Malawi -Institutional Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No 16241 IMPLEMENTATION COMPLETION REPORT MALAWI INSTITUTIONAL DEVELOPMENT PROJECT (CREDIT 2036-MAI) JANUARY23. 1997 CouLntry Department 3 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT Current Unit = Malawi Kwacha (MK) US$1.00 = MK 2.70 (May 1989) = SDR 1.255610 US$1.00 =MK 15.26 (Dec. 1994)= SDR 1.448970 US$1.00 = MK 15.30 (June 1996) = SDR 1.440840 WEIGHTS AND MEASURES Metric System FISCAL YEAR OF BORROWER April 1 - March 31 ABBREVIATIONS AND ACRONYMS DCA Development Credit Agreement DEVPLAN Development Plan ICR Implementation Completion Report ID I Institutional Development Project I ID II Institutional Development Project II IDA International Development Association IMF International Monetary Fund GOM Government of Malawi HIID Harvard International Institute for Development MDC Management Development Consultant MIM Malawi Institute of Management MOF Ministry of Finance MOWS Ministry of Works and Supplies OPRPG Operations Policy Department SACS Surtax Administration Computer System SAL Structural Adjustment Loan SAR Staff Appraisal Report SDR Special Drawing Rights TA Technical Assistance TACS (Income) Tax Administration Computer System TMP Tax Modernization Program TOT Training of Trainers UK/ODA United Kingdom/Overseas Development Administration UNDP United Nations Development Program UOM University of Malawi WB World Bank Vice-President Callisto Madavo Country Director Barbara Kafka Staff Member Ladipo Adamolekun, Principal Public Sector Management Specialist  FOR OFFICIAL USE ONLY Table of Contents PREFACE .......................................................... ii EVALUATION SUMMARY .......................................................... iii INTRODUCTION ........................................................... iii PROJECT OBJECTIVES AND DESCRIPTION ........................................................... iii IMPLEMENTATION EXPERIENCE AND RESULTS .......................................................... iv SUMMARY OF FINDINGS .......................................................... v PART L PROJECT IMPLEMENTATION ASSESSMENT ...............................1........................... PROJECT IDENTITY .......................................................... 1 BACKGROUND .................................................................................................................................................. 1 PROJECT OBJECTIVE AND DESCRIPTION ...........................................................1 ACHIEVEMENT OF PROJECT OBJECTIVES .......................................................... 2 MAJOR FACTORS AFFECTING THE PROJECT .......................................................... 3 IMPLEMENTATION RECORD ........................................................... 3 PROJECT SUSTAINABILITY AND FUTURE OPERATION ........................................................... 5 BANK'S PERFORMANCE ........................................................... 5 BORROWER'S PERFORMANCE .......................................................... 5 ASSESSMENT OF OUTCOME .......................................................... 6 KEY LESSONS LEARNED ........................................................... 6 TAX REFORM PROGRAM .......................................................... 7 PART H. COMMENTS CONTRIBUTED BY THE BORROWER ......................................................... 12 PART ImL STATISTICAL TABLES .......................................................... 15 TABLE A: SUMMARY OF ASSESSMENTS (MM ........................................................... 15 TABLE IB: SUMMARY OF ASSESSMENTS (TAX MODERNIZATION PROGRAM) .................................................... 15 TABLE 1C: SUMMARY OF ASSESSMENTS (COMPOSITE OF TABLES IA AND 1B) ....................... I ......................... 16 TABLE 2: RELATED BANK CREDITS .......................................................... 17 TABLE 3: PROJECT TIMETABLE .......................................................... 17 TABLE 4: CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (US$ MILLION) .................. ...................... 18 TABLE 5: PROJECT COSTS (US $ THOUSANDS) .......................................................... 18 TABLE 6A: PROJECT FINANCING (US $ MILLION) .......................................................................... 19 TABLE 6B: ALLOCATION OF CREDIT PROCEEDS (OBTAINED FROMM I) ......................................................... 19 TABLE 7A: PARTICIPANTS AT MIM's COURSES ............................................ 20 TABLE7B: CONSULTING PROJECTS BY CATEGORY .......................................................................................... 20 TABLE 7C: CONSULTING PROJECTS BY SECTOR .............................................,,,,,.,,,,.. 20 TABLE 8: COMPLIANC E WITH CREDIT COVENANTS ............................................ 21 TABLE9: BANKRESOURCES: STAFFINPUTS .21............................................ 2 1 TABLE 10: BANKRESOURCES: MISSIONS .................................... ...................................................... . 22 Appendices APPENDIX A LIST OF PERSONS MET DURING THE MISSION .......................................................................... 1 APPENDIX B TWINNING ARRANGEMENT BETWEEN ARA CONSULTANTS AND THE MALAWI INSTITUTE OF MANAGEMENT ............................................................................... 3 APPENDIX C EVOLUTION OF THE ENDOWMENT OF THE MALAWI INSTITUTE OF MANAGEMENT .................. 10 APPENDIX D CONSTRUCTION OF MALAWI INSTITUTION OF MANAGEMENT REPORT BY MINISTRY OF WORKS AND SUPPLIES ............................................................................... 13 APPENDIX E MALAWI INSTITUTE OF MANAGEMENT - ORGANIZATIONAL CHART AT INCEPTION ............... 16 MALAWI INSTITUTE OF MANAGEMENT - PROPOSED NEW ORGANIZATIONAL CHART ................................... 17 APPENDIX F REPORTS AND OFFICIAL DOCUMENTS ON FILE ........................................................................ 18 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.   IMPLEMENTATION COMPLETION REPORT MALAWI INSTITUTIONAL DEVELOPMENT PROJECT (CREDIT 2036-MAI) Preface This is the Implementation Completion Report (ICR) for the First Institutional Development Project (ID I) in Malawi, for which Credit 2036-MAI in the amount of SDR8,800,000 was approved on June 13, 1989 and which became effective on January 8, 1990. The original closing date for the credit was December 31, 1994. The closing date was extended thrice for a total of eighteen months, with a final closing date of June 30, 1996. The last twelve months of extension was necessary to allow for the delivery of approved purchases and the completion of the claims for expenditure. By November 4, 1996, the undisbursed balance of the credit was US$143,861.53. This amount was canceled effective from the same date. The amount approved in 1989 was US$11,300,000 and the amount disbursed by November 4, 1996 was US$12,051,131.42. The total amount disbursed is higher than the amount approved because of gains due to the appreciation of the SDR in terms of dollars. The ICR was jointly prepared by the Institutional and Social Policy and the Country Department 3 (Preface, Evaluation Summary, Parts I and III). The report was reviewed by Barbara Kafka, (Country Director for Malawi). The Borrower's comments on the ICR constitute Part 11. 