid and solid waste management), and documenting and - 19- disseminating experience and methods to other municipalities; (iii) Beira Non-Motorized (Bicycle) Transport: demonstrating the feasibility of commercial bicycle assembly, marketing and sales; (iv) Five Project Cities Rapid Mapping: implementing a cost- effective program of photo-mapping to provide accurate and timely information for planning; (v) Maputo Land Information Systems: reforming land legislation, documentation and conveyancing practice; updating the legal cadastre; and introducing street signage and "adressage". It is estimated that a total of about five hundred and fifty (550) person months of consultant services will be required. No significant resettlement is wnsidered likely. However, to the extent that relocation of families may be required, this will only be determined on completion of the preparatory work, financed under the credit, of the pilot sub-projects. As a safeguard, in the event that resettlement is required, the preparation of a resettlement plan acceptable to IDA for all families who could be displaced by the implementation of works was discussed and agreed at negotiations, and is a condition of disbursement on all pilot sub-project works. The submission of evidence, satisfactory to IDA, that GOM is the legal owner of the land on which pilot subproject works is to be executed is a condition of disbursement on all works. 7. Capacity Building, Institutional Support and Project Management. The objective of this component is to assist MAE, MCA and the project cities to effectively implement the reform program. It includes: (a) Technical Advice and Training: supporting MAE and the project cities in solving problems in interpretation, integration and uniform and effective application of the new law and financial and administrative regulations; (b) Technical Support Unit: supporting MAE in establishing and maintaining a TSU-a secretariat for the project-including the employment of the key staff; and (c) HABITAR: supporting MCA in maintaining and strengthening HABITAR - a technical unit established under the existing Bank-supported Urban Rehabilitation Pfro .ect - and the employment of key staff. It is estimated that a total of eight hundred and sixty four (864) person months of consultant services will be required. In addition, the incremental operating expense associated with providing this assistance will be funded under the credit, as will training, essential vehicles, and equipment and supplies. III. Project Management and Review 8. The project will be implemented over a four-year period beginning October 1, 1993 and ending September 30, 1997. The project organization chart, responsibility matrix and a note on WG operations are presented in Appendix A; the project monitoring indicators are presented in Appendix B; the implementation schedule is set out in Appendix C; a consultants matrix is presented in Appendix D; a capacity building note and the training program matrix are summarized in Appendix E; a note on user demand assessments is included as Appendix F; the Letter of Sector Policy is presented in Appendix G; and the criteria for the preparation of resettlement plans in Appendix H. -20- 9. Policy Guidance. Overall policy guidance and coordination will be provided by the IMC chaired by the Minister of MAE. This committee would be comprised of a core group of ministers including, in addition to MAE, those for MOF and MCA, MOJ and the Ministry of Labor (MOL) and the Vice- Minister of Planning. It would be established by and report directly to the Council of Ministers (COM). Specifically, it will be responsible for giving guidance to and securing GOM's approval of the proposed legal, administrative, and financial instruments and actions required to give effect to the decentralization program. The IMC will meet at least quarterly during the first year of the project and half-yearly thereafter. It will also meet on an ad hoc basis when necessary to resolve urgent legal, institutional and financial policy issues. Establishment of IMC and the submission by GOM to IDA of an acceptable letter of local government sector policy were conditions of Board presentation. 10. Project Preparation, Coordination and Implementation. Project preparation and implementation is the overall responsibility of MAE, working in close collaboration with the MOF, and MCA, CNA, INPF and the local authorities in the five project cities. To assist MAE in preparing and overseeing the implementation of the project, the CG has already been established, chaired by DNAL. The chair of the CG reports directly to the Minister of MAE in his capacity as chair of IMC and Minister. 11. Within the CG, three inter-ministerial working groups (WGI: Legal and Institutional; WGII: Fiscal and Fir .ncial; and WGIII: Urban/Environmental) have been established, each with its own chairman but under the overall direction of the Chairman of the CG. The WGs are comprised of senior officers of MAE, MOJ, MOF, MCA, CNA and INPF, and are supported by the services of selected consultants. The CG, in turn, is comprised of the Chairs and the Vice-Chairs of the individual WGs, plus selected consultants. The WGII, in particular, will employ the services of a finance and taxation advisor whose task will be to assist the WG chair and, through the chair, MAE on all matters relating to local government fiscal and financial reform, including reviewing the work and proposals of the other consultants working for the WG. The WGII would also be responsible for assisting MAE with the coordination of all training activities under the project and to that end would employ the services of a training coordinator - the latter reporting through the chair of WGII to the chair of the CG. The CG and WGs play key roles in the project although they do not have executive authority. WGs have responsibility for specific sets of project sub-components. They advise and assist MAE on substantive reform issues (legislative, institutional, fiscal, training, etc.); in developing terms of reference for, and reviewing the outputs of consultants; and in overseeing the implementation of the reform program. And, equally importantly, they help MAE to ensure that the various project sub-components and outputs are effectively integrated into a coherent overall reform program. The CG and WGs will each meet monthly during the first two years of the project and quarterly thereafter. Both would also meet on an ad hoc basis to resolve problems and expedite project implementation. 12. While MAE will have overall responsibility for the project, MOF, MOJ, MCA, CNA and INPF will be responsible for implementation of key aspects of the project. These responsibilities will be discharged in close consultation with MAE and each other. Preparation and implementation of the legal, institutional, fiscal, financial and administrative reforms will be closely coordinated with the CECs in each of the five cities, and with the offices of the respective provincial governors. Each project city will enter into an Implementation Agreement with MAE in order to be eligible for technical support, training, vehicles and equipment, and pilot sub-project works under the project. This Implementation Agreement will oblige project cities to implement the proposed legal, institutional and fiscal reforms and to prepare and then adopt a satisfactory MDP. -21- 13. In order to ensure effective local project implementation and coordination, an LSG will be established for each city comprising the senior officers of the respective CEC and the representatives of MAE, MCA, CNA and INPF plus selected consultants, and will meet monthly, or as often as necessary, to expedite the project. Preparation and implementation of the urban/environment sub-component at the local level will be the responsibility of the respective CEC, with the assistance of MCA and CNA. The urban transport (bicycle) pilot sub-project in Beira would be implemented by an NGO resident in Mozambique, selected through competitive procedures acceptable to the Bank. This NGO will sign a pilot sub-project agreement with MCA and Beira CEC for this purpose, and the agreement will be sent to the Association for review. 14. To fulfill its technical, managerial and supervisory obligations in respect of the Urban/Environmental sub-component, MCA will continue to maintain HABITAR on terms and conditions acceptable to IDA. The staff of this unit would include the Project Manager, Senior Urban Planner, Systems Analyst and Economic/Financial Analyst, all recruited on terms and conditions acceptable to the Association. Working closely with the CECs, the HABITAR would have specific responsibility for assisting WGIII in developing terms of reference; employing consultants; monitoring and evaluating consultant outputs; helping to prepare engineering designs, resettlement plans, costing and contract documentation; and supervising consultants and works. CNA would have special responsibility for overseeing the preparation and implementation of the environmental pilot sub-project in Nampula and would liaise closely with HABITAR for this purpose. The designation of HABITAR as a project agency and its staffing of on terms and conditions acceptable to IDA would be a condition of effectiveness. Since HABITAR already has a project manager and staff, the key staff that should be hired prior to effectiveness is the senior urban planner, but it was agreed at negotiations that HABITAR would ensure that qualified local counterpart staff to work with and receive training from consultants would be contracted on a timely basis. 