Guinea - First and Second Economic Management Projects

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 13261 PERFORMANCE AUDIT REPORT REPUBLIC OF GUINEA TECHNICAL ASSISTANCE PROJECT FOR ECONOMIC MANAGEMENT (CREDIT 1559-GUI) AND SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT (CREDIT 1963-GUI) JUNE 30, 1994 Operations Evaluation Department 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 = Guinean Franc (GF) (Average Exchange Rate in GF per US$): 1985 1986 1987 1988 1989 1990 1991 1992 1993 (July) 24.3 345.0 428.0 474.4 591.6 660.2 735.9 902.0 955.8 ABBREVIATIONS AND ACRONYMS ADB African Development Bank ADETEF Association pour le Ddveloppement des Technologies Economiques et Financi6res (Association for the Development of Economic and Financial Technologies) CCEF Comit6 de Coordination Economique et Financitre (Economic and Financial Coordination Committee) CFD Caisse Frangaise de Ddveloppement (French Development Fund) CNPG Centre National de Perfectionnement i I Gestion (National Management Training Center) DDE Division de la Dette Ext6rieure (External Debt Division) DNIP Direction Nationale des Investissements Publics (National Directorate of Public Investment) DNPE Direction Nationale du Plan et de l'Economie (National Directorate of Planning and Economy) DNSI Direction Nationale de la Statistique et de I'Informatique (National Directorate of Statistics and Data Processing) FAC Fonds d'Aide et de Coop6ration (French Aid Agency) FGA Fichier de Gestion Administrative (Administrative Management Data Base) IDA International Development Association ILO International Labor Office IMF International Monetary Fund MEF Minist6re de l'Economie et des Finances (Ministry of Economy and Finance) Pagen Projet d'Appui & la Gestion de I'Economie Nationale (Economic Management Support Project) PAR Performance Audit Report PIP Public Investment Program PIRN Programme Int6rimaire de Redressement National (Interim National Recovery Program) PREF Programme de Redressement Economique et Financier (Economic and Financial Recovery Program) RMU Reform Monitoring Unit SAC Structural Adjustment Credit SGG Secrdtariat Gdndral du Gouvernement (General Secretariat of the Government) SIG Service de l'Information de Gestion (Management Information Service) TSU Technical Support Unit UNDP United Nations Development Programme USAID United States Agency for International Development Fiscal Year January 1 - December 31 FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation June 30, 1994 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Performance Audit Report on Guinea - Technical Assistance Project for Economic Management (Credit 1559-GUI) and Second Economic Management Support Project (Credit 1963-GUI) Attached is the Performance Audit Report on Guinea - Technical Assistance Project for Economic Management (Credit 1559-GUI) and Second Economic Management Support Project (Credit 1963-GUI) prepared by the Operations Evaluation Department. Both projects had the twin objectives of facilitating the short-term implementation of the Government's economic reform program and fostering longer-term institutional development and capacity building related to improving economic management. The two projects were approved at the same time as the first and second structural adjustment credits to Guinea, in 1985 and 1988, respectively. The audit of the first project agrees with the main findings of the Project Completion Report. Overall, the project outcome is rated as marginally satisfactory, its institutional development impact as modest, and its sustainability as uncertain. The audit of the second project is also in agreement with the PCR-based ratings of institutional development impact as modest and sustainability as uncertain. But the audit's rating of the outcome of the second project is marginally unsatisfactory, whereas the rating based upon the PCR had been satisfactory. The main reasons for this difference are that the audit found the second project to have notable shortcomings in terms of (i) the ambitiousness of its objectives and the complexity of its design; (ii) the lack of coordination amongst the several donors involved in the project; and (iii) the lack of progress in strengthening local capacities and institutions. The outcomes of these projects reconfirm the need for technical assistance to Guinea to be based upon an integrated institutional development strategy that incorporates strategies for dealing with systemic issues (e.g. incentive structures in the civil service), aid coordination issues, and skill- transfer issues. Robert Picciotto by H. Eberhard K6pp Attachment 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.  FOR OFFICIAL USE ONLY PERFORMANCE AUDIT REPORT. REPUBLIC OF GUINEA TECHNICAL ASSISTANCE PROJECT FOR ECONOMIC MANAGEMENT (Credit 1559-GUI) and SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT (Credit 1963-GUI) TABLE OF CONTENTS Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .i Basic D ata Sheets ................................................ ii Evaluation Summ ary .............................................. ix I. INTRODUCTION ............................................ 1 II. TECHNICAL ASSISTANCE PROJECT FOR ECONOMIC MANAGEMENT (Pagen I) . 3 A . Project Objectives .......................................... 3 B . Project D esign ............................................ 3 C. Project Implementation ....................................... 7 D . Project Results ............................................ 10 E. Project Sustainability ....................................... 12 III. SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT (Pagen II) ......... 14 A. Project Objectives ....... .......................................... 14 B. Project Design ......... ........................................... 14 C. Project Implementation ............................................. 17 D. Project Results ........ ........................................... 19 E. Project Sustainability ....... ........................................ 22 IV. PRINCIPAL PROBLEMS AND LESSONS.......................... . . .. 23 A. Unsuitable Nature of the Technical Assistance ........................ 23 B. Training and Skills Transfer .................................... 24 C. Civil Service Reform and Institutional Development Strategy ................ 25 D. Monitoring and Coordination of the Technical Assistance .................. 26 This Report was prepared by Robert Armstrong (Task Manager) and Bernard Decaux (Consultant). 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. Table of Contents (Cont'd) ANNEXES I. Comparative Statement of Budget Execution at End of Project ................. 29 II. Budget Status of IDA Financing as of December 31, 1992 .................... 30 ATTACHMENT Translation of the French letter received from the Minister of Planning and Finance . . . . 31 PERFORMANCE AUDIT REPORT REPUBLIC OF GUINEA TECHNICAL ASSISTANCE PROJECT FOR ECONOMIC MANAGEMENT (Credit 1559-GUI) and SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT (Credit 1963-GUI) PREFACE 1. This is the Performance Audit Report (PAR) for two economic management assistance projects in Guinea. Credit 1559-GUI, for US$9.5 million equivalent, was approved on March 14, 1985, and Credit 1963-GUI, for US$14.5 million, was approved on November 8, 1988. The first Credit was closed on June 30, 1990, a year behind schedule, and was fully disbursed. The second Credit was closed on February 8, 1993, 16 months early, and was also fully disbursed. 2. This PAR was prepared by the Operations Evaluation Department (OED) on the basis of Project Completion Reports (PCRs) published in 1991 and 1994 by the Bank's Africa Regional Office,' the President's Reports, project documentation, and interviews with the Bank staff involved in the projects. An evaluation mission that visited Guinea in February 1994 examined the efficiency of the projects in liaison with representatives of the Guinean authorities and the donors. We wish to acknowledge their kind cooperation and the assistance they afforded in the drafting of this report. 3. The PCRs present a good account of the results obtained by the projects. In particular, the second part of the PCR on the second project, prepared by the Guinean authorities, is of good quality and presents useful information on the results achieved. The PAR seeks to extract such conclusions and general lessons as can be drawn from a technical assistance operation spread over a period of eight years (1985-93). It analyzes in particular the questions raised by the presence of a long-term technical assistance operation, the low training level of the Guinean personnel involved, the urgent need for far- reaching administrative reform and the necessity of particularly close monitoring of multi-purpose projects of this kind, whose impact is difficult to measure. 4. The PCR-based ratings of the first project were satisfactory with regard to outcome, partial with regard to institutional impact and uncertain with regard to sustainability. The Audit Report rates the first project as marginally satisfactory, its institutional impact as modest, and its sustainability as uncertain. i/ Project Completioan Report, Ouinca: Technical Assistance Project for Economic Management (Report No. 9892 of September 13, 1991), and Project Completion Report, Oumica: Second Economic Management Support Project (Report No. 12746 of Pcbruary 2, 1994). - ii - 5. In the case of the second project, the PCR-based ratings were satisfactory for overall outcome, modest for institutional development impact, and uncertain for sustainability. The PAR retains the same ratings for institutional development impact and sustainability, but rates the project outcome as marginally unsatisfactory. 6. The draft PAR was sent to the Borrower and cofinancing agencies for comments. Responses were received from the Government and implementating agency and from the French Government. These comments have been taken into account insofar as they relate to the performance of the two projects. The comments of the Minister of Planning and Finance are reproduced as an attachment to the PAR. - iii - PERFORMANCE AUDIT REPORT REPUBLIC OF GUINEA TECHNICAL ASSISTANCE PROJECT FOR ECONOMIC MANAGEMENT (Credit 1559-GUI) BASIC DATA SHEET CREDIT POSITION (Amounts in US$ Million) As of February 28. 1994 C0A Original Disbursed Cancelled Repaid Outstanding 1559-GUI 9.50 12.021' - - 13.48 1' Due to SDR/$ fluctuations, actual disbursements were higher than estimated. CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS FY85 FY86 FY87 FY88 EY8 FY90 Appraisal Estimate (US$M) 0.6 3.8 6.2 9.1 9.5 9.5 Actual (US$M) 2.66 6.05 8.48 11.14 12.02 Actual as % of Appraisal (%) 70 98 93 117 127 Date of Final Disbursement: June 30, 1990 PROJECT DATES Ori2inal Actual Identification 10/09/81 10/09/81 Preparation 09/30/82 09/30/82 Appraisal Mission 12/14/82 12/14/82 Credit Negotiations 01/29/85 01/29/85 Board Approval 03/14/85 Credit Signature 03/20/85 03/21/85 Credit Effectiveness 07/19/85 07/08/85 Credit Closing 06/30/89 06/30/90 Credit Completion 12/31/88 01/30/90 - iv - STAFF INPUTS (staffweeks) FI. ll EI8 FY84 EM EM F87 FIYH EM.2 F29 TMAL Through Appraisal 0.1 26.7 36.5 11.8 12.1 87.2 Appraisal through Board Approval 7.9 7.9 Board Approval through Effectiveness n/a Supervision 7.7 18.2 15.0 19.4 3.4 63.7 Completion 4.2 4.2 OTHER PROJECT DATA Borrower: Republic of Guinea Related Bank Loans Prject Credit No. Amoun Board Dat First Structural Adjustment Credit 1659-GUI US$25 million 02/11/86 Second Structural Adjustment Credit 1926-GUI US$65 million 06/16/88 Second Economic Management Support 1963-GUI US$14.5 million 11/08/88 590 SUPERVISION REPORT RATINGS Eval. Year Overall Dev, Obi, Lgy, Co, Mit. Perf. Av. Funds 1985 1 1986 1 1 1 1 1987 1 1 2 1 1988 1 1 1 1 1989 1 1 1 1 1 1990 2 3 2 3 1 PERFORMANCE AUDIT REPORT REPUBLIC OF GUINEA SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT (Credit 1963-GUI) BASIC DATA SHEET CREDIT POSITION (Amounts in US$ Million) As of February 28. 1994 C12" Original Disbursed Cancelled Repai4 Outstanding 1963-GUI 14.50 15.41' - 15.71 1' Due to SDR/$ fluctuations, actual disbursements were higher than estimated. CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS FY89 FY90 FY91 FY92 FY93 FY94 EI29 Appraisal Etimaate (USSM) 1.4 4.4 7.4 10.4 12.4 14.0 14.5 Actual (US$M) 4.29 8.37 13.21 15.42 - - Actual as % of Appraisal (%) 98 113 127 124 Date of Final Disbursement: February 8, 1993 PROJECT DATES Preparation Dec. 1987 Appraisal Mission Mar./Apr. 1988, completed June 1988 Credit Negotiations Sept. 19-27, 1988 Board Approval Nov. 8, 1988 Credit Signature Nov. 29, 1988 Credit Effectiveness Aug. 30, 1989 Original Closing Date June 30, 1994 Actual Closing Date Feb. 8, 1993 - vi - STAFF INPUTS (staffweeks) FY88 FY89 FY90 FY91 FY92 FY93 TOTAL Preparation 25.5 25.5 Appraisal 10.6 16.1 26.7 Negotiation 5.3 5.3 Supervision 8.2 48.0 35.6 41.9 18.0 151.7 MISSION DATA Month/Year No. Persons Weeks in Field Preparation 09/87 1 2 10/87 1 1 11/87 1 1 12/87 1 1 Pre-Appraisal 02/88 4 3 Appraisal 03-04/88 1 2 07/88 1 1 11/88 1 2 Negotiations 07/89 1 .6 Board to Effectiveness 2 1.8 Supervision 10/89 1 2.8 01/90 3 2 05/90 2 1.5 06/90 1 1 07/90 1 1 10/90 3 4.8 06/91 1 10/91 2 02/92 4 5.8 05/92 2 10/92 1 2.6 03/93 3 2 - vii - OTHER PROJECT DATA Borrower: Republic of Guinea Related Bank Loans Pr:oi9&1 Credit No. Amoun Board Dat First Structural Adjustment Credit 1659-GUI US$25 million 02/11/86 Second Structural Adjustment Credit 1926-GUI US$65 million 06/16/88 First Economic Management Support 1559-GUI US$9.5 million 03/14/85 590 SUPERVISION REPORT RATINGS Eval. Year Overall Dev. Obj, Leg. Cov. MS1, Perf. Av, Funds 1989 1 1 2 1 1 1990 1 1 1 2 1 1991 2 2 1 1 1 1992 2 2 1 1 2 1993 2 2 1 1 2 - viii - - ix - PERFORMANCE AUDIT REPORT REPUBLIC OF GUINEA TECHNICAL ASSISTANCE PROJECT FOR ECONOMIC MANAGEMENT (Credit 1559-GUI) and SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT (Credit 1963-GUI) EVALUATION SUMMARY I. Introduction 3. This report describes, in chapters II and III, the purposes, design, implementation, results 1. Two technical assistance projects for and sustainability of the two projects. Chapter management of the Guinean economy were IV examines the main problems common to the financed by IDA in 1985 and 1988. Their two projects and summarizes the essential purpose was to support far-reaching economic lessons that emerge from them with respect to, reforms undertaken following the fall of the inter alia, efficiency of the technical assistance centralized-planning regime instituted in 1958, a furnished, skillstransfer, institutional impact and regime that had led the Guinean economy to the project monitoring. brink of disaster. 