1 Preparation of this ICR was undertaken during a Bank mission in January/February 1995. The draft ICR served as the Aide Memoire of the mission and was discussed at a wrap-up meeting. With the approval of the Southern Africa Department's Operations Adviser who had consulted with OPRPG, the report follows the "simplified form of ICR" as per footnote 3 (c) of OP13.55. It was considered inappropriate to undertake a comprehensive ICR, as spelled out in the April 1995 directive on ICR (OP 13.55), because the major beneficiary of the credit, the Malawi Institute of Management (MIM), will also be supported under the successor Second Institutional Development Project (ID II) with about 30 percent of the total Credit amount. It was agreed that the elaborate ICR required under OP 13.55 would be more appropriate at the completion of ID II. The report is based, inter alia, on the Staff Appraisal Report; the Credit Agreement; Supervision reports; correspondence between the Bank and the Borrower; internal Bank Memoranda; and interviews with Bank and Malawi Government officials who were closely associated with the project. ' The UNDP that co-financed parts of the project and was expected to provide parallel financing for some other parts was invited to participate in the ICR mission but declined the invitation. However, the mission met with the relevant UNDP staff and a copy of the draft ICR was sent to them. The Borrower's conunents on the ICR were not shared with the UNDP. ii   MALAWI INSTITUTIONAL DEVELOPMENT PROJECT (CREDIT 2036-MAI) Evaluation Summary Introduction 1. The Government of Malawi decided to establish a management institute as part of a project for institutional development. The Malawi Institute of Management (MIM) was to provide in-service training for middle and senior managers in the public, parastatal and private sectors. The proposed project also included the strengthening of institutional capacity in the Ministry of Finance and the continuation of an on-going Tax Modernization Program. The institutional strengthening actions of MOF were to be derived from the Ministry's Development Plan (DEVPLAN) prepared with the assistance of the UNDP. Project preparation was completed in 1989 with negotiations in April and Board approval was granted in June. The project became effective in January 1990. Project Objectives and Description 2. Project Objectives. The project's objective was to strengthen national economic management. The Malawi Institute of Management was to offer a wide range of training programs and seminars aimed at improving the capacity of Malawian managers in the public and private sectors. The strengthening program in the Ministry of Finance was to improve the Ministry's capacity to manage public resources through upgrading processes for budgeting, accounting and auditing, debt management and claims, and to improve revenue flows through modernization of the tax system. 3. Project Description. The project was to establish and operate the Malawi Institute of Management (MIM) to train managers in the public and private sectors in management techniques. In addition to its own campus, MIM was to work closely with the University of Malawi, sharing facilities with two of the University's affiliates, Chancellor College and the Polytechnic. An Endowment Fund was to be established to receive all the fees MIM generated during the five-year project investment period. Income from its endowment, along with annual fees, were to help MIM cover its operating expenses in the post-project period. The project was to fund MIM's civil works, furniture, equipment and operating costs. A Canadian consortium was selected to provide initial technical services under a twinning agreement. 4. The project was also to assist the Ministry of Finance (MOF) with the implementation of its Development Plan and its ongoing tax modernization program. MOF was to be reorganized to strengthen its forward budgeting capability, to improve government accounting and auditing, and to strengthen claims processing and debt management. The project was also to continue support for the ongoing tax modernization begun under SAL III. The tax progran was to focus on reforms in trade taxes, more efficient collection of corporate taxes and an improved duty-drawback scheme to promote export growth. The project was expected to provide the technical assistance, equipment and training iii  required to help MOF carry out its Development Plan and tax modernization program. UNDP was expected to provide US$6.0 million equivalent in parallel financing. 5 . It turned out that at project completion in 1994,2 implementation of the MOF component had not taken off, except the Tax Modernization Program which continued to be implemented. The story of the non-implementation of the major part of the MOF component is provided separately at the end of "Part I: Project Implementation Assessment". The next sections on "Implementation Experience and Results" and "Summary of Findings" are devoted to the project component on the Malawi Institute of Management (MIM) and to the sub-component on Tax Modernization, the only part of the MOF component that was implemented. Implementation Experience and Results 6. Based on the review of available documents both at Headquarters and in the field as well as on interviews conducted in the field, the mission found that: A. MIM. * Training: MIM exceeded planned targets for participants during the first three years but fell short of the targets in the last two years. The conduct of in-house management traimng proved particularly attractive for private sector enterprises. MIM revised and re-designed selected generic courses and introduced some new courses, notably in the areas of Business Management and Human Resources Management. But localization of training materials progressed at a lower pace than expected. * Consultancy: MIM recorded impressive achievements in consultancy with a cumulative total of over 150 tasks. The respective shares of clients among the civil service, statutory corporations and private sector enterprises were 20 percent, 31 percent and 25 percent. MIM's clients expressed satisfaction with the quality of work performed. The only complaints were occasional delays caused by work overload. * Research: MIM's record in the area of research was poor and the Management Development Consultants (MDCs) failed to exploit the mutually beneficial linkages between training, consultancy and research. * Civil Works: The construction of the campus of MIM was successfully completed, some nine months behind schedule. The construction work appears very satisfactory and the entire complex stands out as a beautiful and functional facility. 