15. Project Administrative Support, Accounting, Monitoring and Reporting . Apart from its general substantive responsibility for local government, MAE's specific responsibilities under the project also include, inter alia, ensuring the finalization of terms of reference for all consultancies and works; recruiting and employing consultants; entering into necessary contracts; securing and implementing necessary changes in laws, regulations and administrative guidelines; managing training programs; overseeing process consultation; and undertaking project monitoring, payments, accounting, auditing and reporting, including reporting to the Association. In order to meet these responsibilities, MAE will establish, staff and maintain the TSU, which will function as a project secretariat, and will be under the. leadership of a Project Director - the latter reporting directly to DNAL. Besides the Project Director, the key staff of TSU will include a Manager of Administration and Organizational Development whose task will be to advise and assist the I roject Director on all matters related to the implementation of the reforms, preparation of monthly and quarterly reports on progress, and expediting of all administrative and training tasks required under the project; a Manager of Procurement who will ensure that project procurement inputs are acquired in an efficient, cost-effective and timely manner, and in accordance with IDA Guidelines; and a Financial Controller who will ensure that proper accoun.ts are kept, audits are done effectively and on a timely basis, and the finances of the project are managed efficiently. All will be recruited and employed on terms and conditions acceptable to IDA, and TSU will be provided with necessary administrative and logistical support by MAE. Where necessary, TSU will also provide administrative support to MCA and CNA. The establishment and staffing of TSU on terms and conditions acceptable to IDA is a condition of effectiveness. The key staff that should be recruited prior to effectiveness are the Project Director, the Manager of Procurement and the Financial Controller. To assist MAE, CG, WGs, TSU and HABITAR to manage the project, a set of Project Monitoring Indicators -22 - which provides for regular annual reviews and a mid-term review has been developed (Appendix B). Detailed training plans and the process consultation program were discussed at negotiations, as were the taking of all necessary steps to start the legal, institutional reform no later than June 30, 1994 and the financial reform no later than August 31, 1994. The annual reviews and mid-term review, to be held by September 30, 1995, and the carrying out of agreed recommendations arising out of these reviews, were agreed at negotiations. It was further agreed that on the basis of understanding to be reached between GOM and IDA at the mid-term review, GOM will develop a further program of action and update the Letter of Sector Policy. - 23 - SECT"ION B: Project Costs. Financing, Procurement, Disbursement. Reporting, and Agreements Reached I. Project Costs 16. The total project cost is estimated at US$24.5 million with a foreign exchange component of US$14.2 million or about 58% of total costs. The estimated total project cost is net of taxes and duties which would be borne by the Government. Base cost estimates are calculated using January 1993 prices. The physical contingencies represent 10% of base costs. Price contingencies, corresponding to 7% of base costs plus physical contingencies are derived from expected foreign price increases of 3.1% per annum over a four-year implementation schedule beginning on October 1, 1993. II. Project Financing 17. The proposed IDA credit of US$23.2 million equivalent will finance 95% of total costs, including 100% of the costs of studies and audits, consultant services (including services for the preparation of resettlement plans) and training, and 100% of foreign costs and 70% of local costs of other components. Government financing of US$1.3 million will be utilized for part of the local cost of project components. In order to expedite project preparation funding under a Project Preparidon Facility (PPF) amounting to US$0.75 million has been provided by IDA to GOM. To further expedite project preparation a second PPF has been requested by GOM and is being considered by IDA. If this is approved, the unallocated category would be reduced accordingly. Also, GOM has been discussing the possibility of cofinancing for some pilot subprojects with a number of donors. If these discussions prove successful, the IDA financing share would be reduced or reallocated. 111. Procurement 18. The procurement procedures for the IDA-financed components are as follows: (a) Studies and Audits (US$4.4 million), Consultant Services (US$8.6 million) an' Training (US$2.9 million): consulting firms and long and short-term consultants would be recruited both locally and internationally. The selection, qualifications, experience and terms of employment are subject to standard IDA procedures as set out in the World Bank Guidelines for Use of Consultants (August 1981). It was agreed at negotiations that the Bank's Sample Letter of Invitation, and Standard Contract for Consultant Services, appropriately modified for the purposes of the project will be used in the procurement process. (b) Works are small value contracts (not expected to exceed US$0.5 million each), are dispersed over various scattered areas and spread over time, and are highly labor intensive. The total value of works required under the pilot sub-projects is not expected to exceed US$1.7 million, of which works valued at US$1.2 million would be procured using local competitive bidding (LCB) procedures which would include local advertising, clearly stated evaluation criteria, public bid opening, award to the lowest evaluated responsive bidder. Foreign bidders, if interested, would not be precluded from participation. It was agreed at negoti-tions that the Bank's Standard Bidding Documents for Small Works (1991), appropriately modified for the purposes of the project, will be used. However, force account procedures could be used for the implementation of works up to a maximum of US$0.5 million for works which are small and scattered over wide areas and works which would be attended to without disruption of ongoing operations; risks of disruption could be borne by the Government rather than the contractor, and the IDA -24- financial share would 0e limited to US$0.3 million; (c) Vehicles, Equipment, Spares and Supplies (US$3.2 million) will be procured using standard IDA procedures as set out in the World Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (1992). It was agreed at negotiations that (i) suppliers will be selected on the basis of ICB; (ii) that the Bank's Standard Bidding Documents for Goods, appropriately modified for the purposes of the project, will be used; and (iii) equipment, spare parts and supplies valued in the aggregate at US$0.7 million would include proprietary and off the shelf items which are expected to cost US$25,000 each and would be procured by local or international shopping as appropriate, with three quotations from two eligible countries. Incremental Operating Expenses estimated at US$3.7 million would be procured under government procedures. The estimated schedule of procurement is shown in Schedule B. 19. Contract Review. Contracts above US$100,000 would be subject to prior IDA review. The balance of the packages would be subject to random post-review by IDA supervision missions. IV. Disbursements 20. Disbursement will be made against standard Bank documentation. The proceeds of the Credit would be disbursed against 100% of expenditures on studies and audits, consultant services including services for the preparation of resettlement plans, and training, and 100% of foreign and 70% of local expenditures for all other components. For expenditures on the local component of services of consultant firms, training, works, and incremental operating expenses, and purchase orders and contracts not exceeding US$50,000, disbursements would be on the basis of statements of expenditures (SOEs). All other disbursement claims will be fully documented. In order to expedite disbursement and ensure the timely provision of funds, a special account with an initial deposit of US$1.0 million will be established and will be replenished in accordance with procedures agreed at negotiations. Funds in the special account would be available to finance only eligible expenditure under the project. The estimated schedule of disbursements of IDA funds is shown in Schedule B. Disbursements are expected to take place over a period of four years and be completed by September 30, 1997, with the closing date scheduled for March 31, 1998. In order to ensure the timely provision of local counterpart funding, GOM will open and maintain a Project Account in local currency in a local commercial bank on terms and conditions satisfactory to IDA. Further, GOM will make an initial deposit in local currency equivalent to US$60,000 into the Project Account, and deposit into the account every four months amounts in local currency that would be required to replenish the Account. The opening of the Project Account with the initial deposit by GOM is a condition of effectiveness. There are two conditions of disbursement as follows: on all subproject works, (i) the submission to IDA of a resettlement plan for families to be relocated during the implementation of subprojects, prepared in accordance with criteria and terms agreed upon between GOM and IDA at negotiation; and (ii) evidence, satisfactory to IDA, certifying GOM's legal ownership of land where civil works financed under the Credit will be carried out. V. Accounting, Auditing and Reporting and Monitoring 21. The following accounting and auditing arrangements were agreed upon during negotiations: (i) Project accounts: that consolidated accounts would be maintained on a basis satisfactory to IDA by MAE (TSU) for all IDA-financed components of the project, including local costs financed by Government; (ii) Audits: that the project accounts, including the special account, and all disbursements against SOEs would be audited separately and on an annual basis by independent auditors acceptable to -25 - IDA and submitted annually to IDA no later than nine months after the end of each GOM financial year. In order to ensure maintenance of annual accounts on a satisfactory basis, and timely completion of final accounts, the TSU would be staffed with a suitably qualified accountant supported by appropriate technical assistance. The contracting of independent auditors satisfactory to IDA is a condition of effectiveness. The following arrangements for project monitoring and reporting were agreed upon during negotiations: that MAE (TSU) will provide, on a quarterly basis, consolidated reports (comprising the reports of the consultants and MAE (TSU) comments thereon) on project implementation progress covering the status of procurement of consulting services and training, works, incremental operating expenses and vehicles and equipment, and progress on the legal and institutional, fiscal and financial, and urban/environmental management and development components. The monitoring indicators would provide the basis for reporting on the progress of the reforms and the pilot sub-projects. This report should be submitted to IDA within one month of the end of the relevant quarter. In addition, MAE and IDA would conduct annual project reviews no later than September 30 every year, and a mid- term review no later than September 30, 1995. In preparation for these reviews, MAE would submit annual and mid-term project reports to IDA not later than four weeks before the annual and mid-term reviews respectively. VI. Agreements Reached. 