11. First Project (Pagen 1) 2. These technical assistance projects were approved at the same time as two structural 4. The purposes of this project, financed by adjustment programs (SAL I and II). The initial a Credit of US$9.5 million, were twofold: to reforms (1986-90) yielded encouraging results. provide the Guinean Government with the The economy grew at an annual rate of about 4 necessary data base and operational procedures percent from 1986 to 1990. Growth slowed in to enable it to implement the proposed reforms 1991-93 as a consequence of weak private in the context of structural adjustment; and to investment, a reduction in public investment, and strengthen the Planning and Finance Ministry's a worsening of the balance of payments deficit. low institutional capacity through A major constraint on growth is the extreme reorganizational measures and training. scarcity of trained and educated human resources. This weakness is a serious obstacle to 5. Technical assistance was to be furnished achievement of the country's economic and to help improve statistics, macroeconomic social goals. The two technical assistance planning and investment programming. Other projects (Pagen I and II) were designed to help goals included improving public expenditure upgrade skills and training and at the same time control and debt management, trimming the facilitate short-term implementation of reforms parapublic sector, and developing a Training urgently needed in order to establish a market Center for Planning and Finance ministry staff. economy. 6. Management of this project was deficient, service reform. This greatly impaired the despite the commitment of the Guinean sustainability of the results. At the end of Pagen authorities at the highest level. Some resistance 1, many types of basic economic data were was, however, encountered from staff of the lacking, and macroeconomic and project analysis previous regime. The insistence by the IMF and capacities remained low. IDA on sharp and rapid reduction of civilservice staff aroused opposition at all levels. It also III. Second Project (Pagen 11) created uncertainty concerning assignments of personnel to be retained, at the very time when 10. The purpose of Pagen 11 was to continue the reforms implied more efficient administrative to provide support for the economic and staffing. financial reform program and to strengthen national economic, financial and administrative 7. The project achieved only limited results. management capacities. Like Pagen 1, Pagen 11 Substantial gaps persisted in certain areas had a dual purpose: support for the reforms including statistics, macroeconomic analysis, and through short-term measures, and institutional debt management capacity. In-service training strengthening. The short-term measures were was neglected in the technical assistance financed by amounts (about US$3.5 million) activities, which were entrusted essentially to a similar to those of Pagen I. Pagen 11, however single foreign firm of consultants who were (with a Credit of US$14.5 million, against Pagen poorly supervised by IDA and by the Borrower, I's US$9.5 million) allocated much higher and whose attention was absorbed by a amounts to institutional development (US$11 multiplicity of daily tasks. This "substitution" million, against US$6 million); in particular, it assistance was however understandable initially, allocated large sums for administrative and legal when the entire task of reconstruction remained reforms and for equipment procurement. to be taken up and it was necessary to attend to urgent problems. 11. Pagen 11 thus represented a direct extension of Pagen 1, seeking to ensure its 8. Some objectives were achieved: continuity, particularly in such areas as technical application of a macroeconomic model; assistance to statistics, macroeconomic beginning of preparation of national accounts; forecasting and investment programming; initiation of investment programming; assistance with debt management; installation of promulgation of various Codes; and start-up of contracting procedures, and training. Legal regular courses at the Training Center. Bearing assistance in the preparation of various codes in mind the particularly difficult setting that and the training of legal staff, already started prevailed in Guinea during the project period under Pagen I, was continued and expanded. A (1985-89), the project performance balance new feature was a Technical Support Unit sheet can be described as marginally satisfactory. (TSU), financed by Pagen II, set up within the However, the impact of the project on top-level inter-ministerial coordination agency in institutional development was modest and the order to strengthen support for the reforms sustainability of benefits is uncertain, recommended by SAC g . 9. The results were realized without 12. Pagen II had an ambitious additional adequate participation by Guinean staff. The objective: namely, to coordinate all major impact of the project on the institutional economic and financial technical assistance to development of the agencies and personnel Guinea. To that end, an "umbrella" project was concerned was notably incomplete, particularly devised, intended to group together the in the absence of either satisfactory restructuring assistance provided by IDA, ADB, USAID, of the ministries concerned or effective civil CFD, FAC and UNDP. This concept was based - Xi - on the perceived need, following a NATCAP economic management technical assistance report, to formalize coordination of local through Pagen 11--was not achieved. technical assistance. 17. The main shortcomings of Pagen 11, 13. Unfortunately, since the individual donors' however, relate to the shortfall in realizing the procedures and traditions remained unchanged, project's ID objectives. Among the problem the cordial relations among donors did not lead areas were: persistent imbalances among to improved operational coordination. What macroeconomic, sectoral and regional planning; took place was rather a simple exchange of shortcomings in recurrent costs estimation and information. project selection and appraisal; lack of coordination between the Debt Division and 14. Relations among donors, moreover, other government agencies; lack of participation deteriorated seriously toward the end of the by Planning and Finance Ministry staff in the project when IDA intervened at the Ministry of training facilities set up; inadequate results in Administrative Reform, where the UNDP was terms of in-service training; and a lack of operating, in order to monitor the management implementation of the many legal texts drafted. of the Civil Service Database. It was suspected by IDA that this database included thousands of 18. Even the scattered institutional fictitious civil servants, a suspicion that later development results obtained were due more to proved to be unfounded. This resulted in two the continued practice by resident expatriate things: UNDP withdrew, and funds were rapidly experts of providing "substitution" assistance exhausted in order to finance this direct rather than real skill transfers. Implementation surveillance by the Bank. This led IDA to of Pagen II was moreover hindered by the lack request urgent financing from other donors for of a rational civil service management policy. the Pagen II components that remained to be completed. 19. As in the case of Pagen I, the sustainability of the results of Pagen II remains 15. Some positive results were achieved by uncertain. The few results obtained so far Pagen II, notably in the areas of planning, cannot be turned into definitive gains until more statistics, investment programming, debt serious and sustained efforts are made to management, legal assistance, computerization of understand and solve the systemic constraints to the civil service staff data base, and formal motivating, remunerating, and training Guinea's training. But overall project performance is civil service personnel. judged to be marginally unsatisfactory in view of the persistence of many shortcomings, especially 20. Compliance with credit covenants was the inadequate coordination among donors and marginally satisfactory in the case of both the paucity of institutional capacity projects. While the main conditionalities were improvements. As in the case of Pagen I, the met, at least in form, there were delays in sustainability of the results of Pagen II is meeting some conditions. uncertain. IV. Problems and Lessons 16. Pagen II suffered from having tried to function as an integrated project when in 21. Experience with these two projects practice it was run as a program in which each (especially Pagen 11) has demonstrated how donor (including IDA) financed and managed its difficult it is to achieve satisfactory results for own components. The objective--regarded as this type of project, with multiple and sometimes essential at the outset--of truly coordinating all competing objectives. Experience with Pagen I - Xii - and II points up four main problems and counterpart staff. This training needs to be consequent lessons: better programmed, on the basis of well-defined needs and with more attention to the capacities (i) Unsuitable nature of the technical of counterpart staff to absorb the technical assistance training imparted. In the future, formal training will also need to be targeted much more 22. The fact that almost entire responsibility precisely. for Pagen I was entrusted to a single firm of expatriate consultants, and that this was (iii) Civil service reform and institutional continued to an even greater degree during development strategy Pagen II, offered a number of management advantages for staff of IDA (delegation of 26. One lesson of the Pagens is the need for authority) and the Borrower (little capacity for the Government to adopt and to promote an management). administrative management philosophy, applied to the system as a whole, based on principles of 23. On the other hand, the main concern of rational and technocratic decision-making. An a consulting firm, even a very competent one, is overall policy for the civil service is needed that to make a profit. Performing remote is based on merit, rational resource allocation, management of individual technical assistance and the use of financial incentives. This policy experts, it can hardly have an overall institutional should be applied to the entire public sector strategy perspective within the framework of an rather than through small pilot projects, the ambitious structural adjustment policy. It would ineffectiveness of which has already been make more sense to recruit required managers demonstrated. as and when needed, the Coordinator being responsible, together with IDA staff, for 27. More broadly, a long-term institutional ensuring integration and coherence of the development strategy--itself an integral part of activities of technical assistance agents. an overall development strategy--should be formulated and adopted by the country and 24. Guinea's high dependence on long-term supported by the Bank and other donors. resident technical assistance has to be evaluated in the context of the country's particularly (iv) Monitoring and coordination of the underdeveloped institutional structures and technical assistance manpower resources. The need for expatriate personnel was especially great in 1985 but 28. The sustainability of the benefits from remained high in 1988-92. Today, a realistic technical assistance could be enhanced by closer approach towards reducing this independence monitoring of skills transfer and stricter might be to identify precisely the tasks not supervision of in-service training. Similarly, the accomplished by Pagen II and, while retaining reports on activities prepared both by technical resident advisers in some areas (such as statistics, assistance experts and by Guinean agencies which is still very weak), to examine what can should be presented more regularly and should and what cannot be accomplished by short-term be studied with closer attention by IDA staff and missions (in the areas of, for example, debt Guinean officials. management or certain education modules). 