2 The original completion date for this project was June 30, 1994, six months before the initial closing date of December 31, 1994. However, some implementation activities continued until December 1994 and project credit was still used to cover some operational expenses until June 30, 1995 when the component on MIM under the successor Second Institutional Development Project (ID II) became effective. Although the closing date was extended to June 30, 1996, project credit was only used for the purchase of supplies and equipment that had been approved before December 31, 1994. Therefore, 1994 will be used as the project completion date in this report. iv  B. Tax Modernization Program The results achieved under the TMP were mixed. The tax base was broadened with the introduction of surtax and some tax officials attended in-country and overseas training courses, focused on tax auditing techniques, surtax administration, tax collection and tax policy analysis. But the income tax administration computer system that was designed and installed could not be upgraded when this became necessary. There was also delay in the design and installation of a computerized system for customs and excise administration. Summary of Findings The first part of this summary focuses on MIM and the second part is on the TMP. A. MIM 7. Overall, the project outcome in respect of MIM was satisfactory and the establishment of the institute can be called a partial success story. Although a definite opinion on the sustainability of MIM would have to await the completion of the successor Second Institutional Development Project (ID II), a cross-section of the Institute's clients expressed confidence in its future, provided it learns from the lessons of the first five years. The following were identified as the areas of improvement that could contribute significantly to MIM's prospects for self-financing and sustainability: cost- consciousness, diversification and aggressive marketing of training and consultancy products, more systematic consultation with clients, creative use of visiting trainers (adjunct faculty), networking both in-country and abroad, and optimal utilization of campus facilities. 8. The main positive lessons learned are: * Country ownership and commitment built through intensive participation at project preparation and maintained through implementation (the beneficiary organization, MIM, was also the implementation agency) were key ingredients for ensuring satisfactory project outcome. * Establishing MIM as a parastatal with significant autonomy ensured a sense of responsibility and accountability. To enhance this autonomy the practice of seconding civil servants to MIM was abandoned in 1993 and the incumbent chairman of MIM's Governing Board (1995) was selected from the private sector. * Donor coordination was effective throughout the project cycle, from preparation through implementation. The Bank was informed about the mid-term Evaluation undertaken by GOM and UNDP and it received a copy of the report. In turn, every Bank supervision mission consulted in detail with UNDP. All this contributed to the achievement of project development objectives * Clarity in the objectives set for technical assistance (TA) as was the case for ARA consultants (provided under a twinning arrangement with MIM) helped to guarantee some tangible results even though some of the objectives were not achieved. The concrete results recorded were particularly notable in the areas of curriculum and teaching materials development, staff training and development of consultancy capability. v  * Supervision with appropriate skills mix, and with adequate frequency, had a positive impact on project implementation. 9. The following are the lessons from implementation problem areas: * The weakness of the accounting function in an implementation agency is certain to have adverse consequences for disbursement, auditing and procurement. MIM's limited capacity in accounting was largely responsible for the problems experienced in these areas. MIM was obliged to appoint a professionally qualified accountant as a condition of credit disbursement under ID II. * The implications of the objective of self-financing for MIM should have been spelled out more clearly with strong emphasis on cost-consciousness, examples of investment opportunities and monitoring targets for measuring progress toward the achievement of the objective. The fact that successive MIM chief executives failed to devote adequate attention to the subject meant that little progress was made. * Although MIM was granted significant autonomy, the composition of its Governing Board, with about 80 percent senior civil servants, and the employment of several civil servants as MDCs resulted in the enthronement of civil service culture in the Institute. Progress toward a business and entrepreneurial culture was slow. The recent increase in the number of Board members from the private sector, with one of them as its chairman, could help to hasten the transition from a civil service culture to a business culture. * The weak points in the twinning arrangement between ARA consultants and MIM included, among others, poor management of the transition from the expatriate Principal to a Malawian Principal; inadequate attention to the skills mix of the consultants recruited for MIM; limited interaction between some ARA experts and their Malawian counterparts; and inadequate attention to research and the development of a business culture. * The high proportion of TA funds that is spent on the payment of salaries and other expenses of expatriates, compared to what is spent directly on building capacity (fellowships for training and purchase of training materials and equipment), is certain to remain a controversial subject. The ARA/MIM experience was not an exception. Overall, about 72 percent of a total of US$4.2 million (provided by UNDP) was spent on the ARA consultants compared with only 28 percent on building local capacity in MIM. B. TMP 10. The importance attached to TMP by both the Government and the donors who supported its implementation (UNDP and the World Bank) ensured that it was actually implemented even though the other activities under the MOF component were not implemented. However, the results were mixed with some achievements recorded in the areas of tax policy reform (broadening the tax base) and training. Problems included building local capacity in tax policy analysis, increased staff training, and installation of computerized systems for income tax, customs and excise administration. vi  11. The main lessons from the TMP relate to the role of TA in capacity building for development: * Resident TA that is almost an enclave, as was the case with Harvard Institute for International Development (HIID) for most of the 1987-94 period, could perform satisfactorily in some areas (such as the reform of tax policy and the design