22. During project appraisal, post-appraisal, and subsequent technical discussions, understandings were reached on: implementation procedures at central, provincial and local levels; terms of reference, arrangements and monitoring indicators for undertaking and managing technical assistance, studies and training; and the training and process consultation program, including criteria and mechanisms for evaluation. During negotiations, agreements were reached on the following: (i) detailed reporting and monitoring arrangements, including progress monitoring indicators and annual and mid-term implementation reviews (the latter to be carried out by September 30, 1995) to cover inter alia progress achieved in the reform program and the proposed budgetary allocations for the next year and measures taken to ensure timely provision of counterpart funds (para 21); (ii) the carrying out of agreed recommendations arising out of the annual and mid-term reviews (para 15); (iii) the preparation and implementation, if necessary, of resettlement plans in accordance with criteria, terms, and timetables agreed with IDA (paras 6 and 19); (iv) auditing and procurement procedures, including the use of standard bidding documents, appropriately modified (para 18); (v) detailed institutional arrangements, including Inter alia the satisfactory establishment, staffing and operation of the TSU and IABITAR (para 14 and 15); (vi) appointment of qualified local counterpart staff to work with and receive training from consultants (para 14); -26 - (vii) the timely implementation and content of the Implementation Agreements to be entered into between MAE and the project cities, and of the MDPs, for which preparation would be started by January 31, 1995 (para 12); (viii) the satisfactory maintenance and replenishment every four months of a Project Account to finance the Governments project contribution (para 20); (ix) the taking of all necessary steps to start the legal and institutional reform no later than June 30, 1994, and the financial reform no later than August 31, 1994 (para 15); and (x) by December 31, 1995, agreement with IDA on a further program of action and updating of the Letter of Sector Policy (para 15). 23. The conditions of effectiveness are: (i) the establishment of TSU, the designation of HABITAR as a project agency, and the staffing of TSU and HABITAR on satisfactory terms (paras 14, 15 and 22); (ii) the signing of satisfactory implementation agreements between MAE and the five project cities (para 12); (iii) the contracting of independent auditors, on terms satisfactory to IDA (para 21); (iv) the initial deposit of US$60,000 equivalent into the Project Account (para 20); and (v) the contracting of consultants for the fiscal, financial and organizational reform studies (para 5). 24. The conditions of disbursement are: (i) for all subproject works, if relocation of any households is necessary as a result of sub- project investments, preparation of a satisfactory resettlement plan (para 6); and (ii) for civil works under each subproject, the submission of satisfactory evidence certifying GOM's legal ownership of the land where civil works will be carried out (para 6). -27 - Section C: Project Qrganlzation. Monitoring Indicators. Implementation Schedule. Capacit, Building. User Demand Assessment. Letter of Sector Policy and Criteria for the Preparation of Resettlement Plans Apdic: A. Project Organization Chart, Responsibility Table and Note on WG Operations B. Project Monitoring Indicators C. Implementation Schedule D. Consultant's Matrix E. Capacity Building: Process Consultation and Training F. User Demand Assessment Note G. Letter of Sector Policy H. Criteria for the Preparation of Resettlement Plans MOZAMBIQUE: LOCAL GOVERNMENT REFORM & ENGINEERING CREIrT IKC MOF MO CNP ME?MCA OL OT INC CHAIR MIN MAE CG -----------N-DIR-LG--------- TSU-- -----A-TA WGIK WGIIIWII PROJECT TECHNICAL ADMIN --- SECRETARIATl SECRETARIAT ILSGn DEPTe Nos MAY 1993 -29- Appendix A Page 2 of 3 LOCAL GOVEWNMENT REFOlM AND ENGINEERING PROJECT Responsibility Matrix Aciby ReMhibt Grou Composition and Reportin Overall Policy Guidance IMC Ministers of State: MAE (Chair.), MOF, MOJ, CNP, MOL & MCA - (Reports to COM). Policy Advice, Project CG, WGs & Director of Local Government Administration, Preparation, Consultant (LSGs at local MAE (Chair.); Chair. & V. Chair. of WGs; TSU TORs and Supervision, level, see Project and HABITAR managers; & selected Integration and below). consultants - (Reports to IMC through Minister, Coordination MAE). * Legal and Institutional WGI Snr. Legal & Administrative officers of MAE, MOJ and selected consultants (Reports to CG). * Fiscal, Financial and WGII Snr. officers of MOF, MAE & selected Organizational consultants (Reports to CG). (including training) * Urban/Environmental WGIII Snr. officers of MCA, CNA & INPF - (Reports to CG). Implementation * Legal & Institutional MAE/MOJ/ Snr. Officers at MOF, MAE & CECs; assisted * Fiscal, Financial and MOF/CECs by consultants - (Reports to relevant Ministry or Organizational CEC). (Including Training) Urban & Environmental MCA/ HABITAR, Snr. Staff of CNA & CECs, NGO (lABITAR)/ (Beira) & selected consultants (Reports to MCA, CECs/NCO/ CNA & CECs). CNA Local Level Coordination LSG President of CEC; Snr. officers of MAE, MCA, and Support and CNA at local level; & selected consultants - (Reports to CEC). Project Administration MAE (TSU) TSU Project director, Dir. of Administration, (Procurement, Financial Controller, & Dir. of Procurement Disbursement, Accounting, (Reports to Minister, MAE). Monitoring, Reporting, Audits and General Support) - 30 - Appendix A Page 3 of 3 Working Groups Structure and Relationships 1. A Coordinating Group (CG) has been established to oversee the implementation of the project. The CG is chaired by the National Director for Local Government Affairs (DNAL), and includes the National Directors of the Ministry of Construction and Water (MCA) and the Finance Ministry (MOF). A Technical Support Unit (TSU), including a Project Director appointed full-time to this assignment from within MAE, would service the CG. 2. Three Working Groups (WGs) covering: WG I - institutional and legal; WG II - fiscal, financial and organizational; and WG III - urban/environment management and development, under the supervision of the CG, have been established to implement the project. All of the working groups would utilize consultancies as required, and the core groups would themselves be modified according to changing skill mix requirements as the work progresses. 3. Coordination and Internal Structure: The tasks of the WGs will be coordinated by the Chairmen. The Chairmen also will be responsible for coordination with their counterparts in the other two working groups. Each Group will establish whatever internal structure the Chairman considers appropriate for the tasks to be carried out. 4. Relationship of Consultants to WG: The work of the Groups will be supported by consultants hired by MAE and assigned to the WGs. Within one month after the start of the consultancies, the consultants will prepare and present to the Chairman of their WG a detailed work program proposal and a schedule for each assignment, outlining issues to be covered, and areas of decisions to be made. The proposed work program would outline the staged decision-making required to implement the action plan based on forthcoming findings. Upon submission, it will be evaluated by the WG/CG, adjusted as deemed necessary, and returned to the consultants for the completion of their assignments. The proposed work program would be submitted by the WG to IDA for its comments, prior to its approval. 5. Under their work program, the consultants will be expected to report their findings and recommendations to the WG Chairman at least every two weeks to ensure technical coordination and an early assessment and implementation of the recommendations. The consultants will focus on the detailed development of technical options in response to objectives, policy strategies and alternatives as expressed by the WG. The consultants will organize workshops with the WGs on key issues and on complex analyses in order to ensure that the WGs fully appreciate the critical factors involved in any recommendations that they may make. 6. In executing their terms of reference, the consultants will identify any legislative and/or regulatory cianges required and assist in drafting appropriate changes. 