29. The past "blueprint" approach to technical (ii) Training and skills transfer assistance has proved disappointing and not very realistic. This approach needs to be replaced by 25. Experience has shown that more emphasis a more flexible and individually-tailored "process" should have been placed on in-service training of approach that allows the project to be re- - Xiii - designed during the course of implementation in 30. In conclusion, the following lessons can be response to changing political, economic, and drawn from these projects: other factors affecting either the entirety or certain specific components or subcomponents (a) the use of consulting firms for project of the project. Performance indicators or management should be minimized; "warning lights" should alert the authorities to ongoing project developments, enabling them to (b) a mixture of short-term and resident take rapid corrective action. With respect to technical assistance experts is needed monitoring of this process, the traditional when the institutional context is approach of a few narrowly-targeted monitoring particularly poorly developed (as in missions seems inadequate. An experienced and Guinea); independent external adviser, familiar with technical assistance questions, particularly in (c) priority should be given to in-service Africa, might be better able to monitor the training; project and to provide advice to all parties regarding mid-course corrections that could be (d) the systemic problems of civil service made. Such an adviser would be concerned at management and motivation need to be all times to obtain the best possible results, addressed in the context of an without being involved in day-to-day institutional development strategy that in management problems and without needing to turn is an integral part of the overall be permanently resident. development strategy. - ATX - PERFORMANCE AUDIT REPORT REPUBLIC OF GUINEA TECHNICAL ASSISTANCE PROJECT FOR ECONOMIC MANAGEMENT (Credit 1559-GUI) and SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT (Credit 1963-GUI) I. INTRODUCTION 1.01 After 25 years of centralized economic planning, Guinea decided in 1985 to adopt the market economy system. In the initial adjustment phase the Government deregulated prices, devalued the currency, deregulated domestic and foreign trade, privatized banking and business, reduced the size of the civil service and embarked on infrastructure rehabilitation while eliminating many economically unprofitable projects. The Bank provided its support for this first adjustment phase in February 1986 by means of SAL I, for an amount of US$42 million. This SAL had been preceded by a first project of assistance for management of the national economy (Project dAide d l'Economie Nationale--Pagen) approved in March 1985 for an amount of US$9.5 million. The purpose of this assistance project was to improve the Government's economic management by means of a program of technical assistance and training of managers intended to extend over three years. 1.02 The initial reforms posted encouraging results. Over the period 1986 to 1988 the economy grew at an annual rate of 4.5 percent, i.e. 2 percent per capita, and inflation slowed from 65 percent to 27 percent. Growth was particularly strong among small enterprises, including services. 1.03 The second adjustment phase began with SAL II, for an amount of US$65 million, approved on June 16, 1988. A second Pagen of US$14.5 million was approved on November 8, 1988. This was designed to support the SAL and strengthen the Government's capacity to monitor the evolution of the economy, forecast its development and improve economic and financial management in the Planning and Finance ministries. 1.04 The progress accomplished was slower than expected, partly because the Government had to go beyond dismantling the former structures and policies and to put in place new institutions intended to foster the development of a market economy. As a consequence of the difficulties encountered in setting up the macroeconomic framework and of the delay that occurred in establishing reliable civil service staffing data (a condition of SAL II), disbursement of the second tranche of the SAL was postponed to November 1992. -2- 1.05 Annual GNP growth averaged only 3 percent in 1991-92, compared with 4 percent in 1988- 90, partly owing to low private investment (due to political uncertainties) and the need to reduce public investment for budget reasons. The balance of payments current account deficit worsened between 1990 and 1992, from 9.8 to 13.5 percent of GNP. Guinea continues to depend heavily on receipts from exports of bauxite, the prices of which remain depressed. 1.06 Improving long-term economic management is essential if the adjustment efforts accomplished are to have any lasting effect. A major constraint on economic growth is Guinea's scarcity of trained and educated human resources. This scarcity has serious repercussions on achievement of Guinea's economic and social goals. The two technical assistance projects (Pagen I and II) were designed to help improve skills and training. This report tends to show that they were only partially successful. -3- II. TECHNICAL ASSISTANCE PROJECT FOR ECONOMIC MANAGEMENT (Pagen I) A. Project Objectives 2.01 The purpose of the project, which was financed by an IDA Credit of US$14.5 million, was to improve the Government's economic management by means of a technical assistance and staff training program whose first phase would extend over three years. This improvement of economic management was to take place within a framework of in-depth reform of the Guinean economy. To enable this reform to be implemented successfully, it was felt necessary to develop Guinea's totally inadequate planning capacity, strengthen its short- and long-term economic management capacity and improve control of the public finances. This involved, on the one hand, providing the Guinean authorities with the data base and operational procedures necessary for implementation of the proposed reforms in a structural adjustment context, and on the other hand, strengthening the very low institutional capacities of the Planning and Finance ministries through restructuring measures and improved staff training. B. Project Design 2.02 The project focused on the preparation of economic data bases, macroeconomic planning and investment analysis; it also included, however, control of the public finances, external debt management, the parapublic sector, contracting, and training. (a) Economic data 2.03 The project sought to assist the Ministry of Planning's Statistics Directorate to prepare national accounts estimates as the basis for a macroeconomic framework for planning and decision- making and at the same time to update the national accounting plans and analysis methods. In light of the priorities of the economic reform program, the project also aimed to: (i) gather and evaluate sectoral data, particularly on agriculture and industry; (ii) prepare foreign trade estimates, and (iii) conduct household and industrial unit surveys. The three-year work program provided for the recruitment of short-term consultants to carry out, inter alia, surveys on prices and farm operating budgets. Finally, a master plan for a medium-term statistics program would be prepared, and the Government undertook to adhere to an annual statistics program. (b) Macroeconomic planning 2.04 A resident expert would be recruited for three years to help the Planning Ministry's General Planning Division prepare a diagnostic study of the Guinean economy and analyze the macroeconomic and sectoral factors involved in public investment planning and financing. A working group would prepare the macroeconomic and policy framework for three-year investment programs and where necessary furnish the technical ministries preparing sectoral investment programs with economic data and comments. Finally, a training and long-term institutional development plan to help improve economic management would be prepared. -4- (c) Investment analysis 2.05 Expatriate advisers would help the Planning Ministry to identify, prepare and select investment projects and to define the criteria and methods to be applied by the technical ministries; the latter would remain responsible for preparing and implementing the projects and for formulating sectoral investment strategies and programs. A project appraisal manual was to be developed. A 1986-88 investment program was to be prepared, the first of a series of rolling three-year programs, revised and updated annually. The project also provided for a US$350,000 fund for prefeasibility studies of projects that appeared to require more detailed examination before the feasibility studies were undertaken. This fund was to be financed by UNDP (US$300,000) and IDA (US$50,000). (d) Management of the public finances 2.06 The Ministry of Finance would enter into a twinning arrangement with the French Ministry of Economy and Finance under which the latter's non-profit association ADETEF would second resident advisers and short-term experts at an estimated cost of US$700,000. The IDA Credit would cover only the travel and subsistence costs of the French personnel seconded at short and long term, for an amount of US$170,000. 2.07 This project component comprised: - critical analysis of budgetary procedures and relations between the Finance and Planning ministries; - modernization of budgeting and financial control methods and introduction of new methods throughout the administration; - improvement of tax collection, receipts control and day-to-day management at the Treasury; - critical analysis of customs practices and of the current Customs Code in order to identify the reasons for the low customs duty receipts and the high incidence of fraud; - simplification and effective application of the Customs Code. 2.08 The Ministry of Finance would administer a budget of US$100,000 earmarked for the recruitment of legal advisers, with the task of inter alia drafting laws and decrees relating to the parapublic sector, the Customs Service and financial matters. (e) External debt management 2.09 The Central Bank's External Debt Division (DDE) would be transferred to the Ministry of Finance, which would then become responsible for external loans, external debt monitoring, debt service, and so on. 2.10 DDE staff would develop their debt analysis and control skills with the help of short-term consultant missions in 1985-86, with a view to: -5- - conducting an exhaustive assessment of Guinea's external debt, information on which is poor; - introducing a system of quarterly reports analyzing the debt profile, beginning in 1986; - strengthening the DDE's capacity to define the arrangements for financing development and investment projects that require guarantees, so as to facilitate the formulation of a public-sector borrowing policy compatible with Guinea's limited debt capacity. (f) Parapublic sector 2.11 Short-term specialist consultants and a resident expert at the Planning Ministry would organize withdrawal by the Government from certain public enterprises, beginning in mid-1987. These experts would also help the Government to rehabilitate the enterprises that were to remain under government control and to supervise the liquidation of a number of commercial enterprises in 1985. (g) Contracting 2.12 The object was to help the National Public Contracts Commission to draw up government contracting rules in conformity with international practice and the donors' requirements. (h) Training 2.13 A training program was to be prepared, in collaboration with the National Productivity Training Center (CNP), tailored to the needs of the other project components. Resident and temporary experts would provide in-service training. This training was to be supplemented by 21 courses, lasting two to four weeks, for some 400 staff seconded from their normal duties for the duration of the course. The participants would be officials of the Ministry of Planning, the Ministry of Finance and technical ministries with project planning and analysis responsibilities. The Government undertook not to transfer staff trained under the project to other posts. 2.14 The project also provided for: - training of 60 typists and word processors in the CNP; - preparation of a program of training of civil service accountants and auditors. This program would lead to effective training, at an estimated cost of US$200,000, to be carried out with ILO support. 2.15 Finally, the project provided for 55 months of supplementary training abroad and study fellowships, at an estimated cost of US$120,000. 2.16 The total cost of the project was estimated at US$11.4 million, with 96 percent in foreign exchange. The IDA Credit amounted to US$9.5 million. France financed US$700,000 of the cost, and UNDP, US$300,000. The balance was financed by the Government. The four major project components concerned the Ministry of Planning (macroeconomics, statistics, investment) for a total of US$9.2 million, the Ministry of Finance (US$1.1 million) and the parapublic sector (US$1.2 -6- million). Training alone received US$2.7 million (cf. PCR, table 4). These four components accounted for US$8.2 million, i.e. 88 percent of project cost (excluding provisions for contingencies and refinancing of the project preparation funds). 