of new computer systems) but inadequate oversight by the beneficiary government could result in avoidable errors such as the unupgradable TACS. With the advantage of hindsight, one can now say that the oversight the GOM tried to provide through request for periodic reports turned out to be ineffective as HIID produced thick reports (including new proposals for extension of contract) that were not critically reviewed . After the disbursement of the funds provided under the IDA credit was completed in July 1991, the World Bank only monitored developments regarding TMP. And the UNDP apparently did not supervise the utilization of the additional grants that it provided. The result of all this from 1992 onwards was one "bridging finance" after another (always at the request of GOM) with no real check on what had been achieved. Thus, for example, the inadequacy of the TACS was not discovered until late in 1994. * The poor coordination (involving GOM, UNDP and the World Bank) evident in the plans for the computerization of customs administration suggests that the new strategy GOM was putting in place for donor coordination in the field of TA for economic and fiscal management (January/February 1995) needed to be fine-tuned. (Subsequently, some fine- tuning of donor coordination mechanisms was carried out and the IMF, UNDP and UK/ODA are now supporting GOM's efforts to improve tax and customs administration). * The training of counterparts in specialized areas of tax policy analysis and the design and installation of computer systems produced the same mixed results as in TA efforts in many other developing countries: many counterparts were sent for training but only a few have returned to strengthen tax administration. Some were lost to other sectors of the economy while a few were lost to natural causes. Currently, GOM has only two experts in tax policy analysis and GOM has decided to utilize part of the new Second Institutional Development credit to build tax policy analysis capacity. vii   MALAWI INSTITUTIONAL DEVELOPMENT PROJECT (CREDIT 2036-MAI) Part 1. Project Implementation Assessment Project Identity Project Name Institutional Development Project (ID I) Credit No. 2036-MAI RVP Unit AF1C3 Country Malawi Background 1. In 1985, the Government of Malawi decided to establish a management institute and it formally requested the Bank for assistance in 1986. GOM's decision was based on studies carried out between 1979 and 1985 on how it could provide in-service training for middle-level and senior officials in the civil service. Following a further preparatory study, it was decided that a Malawi Institute of Management would be established with a main campus in Lilongwe and satellite campuses in Zomba and Blantyre. The satellite campuses were intended to help ensure close collaboration between the proposed MIM and the University of Malawi (UOM) through its Chancellor College at Zomba and the Polytechnic in Blantyre. Furthermore, MIM was expected to use the satellite campuses for courses aimed at the numerous parastatal and private enterprises in the Blantyre area. 2. By 1988, GOM had decided to make the establishment of MIM part of a larger project for institutional development. The proposed project included the strengthening of institutional capacity in the Ministry of Finance (MOF) and the continuation of an on-going Tax Modernization Program (TMP). The institutional strengthening actions of MOF were to be derived from the Ministry's Development Plan (DEVPLAN) prepared with the assistance of the UNDP. Project preparation was completed in 1989 with negotiations in April and Board approval was granted in June. The project became effective in January 1990. Project Objective and Description 3. Project objective. The project's objective was to strengthen national economic management. The Malawi Institute of Management was to offer a wide range of training programs and seminars aimed at improving the capacity of Malawian managers in the public and private sectors. The strengthening program in the Ministry of Finance was to improve the Ministry's capacity to manage public resources through upgrading processes for budgeting, accounting and auditing, debt management and claims, and to improve revenue flows through modernization of the tax system.  4. Project Description. The project was to establish and operate the Malawi Institute of Management (MIM) to train managers in the public and private sectors in management techniques. In addition to its own campus, MIM was to work closely with the University of Malawi, sharing facilities with two of the University's affiliates, Chancellor College and the Polytechnic. An Endowment Fund was to be established to receive all the fees MIM generated during the five-year project investment period. Income from its endowment, along with annual fees, were to help MIM cover its operating expenses in the post-project period. The project was to fund MIM's civil works, furniture, equipment and operating costs. A Canadian consortium, ARA consultants, was selected to provide initial technical services under a twinning agreement (see Appendix B). 5. The project was also to assist the Ministry of Finance with the implementation of its Development Plan and its ongoing tax modernization program. MOF was to be reorganized to strengthen its forward budgeting capability, to improve government accounting and auditing, and to strengthen claims processing and debt management. The project was also to continue support for the ongoing tax modernization program (TMP)begun under SAL III. The tax program was to focus on reforms in trade taxes, more efficient collection of corporate taxes and an improved duty-drawback scheme to promote export growth. The project was expected to provide the technical assistance, equipment and training required to help MOF carry out its Development Plan and tax modernization program. UNDP was expected to provide US$6.0 million equivalent in support of the project. At the implementation stage, only the TMP sub-component continued to be implemented. Following the detailed "Implementation Assessment" of the MIM component, a brief assessment of the TMP is provided and this is followed by the story of the non-implementation of the MOF component. A. MIM Achievement of Project Objectives 6. The objective of establishing MIM as a center of excellence for training and consultancy in management was achieved to a great extent. The Mid-Term Evaluation Report prepared jointly by the UNDP and the Government of Malawi in July 1992 declared MIM a success story, pointing to the fact that it was providing high quality training and consultancy services for the civil service, the parastatals and the private sector. At that point in time, MIM steadily exceeded the targets set for it in respect of both training and consultancy and its Endowment Fund was much larger than had been anticipated. At the end of the project, a verdict of apartial success story would be more appropriate. MIM did not fully meet the targets set for participants at its courses in 1993 and 1994. However, consultancy activities remained at levels that were above what had been anticipated in the SAR. Although the Endowment Fund was almost thrice the amount projected in the SAR, the real value of the total amount was probably only slightly over the initial projection because of high inflation and rapid depreciation of the Malawi Kwacha in 1993/1994. The goal of self-financing for MIM at the end of the project, that is, the capacity to meet its operating costs from its Endowment Fund along with annual fees, was not achieved (see Appendix C). 