7. Decision Making. The COM would make the final decisions regarding policy recommendations which will be tested in the project cities. However, before recommendations are presented to the COM, there would have been process consultations involving officials of affected agencies and levels of government, and consideration within the WG and at the CG and IMC. PROCT NITOMR INDICATORS MONITORING PERIOD PRIOR TO OCT Q:1&2 Q:3&4 Q:S&6 Q:7&8 Q:9&10 Q:11&12 I Q:13116 COMPONENT 1993 OCT 19931 MAR APRIL/SEP 1994 OCT 1994/MAR APRIL/SEPT OCT 1995/ APRIJSEP OCT 16SE 1994 1995 1995 MAR 1996 1996 1997 KEY STAGE' Pre-Effectiveness Effectiveness (Oct. 1, Pilots Begin Mid-term Re- Preparation for Pre-Globaliza- Final Project 1993) (Oct. 1, 1994) view Sept '95 Globalization tion Review, Review, Sept Sept '96 '97 Project Review Project Launch Project Progreft Proj. Review Mission Sept Review Prog- Review 1st Review Glo- Missions Workshop-Oct. '93 Mission Mar '94 Mission March '95 ress re Glob- Draft of Glob- bal'a Plan '95 alization Prep alization Plan Mar '97 Pre-Pilot Project Mar '96 Sept '96 Review Mission Final Mission Sep. '94 1 Sept '97 LEGAL AND INSTITUTIONAL REFORM (WGI) a (A) (i) Legal Re- Enabling legislation Begin Prep. of Insti- Integrate Results of Begin Implem- Review of Summary of Complete 1st Globalization form Approved tutional Law Finance Studies and ention of Laws Implementation Experience to Draft of Glob- Program Plan Publish Inst. Law date alization Plan Recruit Consultants Begin Global- Draft Financial ization Prepara Finalize Glob- Law tion alization Approval ofLaw (A) (ii) Administa- Develop New Ad- Detail First Year Integrate Financial Begin Admin. Review of Summary of Complete Ist Globalization tive Reform ministrative Program Reform Program Study Results in Program Reform Implementation Experience to Draft of Glob- Program Plan Outline Admin. Program in Municipalities date alization Plan Begin Global- ization Prepara Finalize Glob. tion alization (B) (i) Training & Draft Detailed Tra- Detail Ist Year Complete Training Update training 60% of Train- Update training Training Com- Evaluate Train- ining Program Training Program of Trainers program. ing Completed program. pleted ing Programs Full Scale Train- 90% of Train- Recruit Consultants Begin Training of Begin Training of ing of Central Review Prog- ing Completed Initial Evalua- o Trainers Central and Munic- and Municipal ress tion ipal Officials Officials Review Prog- 5 (B) (ii) Process Meet with Central, Hold Initial Con- Hold Consultations Initiate City and Hold Consulta- Hold Pre-Glob- Evaluate pro- tol Consultation 2 Provincial and Local sultations on 1st Year on Financial Re- Community Con- tion on Mid- alization Con- cess consulta- Government Officials Legal and Admin.Re- form Implications sutations term Review' sultation 4 tion to Explain Process form Activities Eval. process consultation PROJECT MONITORING INDICATORS MONITORING PERIOD PRIOR TO OCT Q:1&2 Q:3&4 Q:5&6 Q:7&8 Q:9&l0 Q:11&12 Q:13/16 COMPONENT 1993 OCT 19931 MAR APRHJSEP 1994 OCT 1994/MAR APRIL/SEPT OCT 1995/ APRIL/SEP OCT 1996/SEP 1994 1995 1995 MAR 1996 1996 1997 KEY STAGE' Pre-Effectiveness Effectiveness (Oct. I Pilots Begin Mid-term Re- Preparation for Pre-Globaliza- Final Project 1993) (Oct. 1, 1994) view Sept '95 Globalization tion Review, Review, Sept sent '" '97 (C) Support to TSU established Recruit Trainers Continue Training Evaluate Sup- Evaluate Sup- MAE and pilot cit- Support port to MAE port to MAE ies Recruit Training and Begin Training Sup- Admin.Director port FISCAL, FINANCIAL AND ORGANIZATIONAL REFORM (WGII) (A) Reform Fiscal Recruit Consultants Studies and Draft Integrate Study Re- Begin to Imple- Review of Summary of Complete Ist Globalization Transfer System Proposals sults into Draft In- ment New Ar- Implementation Experience to Draft of Glob- Program Plan stitutional and rangements date alization Plan Financial Laws Begin Global- ization Prepara Finalize Glob- tion alization (B) LO Resource Recruit Consultants Studies and Draft Integrate Study Re- Begin to Imple- Review of Summary of Complete 1st Globalization Mobilization (Tax- Proposals suits into Draft In- ment New Laws Implementation Experience to Draft of Glob- Program Plan es and User Char- stitutional and date alization Plan ges) Financial Laws Begin Global- izatiosi Prepara Finalize Glob- tion alization (C) LG Financial Recruit Consultants Studies and Draft Integrate Study Re- Begin to Imple- Review of Summary of Complete Ist Globalization Urban Services Proposals sults into Draft In- ment New Laws Implementation Experience to Draft of Glob- Program Plan stitutional and date alization Plan Financial Laws Begin Global- ization Prepara tion (D) Reform Ac- Recruit Consultants Studies and Draft Detail Ist Year Begin Implem- Review of Sumnary of Complete Ist Globalization counting, Budget- Proposals Plan entation Implementation Experience to Draft of Glob- Program Plan ing, and MIS date alization Plan Systems Outline Follow-up Begin Global- Finalize Glob- Plan ization Prepara- alization Finalize Glob- tion alization PRO.ECT MONITORING INDICATORS MONITORING PERIOD PRIOR TO OCT Q:1&2 Q:3&4 Q:5&6 Q:7&8 Q9&IO Q:11&12 Q:13116 COMPONENT 1993 OCT 19931 MAR APRIUSEP 1994 OCT 1994/MAR APR1IJSEPT OCT 19951 APRIUSEP OCT 1996/SEP 1994 1995 995 MAR 1996 1996 1997 KEY STAGE' Pre-Effectiveness Effectiveness (Oct. 1, Pilots Begin Mid-term Re- Preparation for Pre-Globaliza- Final Project 1993) (Oct. 1, 1994) view Sept '95 Globalization tion Review, Review. Sept _Sent96 297 (E) Administration Recruit Consultants Studies and Proposals Detail Plan for Begin to Imple- Review of Summary of Complete Ist Globalization & Staffing Financial Manage- ment Plan Implementation Experience to Draft of Glob- Program Plan meat Functions date alization Plan (i) Functions and Begin Global- Staffing ization Prepara Finalize Glob- tion alization (E) (ii) Training Recruit Training Detail Ist Year Pro- Train Trainers and Update train 60% Complete Update train Completed Evaluate Train- Coordinator grain Begin Training of program Review Prog- program Initiate Evalua- ing Programs Draft Training Pro- Municipal Staff Train Municipal ress 90% Complete tion grain Staff Review Prog- ress (F) (iii) Process Meet with Central, Hold Initial Con- Hold Consultations Hold Municipal Hold Consulta- Hold Pre-Glob- Evaluate pro- Consultation Provincial and Local sultations on Study on the Draft Laws and Community tion on Mid- alization Con- cess consulta- Officials to Explain Results Draft Fin. Involving Local Level Cons- term Review s sultation' tion Process Proposals Government Fi- ultations nance (0) Operational Recruit Finance and Recruit Trainers Continue Training Evaluate sup- Evaluate sup- and Technical Taxation Advisor Support port to MAE port to MAE Support to MAE Begin Training Sup- port URBANIENVIRONMENTAL MANAGEMENT AND DEVELOPMENT (WOIII) (A) Municipal De- Recruit Consultants Recruit Consultants Initiate Studies in Mid-Term Implementation Update and Update and velopment Pro- Cities Review MDP Implementation continue MDPs s gram (Five Cit. Develop Studies MDPo ies)' and Draft Pro- Implement posals MDP Activities and Investment PROJECT MONITORING INDICATORS MONITORING PERIOD PRIOR TO OCT Q:1&2 Q:3&4 Q:5&6 Q:7&8 Q:9&10 Q:11&12 Q.13/16 1993 OCT 1993/ MAR APRIUSEP. 1994 OCT 1994/MAR APRIUSEPT OCT 1995/ APRILJSEP OCT 1996/S 1994 1995 1995 MAR 1996 1996 1997 KEY STAGE Pre-Effectiveness Effectiveness (Oct. 1, Pilots Begin Mid-term Re- Preparation for Pre4tobaliza- Final Proet 1993) (Oct. 1, 1994) view Sept '95 Globalization tion Review, Review, Sept SeW '96 '97 (B) Urban Upgrad Recruit consultants Recruit Consultants Initiate Studies in Develop Studies Mid-Term mng Pilot Cities and Draft Pro- Review (Pemba) posals. Prepare resettle- Implement ment plans. Investment Program (C) Environmental Continue Preparator Begin Documenation Continue Studies. Integrate Results Mid-Term Development Pilot Work of Work to-date Prepare resettle- with MDP Review (Nampula) meet plans Recruit Consultants Continue Studies Develop Training Implement Materials Investments (D) Non-Mot- Select NGO Begin Planning and Import, Assem- Mid-Term Sales of Bicyck arled Transport lovestment Studies ble and Sell of Review Supply Opera- (Beira) Recruit Consultants Bicycles tion to Entre- Establish Bicycle preneurs Credit Mechanisms Promotionot Private Sector Interest (E) Rapid Map- Recruit Consultants Begin Mapping Provide Maps to Completion of ping (Five Cities) Program Municipalities Program (P) Land Informa- Recruit Consultants Begin Studies Completion of tion Systems Program (Maputd) PROJECT MONITOG INDICATORS MONITORING PERIOD PRIOR TO OCT Q:1&2 Q:3&4 Q:5&6 Q:7&8 Q:9&l0 Q:11&12 Q:13116 COMPONENT 1993 OCT 1993/ MAR APRIIJSEP 1994 OCT 1994/MAR APRILSEPT OCT 1995 APRILSEP OCT 1996/SEP 1994 1995 1995 MAR 1996 1996 1997 KEY STAGE' Pre-Effectiveness Effectiveness (Oct. 1, Pilots Begin Mid-term Re- Preparation for Pre-Globaliza- Final Project 1993) (Oct. 1, 1994) view Sept '95 Globalization tion Review, Review, Sept (G) (i) Project Finalize TORs and Review Consultant's Finalize contract Assist with im- Provide input Mornitoring Monitoring and Finalize all Management Recruit Consultants outputs and progress documents for plementation of for review and Review Review project ac- for MDP Pilots works and submit MDPs and moni- counts and documents to Bank tor MDP con- prepare PCRs for approval tracts (0) (ii) Training Identify Trainees for Develop Training Update training Completion of Update training Completion of Evaluate train- Mapping Program Plan in MDP and program. Training in program. Training in ing program Urban Upgrading Begin Training in Mapping Completion of MDP Prepara- Begin Training in MDP and Urban Training in LIS tion and Updat- Mapping Program Upgrading Evaluate and ing, and Urban Upgrading (G) (iii) Process Hold Initial Pro- Evaluate pro- Evaluate pro- Consultation cess Consu- cess conslta- cess consulta- Itations on MDP tion tion and Urban Up- grading Propos- als. (G) (iv) User De- Initiate user demands Initiate user de- Initiate User De- Continue Asse- Evaluate user Assessment of Evaluate user mand Assessment assessments for mand analysis for mand Assess- ments demand assess- the Outcome of demand analy- Environ. pilot urban upgrading ments for MDPs ment the MDP, sis. Urban Upgrad- ing and Bev. Planning and Management a l _ _ (JtA PROJECT MONITORING INDICATORS ENDNOTES 1. The Items to be comnleted in the boxes under all Key Stages would be reviewed by the Bank before the next key stage may begin. 2. Consultations regarding the Institutional and Local Government Finance laws will involve officials of MAE, MCA, the Ministries of Finance Justice, the Provincial Governments and the Local Governments. Consultations prior to implementation of the i Jorms would be expanded to include community interests in the local government jurisdictions. 