2.17 The basic concepts underlying the implementation of Pagen I were as follows: (a) Use of a French firm of consultants on a "turnkey" basis, as it were, the consultants furnishing resident experts and short-term consultants (with a few exceptions, such as legal advisers and consultants for the parapublic sector). In light of the dearth of local personnel capacity and the difficulty of detailed monitoring from Washington, the Bank decided to recruit a firm of consultants to achieve the essential objective of producing basic data and setting up procedures to support implementation of the reforms within the structural adjustment context. It was also assumed that the in- service training objective would be achieved through use of the same consulting firm's resident and temporary specialists. It was expected that the resident specialists would immediately train good-quality counterpart staff. (b) Recourse to a twinning arrangement between ADETEF and the Ministry of Finance in order to strengthen the Ministry's institutional capacity. (c) A large training program, based on the concept that several hundred officials of the Ministry of Planning, the Ministry of Finance and other technical ministries would be trained rapidly, through 21 specialized training courses, and would return better equipped to perform their previous duties. Training on the job and through these courses would help strengthen the institutional capacities of the Planning and Finance Ministries, in particular. (d) Active but autonomous participation by the six department heads (directors general) involved in the project (cf. PCR, para. 22). It was intended that a full-time Project Administrator located in the Ministry of Planning (the Director of Planning) would manage the project, with some authority over the directors of the other units, grouped together to form a Coordination Committee. (e) Rapid entry into use of the legal instruments, procedures and mechanisms prepared under the project (Contracting Code, Public Investment Plan, and so on). This process would be facilitated by drastic organizational and legal restructuring of the Planning and Finance ministries and the Central Bank. The detailed structures of the administrative apparatus were not firmly defined, however; this fact obviously jeopardized the success of Pagen I. Moreover, the IMF had clearly laid down conditions with respect to reduction of civil service staffs and of the salary bill, a fact that could not fail to have repercussions on administrative reform and assignment of the personnel concerned. Pagen I failed to take these factors into accouat when the project components were being set up. (f) UNDP had participated in the preparation of the 1985-87 Interim National Recovery Plan (PIRN), designed to facilitate the transition from a dirigist to a liberal system. Project GUI/84/007 (assistance in strengthening sectoral planning and economic management capacities) was designed to strengthen not only the Ministry of Planning -7- but also certain sectoral ministries (Transportation, Industry, Mining and Urban Planning). The objective was to install both global and sectoral medium- and long- term planning capabilities. UNDP hence did not at that time have the more immediate concerns that the IMF and the Bank had in the context of the adjustment measures designed to secure a rapid improvement in management of the economy, notably through the provision of instruments such as macroeconomic fine-tuning, rolling investment programs and more stringent budget control. The Bank therefore felt free to finance Pagen I without any risk of conflict with UNDP, even though experience subsequently demonstrated that pursuit of the short-term economic and financial management objective considerably weakened execution of the UNDP project of strengthening medium- and long-term planning, which in the eyes of the Guinean authorities now rated much lower priority. C. Project Implementation 2.18 Implementation of the project cannot be understood except against the background of the far-reaching and urgent reforms decided on in Guinea in 1985 with the active support of the IMF and the Bank. Seven working groups were set up, under the authority of an Economic and Financial Coordination Committee (CCEF), in May 1985. The Committee was chaired by the Ministry of Planning and Natural Resources. 2.19 The working groups included one on the public finances whose task was to prepare a budget integrating investment and current expenditures, improve the existing budgetary procedures, contracting rules and customs formalities, lay the groundwork for tariff reform, and overhaul the Treasury accounts system. 2.20 Of the other five working groups, three were responsible respectively for the banking sector, reorganization of the Central Bank, and external debt; one for civil service staff cutting, based on a census survey and evaluation tests; and two responsible for privatization of the industrial and non- industrial parapublic sectors, respectively. 2.21 All these operations concerned urgently needed action and their execution was seen to depend not only on the political will of the Guinean authorities, an obvious requirement which appeared to be met, but also on the reaction of the staff in post and the available technical assistance resources. As a result, the Pagen rapidly came to be regarded as the instrument of the reforms adopted in response to, in particular, IMF pressure. 2.22 Although it was entirely logical to use Pagen resources to support implementation of the adjustment reforms, it resulted in a number of major drawbacks which appreciably reduced the efficiency of the technical assistance project itself: (i) The Project Manager was the Director of Planning. However, he very quickly became absorbed by a great many operational tasks such as coordination with the CEEF, supervision of the working group responsible for public enterprise liquidation, and so on. Continuous detailed supervision of the Pagen quickly turned out to be an illusion, particularly since the other Directorates involved in the Pagen did not feel themselves to be in any way subordinate to the Planning Director. -8- (ii) The Consultants to which the Bank and the Borrower had delegated responsibility for most of the components despatched a number of resident experts and many specific missions to Guinea. Delays occurred due to lack of basic infrastructures (housing, electric power, equipment). The experts did not always adapt well to the Guinean milieu, and this had a very negative impact on in-service training of counterpart staff, a vital project objective. The resident experts complained of the lack of skilled and motivated counterpart staff (the latter received no bonus whereas ADB and USAID gave bonuses to make up for the extremely low salaries). The short-term concerns of the IMF and Bank missions in the adjustment context generated a constant and growing flow of requests from the CEEF. These requests ended up with the resident experts, already occupied by a thousand operational tasks, made all the more difficult by unsatisfactory physical conditions and low morale (lack of cooperation by and training of the staff in post). The constant confusion between short-term tasks generated by the adjustment reform program and pursuit of the objectives of the institutional strengthening project, based on training and preparation of procedures, inevitably weakened the efficiency of the project. (iii) The ADETEF/Ministry of Finance twinning program did not come up to the Bank's expectations. ADETEF's methods were based mainly on despatching short-term experts to perform narrowly targeted tasks. The Bank, however, had expected that ADETEF would quickly lead to the selection/evaluation of Ministry staff, with a view to reducing staff numbers, and to clarification of budget relations between the Finance and Planning ministries, in brief to getting a firm grasp on the Finance Ministry's organization and management problems. Here again, it seemed that ADETEF felt that, contrary to its rules, it was excessively replacing the local authorities in day-to-day operations, whereas the IMF and the Bank perceived an urgent need for rapid and direct action and felt that the activities of the ADETEF experts were not sufficiently tightly targeted and lacked impact. Moreover, the in- service training problems could not easily be resolved by ADETEF spot missions. The net effect was to loosen the links between ADETEF and the Bank, to the point that only US$32,000 was disbursed for reimbursement of expenses of ADETEF experts out of the total of US$170,000 a year provided for in Pagen I. This situation of cross-purposes between ADETEF and the Bank was regrettable because it prevented remedying of the problems of coordination between the Planning Ministry (responsible inter alia for investment programming) and the Finance Ministry (responsible for budget preparation). (iv) The fact that the consulting firm was in practice entrusted with execution of the project, and the Bank's increasing preoccupation with the structural adjustment program, tended to take the edge off monitoring of Pagen I. Shortly before the project was approved, Bank Management took the view that highly sustained monitoring was essential for such a diffuse project and even suggested that a Bank staff member should be permanently stationed in Conakry to monitor it. The Bank authorities were also disturbed that the operational staff of Africa Regional Office seemed to place more emphasis on the medium-term concerns shared with the IMF than on medium- and long-term issues, including institutional development strategy. Despite these admonitions, monitoring from Washington turned out to be limited both in number of missions and in intensiveness. Perhaps excessive confidence was placed in the consulting firm, which behaved like a Project Chief. The lack of contact between most of the experts and the Guinean personnel, the almost total absence of in-service training, the high cost of the technical assistance furnished and its slowness in yielding results should have aroused greater attention on the part of the Bank, even though the physical and personnel staffing difficulties of all kinds admittedly made performance of the necessary particularly arduous. (v) Management of the project was deficient, despite the commitment of the Guinean authorities at the highest level. At the time of execution, however, some resistance, more or less brushed aside, was encountered on the part of staff of the previous regime. The insistence by the IMF and also by the Bank on sharp and rapid reduction of civil service staffs aroused latent but important opposition at all levels. It also created uncertainty concerning assignment of the personnel to be retained, just when the reforms implied the setting up of a renewed and more efficient administrative apparatus. (vi) Poor management was reflected in, for example, lack of or inaccuracy of accounts. The audit report of October 15, 1990 stressed the following deficiencies: lack of regular accounting in accordance with generally accepted accounting principles; lack of exhaustive analysis of the Guinean Government's contribution; numerous weaknesses in internal control, including a great many anomalies in the preparation of direct payment requests to the Bank. The package of anomalies described in the audit report made it impossible to ensure the reliability of the requests presented by the project, involving the risk of payment by IDA of unjustified amounts; the magnitude of the shortcomings in management and in the controls and procedures used in preparing reimbursement and direct payment requests. The audit report was unable to certify that the use of the IDA financing was correct and reliable. This was hence an extremely severe rating. (vii) Installation of the Parapublic Sector Reform component was particularly arduous and disappointing. At the insistence of the IMF, this component became one of major importance--a matter of liquidating and/or privatizing the largest possible number of public enterprises. Following a fairly rapid start, with the adoption, beginning in September 1985, of a formal classification of the enterprises and the search for potential partners for the enterprises that were to be kept in operation, the decision process lost its edge. Some agreements were disputed as a matter of principle, owing to opposition to dismissal of the redundant personnel, the liquidation of state monopolies and the arrival of foreign investors. Pagen I had to take over responsibility for certain important tasks, such as the analysis of mutual debts of public enterprises and banks, auditing of enterprises to be privatized and payment for appraisals for the rehabilitation or liquidation of other enterprises. As a result, the amount of the component rose from US$1,130,000 to US$2,270,000, i.e. double the - 10 - original amount. Progress nevertheless remained limited, and the entire divestiture program had to be transferred to SAL II. (viii) Execution of the Training Program was severely affected by the weakness and the vagueness of content of the training as originally provided for. The CNPG (National Management Training Center) component of Pagen I provided for a center to be set up which would provide specialized training in all disciplines associated with the work programs of the ministries (particularly Planning and Finance) and the economic management agencies. The method adopted was based on training spread over three years through closely targeted seminars, specialized and with no interlinkage. These seminars were to last from two to four weeks each and together were addressed to an impressive number of trainees: 450 a year. It became obvious, however, from the first months of implementation of the project that such a formula could not resolve the Guinean administration's problems, so low was the level of the training and so poorly suited was its content to the management needs of a liberal economy. The staff had first to be brought up to standard, which called for a program of cumulative, long-term training. A new approach was therefore adopted, the main characteristics of which were: (i) long-duration training (two-years, part-time); (ii) a solid general training during the first year, followed by specialized training in the second year, and (iii) a smaller number of trainees: about 50/class/year. This revision of the CNPG component meant that precious time was lost in 1986. In 1987 the CNPG concentrated entirely on instructor training: it was impossible to recruit trainees at that time owing to the ongoing survey aimed at trimming and reassigning civil service staffs. In mid-1987 the Bank and the Guinean authorities authorized the CNPG to broaden its recruitment beyond the Finance and Planning ministries, which had not yet taken the necessary decisions concerning final staff assignments. This allowed the CNPG to go well beyond the original scope of Pagen 1: training of staff of the ministries of Planning and Finance and a few technical ministries. Some Finance Ministry staff were graduated during the first class year (1988); after that, Finance Ministry--like Planning Ministry--staff disappeared completely. The reasons: lack of motivation to attend the CNPG owing to uncertainty about the results of the Planning and Finance staff cuts; some officials were finally given definite assignments but from then on saw no advantage in attending the CNPG full time and without any special bonus. Noteworthy also are the low interest shown by Planning and Finance department and section chiefs in the CNPG and the preference given to specifically targeted seminars held locally, outside the CNPG. D. Project Results 2.23 At the end of Pagen I, while some gains had been obtained, considerable gaps persisted, notably in the areas of data gathering, analysis capacity and institutional structures. 