2  Major Factors Affecting the Project 7. The poor performance of the Malawian economy from 1992 onwards, due partly to the suspension of overseas development assistance (excluding humanitarian aid) for governance reasons and partly to successive droughts, reduced the demand for MIM's services. Although the actual impact is difficult to measure, MIM's clients admitted that a period of staff reduction and reduced profits was also matched by reduced resources for training and consultancy services. 8. The political transition that dominated the last two years of project implementation (1993 and 1994) had some impact on the project. While the construction of MIM's campus was completely insulated from this factor, the leadership crisis at the Institute which persisted for most of 1993 could be traced, in part, to the new atmosphere of questioning of authority prevailing in the larger society. In the end, the first Malawian Principal who was appointed in April 1992 was removed in September 1993. (The interim Principal who took over from him was confirmed in the position a year later). This leadership crisis interlude adversely affected MIM's performance in 1993 and 1994. (In addition to the Principal, MIM lost three of its MDCs whose secondment from the Civil Service was terminated as part of the resolution of the leadership issue). Implementation Record 9. Key Performance Indicators. The SAR provided key performance indicators in two areas of MIM's activities: participants in its courses and the progress recorded in building up its Endowment Fund. A summary of the targets set for MIM regarding participants at its courses and the actual achievements is provided in Table 7A. The targets set regarding the Endowment Fund and the actual results are recorded in Appendix C. 10. Training, Consultancy and Research. As shown in Table 7A, MIM exceeded the planned targets for participants during the first three years but fell short of the targets in the last two years. The adverse effect of the leadership crisis of 1993 was the major explanatory factor of this decline in performance. The mix of training through the delivery of generic courses and the conduct of in-house (tailor made) training (in form of consultancy) was uneven - participation in in-house training was very high in both 1993 and 1994 when there was a significant decline in the participation in generic training courses. MIM's clients expressed great satisfaction with in-house management training courses throughout the project period. The courses are designed in close collaboration with relevant officials of the enterprises concerned and this ensured both relevance and ownership. They were also cost-effective because they were delivered in-house to varying numbers of clients' employees. Significantly, the private sector made greater demand on MIM's in-house courses than the parastatal and public sectors. Selected generic courses were revised and re-designed and some new courses introduced, notably in the areas of Business Management and Human Resources Management. But localization of training materials progressed at a lower pace than expected. With regard to the objective of having clients pay for the full costs of training at MIM, GOM's 1990 directive to ministries to make annual budgetary allocations for training was not faithfully implemented and MIM sent confusing signals to its clients by failing to systematically phase out the fellowships for its courses. 11 MIM's achievements in consultancy were very impressive. The SAR only mentioned that it would conduct some consultancy tasks, yielding only modest earning that would be paid to its Endowment Fund. Tables 7B and 7C show the number of consultancy tasks undertaken by MIM during the period. The respective shares of the civil service, statutory corporations and private sector 3  enterprises are 20 percent, 31 percent and 25 percent. The significant contributions of consultancy to MIM's Endowment Fund is reflected in Appendix C. MIM's clients expressed satisfaction with the quality of work performed by the MDCs. The only complaints were occasional delays caused by work overload. Within, MIM there was lack of adequate monitoring of the balance between training and consultancy. Specifically, there was a tendency to spend more time on consultancy (which yielded additional earning for the MDCs) than MIM's own rules formally allowed, leaving reduced time for training and research. In theory, each MDC was expected to share his/her time as follows: 60 percent for training; 30 percent for consultancy and 10 percent for research. In practice, MDCs spent, on average, more than 40 percent of their time on consultancy. 12. MIM's record in the area of research was poor. The occasional efforts made did not yield any significant results. The attempts to launch a publication, were quickly abandoned and no real effort was made to disseminate what MIM learned about management in the Malawian milieu. The MDCs failed to exploit the mutually beneficial linkages between training, consultancy and research. 13. Civil Works. The construction of the campus of MIM in Kanengo, Lilongwe, was successfully completed, some nine months behind schedule. The construction work appears very satisfactory and the entire complex stands out as a beautiful and functional facility. (See Appendix D, "Construction of Malawi Institute of Management. Report by Ministry of Works and Supplies"). 14. Disbursements, Counterpart Financing and Co-financing. Disbursement data show a steady utilization of project credit that was very close to the projections in the SAR for the mniddle years. Total credit disbursed by November 4, 1996 was US$12.1 million.3 The undisbursed balance at project closing was canceled. 15. Counterpart financing was provided by GOM as required in the DCA. Of the US$1.6 million government contribution envvuag?.d, US$2.5 million was actually spent. Thuls, the Borrower's share of project financing was 21 percent (see Table 6A). 16. UNDP, the cofinancier, was expected to contribute about US$6 million to the financing of the project UNDP's actual contribution was US$4.1 million.4 17. Procurement. The major procurement in the project was the contract for MIM's campus and this was done according to acceptable Bank procedures. Procuring vehicles and other equipment also followed acceptable Bank procedures. The final tendering for carpets and furnishing of the buildings on MIM's campus was delayed partly because it had to be prepared over several iterations to ensure compliance with established procedures. To allow adequate time for completing the procurement process, the original closing date of December 31, 1994 was extended thrice at the request of the Government for a total of eighteen months, with a final closing date of June 30, 1996. 