3. Officials of all the Central, Provincial and Local Governments involved in the reform program, as well as private sector and community representatives would participate. 4. Participants would include MAE, Ministries of Finance and Justice, MCA and the Provinces and Local Governments to be involved in the Globalization Program. 5. See End Note 7. 6. See End Note 8. 7. User demand assessments will be done in this component. 8. User demand assessments applied. 9. These consultations will involve officials of the Local and Provincial Governments, MCA, private sector and community representatives. 0>%I MOZAMBIQUE: Local Government Reform & Engineering Project Implementation Schedule 1993 1 1 _19IS_ 196 1997 ACTIVITIES ACTION BY 1 QZ Q3 Q4 Q1 IQ2 Q3 Q4 Q Q2 IQ3 Q4 Q1 Q2 Q3 Q4 Q1 QZ Q3 Q4 KEY EVENTS Negotiation GOM/IDA Establish IMC Letter of Sector Policy Board IDA Establish TSU & HABITAR _ Effectiveness IDA Key Missions _ Piqject Launch IDA Mid-term Review IDA Closing IDA SELECTION OF CONSULTANTS TORs & Shortlist GOM/IDA Submit Proposals CONS Eval & Awaid GOM/IDA Consultant Mobiliatits CONS - WGI: LEGAL & INSTIFUTIONAL Prop of lationEnablig MAE/CONS Diso & App of legislation MAE/CONS Draft lAst Framework MAE/CONS Draft Financial Leg MAE/CONS =....- Consideration & App of Inst. Frame MAEICONS Pubt of last Gazette MAEICONS Admia org of 5 cities MAE/CONS Draft Traiing Plan MAE/CONS Training of Trainems MAE/CONS Training Implenentation MAE/CONS Global Reform MAEICONS won Transfesn: Study MAE/CONS Expenditures: Study MABICONS *** Log Taxes Mob: Study MAEICONS Non Tax Somes MAE/CONS **t Patel1 MOZAMBIQUE: Local Government Reform & Engineering Project Implementation Scbedule 1993 1994 1995 19% 1997 ACTIVITIES ACTION Y Q1l QZi Q3 Q4 Q1 Q2 Q3 Q4 Ql Q2 Q3 Q4 Q1 Q2 Q3 Q4 Ql Q2 Q3 Q4 Pub. Utility Tariff MAB/CONS Priv Sector: Study MAE/CONS Acetg & Budet: SdyMAB/CONS MIS Study MAB/CNS StfFitions MAB/CONS Traing: StdY MAE/CONS - Tranig Of Tran~ MAB/CONS ImplmenttionMAB/CONS WGI: URBAN & ENVIRONMENT Mu Døv Plan: Studie MCA/CONS Implemntation MCACOS Pilot Preparation MCA-CONS Implementation MCAjCONS Project Management HABITAR Page 2 -39 - Appendix D CONSULTANTS MATRIX Page 1 of 4 LEGAL AND INSTITUTIONAL REFORM (Prep. and Oversight Resp.: WGI (Implement. Resp. Central/Provincial: MOF/MOJIMAE) (Implement. Resp. Local: MAE/CECs, with LCO coordination (Administrative and Logistical Support: MAE) Component and Consultants Local/ Person Comments Sub-Component I Foreign I Months A. Municipal L 15 Individ.: Consultant employed i) Legal Reform Finance Law ii) Administative (group leader) Reform Administrative L 12 Individ.: Consultant employed Law Public Law L 6 Individ.: Consultant employed Constututional/ F 12 Individ.: Consultant employed Public Law (Advisor) Org. Expert F 5 Individ.: Consultant employed B. Training & Lawyer L 36 Individ.: Consultant employed and recruit Capacity Building (Coordinator) by January 1, 1994; Bank clearance of draft contract required Lawyer F 4 (Advisor) (ditto) Train. Expert F 27 Individ.: MAE to finalize TOR & recruit by Oct. 1, 1993; Bank clearance of draft contract required Train. Expert F 27 (ditto) C. legal & Org. Expert F 10 Individ.: MAE to finalize TOR & recruit Admin. Support to by January 1, 1994; Bank clearance of MAE and Pilot draft contract required Cities Lawyer L 15 (Finance) (ditto) Lawyer F 14 (Advisor) (ditto) Lawyer L 12 (Admin'tion) (ditto) Org./Admin L 28 Assistants Group (ditto) Legal/Admin L 110 Individ.: MAE to finalize TOR & recruit Assistants Group by January 1, 1994; Lawyer/Admin F 5 Individ.: MAE to finalize TOR & recruit Expert by January 1, 1994; Bank clearance of draft contract required -40- Appendix D MATRIX Page 2 of 4 FISCAL, FINANCIAL AND OROA1I1ATIONAL REFORM (Prep. and Oversight Resp.: WOI) (Implement. Reap. Central/Provincial:MOF/MOI/MAE) (Implement. Reap. Local: MAECEC, with LCG coordination (Administrative and Logistical Support: MAE) Component and Consultants Local/ Person Comments Sub-Component _ Foreign Months A. Reform Fiscal Econ. Fiscal F 24 International Firm in Association wi* Transfer System Transfers local Experts: MAE to finalize TOR and employ by October 1, 1993; Bank Econ. F 10 clearance of TOR, shortlist, selection & Expenditures - draft contract required. Contracting of firm is a condition of Local L 24 effectiveness. Counterpart B. LG Resource Econ. F 8 Mobilization Municipal (Taxes and User Taxation Charges) Econ. Non-tax F 8 Revenue Local L 8 Counterpart C. LO Financing Econ. Public F 20 Util. Tariffs Econ. Private F 11 Sector Participation D. Reform Mun. Fin. F 15 Accounting, Bud- Exp., Acct.& geting, and MIS Budget systems Data F 24 Processing & MIS Experts Local L 24 Counterpart E. Administration Org. Expert F 12 i) Functions & Stamg Train. Expert F 18 ii) Training F. Management & General L 48 Individ.: Consultant employed Support to MAE Manager Finance and F 36 Individ.: MAE to finalize TOR & recruit Taxation by Oct. 1, 1993; Bank clearance of draft Advisor contract required Training F 36 Coordinator (ditto) Sub.Group L 18 Coordinator (ditto) Sub-Group L 18 Coordinator (ditto) Support Group L(group) 30 (ditto) -41- Appendix D CONSULTA MATI=X Page 3 of 4 URBAN/ENVIRONMENTAL MANAGEMENT AND DEVELOPMENT (Prep. and Oversight Resp.: WGII (Implement. Reap. Central/Provincial: MCA(PIU)/CNA (Implement. Reap. Local: MCA(ABITAR)/CNA/CECs/NGO(Beira), with LCGs coordination (Administrative and Logistical Support: MAE) Component and Consultants Local/ Person Comments Sub-Component I [ Foreign I_Months A. Municipal De- Urb F 36 International Firm in Association with velopment Pro. Planner/Manag local Experts: MCA (HABITAR) to grams (Five Cit- or finalize TOR and employ by October 1, les) 1993; Bank clearance of TOR, shortlist, Infra.Engineer F 30 selection & contract required Urb. Econ/Fin. F 30 Analyst Environ. F 24 Planner Transp. F 15 Engineer Urb. F 30 Sociololist (B) Urban Local Plan/ L NA Local Firm: MCA (HABITAR) to Upgrading Pilot Engineering finalize TOR and employ by October 1, (Pemba) Firm 1993; Bank clearance of TOR, shortlist, selection & contract required C. Enviromental Local Group L/F 278 Local Group with For. Consult: Development Pilot with assist of CNA/MCA (HABITAR) to finalize TOR (Nampula) For. Environ. and employ by Jan. 1, 1994; Bank Consultant clearance of TOR, shortlist, selection & contract required D. Non-Motorized NGO F NA Locally resident NGO: MCA Transport (Beira) (HABITAR) to finalize TOR and employ by Jan. 1, 1994; Bank clearance of TOR, shortlist, selection & contract required E. Rapid Mapping Firm F NA International Firm: MCA (HABITAR) to (Five Cities) finalize TOR and employ by Jan. 1, 1994; Bank clearance of TOR, shortlist, selection & contract required F. Land Informa- Firm F 99 International Firm: MCA (HABITAR) to tion Systems finalize TOR and employ by Jan. 1, (Maputo) 1994; Bank clearance of TOR, shortlist, selection & contract required (Continued) -42 - Appendix D CONSULTANTS MATRIX Page 4 of 4 URBANIENVIRONMENTAL MANAGEMENT AND DEVELOPMENT (Prep. and Oversight Resp.: WGIII (Implement. Resp. Central/Provincial: MCA(PIU)/CNA (Implement. Resp. Local: MCA(HABITAR)/CNA/CECs/NGO(Beira), with LCGs coordination (Administrative and Logistical Support: MAE) Component and Consultants Local/ Person Comments Sub-Component Foreign Months 0. HABITAR Individuals: MCA (HABITAR) to finalize i) Project Manage TORs and employ by October 1, 1993; ment Proj.Manager L 30 Bank clearance of TOR, selection & ii) Training Snr. Urb. F(2) 24 contract required; Project Manager iii) Process Con- Plan. already employed. sultation (G) (iv) Beneficia- Jnr. Civ. Eng. L 36 ry Assessment Jar. Urb. Plan. L 48 Econ./Fin F 48 Anal. Technicians L 72 Syst. Analyst F 21 Ecological F 20 Advisor Ecological L 20 Technician INSTITUTIONAL SUPPORT MAE(TSU) (Administrative and Logistical Support WGs & CGs, CECs & LCGs) Component and Consultants Local/ Person Comments Sub-Component Foreign Months Administration, Project L 481l Individuals: MAE to finalize TOR & Contracts, Director recruit by Oct. 1, 1993; Bank clearance Payments, of TOR, selection & contract required Monitoring, Manager L 48 Reporting, Audits, Admin & Org. Procurement, Devi. Disbursement, Training Support, Manager L 48 Process Procurement Consultation & Beneficiary Fin. Controller L 48 Assessment 11 It is possible that this post will be occupied by MAE DNAL, in which case, no provision should be necessary here. -43 - Appendix E Page 1 of 3 CAPACITY BUILDING: PROCESS CONSULTATION AND TRAINING Introduction 1. A critical objective of this project is to assist in building the individual and institutional capacities necessary to ensure the success of the reform program. Building these capacities involves: a) creating or strengthening commitment to new responsibilities and tasks; b) reducing constraints to productivity and effectiveness; c) increasing understanding about the new responsibilities and tasks and their operational requirements; and, d) increasing the skills necessary to carry out the new responsibilities and tasks. This project integrates two elements into the efforts at individual and institutional capacity building: process consultation and training. These elements contribute in specific ways but by different methods. The process consultation element of the program is designed to ensure that the decision making about the reform is fully informed and supported by the stakeholders. The training element is designed to prepare the administrators of the reform to carry out their tasks effectively and productively. PROCESS CONSULTATION Background 2. One of the most important lessons which has emerged from reviews of efforts at policy and institutional change is the need to involve everyone who have important interests in the outcome (the stakeholders) in the process of guiding and shaping the necessary changes. There are several reasons why this involvement is necessary; among them: a) stakeholders must have a sense of ownership of the proposed reforms, as well as a clear understanding of its elements, if they are to be committed to carrying out their part in the program; b) there is a real danger in the complex circumstances of such reforms that important perspectives may be overlooked