2.24 With regard to statistics, national accounts were prepared for 1986/87. Surveys were conducted of companies and the informal sector: a new accounting plan was drawn up. The national accounts nevertheless remained difficult for the Planning Directorate to use in macroeconomic forecasting. The accounting plan had not been disseminated adequately. Enormous gaps remained with respect to knowledge of sectors, price and production indices, external trade, and so on. Finally, - 11 - little or nothing had been done about staff training (no staff had gone to the CNPG). No master plan for the installation of a coherent statistical work program was prepared. 2.25 At the Planning Directorate, a macroeconomic model (MPEGUI, a version of the RMSM) was put in place with difficulty. A monthly economic monitoring chart and a trial annual economic report were prepared. However, the unreliability of the national accounts was a permanent obstacle and threw doubt on the Plan forecasts, to the point that the Investment Directorate preferred to use the IMF's "estimated" data to prepare for macroeconomic fine-tuning of the three-year investment plan. The same was true of the Budget Directorate. It should be noted that the work was performed in practice by the expatriate experts, with negligible involvement of Planning staff. The Planning Ministry's training and long-term institutional development plan was not prepared; the excuse given was the lack of overall reform of the civil service. 2.26 Although a three-year investment plan for 1987-89 had been prepared, major gaps persisted with respect to the calculation of project operating costs and intersectoral linkages between investment projects. Moreover, the annual tranches of the PIP were not reflected in the budget satisfactorily. The sectoral strategies were very few in number. Project selection continued to be heavily influenced by the donors, applying their own criteria. Little was accomplished in terms of the feasibility studies scheduled for Pagen I: only US$15,000 of the proposed US$50,000 was spent against the Credit. A project appraisal and analysis manual was indeed prepared; however, it was not used at all in Planning or elsewhere owing to the poor level of the staff who were its potential users. The Investment Directorate retained a personnel poorly trained and with little capability to play a role in evaluating and selecting projects to be included in the PIP. This work was done almost entirely by the foreign consultants. 2.27 Although some progress was achieved under Pagen I (in collaboration with ADETEF) in the area of budgetary and financial control procedures in the Ministry of Finance, the same cannot be said of tax and customs duty collection, owing to major administrative shortcomings of all kinds. The results were therefore on the whole disappointing. 2.28 At the end of Pagen I the Ministry of Finance was greatly overstaffed (3,000 people) and very poorly organized. It lacked a budget nomenclature (i) distinguishing clearly between investment and operating expenditures by category; (ii) permitting budget-line monitoring and posting of resources and expenditures, and (iii) identifying all the budget resources required for the investment projects, including details of domestic and external financing sources. 2.29 The external debt inventory was prepared by a resident expert despite the dispersion--and in some cases nonexistence--of reliable data. Guinea succeeded in renegotiating the debt at the Paris and London Clubs. None of the other objectives of Pagen I were achieved, however: development of a regular debt information system, analysis of debt structure, and development of an institutional debt management, negotiating and strategy formulation capacity. 2.30 A Contracting Code was drawn up, though behind schedule: the first application texts did not appear until November 1989. At the end of Pagen I, effective reform of practices and customs remained to be done. 2.31 While a large number of public enterprises were liquidated or privatized, this took place on terms that were unsatisfactory to the Treasury and sometimes far from clear. Much larger sums than - 12 - planned were expended under Pagen I on audits, enterprise studies, etc. At the end of Pagen I no overall institutional framework of the public enterprises had been prepared. No rehabilitation program had been implemented for the enterprises that were to remain in the public sector. 2.32 Concerning training, reference has already been made to the lack of in-service training in the Planning and Finance ministries, the resident advisers devoting considerable (and no doubt excessive) time to operational tasks, sometimes urgent, in support of the adjustment reforms. 2.33 A number of tasks were accomplished that benefitted the CNPG, such as organization of suitable premises, instructor training, and the installation, with ILO support, of accounting training for certain public-sector staff. 2.34 It must be stressed, however, that the core objective of Pagen I, i.e. the training of Planning and Finance management staff, was not in practice achieved owing to many delays, lack of motivation and low starting caliber. The CNPG consequently acted increasingly as a training center for other staff--including many technical staff--coming from the technical ministries, the private sector and the University. Even if the training given can be regarded as correct in terms of level, in the strict sense it was not addressed to those originally intended to benefit from it. 2.35 Although Pagen I did not earmark funds for support of administrative reform, some resources (US$415,000) were set aside at the end of the project to finance a civil service staffing inventory and help in evaluating and selecting staff, particularly of the Planning and Finance ministries. The Bank had in fact taken note of the difficulties encountered in pursuing the objectives of Pagen I owing to the lack of progress in civil service reform. The considerable delays that occurred in reorganizing the ministries, clarifying duties (definition of "organic staff") and selecting personnel to perform clearly defined functions (which affected the choice of counterpart staff) had an extremely negative impact on achievement of the staff training and institutional development objectives defined in Pagen I. This activity was continued under Pagen II. E. Project Sustainability 2.36 From the results achieved by Pagen I in terms of start-up of the macroeconomic model, start of preparation of national accounts and an investment program (PIP), project analysis manual and accounting plan, external debt inventory and negotiation, enactment of a Contracting Code, installation of budgetary control and regular courses at the CNPG, the Pagen I balance sheet may be rated as marginally satisfactory. These results were achieved, however, without adequate involvement of Guinean staff, and the technical assistance provided was mainly substitution assistance. The impact of the project on the institutional development of the agencies and personnel concerned was very fragmentary, particularly in the absence of satisfactory restructuring of the ministries concerned and of reform of the public service in general, with all that this meant with respect to democratization and to the low standard of living and absence of prospects and training of the staff concerned. 2.37 The sustainability of such results as were obtained was of course greatly impaired by the lack of in-depth reforms of the civil service, a reform that the Bank had not known how or dared to tackle head on (with possibly the support of the other donors) at the time of preparation of Pagen I. - 13 - 2.38 However this may be, at the end of Pagen I no lasting gains had been accomplished: reliable national accounts and many economic data bases were lacking, which prevented the preparation of efficient macroeconomic models; the macroeconomic analysis and project analysis capacities remained rudimentary; the projects included in the PIP suffered from a crying lack of sectoral data; everything still remained to be done with respect to training and development of management capacity and debt analysis and negotiation; restructuring of the parapublic sector was incomplete; the Ministry of Finance suffered from inability to prepare an integrated budget, and had not succeeded in raising tax and customs receipts. The sustainability of the gains accomplished under Pagen I was hence at least uncertain. A Pagen II was consequently essential, just as the reforms uncompleted under SAL I would necessitate an SAL II. - 14 - III. SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT (PAGEN II) A. Project Objectives 3.01 The Economic and Financial Recovery Program (PREF) adopted in 1985 had been supported by Pagen I, approved in 1985, and the first structural adjustment credit (SAL I), approved in 1986. 3.02 Based on the relatively encouraging results posted by SAL I, a second structural adjustment credit (SAL II) was approved in May 1988. The purposes of SAL II were to continue the process of deregulating economic management and to strengthen it through continued administrative reform, public investment programming and reform of the public enterprises. The success of SAL I had been impaired, however, by weak administrative capacity in the reform program. It was therefore decided to support implementation of the SAL II measures by financing a second Pagen. The two Credits, SAL II and Pagen II, were prepared in parallel (SAL II was approved on June 16, 1988 and Pagen II on November 18, 1988). 3.03 The Pagen 11 Credit Agreement was very clear: "The objectives of the project are to suDport the PREF and to strengthen national economic, financial and administrative capacity." 3.04 To accomplish these general purposes, the project had three specific objectives: (a) to strengthen key management functions (investment planning and programming, and management of the public finances, of the public enterprises and of the civil service); (b) to facilitate execution of the PREF by enhancing the Government's capacity to implement, coordinate and monitor the reforms included in SAL II; (c) to strengthen civil service staff training in the areas of economic, financial and administrative management. B. Project Design 3.05 Despite intensive discussions among the donors in 1985, the various technical assistance operations financed by Pagen I had not been designed as an integral part of an overall institutional strengthening effort. Each assistance agency (including the Bank) focused its efforts on the institution it had decided to support, and the Government lacked the capacity to coordinate and manage the various technical assistance programs efficiently. 3.06 At the end of 1987 and in 1988 (particularly following a NATCAP mission) the major donors concluded that it was necessary to strengthen technical assistance coordination in the areas of economic management and administrative reform. 3.07 Pagen II was designed to meet this coordination need. It sought to group a large number of operations, financed by six donors (IDA, ADB, FAC, CFD, USAID and UNDP), together within an - 15 - "umbrella" project with the object of mounting a coordinated institutional restructuring and development effort. 3.08 The project comprised six components: (a) Economic analysis and planning. The objective was again to strengthen the Planning Ministry's analytical capacity. IDA wanted to continue to finance the activities undertaken in the Planning Ministry under Pagen I (cf. paras. 2.03 through 2.05 above). However, ADB also wished to lend its support. (b) Management of the public finances. This component was financed by France. IDA continued to finance the activities undertaken under Pagen I concerning contracting and debt management. (c) Administrative and civil service reform. UNDP would continue its assistance in this field. IDA had released the residue of Pagen I funds to assist with the tasks of preparing a civilservice staff inventory and of staff evaluation and selection, especially in the Planning and Finance ministries. This assistance had been followed by a Pagen II PPF and an SPPF in the same spirit. Pagen II did not, however, provide for any major additional action by IDA. UNDP continued to be the sole direct channel to the Guinean authorities. (d) Management staff training. IDA continued to finance the CNPG, training fellowships abroad and junior management posts. In addition, a new project analysis program was to be developed. The other donors played very little part in this training program. (e) Support for the PREF: (i) Legal assistance. The assistance financed by IDA under Pagen I was pursued and broadened, with three advisers, to the Ministry of Justice, the Ministry of Finance and the CCEF. They would compile the existing laws and decrees, organize the legal departments of the ministries of Justice and Finance and train Guinean legal advisers. (ii) Assistance to the Central Bank. USAID and the IMF would furnish technical assistance. (f) Support for the CCEF. The project financed the setting up and operation of a Technical Support Unit (TSU). The TSU would serve as secretariat to the CCEF with a view to better monitoring of implementation of the PREF and of SAL II conditionalities. A TSU Coordinator was appointed (an expatriate, seconded by the Bank). A very important feature was that this same Coordinator was required to serve as Pagen II Proiect Manager and to chair the Pagen II Management Committee, composed of the officials responsible for execution of the six project components. IDA and ADB financed this new component, which did not exist under Pagen I. 3.09 The foregoing analysis shows clearly that IDA financed almost entirely the same components as under Pagen I. The sole exception was the new TSU component. France and UNDP continued - 16 - their ongoing programs in the Ministry of Finance and the Ministry of Administrative and Civil Service Reform. USAID operated separately, in the Central Bank. Only the ADB undertook joint action with IDA, though for only three components: Planning, Fellowships and Junior Managers, and TSU) out of a total of six components financed by IDA. 3.10 Although Pagen II sought to project the image of an integrated project, in practice it could hardly be run other than as a program, in which each donor financed a part or component of the program and each component was managed as if it were the project of a particular donor. The fact that these various financing operations were located within one and the same program could, it is true, ensure a minimum of communication among donors concerning progress in execution of the individual components, and on occasion provide a basis for dialogue among donors concerning a number of implementation problems. Experience showed however (see below) that coordination at the level of information and financing did not in itself provide an adequate assurance of achievement of the donors' common objectives. 