3 This figure includes the SDR 620,000 (US$0.8 million) spent on TA and training for the Tax Modernization Program. 4 While UNDP's actual financing of MIM is known, data on its actual financing of the Tax Modernization Program are not available. The non-financing of the other activities under the MOF component is discussed separately below. 4  Project Sustainability and Future Operation 18. MIM has been firmly established as a management Institute and continued IDA support under the Second Institutional Development project (ID II) is intended to help consolidate the achievements recorded under ID I. While a verdict on the institute's sustainability would have to await the completion of ID II, the single performance criterion set for it under the new operation is the progress it makes towardfinancial self-reliance. To this end, performance indicators have been established to monitor progress and project credit will be provided on a declining basis to ensure that the Institute's own resources are progressively used to meet operating costs. The SAR for ID II requires MIM to progressively cover its salaries and operating costs from its Endowment Fund as follows: 20 percent in 1995/96, 40 percent in 1996/97, 60 percent in 1997/98, and 80 percent in 1998/99. Bank's Performance 19. Identification of the project was largely completed by the Government before IDA assistance was formally requested. Preparation was a joint effort of the Government and IDA. UNDP as cofinancier provided some inputs. In appraisal, the innovative idea of an Endowment Fund for MIM was adopted but the expectation that the Fund would help to ensure MIM's financial self-reliance at the end of the project turned out to be unrealistic. Similarly, the scope of physical infrastructure envisaged for MIM - one main campus in Kanengo (Lilongwe), one satellite campus each in Zomba (Chancellor College) and Blantyre (at The Polytechnic) and some staff housing - was far beyond what the project credit could finance. These ambitious plans were agreed upon by IDA and the Government at negotiations. However, the physical infrastructure plan was quickly scaled down to the construction of the main canpus by the end of the first year of project implementation. 20. Supervision by IDA was adequate: an average of two supervision missions per year. Only two task managers were involved from project preparation through project completion. This continuity had a positive impact on project implementation. To ensure that MIM was provided with relevant advice and some comparative perspectives, one Institutional Development Specialist with first-hand familiarity with the work of similar Institutes in Sub-Saharan Africa participated in one of the two supervision missions in 1990, 1991, 1992 and 1993. The self-standing reports prepared by the Institutional Development Specialists contain thoughtful observations and suggestions that MIM could continue to mine for use in future. IDA failed to get MIM to submit audit reports on time. However, the delayed audit reports were unqualified and they were accompanied by useful "management reports" which consistently drew attention to MIM's lack of cost-consciousness. IDA monitored adherence to procurement and disbursement procedures fairly closely and a major case of misprocurement was averted because of the vigilance of the Resident Mission which was systematically involved in project supervision. Borrower's Performance 21. The fact that project identification had been completed by the Government before it requested IDA assistance was a strong evidence of country ownership and commitment. Subsequently, the involvement of several pioneering MIM staff in projectpreparation further deepened borrower ownership and commitment. Government decision to grant significant autonomy to MIM as a parastatal enhanced its smooth take off and steady progress. In implementation, MIM's 5  capacity was rather limited in its Accounting Section and this was largely responsible for the delayed audits and persistent errors in disbursements. MIM staff responsible for procurement did not fully master IDA's procurement procedures and this almost resulted in a serious mis-procurement in 1994. Covenant compliance was very satisfactory; all covenants relating to MIM in the Development Credit Agreement were met on schedule. In project operation, MIM's coordination with the Ministry of Finance was inadequate, with IDA serving as a link on occasions. Some improvement was noticeable during the last year of project implementation. Assessment of Outcome 22. Overall, the project outcome was satisfactory. Indeed, there is a real sense in which the establishment of MIM could be called apartial success story. The ICR mission found unanimity on MIM's relevance and satisfactory performance among its clients in the public, parastatal and private sectors. It was variously referred to as a "welcome management gap filler", a "very useful institution", a "superb initiative" and the "best in the market". Although a definite opinion on its sustainability would have to await the completion of ID II, it is significant that the cross-section of its clients expressed confidence in its future, provided it learns from the lessons of the first five years. MIM's staff as well as all six key members of the Governing Board met by the mission shared this opinion. (See Appendix A). There was broad agreement on the areas of improvement that could contribute significantly to MIM's prospects for self-financing by the end of ID II: cost-consciousness, diversification and aggressive marketing of training and consultancy products , more systematic consultation with clients, creative use of visiting trainers (adjunct faculty), networking both in-country and abroad, and optimal utilization of campus facilities. Key Lessons Learned 23. The main positive lessons learned are: * Country ownership and commitment built through intensive participation at project preparation and maintained through implementation (the beneficiary organization, MIM, was also the implementation agency) were key ingredients for ensuring satisfactory project outcome. * Establishing MIM as a parastatal with significant autonomy ensured a sense of responsibility and accountability. To enhance this autonomy the practice of seconding civil servants to MIM was abandoned in 1993 and the incumbent chairman of MIM's Governing Board was selected from the private sector. * Donor coordination was effective throughout the project cycle, from preparation through implementation. The Bank was informed about the Mid-Term Evaluation undertaken by GOM and UNDP and it received a copy of the report. In turn, every Bank supervision mission consulted in detail with UNDP. All this contributed to the achievement of project development objectives. * Clarity in the objectives set for TA as was the case for ARA consultants helped to guarantee some tangible results even though some of the objectives were not achieved. The concrete results recorded were particularly notable in the areas of curriculum and 6  teaching materials development, staff training and development of consultancy capability. * Supervision with appropriate skill mix, and with adequate frequency, had a positive impact on project implementation. 