or given insufficient weight if key actors are excluded from participation; and, c) unnecessary opposition, even to worthwhile changes, may be engendered by inadequate understanding of the rationale for the changes. As a result, the process of devising and implementing the Local Government Reform Program in Mozambique will include several mechanisms for involving stak holders. The composition of the Inter-Ministerial Committee, the CG, the Working Groups and the LSGs are important examples. However, there needs to be opportunities to draw other important actors into the dialogue at crucial stages. The process consultation mechanism has been designed for this purpose. Carrying Out Consultations 3. MAE, as chair of the Coordinating Committee, will be responsible for the preparation and convening of, and follow-up to, consultations. During the preparation of the legal and administrative and financial reforms, there will be a number of stages at which important decisions and choices will need to be made. Specific stages noted in the monitoring indicators matrix (Appendix B) include: when the principles of the legal and administrative reform have been outlined, but before the drafting of the institutional law is done (4th Quarter '93); on completion of the analytic studies for financial reform (2nd Quarter '94); when the draft Institutional and Local Government Finance laws are prepared (2nd/3rd Quarter '94); prior to the implementation of the reforms (3rd Quarter '94); at the review of the studies and draft proposals for the Municipal Development Programs in the five cities and the Urban Upgrading Project in Beira (4th Quarter '94/1st Quarter '95); a year after the initiation of the reforms (3rd Quarter '95); and, prior to the globalization phase of the reforms (3rd Quarter '96). -44- Appendix E Page 2 of 3 4. As key draft documents or analytic results become available, these documents or results will become the focal point around which consultations will be organized. These consultations would take the form of a meeting or series of meetings at which pertinent stakeholders would be given a thorough explanation of the draft document or analytic result and the implications that follow from it. For the consultations leading to the promulgation of the Institutional and Local Government Finance laws, officials of MAE, the Ministries of Finance and Justice, MCA, the Provincial Governments and the Local Governments need to be involved. Because responsibilities for different aspects of activities associated with the reform are allocated to several directorates within agencies, it is important that representatives of all concerned directorates are involved. The consultations prior to implementation of the reforms and with regard to the Municipal Development Programs in the five cities and the Urban Upgrading Project in Beira would be expanded to include community interests in the local government jurisdictions. 5. The participants would be encouraged to comment fully on the materials with the assurance that their comments would be carefully taken into account. To the extent possible, a consensus should be reached on key proposals that would be endorsed by the participants in the consultation. Although complete consensus on all matters may not be achieved, all participants should be assured that they had been heard and their views taken into account before moving on to the next stage of the reform process. 6. Because of the importance that genuine participation plays in achieving its objectives, a consultation would be carefully prepared and carried out. As the convener of the consultations, MAE would prepare a checklist of considerations including: aspects and characteristics of the subject matter; the number of participants and the time needed to be spent to ensure adequate discussion; the particular mix of participants that would encourage free and open exchanges; the venue and style (formal/informal, open or closed) that would be appropriate. Participants should be advised beforehand of what would be asked of them. The outcome would be documented as appropriate and circulated to the participants, the Working Groups and the Coordinating Group and would feedback into the design of project activities. 7. The Bank would observe critical consultations to ensure itself that there is clarity and consensus on crucial issues, and to receive first-hand some of the feedback. TRAINING Objectives 8. The training components of this project will be designed to increase the productivity of the staff who will administer the reform program. Consequently, training would be geared towards practical tasks that would need to be accomplished. It must therefore be based on the realities in Mozambique. The components will focus on ensuring that these staff understand the new administrative and legal structure in which they will operate, the content of the tasks which they will be called upon to perform, the tools and assistance that will be available to them and the output that will be expected. The Preparation of Training Plans 9. Training plans are to be prepared by the Working Groups with the assistance of their consultants and in consultation with the Director of Administration and Organizational Development in the Technical Support Unit (TSU). In order to effectively design the training program, the various components will explicitly assess the Local Government workforce that will be available to carry out the tasks for which -45 - Appendix E Page 3 of 3 the training is intended and the workplace and circumstances in the five cities, under which this workforce would be operating. The workfore assessmet would produce: job positions with associated descriptions of the function and tasks of each position; staff in posts, with i) grade level, ii) years of service, iii) prior experience, and iv) prior training; staffs functional capacities relevant to the job description, identifying separately the tasks that the staff are capable of doing but are constrained by other reasons, from the tasks which require knowledge and skills which the staff do not have. In the (many) instances where there are vacancies, the assessment would specify the minimum requirements that can be realistically expected of new staff in order that they may effectively absorb the training that is planned. 10. The workplace assessment would indicate the materials, supplies, equipment and tools that would be needed to perform the functions and tasks set out in the job descriptions. To the extent that physical conditions in any city are a barrier to the performance of jobs, this would be set out along with the steps necessary to create satisfactory conditions. 11. Other Constraints that significandy affect prod uctivi:y also would be examined. Personnel management, employee supervision and career develop nent issues, including ambiguity or conflicts in lines of authority and reporting relationships, inappr )riate influences on recruitment, promotion and discipline, and frequent changes of assignments are among the considerations that would be reviewed by the consultants. Incentives, especially with regard to compensation relative to comparable jobs in the cities, would be explicitly considered. Budget, transportation and other logistical requirements for effectiveness and productivity also would be reviewed. 12. The results of these assessments must be fed back to the appropriate Working Groups so that remedial actions may be incorporated into the reform program prior to the initialization of the new tasks and responsibilities. 13. The training activities would be based on the knowledge and skills deficiencies that are identified among the potential trainees. This is particularly important in Mozambique, given the well recognized weakness of the workforce especially at the local level. Further, current limitations in local capacity are likely to require ongoing efforts beyond this project. Opportunities would be used to identify follow-up training activities that should be picked up by other capacity building programs. The training mode (on- the-job, lectures, workshops, etc.) and location (at or away from the workplace in the cities, at regional centers, in Maputo) by and at which these skills and knowledge would be imparted would be carefully selected on the basis of efficiency and cost effectiveness. A realistic schedule that matches inputs to anticipated outcomes, would be adopted. Evaluation criteria and functional tests would be explicitly established in order to verify that the necessary knowledge and skills have been absorbed. A training matrix summarizing the plan and its elements is to be prepared. - 46 - Appendix F Page I of 2 USER DEMAND ASSESSMENTS Background I. A critical test of the reform program is the extent to which it results in the provision of a sustainable, reliable flow of municipal services in the five project cities that are of high priority and value to their population. In this project, the preparation of the MDP in all of the project cities (Appendix C, Part 1) and the Urban Upgrading Project in Pemba are designed to ensure that the efforts of the reform culminate in the fulfillment of this objective; as a consequence, the results of the reform would be manifest in the performance of these components. The capacity building and institutional development program also is oriented towards supporting the MDPs and the Upgrading Project in achieving this objective. A crucial step in achieving the desired results is the development and implementation of investment programs. II. The success of these investment programs that are designed to provide municipal services depends crucially on the extent to which the CECs, MCA and their consultants interpret accurately the requirements of the potential users of those services. Experience elsewhere indicates that these potential beneficiaries will be willing to use and pay for services when those services match their priorities and are delivered at standards and by mechanisms that they value and can afford. This willingness to pay will be a key to the sustainability of these services. Consequently, this project includes mechanisms through which the potential users may express their concerns