3.11 Apart from this outward garb of "umbrella" project, Pagen II in fact met two concerns: to facilitate continuation of the short-term reforms supported by SAL II (as in the case of assistance to the TSU), and to continue the activities undertaken under Pagen I in the Ministry of Planning (preparation of national accounts, macroeconomic forecasts, PIP) in order to facilitate monitoring of the economy and of budget management. The other components of Pagen II, as the successor to Pagen I, financed by IDA (debt management, contracting, legal assistance) met the same concerns. 3.12 The desire to pursue the technical assistance activities specific to the Planning Ministry and the CNPG was no doubt inspired by the fragmentary nature and insufficiency of the results achieved by Pagen I. In view, however, of Pagen II's role as successor to Pagen I, which had had to contend with a great many difficulties created by a deplorably poor economic and financial management system, the decision to assist the Structural Adjustment Program by means of a new Pagen was inevitable. It was therefore sought to ensure continuity of the SAL I and II reforms through pursuit of the task of improving economic, financial and administrative management capacities. The major new element was the search for better coordination of technical assistance in the field among the donors, with, however, the above-mentioned risks and reservations. 3.13 This pursuit of continuity was reflected in the continuation of IDA assistance to the same components and subcomponents. In the Planning Ministry: statistics, macroeconomics and the three- year investment program. Responsibility for this component was entrusted to the same French firm of consultants as under Pagen I (without bidding, and with all the drawbacks described above). The same can be said of the CNPG, where the same consultants were kept on to do the same thing as before, with the exception of a narrowly-targeted project analysis seminar which IDA kept for itself. In the Finance Ministry, IDA's role (relatively modest in comparison with that of French aid) of support for debt management and improvement of contracting procedures was continued as under Pagen I. Finally, the legal advisers recruited at the end of Pagen I were retained for the duration of Pagen II. 3.14 The TSU was designed to be the linchpin of the PREF and the SAL. It would serve as joint ministerial office for the CCEF. The TSU Coordinator would also serve as Pagen II Project Manager, under the authority of the Chairman of the CCEF. It was only to be expected, however, that the TSU's PREF-related tasks would grow exponentially, in step with progress in implementing the reforms, and that the TSU Coordinator would prove incapable of effectively managing the Pagen. - 17 - The Project Administrator who assisted him, whatever his qualifications, could not possess the necessary rank or authority to replace the Pagen Manager, who in theory was responsible for monitoring and orienting this project, with its linkage to SAL II. There was thus a flaw at the design level which subsequently turned out to be very detrimental to the success of the project. C. Project Implementation 3.15 The difficulties encountered in Pagen I persisted during Pagen II. The resident experts, particularly those of the French consultants in the Planning Ministry, continued to play a role more of substitution than of transfer of experience. In some cases this was due to inability to communicate with their Guinean colleagues or to pressure of work (obligation to produce results, and heavy demands on the part of IMF/Bank missions). The difficulty in finding motivated counterpart staff of acceptable caliber also played an important role. The experts' terms of reference with respect to in- service training were often vague and the Pagen did not provide for any true strategy in this area since it had accorded priority to formal CNPG training, in the mistaken assumption that the staff trained would subsequently resume their posts in the ministry (with or without promotion). 3.16 The problems encountered in the Planning Ministry were repeated in the Finance Ministry, where the training of Guinean Debt Department staff was long and arduous. The three legal experts, themselves swamped by a multiplicity of operational tasks, faced the same problems. 3.17 Implementation of Pagen II (as of SAL II) was hampered by lack of a rational civil service management policy. The development of technical skills in Planning, Finance and the Central Bank suffered from lack of a management philosophy--disseminated through the entire system--based on a minimum of rationality in decision-making, integrity and effort-rewarding values. 3.18 UNDP had for several years been responsible for activities in the area of Administrative and Civil Service Reform. The purpose was to prepare an inventory of surplus staff, prepare organizational charts, define personnel needs, improve management of the agencies, and so on. This medium- or long-term action was brusquely interrupted by intervention of IDA (and the IMF) in this process, for example through delay in disbursing the second tranche of SAL II for failure to meet the requirement that a Payroll Department be set up in the Ministry of Finance and a permanent staffing and payroll monitoring and control system be installed. 3.19 The delay that occurred under the UNDP project in narrowing the gap between the civil service staffing figure calculated by the Ministry of the Civil Service and that used by the Finance Ministry's Payroll Department, led to direct action by IDA at the Civil Service Ministry. The IDA representatives, suspecting cheating in the staffing calculations, which seemed to be artificially inflated, called for an audit and for the right to inspect the operations of the Civil Service Ministry's Management Information Service (SIG). This action involved heavy expenditure on consultants and expertise (US$1 million), a breach with the UNDP and strained relations with the Guinean authorities. While this led to an improvement in the personnel data base and the management of the SIG, the doubts concerning fictitious staff were not confirmed; this tarnished the reputation of the Bank staff, which had formed its suspicions too hastily. This precipitateness was highly regrettable, even if it could have been explained by the considerable pressure imposed by the delay in releasing the second tranche of SAL II, which delayed the entire program. This offers a typical example of confusion of styles between legitimate short-term disbursement concerns and the - 18 - objective the Pagen ought to have been pursuing of getting a firm grip on the problems of institutional strategy and rational management of the civil service. 3.20 IDA's intervention in a project component for which UNDP was chiefly responsible symbolized the limits of the ambitiously programmed coordination among donors. The antagonism between UNDP and IDA demonstrated the extent to which the Pagen formula resulted in the involvement of different donors with different working methods and operational mentalities and dissimilar "corporate cultures." Despite great homogeneity of objectives, this is often reflected in great heterogeneity of attitudes and approaches to the common problems the donors face in implementing the individual project components. The co-existence of the donors' fundamentally different procedures and traditions hardly survived the test of practical conditions. The "integrated" coordination of technical assistance turned out to be largely illusory. 3.21 This was confirmed throughout the monitoring of Pagen II. The Project Manager, Coordinator of the TSU, absorbed by his considerable PREF- and SAL-related tasks, proved incapable of monitoring the project. Moreover, as an expatriate, a staff member seconded by the Bank, he was reluctant to involve himself in civil service management problems and to intervene directly vis--vis the six department heads (National Directors) in charge of the Pagen components. 3.22 In practice, the Pagen Administrator became the Pagen Manager but without the latter's status or authority. The committee of the six Pagen chiefs never actually met. The Administrator, highly competent and dedicated, in fact kept the disbursement accounts only for IDA, ADB and the government counterpart contribution--a fact that again demonstrates the superficialness of Pagen II's presentation as an "integrated" project. These accounts were not communicated regularly to the other donors--FAC, CFD, UNDP and USAID--involved in the project. Similarly, the other donors communicated to the Project Administrator only the annual evaluation reports and/or the provisional annual budgets, without any detailed execution inventories. Yet such inventories were essential for coordinating activities and avoiding duplication of financing. 3.23 Project monitoring by Bank staff suffered from the speedy departure of the team that originally appraised Pagen II. A hiatus occurred between this departure and the effective assumption of his duties by the new official responsible for monitoring Pagen II. The latter was greatly involved in the project at the beginning but subsequently was very largely absorbed by the problem of the staffing data base in 1991/92, which led him to neglect the other project components. It seems that these components were more or less managed by the consultants concerned, with varying fortune, largely reflecting the experts' often very different personalities. 3.24 Project implementation was thus marked by a lack of general oversight on the part of both the Borrower and the Bank and very imperfect coordination among donors. The lack of commitment by the Borrower, apart from an obvious short-term interest in obtaining data processing resources, vehicles and "substitution" labor, perhaps reflected a feeling that the Pagen was only an instrument of the SAL (a much larger source of funds) and that institutional capacity strengthening of the Planning and Finance ministries was not only a very long-range undertaking but also one that might even be impossible to implement in depth without a "cultural" and ethical reform which in any event transcended by far anything the Pagen could effectively accomplish in three years. 3.25 It was originally intended that Pagen II would last into 1994. Unfortunately, the commitments entered into to ensure completion of the general administrative data base (US$1 million) pre-empted - 19 - part of the available funds. In addition, a number of codicils were signed in 1991 and 1992 to the basic contracts (consultants in the Planning Ministry and the CNPG, TSU Coordinator, legal advisers). Financing of the adviser to the ministers also had to be assumed by the project in 1992. Although savings were achieved on equipment, vehicles and operating costs (maintenance and salaries), consultancy services exceeded the original budget by 35 percent. To this had to be added US$800,000 in the form of PPF for a future Pagen III to pay the fees of several consulting firms that could not be paid by Pagen II. The result was to exceed the original Credit (SDR 11.3 million). 3.26 The situation would have been even more serious if other donors had not acceded to IDA's request to assume responsibility, urgently, for the costs of a number of components: debt management, taken over by CFD; CNPG, taken over in part by the European Union; Management Information Service (SIG) taken over by USAID, and so on. This-more or less involuntary-gesture generated a certain amount of resentment by the donors toward the Bank and its management methods. It demonstrated the inefficiency of the "umbrella" project approach. D. Project Results 3.27 Although the objectives of coordination of assistance and overall improvement of institutional capacities, particularly in the civil service, were not achieved, improvements in relation to Pagen I were obtained in specific areas. 1. Planning and statistics 3.28 A number of successes can be identified: - installation of economic models; - a control chart (quarterly and monthly) of principal economic data; - a macroeconomic fine-tuning procedure, performed twice a year; - an annual economic and social report (suspended, however, in 1992); - relatively reliable national accounts; - a descriptive list of enterprises (1990-91). 