24. The following are the lessons from implementation problem areas: * The weakness of the accounting function in an implementation agency is certain to have adverse consequences for disbursement, auditing and procurement. MIM's limited capacity in accounting was largely responsible for the problems experienced in these areas. MIM was obliged to appoint a professionally qualified accountant as a condition of credit disbursement under ID II. * The implications of the objective of self-financing for MIM through the Endowment Fund should have been spelled out more clearly with strong emphasis on cost-consciousness, examples of investment opportunities and monitoring targets for measuring progress toward the achievement of the objective (see Appendix C). The fact that successive MIM chief executives failed to devote adequate attention to the subject meant that little progress was made. - Although MIM was granted significant autonomy, the composition of its Governing Board, with about 80 percent senior civil servants, and the employment of several civil servants as MDCs resulted in the enthronement of civil service culture in the Institute. Progress toward a business and entrepreneurial culture was slow. The recent increase in the number of Board members from the private sector, with one of them as its chairman, could help to hasten the transition from a civil service culture to a business culture. * The weak points in the twinning arrangement between ARA consultants and MIM included, among others, poor management of the transition from the expatriate Principal to a Malawian Principal; inadequate attention to the skill mix of the consultants recruited for MIM; limited interaction between some ARA experts and their Malawian counterparts; and inadequate attention to research and the development of a business culture. * The high proportion of TA funds that is spent on the payment of salaries and other expenses of expatriates, compared to what is spent directly on building capacity (fellowships for training and purchase of training materials and equipment), is certain to remain a controversial subject. The ARA/MIM twinning experience was not an exception (see Appendix B). Overall, about 72 percent of a total of US$4.2 million was spent on the ARA consultants compared with only 28 percent on building local capacity in MIM. B. TMP5 5 This assessment is brief, compared to that of MIM, because the IDA funding was disbursed quickly within the first eighteen months of project life. Subsequent funding was through "bridging finance" that was most often provided retroactively (mostly by UNDP) and the full details were not available to the ICR mission. 7  25. According to the Development Credit Agreement, the Ministry of Finance (MOF) was expected to implement TMP "with the assistance of suitable consultants." As already mentioned, the TMP, was already on-going when the other components of the project were being prepared. The first implementation phase was through a two-year contract signed with the Harvard Institute for International Development (HIID) in 1987. IDA's contribution to the TMP was SDR 620,000 to be spent on TA and training. By July 1991, the IDA credit allocated to the TMP had been spent and over US $1.0 million of UNDP funds had also been spent on the program. In 1992, UNDP allocated an additional US $0.5 million to the TMP. 26. Before the HIID contract was renewed for another two-year period (March 1992 - February 1994), the major achievements of the TMP were in respect of tax policy and legislative reform, especially the broadening of the tax base. Surtax, a value-added type of taxation, was introduced and later expanded to cover most services. An income tax administration computer system (TACS) and a surtax administration computer system (SACS) were designed, installed and made operational. Many tax officials attended in-country training courses and a few were sent on overseas training. The in- country training courses focused on tax auditing techniques, surtax administration, and tax collection administration (using training manuals prepared by HIID experts). The overseas training courses were focused on tax policy analysis and computer studies. The achievements recorded during the 1992- 94 period consisted of the addition of new features to the computerized income tax system and the design of a computerized system for customs and excise administration. By February 1995, the system was partially ready to begin operation. In-country training of the staff of both the Income Tax Department and the Department of Customs and Excise also continued, especially in computer applications. 27. Notwithstanding the achievements recorded, the mission found that GOM was dissatisfied with the performance of its tax and customs administration. The computerized system designed for the Income Tax Department is not upgradable and the existing system has to be expanded and new equipment must be purchased. With regard to customs administration, new technical assistance to be provided by the IMF and UK/ODA could mean that only the aspect of HIID computerization work relating to customs administration in border posts would be used for about two years while a new system, the ASYCUDA (reputed to be performing satisfactorily in many developing countries), developed externally, would be installed. If this were to happen, the current system developed for Malawi will be discarded. It would also mean that the Customs Department would not be able to exchange data easily with the computer system already in place for income tax and surtax administration. All this would amount to a huge waste of resources: all the expenses on research, design, programming and computer-related training would be lost. Only some of the recently purchased equipment would be salvaged. Key Lessons Learned 28. The main lessons from the TMP relate to the role of TA in capacity building for development: Resident TA that is almost an enclave, as was the case with HIID for most of the 1987-94 period, could perform satisfactorily in some areas (such as the reform of tax policy and the design of new computer systems) but inadequate oversight by the beneficiary government could result in avoidable errors such as the unupgradable TACS. With the advantage of hindsight, one can now say that the oversight the GOM tried to provide through request for periodic reports turned out