and preferences so that their views may shape the delivery of services intended for them. User Demand Assessment III. MCA, the local government agencies and their consultants would establish an approach specific to local circumstances in Mozambique, including an iterative process in which they would listen to community ideas, sketch possible alternative solutions, discuss these ideas with the community, and progressively refine their proposals until satisfactory agreements are derived. Communities would be identified according to several dimensions: traditional ethnic groupings, formal groupings and associations, by geographical location, by income levels as manifest by readily identifiable living standards, and by gender. Prior to the provision of a service, there would be a follow-up assessment to verify that community expectations have been met. An important objective of this approach is to institutionalize lines of communications between the community and local governments with regard to service planning, delivery, quality and cost. IV. Consultants experienced in social research working on the MDPs in the project cities and the Urban Upgrading Pilot in Pemba will conduct conversational interviews with key members of the communities to ascertain broad attitudes towards municipal services and the constituency for particular services. In preparing for these interviews, particular attention will be paid to ensuring that: a) a strategy for verifying the accuracy of communication between the consultants and the community members is established; b) key roles and actors within the communities are identified; and, c) distinctive groupings which would have different perspectives on particular services or service standards or methods of service delivery also are identified. - 47 - Appendix F Page 2 of 2 V. On the basis of the results of these interviews, the consultants would design the detailed steps in the process of quantifying priorities, standards and service delivery mechanisms and associated willingness to pay. This design would: a) identify the stages in the process of developing and refining alternatives for services provision at which community inputs would be necessary; b) identify the level and type of interaction with the community (individual meetings with leaders, meetings with representative groups, meetings with focus groups or panels, questionnaire surveys) that would be used to solicit community views; c) identify groups and sub-groups that should be specifically targeted in the interactions; d) develop the instruments (survey questionnaires, panel interviews, etc.) that would be used; e) identify preparatory activities for the various interactions (training of interviewers, organization of panels, etc.). The consultants would give priority to approaches that would facilitate institutionalizing communications between the community and the local providers of services. VI. The record of the results of the initial interviews and subsequent interactions with the communities would be copied to the local governments, MAE and the Bank for review and comments prior to subsequent to the next stage in the planning or implementation process. As results emerge about preferences (as to priorities, standards, service delivery mechanisms) and willingness to pay, these results would be fed into the planning.and design process. Willingness to pay (which also may be observed by noting the costs of whatever substitutes for, or is consequential on, missing or inadequate public services) would be fed into appropriate economic analyses (benefit-cost, affordability, pricing). VII. Before closing of this Credit, and after experience has been gained with the actual delivery of the services, a follow-up assessment would be carried out to determine the level of satisfaction with the services as delivered, the extent to which expectations had been met in practice, to what extent the communities had honored their agreements to pay for these services and to what extent the user assessment process had contributed to the effectiveness of the design. .48- Appendix G Page 1 of 4 REPOSLICA DE MOIAM8IQUE MINISTERIO DA ADMINISTRAgAO ESTATAL May 7, 1993 Mr. Edward V. X. Jaycox Vice President Africa Region The World Bank 1818 R Street, N. W. Washington D. C. 20433 Dear Mr. Jaycox: 1. The Government of Mozambique is currently undertaking an overall administrative reform that will affect central- and local-level public administration across the country. The purpose of this letter is to inform you of the underlying policies and major measures adopted by the Government in order to ensure and& facilitate the detailed preparation and implementation of this reform. Backer_od 2. Over the past six years the Government has been engaged in a program of economic. rehabilitation. Under this program the role of the public sector has progressively shifted from centralized control and extensive direct involvement in economic activity toward a more market-oriented policy and management strategy. During this period the Government also consLdered its own structure and concluded that our objectives of development and democratization would be greatly facilitated by deconcentrating and ultimately, decentralizing government administration. 3. We included in our new Constitution (effective 30 November 1990) the basic framework that was intended to facilitate the creation of autonomous local governments with a distinct legal personality and administered by representatives elected by the people. In this context the government organized a seminar on Local organizational Reform in November, 1991. This Seminar was funded with the assistance of the World Bank and the Municipal Development Program for Africa (MDP/A). The basic guidelines for the reform were established and studies were initiated to design the elements of the new local government system. 4. In May 1992, the Council of Ministers (COM) approved a set of proposals based on a presentation by the Ministry of State Administration, which are the core of the program for reform that are currently being pursued. These decisions included: the approval of the principle of decentralization; that this decentralization would be focussed at the city and district levels; that the decentralization would be gradual, starting with five important cities (Maputo, Beira, Nampula, Quelimane and Pemba). S. The COm also decided upon the coordinating structure for this program of reform. This structure would be headed by an Inter-Ministerial Committee (IMC) headed by the Minister of State Administration and including the Ministers of Finance, Construction and Water, Labor, Justice and the Vice-Minister of Planning. A work plan, including a timetable was also approved. .49- Appendix G Page 2 of 4 6. The proposals accepted by the COM included the objective of giving to lecal governments administrative and financial autonomy and the right to own and acquire property. Administrative autonomy incorporates the authority to takes decisions on matters within their jurisdiction without participation by the Central or Provincial Governments. Financial autonomy would include control over their own budgets and having their own sources of income. acent Develosents 7. The country has recently (October, 1992) ended several, difficult years of internal conflict. The cessation of hostilities has presented us with both unique opportunities and critical challenges. We will now move forward with the development and implementation of the reforms in a far more positive economic and political atmosphere, however, the necessity to move rapidly and expeditiously to capture the momentum and benefits of peace is heightened. The Government has, therefore, prepared a National Reconstruction Program (NRP) to facilitate the resettlement of our people displaced by the conflict and to rebuild and extand physical and institutional infrastructure necessary to take advantage of our substantial potential for economic growth. As part of the NRP, we need to puz into place as quickly as possible, public management and administrative arrangements that facilitate our objectives of democratization and development. Decentralization, as efficted through the local government reform, is a critical element of the NRP. 8. In April, 1993, we held a second seminar on Local Organizational Reform and the Role of Traditional Authorities. Several Ministers and Provincial Governors, Local Executive Council representatives, representatives of private bodies and emerging political parties and donors participated. The primary conclusion of this seminar were that the reforms should move forward as expeditiously as possible. Among other documents, a draft of the guidelines for the Institutional Framework of the new autonomous local governments was discussed. Actions To Date 9. In order to ensure that the reform proceeds expeditiously, the Government has established the structure for the management of the process led by the INC. Reporting to the INC is an official-level inter-ministerial Coordinating Group (CG) chaired by the Director of Local Government Administration and including the Chairman of the three Workings Groups (WGs) that have been assigned responsibility for preparing substantive areas of the reform. The WGs, which also are composed of officials of several partinent Ministries, will prepare the detailed proposals on Legal and Institutional reform (WGI), Fiscal and Financial reform (WGII), and Urban/Environmental Management (WGIII). This structure is already functioning and has managed the preparation of the project which is being proposed for World Bank assistance. 