3.29 Weaknesses noted include lack of a strategic perspective of Guinea's medium- and long-term development; imbalance between macroeconomic planning and sectoral and regional planning, due to lack of assistance in these areas; and a Statistics Directorate whose efficiency remains to be proven. 2. Public investment 3.30 Computerization of public investment programming was achieved, an independent programming unit was set up to monitor these investments, and project data bases were improved. Gaps persist, however, with respect to the estimation of recurrent project costs and project appraisal and selection by DNIP (PCR, para. 27). - 20 - 3. Contracting 3.31 The legal instruments were put in place, a Contracts Directorate in the Ministry of Finance and Contracting Commissions were set up, and public contract awarding and monitoring procedures were instituted. The general weakness of the administration is, however, reflected in the contract awarding procedures, and there continues to be a problem of dialogue with respect to public investment. 4. Debt Division 3.32 Debt management was improved and counterpart staff trained, though behind schedule. The possibility can be envisaged of ending permanent technical assistance and replacing it by short-term missions in order, for example, to help with forward management or renegotiation of the debt in specific cases. Coordination between the Debt Division and the other government agencies remains however to be consolidated in order to avoid being left out of loan negotiations and therefore to be able to assemble all the relevant information. 5. Civil service 3.33 The Bank's intervention made it possible to achieve the objectives of reorganizing the SIG to make it more efficient, upgrading the Administrative Management Data Base (FGA), a copy of which is transmitted for payroll processing to the Ministry of Finance, and management of the FGA through installation of a procedure for control of updating of the personnel data base. The SIG Directorate remains fragile as regards training and owing to the uncertainties that continue to affect its stability. Moreover, although "fictitious" civil servants proved to be few in number, several thousand still have not been given precise assignments. 6. Training 3.34 The major results achieved in the case of the CNPG are as follows: - a long (two-year) cycle, with two specialized streams supplementing a common main stream (continuation of Pagen I); - a three-month short cycle on project appraisal (suspended in 1991); - a number of specifically-targeted seminars; - an operational structure through which to accommodate training requests by other agencies. 3.35 Major problems subsist in the following areas: - a problem of understanding and dialogue with certain directorates, particularly the DNIP and DNSI, which have not sent any staff, the latter lacking motivation and afraid of losing their positions if they go to the CNPG for training. Yet training of Planning Ministry staff was a formal objective of Pagen II; - 21 - - a problem of recruitment in economics and planning, the two streams that had to be abandoned for the long course. Some people believe that they would not have been abandoned if the training had been better tailored to job requirements; - many graduates apparently receive no "plus" from the CNPG training in the form either of a recognized diploma, increased responsibility, salary grade advancement, or promotion. 3.36 In-service training posted very inadequate results, though with certain notable exceptions (for example, PIP staff in the DNIP, and medium-term macroeconomic model staff in the Planning and Economy Directorate). Skill requirements with respect to in-service training were never imposed in selecting the technical assistance personnel, nor was there any check of instructor training of the technical assistance officers sent into the field. Coordination with the CNPG was very inadequate and little practical interest was shown on the Guinean side in designating and systematically installing counterpart staff (including groups of such staff). 7. Legal component 3.37 Many positive activities were undertaken: - assistance in drafting the various legislative oggs; - assistance in drafting laws; - assistance to the Ministry of Finance, the Ministry of Justice and the General Secretariat of Government; - computerized legal data base; - resumption of publication of the Official Gazette (Journal Officiel). 3.38 The progress made, however, was largely in terms of the drafting of new legislation and legal texts, rather than in terms of implementation. The implementation was only very partial, owing to delays in setting up new institutions and in providing the necessary training to Guinean officials. The weaknesses in counterpart staff, both quantitative and qualitative, also inhibited the rate of implementation of the legal reforms. 8. Assistance to the CCEF 3.39 The TSU was a crucial instrument in imparting a technical dimension to the economic decision-making process. It helped greatly to introduce homogeneity into the CCEF, for which its serves as joint ministerial office. It provided a channel for almost continuous dialogue with the IMF, the Bank and the other donors. Unfortunately the TSU Coordinator did not perform his role of Pagen Project Manager. The Pagen Administrator nevertheless succeeded in instituting accounting by component and computerized management of this accounting. Attention must however be drawn to the absence of true monitoring of the Pagen and the fact that the proposed Management Committee never actually functioned. There was no control chart by means of which to monitor technical and financial developments, not only by component but also by contract and by account. - 22 - There was no systematic technical reporting by the various participants. The observations following supervision missions and the mid-term project mission were often not followed up by action. E. Project Sustainability 3.40 Analysis of the specific results of the various components of Pagen II points to the conclusion that overall project performance was not satisfactory, owing to the persistence of numerous shortcomings and above all of difficulties in the areas of coordination and institutional capacity strengthening. 3.41 The conclusions reached at the end of Pagen I with respect to project sustainability apply also to Pagen II. This sustainability is eminently uncertain. Consideration can undoubtedly be given to continuing the efforts undertaken from 1985 to 1993 (by means of a Pagen III) in specific areas, such as better statistics preparation, more reliable macroeconomic and sectoral projections, greater coherence in PIP programming and effective institution of contracting procedures and of the new legal instruments enacted. The question nevertheless remains of the possibility of boosting the quality, efficiency and competence of civil service staff as a whole in order to ensure that overall institutional capacity is truly increased and that technical assistance experts are no longer drowned in a sea of incompetent and unmotivated employees. It seems that the results obtained up to now will not be converted into solid gains until a true understanding exists of the full importance of the problem of reform of the civil service and all its long-term implications. - 23 - IV. PRINCIPAL PROBLEMS AND LESSONS 4.01 Experience with Pagen I and II points up four main problems and consequent lessons: A. Unsuitable Nature of the Technical Assistance 4.02. While the designation of a single firm of consultants, as was done for Pagen I and in large part for Pagen II, offered the advantage of facilitating the work to some degree and creating synergy between the activities while lightening the Bank's monitoring task, it also had the disadvantage that some of the members were not suited to the work assigned to them. The main concern of a consulting firm, however competent it may be, is to make a profit. The technical assistance experts, whether short- or long-term, have to be profit centers. While the consulting firm may well take care to coordinate the assistance experts' activities (this was done during Pagen 1) from its headquarters office, it is hardly in a position to have an overall perspective of the institutional strategy to be put in place or the structural adjustment policy to be supported. The long-term technical assistance experts tend to operate within their own sphere (i.e. component) and do not always feel themselves to be part of a whole. 4.03 The technical assistance contracts did not always specify precise time frames for execution of the various tasks. One has the impression that these were regarded more as an administrative obligation than as a reciprocal commitment by the parties to execute a specific number of tasks in accordance with a precise timetable. Moreover, monitoring of the performance of these services apparently left much to be desired. Some technical assistance experts were left to their own devices, including by the headquarters offices of the Paris consulting firms, especially during Pagen II. Yet they need to be supervised and monitored and moreover encouraged in a difficult work environment. 4.04 The use of two main consulting firms in Pagen II within the DNIP, one financed by IDA and the other by ADB, also posed problems of demarcation of each firm's activities and structural environment occupied and, therefore, of overlapping of work. This arrangement was disputed more than once and created operational difficulties in the technical assistance that were difficult to avoid. 4.05 To resolve these operational difficulties and at the same time avoid overlapping and duplication of the technical assistance and make it possible to define more precise action programs and execution timetables for technical assistance projects of the Pagen II type, it would make more sense to recruit the assistance as and when needed, the Coordinator being responsible for integrating the technical assistance experts' activities. The Coordinator's role would be a vitally important one, focusing on ensuring coherence among the various operational plans and analyzing their content and synergic effect. 4.06 Pagen I and II were implemented in a particularly poorly developed setting in terms of economic, financial and administrative management, in which long-term substitution technical assistance often proved indispensable, especially during the first few years. While some progress was accomplished, it seems hardly possible, at this stage, to do without long-term experts to perform the tasks that remain to be completed. This will not be possible for several years, since the caliber of many of the staff is still too low. Nevertheless, without wishing to be dogmatic, we feel that it would be perfectly feasible, through precise and detailed analysis of the tasks to be accomplished, to determine in what cases short-term missions could achieve results without jeopardizing the - 24 - sustainability of this or the other component. For example, targeted missions could help with management of the Debt Division, training modules could be conducted by short-term experts, and statistical surveys could be monitored by technicians who would visit Guinea at regular intervals to supervise the operations. 4.07 Experience in the Planning Ministry and elsewhere suggests that the technical assistance expert could well be given an advisory role, outside the hierarchy. This would make it possible to limit substitution assistance and focus on the fundamental problems that still impede the smooth functioning of some departments and reduce the efficiency of the technical assistance. It would then be possible, for example, to tackle the problems of structural organization and allocation of responsibilities of the various departments; to deal with the problems of relationships and exchange of information within and between ministries; to obtain a broader picture of the fundamental problems or obstacles that persist in them, and to perform the role with greater flexibility and foresight and thereby to focus on what are perceived to be the most fundamental problems. Finally, this arrangement would facilitate more efficient skills transfer since execution would effectively be in the hands of the counterpart staff, under the supervision, however, of the adviser. B. Training and Skills Transfer 4.08 Reference was made earlier to the serious gaps in the training provided by the CNPG, despite the positive results already obtained. In the future, training will need to be targeted much more precisely to strengthening certain departments of the Ministry of Economy and Finance and of the technical ministries. 4.09 It is in the area of skills transfer, however, that this deficiency is most painfully evident. After nine years of technical assistance (1985-94), it has to be stated that the Guinean side is still not competent to take over responsibility in the sectors studied. It is therefore on this area that the efforts ought to focus. 4.10 The training programs for each component ought to have been studied more closely, in the framework of an overall training scheme. Such a scheme could have been based on the following considerations: (a) Emphasis on the training of one or more counterparts able to take over responsibility both from the technical standpoint and from that of later dissemination of the skills throughout the departments. Where necessary, the technical assistance expert would participate in selection--and even recruitment--of the counterpart officer(s). This involves civil service personnel management decisions (see below). (b) Targeted, specialized and personalized training. The capabilities of the counterpart personnel would be evaluated and, in light of this evaluation, a personalized training program, tailored to the task to be performed, would be implemented. Training needs would also be evaluated on a personal basis, and the training would be offered selectively, in priority to the most receptive staff, i.e. those best equipped to absorb the final technical training in the field. In view of the magnitude of the work remaining to be done (especially in DNSI and DNPE), it seems clear that the presence of a medium- or long-term resident assistant continues to be justified. - 25 - C. Civil Service Reform and Institutional Development Strategy 4.11 This training policy, designed to generate the transfer of skills, cannot be effective unless it is backed by a rational policy for the civil service. The shortcomings in this area represent a major constraint on skills transfer and therefore on the efficiency of the public sector; this in turn has an adverse impact on economic and financial management. 4.12 Experience with Pagen I and II points up the following weaknesses of the system: (a) Recruitment and assignment decisions are taken without reference to any rational criterion with respect to the employee's technical skills. They are often based on irrational political or personal criteria. (b) The staff assignment process is also devoid of all rationality. Cases were noted in which personnel trained in specific tasks were suddenly transferred to departments were those skills could not be used. The result, since careers are not based on the principle of merit, is to weaken the incentives to efficiency and boost the incentives to collusion. (c) There are no financial incentives to efficiency, with the result that a career in the public service is not very attractive and efficiency in the administration is not financially rewarding. (d) The Administration organizational charts ("organic frameworks") still remain to be completed, though some progress has been made. This makes the task of containing the salary bill more difficult. It moreover means that the structures within which the technical assistance is to operate are not very appropriate, since it is hard to interest staff in serving as counterparts so long as they are uncertain about the nature and duration of their assignment. 4.13 These problems are extremely difficult to "resolve" piecemeal, for example (as has been suggested) by looking for solutions within the framework solely of the Ministry of Economy and Finance that could perhaps de disseminated among other sections of the civil service. The MEF is, however, precisely one of the places where, by definition, the dangers of collusion and of temptation from outside, notably the private sector, in order to obtain approvals of many kinds, are greatest. It is by no means clear that the MEF itself is convinced that this "pilot" approach is realistic and feasible, having regard to civil service rules, the reaction of the other ministries and political interference. 4.14 A broader approach, coming to grips with the problems of the civil service as part of a long- term institutional development strategy--which must itself form an integral part of an overall development strategy--adopted by Guinea and supported by the Bank and the other donors, would seem better fitted to help resolve these basic problems. 4.15 One of the lessons taught by the Pagens is the need to promote economic management cacy. This calls not only for the development of technical skills in specific areas (this has been achieved, at least in part) but also for the adoption of a management philosophy--applied throughout the system--based on rational decision-making, the concept of mission of government, and integrity. - 26 - 4.16 The present system impedes the emergence of dynamic/innovative staff able to breathe a new spirit into the government apparatus. This is no doubt attributable to the legacy of the First Republic, which imposed downward leveling and an irrational style of personnel management. Experience shows that in order to break out of the present model it would be desirable to inject an adequate proportion, a critical mass, of motive staff, vectors of reform, into the system at "impact points" where they can start cracks in the system. To that end it is desirable first to identify suitable candidates to staff this critical mass of motors of change, and then to sustain this approach by means of an overall civil service management policy based on merit, rational assignment, and the use of financial incentives. This policy must be applied to the entire public sector and not through small pilot projects, the ineffectiveness of which has already been demonstrated. D. Monitoring and Coordination of the Technical Assistance 4.17 Supervision mission reports on Pagen projects have generally been produced in the course of visits to Guinea of headquarters missions and have reflected the issues of the moment and the immediate concerns of the Borrower and the technical assistance experts. This activity of periodic monitoring in the field needs to be strengthened in order to identify the real potential constraints on the efficiency of the technical assistance, which are often non-technical and frequently do not come through in the official reports. For example, the sustainability of the project could be enhanced by closer monitoring of skills transfer and stricter supervision of in-service training. Similarly, the progress reports prepared by both technical assistance experts and the Guinean agencies ought to be presented regularly and above all be studied closely by Bank staff. 4.18 It would be advisable also to strengthen the position of Program Coordinator. The Coordinator should be capable of truly managing the project, not only in terms of accounting but also from the technical and strategy standpoints. A Coordinator of this kind ought moreover to enjoy some degree of independence of the Government, as was demonstrated by the unfortunate choice of the TSU Coordinator during Pagen II. 4.19 The detailed planning (blueprint) approach to a project of technical assistance for economic and financial management has proved difficult if not impossible to implement owing to the complexity of the operations deriving from the package of economic and financial reforms and necessary structural adjustments. The main clauses of the Credit Agreements (Pagen I and II) were on the whole respected, at least in form. The Pagen I accounts were, however, very badly kept. The first project audit was rejected by the Bank. The situation improved with Pagen II and the accounts were administered more correctly. Note however that the Agreements contained many clauses prescribing precise and tightly bunched deadlines for compliance with certain requirements. It was often impossible to adhere to the timetable because it was unrealistic and excessively rigid. A flexible and individually tailored ("process") approach is, it would seem, eminently to be preferred. For example, the Government may take decisions during execution of the project whose effect is to increase or reduce the technical assistance resources allocated to this or the other component. Similarly, while the absorption capacity of government agencies involved is often limited, it can vary over time. Performance indicators ("warning signals")then need to be available for the various components that make it possible to judge whether the technical assistance is being effectively used. 4.20 The continuous evaluation ("process") approach, more flexible and better adapted to local conditions than the detailed planning approach at the project preparation level, involves a monitoring process that keeps close track of the evolution of the project and the consequent possible need for - 27 - frequent revision. This type of project, both complex and flexible, would call for the presence of a highly experienced and mature expatriate expert. To the extent that such a person could not be made available from Bank staff, an outside expert could be used. The latter would not only act as consultant to the Bank but would also be responsible for monitoring the smooth general progress of the project and adherence to its main objectives. A process of continuous project evaluation would be instituted. 4.21 The Project Adviser's monitoring and evaluation responsibilities need not involve continuous intervention at the detailed project management level. On the contrary, this experienced expert would undertake field visits from time to time to assess the overall development of the project and necessary action to resolve any difficulties that have arisen. The Adviser would however exercise continuous overall responsibility for the project and the efficiency of the technical assistance, a function that, as experience has shown, cannot easily be performed by intermittent missions of Bank experts. The Adviser would have to enjoy complete independence, be skilled in the field of technical assistance in Africa, be very familiar with the Bank's procedures, and possess adequate authority to be able to engage in effective dialogue both with all of the donors and with the Guinean authorities. - 28 - - 29 - Annex I TECHNICAL ASSISTANCE PROJECT FOR ECONOMIC MANAGEMENT (Pagen I) COMPARATIVE STATEMENT OF BUDGET EXECUTION AT END OF PROJECT (SDR 000) Amount Amount Category AllocatedY Disbursed! Difference 1. Civil engineering works 360 309 51 2. Vehicles, furniture, supplies and office equipment 820 889 (69) 3. Investment prefeasibility studies 50 15 (35) 4. Services of consultants and resident advisers and related expenses: a. Parts A-C and E-G of the project 6,030 5,852 (178) b. Part D of the project (budget and customs) 170 32 138 c. Part H of the project (parapublic sector reform) 1,130 2,271 (1,141) 5. Training abroad 120 85 35 6. Special account 30 -- 30 7. Reimbursement of project preparation advances 410 245 165 8. Unallocated 580 -- 580 TOTAL 9,700 9,698 2 1/ According to Credit Agreement 1559-GUI of March 21, 1985. 2/ Conversion of billing currency to SDRs at IDA disbursement dates. - 30 - Annex II SECOND ECONOMIC MANAGEMENT SUPPORT PROJECT (Pagen II) BUDGET STATUS OF IDA FINANCING AS OF DECEMBER 31, 1992 (SDR) Initial 1992 Cat. Description Budget Reallocation Execution 1. Equipment and vehicles 1,910,000 630,896 (630,896) 2. Consultants' services 7,190,000 9,712,721 (9,712,106) 3. Study fellowships 240,000 328,040 (328,040) 4. Operating costs 1' 630,000 301,173 (301,788) 5. Reimbursement of SPPF and PPF advances 550,000 315,361 (315,361) 6. Unallocated 780,000 -- "A" FUND: INITIAL DEPOSIT Pagen II -- 3,760 (3,760) "P" FUND: INITIAL DEPOSIT P 504-GUI -- 7,422 (7,422) TOTAL 11,300,000 11,299,373 (11,299,373) 1/ Operating costs comprise expenditures on equipment and vehicle maintenance and project staff salaries and allowances. - 31 - ATTACHMENT Page 1 of 2 REPUBLIC OF GUINEA Ministry of Planning and Finance Conakry May 30, 1994 Mr. Manuel Pefialver Chief, Country Policy, Industry and Finance Division Operations Evaluation Department The World Bank Washington, D.C. Subject: Performance Audit Report on Economic Management Support Projects Credits 1559-GUI and 1963-GUI Dear Mr. Pefialver: I acknowledge receipt of the Audit Report on Credits 1559-GUI and 1963-GUI. While in no way questioning the soundness of the analysis which the Report gives of the problems associated with these two technical assistance projects and the lessons to be learned from them, I should like to make the following observations: - With regard to their legal component, the Report stresses that "the work accomplished belongs more to the domain of theory and design than of practical application" - an assertion which warrants some commentary: The stated purpose of the legal assistance component, in the context of development of a new legal framework in the Republic, was chiefly the formulation of legal texts more in keeping with the liberal economic environment in gestation. Actual application of a series of regulatory texts, which often takes considerable time, requires training for the personnel involved and on occasion the setting up of new institutions - and in fact, as part of these two projects, practical steps were taken to provide training for lawyers (seminars on the laws governing economic activities, land tenure law, legal drafting, etc.) and to establish new institutions and facilities (the Management Training Center, various contract award committees, a Government Contracts Department within this Ministry, a legal data bank, etc.) or to reorganize old ones (the General Secretariat of the Government). - 32 - ATTACHMENT Page 2 of 2 With regard to the general problem of coordination, it may be noted that: (1) Coordination among cofinancing donors, a key objective under UNDP's National Technical Cooperation and Assistance Program (NATCAP), left something to be desired, in the sense that there were no concerted efforts to monitor disbursements and reallocations of available funds. However, each donor supervision mission provided opportunities for contacts and exchanges of information on execution of the particular component of the project and any problems associated with it. The regrettable example of the civil service reform component was simply an error of judgment on the part of World Bank missions also responsible for monitoring compliance with SAL II second-tranche conditionalities. (2) Project coordination, by the coordinator of the Economic and Financial Recovery Program (PREF), was initiated in view of the considerable importance of the project to that Program. The shortcomings noted would clearly not have existed if the choice for coordinator had been one of the top staff of this Ministry. However, it has to be remembered that at the time two separate ministries (Planning and International Cooperation, and Economic Affairs and Finance) exercised powers which sometimes overlapped; this made it difficult, even impossible, to choose a top staff member (from either Planning or Finance) capable of coordinating the project objectively and effectively. Yours truly, Is/ Soriba Kaba Copy to: World Bank Resident Mission