10. A background paper on the reform has been prepared by the COX and has been submitted to the Assembly of the Republic for their consideration along with draft principles for legislation. Planned Activities and A=iroaches 11. In order to give effect to the reform we will establish a legislative framework with the following elements: a. an institutional law which will set out: the local organizational structure, the composition of the elements and their governing rules; the functions assigned to local governments; the relationship between the central, provincial and local levels of authority; and, the transitional rules that will govern the transfer of authority and responsibilities from central ministries to local bodies. We will present this law to the Assembly by June, 1994; -50 Appendix G Page 3 of 4 b. a financial law which will: detail the taxing authority of local governments; identify other sources of revenues; establish the framework and procedures for budget preparation and management; rules for budgetary expenditures; and, the accounting and auditing framework. We will present this law to the Assembly by August, 1994; c. transfer decrees which would give full force and effect to implementation of all aspects of the two laws, including such aspects as: give effect to the transfer of functions that are associated with specific responsibilities; set out the responsibilities and privileges of officials; set out the staffing and personnel framework; outline monitoring arrangements and instruments. We will initiate the issuance of these decrees by September, 1994. 12. The principles which will guide the preparation of this legislative framework are: to establish appropriate autonomy and associated responsibilities at the municipal level consistent with efficient allocation and use of our scarce resources. We recognize that it is critical that the functions of the various levels of government with regard to public management and governance at the local level are clear, consistent and with the minimum of ambiguity and overlap. It is also crucial to ensure the full participation of the local citizens in the processes of their government. 13. It is very important to us to establish effective and efficient municipalities as soon as possible. However, we are well aware that the current limitations on appropriately trained and experienced human resources in the public sector is particularly acute at the local level. We have determined, therefore, to initiate a massive training program to accompany the transfer of functions. This program will be aimed at the organs of government that must carry out the new arrangements and will also provide for training and public education for private bodies who are affected. 14. To promote the rapid absorption of their new responsibilities, the local governments of the five cities which will pilot these reforms will prepare Municipal Development Programs (MDPs). These Programs will incorporate institutional development and investment plans for their jurisdictions. We will initiate the preparation of these MDPs by January, 1995. 15. We will adopt a strategy which focusses our efforts on learning from a few selected cases - the five cities to be supported under the proposed project - utilizes all available resources, including the private sector and community organizations and builds local capacity to plan and manage local development as rapidly as possible. In implementing this project, we will organize support from the central government agencies in a manner that is consistent with this strategy and will strongly apply this support to these efforts. We are particularly concerned to ensure that there is rapid feedback from these project system into the rest of the local government system. We will monitoring this program closely and carefully and will assess results of the initial experiences by September, 1995. We look forward to meeting with Bank representatives during your bi- annual review missions to exchange views on the progress of the project including the measures we have indicated above. We particularly welcome the proposed mid- term review so that we may have a systematic and comprehensive assessment of results-to-date, replicating the positive lessons more widely and making necessary corrections in a timely manner. 16. As a result of the mid-term review we will prepare a revised program and schedule of implementation in order to meet the objectives we have stated. We will communicate this revised program and schedule in a letter to the Bank by December 1995. 17. The reforms we are undertaking will have a major impact on the immediate and long-term future of Mozambique. It is imperative, therefore, that there is Appendix G Page 4 of 4 wide participation within and outside of government in the deliberations at various stages of the preparation of the plans and during the implementation stages. We have planned that at critical points in the process there will be carefully planned consultations among affected and interested groups. Initially, we anticipate that these consultations will primarily involve officials of the central, provincial and local governments as analytical, technical and procedural bases are being established. However, we plan to invite community and private sector interests to participate as the definition and scope of their potential roles begin to take shape. We intend by this process to build a broad consensus and commitment to the new structure and style of local government. 18. I hope that this letter has provided you with useful understandings of the policy, objectives, and strategies of the Government of Mosambique with regard to local government reform in the context of decentralization and the role that the Bank supported project would play. I look forward to our joint efforts to bring this reform to fruition. Sincerely, nm in st7& of State Admuinistration - 52 - Appendix H Page 1 of 1 CRTERIA FOR THE PREPARATION OF RESETTLEMENT PLANS The plan would clearly identify: (a) the location, numbers and socio-economic characteristics of the persons to be relocated, as identified in a socio-economic survey; (b) the specific hazards and other circumstances that require that particular groups of persons be moved; (c) alternative resettlement sites that are, or will be made available prior to the moves, beginning with those environmentally satisfactory and economically viable locations closest to the areas from which persons must be moved; (d) the personal and community assets (tangible and intangible) and their values that will be lost as a result of the moves, and the compensation that will be provided for these assets; (e) the methodology and mechanisms for establishing the value of assets and the payment of compensation; (f) provision of income restoration measures; (g) the procedures and mechanisms for involving the affected communities, including both the displaced and host communities, in the planning and decision-making with regards to relocation; (h) the procedures, timetable and institutional and organizational responsibilities for carrying out the resettlement, including the recognition of legal status at the destination sites; (i) the monitoring program to ensure that implementation proceeds as planned; and (j) the evaluation and follow-up program to ensure that unanticipated problems arising from the resettlement are corrected and to evaluate the effects of the relocation on the welfare of the affected people. - 53 - Section D. Supervision Plan General I. The project involv,s major institutional change, and is both complex and politically sensitive. Careful attention will therefo-e have to be paid to supervision, particularly in the first year when the basic legal, institutional, fiscal and financial framework being elaborated and agreed. After year two, supervision requirements should decrease considerably, except for the mid-term review scheduled for September, 1995. Supervision will be aided by the monitoring indicators presented in Section C, Appendix B which lays out key project stages and events, and highlights key project stages and the points at which key missions inputs are needed. Supervision will also be aided by the Consultants Matrix (Appendix D) which summarizes consultancy procurement actions-the latter constituting most of the procurement under the project. IDA Supervision Input Staff input into supervision will take the following form: (a) Portfolio Management Operations. Review of work programs/schedules, reports (WGs, Consultants, TSU and PIU), and financial statements at headquarters and correspondence and internal reporting related to such activities are estimate to require six staff weeks in each staff year of project implementation. (b) Field Supervision. The supervision of the project in the field will generally involve two missions per year, tied to key project stages as indicated in Appendix G and the Field Supervision Plan below. Supervision would comprise four broad areas: (i) Review of procurement, disbursement, and project costs; (ii) Review of project preparation including the progress and quality of the work of the WGs and the consultants; support to MAE and the project cities; training, process consultation; and preparation of the MDPs and pilot sub-projects; (v) Review of progress on the overall national municipal reform program (sector dialogue on content and strategy); (vi) Review of coordination with other capacity building projects and other reconstruction activities of GOM; and review of complementary activities of Donors and Donor coordination; - S4 - LOCAL GOVERNMENT REFOR AND WENN PROJCT FROMd ftpmj4le Pla Approx. Activity Expected Skill Requirements Staff Date Input (month/ (staff year) weeks) 10/93 Project Launch Municipal finance spec.; urban management 16 Workshop spec.; procurement and disbursement offs.; training spec.; urban planner, lawyer, ecologist; 04/94 Progress Municipal finance spec.; urban management 8 spec.; training spec.; urban planner; 09/94 Pre-Pilot Municipal finance spec.; urban management 8 Annual Review spec.; training spec.; urban planner; 03/95 Progress urban management spec.; training spec.; urban 6 planner; 09/95 Mid-Term Review Municipal finance spec.; urban management 16 spec.; procurement and disbursement offs.; training spec.; urban planner, lawyer, ecologist; 03/96 Progress; training spec.; urban planner; 4 09/96 Progress; urban management spec.; training spec.; urban 6 Annual Review planner; 03/97 Annual Project training spec.; urban planner; 4 Review; Prep. of next stages of reform. 09/97 Project Review; Prep. Municipal finance spec.; urban management 16 of next stages of spec.; procurement and disbursement offs.; reform. training spec.; urban planner, laywer, ecologist. 03/98 Final wrap-up urban planner. 2 Total 86 슨 ㅆ＾Y 1993