to be ineffective as HIID produced thick reports (including new proposals for extension of contract) that were not critically reviewed. After the 8  disbursement of the funds provided under the IDA credit was completed in July 1991, the World Bank only monitored developments regarding the TMP. And the UNDP apparently did not supervise the utilization of the additional grants that it provided. The result of all this from 1992 onwards was one "bridging finance" after another (always at the request of GOM), with no real check on what had been achieved. Thus, for example, the inadequacy of the TACS was not discovered until late in 1994. * The poor coordination evident in the plans for the computerization of customs administration suggests that the new strategy being put in place for donor coordination in the field of TA for economic and fiscal management (January/February 1995) needed to be fine-tuned. (Some fine-tuning of donor coordination mechanisms has since taken place and the IMF, UNDP and UK/ODA are now supporting GOM's efforts to improve tax and customs administration). * The training of counterparts in specialized areas of tax policy analysis and the design and installation of computer systems produced the same mixed results as in TA efforts in many other developing countries: many counterparts were sent for training but only a few have returned to strengthen tax administration. Some were lost to other sectors of the economy while a few were lost to natural causes. Currently, GOM has only two experts in tax policy analysis and GOM has decided to utilize part of the new Second Institutional Development credit to build tax policy analysis capacity. C. MOF's Devplan: Implementation Failure 29. The identification and preparation of the MOF component involved GOM, UNDP and the Bank. Although there were consultations among all three partners during the preparation phase, the studies undertaken with financial support from the UNDP and the Bank were not effectively coordinated. A Bank-supported study, "Building Capacity for the Future: A Program to Strengthen the Organisational Performance of the Malawi Ministry of Finance in a Period of Structural Adjustment" was completed in February, 1988 while the UNDP-supported study on the Development Plan (DEVPLAN) of MOF was not completed until February, 1989. According to the Development Credit Agreement, MOF was expected to implement its comprehensive development plan by taking all necessary measures to: "(a) restructure its organisation, in accordance with such plan, with the assistance of consultants, as necessary; (b) (i) prepare a plan for introducing a forward budget system; (ii) develop terms of reference for a user needs study of computerization requirements; and (iii) prepare a plan for improving its audit services; (c) prepare a human resources development plan including a timetable for filling vacancies for professional positions in MOF." 30. In September 1990, UNDP approved US$3.5 million to support the MOF DEVPLAN but the project document was not finalised until October 1991 when it was renamed "Government Financial Management Development" and the project fund was reduced to US$2.5 million. The institutional 9  strengthening activities spelled out in the project document were to focus on government financial management, government accounting, government auditing and taxation. (The specificity in the project description contained in the Bank's DCA had disappeared). 31. At the fonnal completion of ID I in June 1994, implementation of the MOF component had not taken off apart from implementation of the Tax Modernization Program (TMP) which continued with periodic interruptions. GOM, the Bank (which provided the framework ID project) and UNDP (which approved funds for the MOF component) failed to coordinate effectively to ensure implementation. (See GOM's views on this problem in Part II of the Report). A major problem on the part of GOM was the lack of continuity and quality in the staffing of MOF in some critical positions for most of the period. This delayed the finalisation of the project document and after UNDP had approved the project, MOF was unable to provide qualified staff to take charge of implementation. Because the MOF component was regarded as one single package (excluding the TMP), the activities aimed at strengthening the Accountant General's office could not be implemented even though the AG and his staff were ready for action. 32. UNDP was unable to persuade GOM to employ some technical assistants to lead the implementation effort. GOM did not want a large proportion of the project fund to be spent on the salaries of TA. It was at this juncture that UNDP proposed a further reduction of its allocation from $2.5 million to US$ 1.1 million in 1992. (This new reduction coincided with a general reduction of UNDP's total support for the Fifth Country program, 1992-1996). Finally, UNDP abandoned pressing for the implementation of the Government Financial Management Development Project in July 1994 when it diverted the project fund to a new initiative, called Capacity Building Program for Economic Management (CBPEM). 33. The continuous promise of impending agreement between GOM and UNDP between 1990 and 1992 prevented the Bank from considering any amendment to the project's Development Credit Agreement to take into account the non-implementation of the MOF component. Eventually, by the time the preparation of the successor Second Institutional Development Project (ID II) began in 1992, both GOM and the Bank agreed to take into account the lessons of implementation failure of the MOF component under ID I, especially in respect of the use of technical assistance. Furthermore, strengthening the capacity of the office of the Accountant General was constituted into a distinct sub- component of ID II. Key Lessons Learned 34. The following are the key lessons learned from this unsuccessful effort to strengthen the institutional capacity of the MOF. * The studies sponsored by IDA and UNDP did not involve MOF staff who were only required to react to the reports of the studies. This was responsible for the delay in finalising the project document. More importantly, MOF staff did not seem committed to the project. * UNDP's excellent idea of using Govermments as executing agencies for its development programmes runs the risk of failure in cases where there is limited local management capacity as in the MOF experience. 10  * Ineffective donor coordination was a major explanatory factor for this implementation failure. Although both the UNDP and the Bank showed interest in assisting GOM to strengthen its MOF, no single tripartite meeting was held; the Bank consulted regularly with the UNDP and each maintained regular contacts with GOM. With the advantage of hindsight, one or two tripartite meetings (GOM/UNDP/Bank) at some critical points could have made a difference. * The fact that TMP was implemented as a self-standing sub-component suggests that if the institutional strengthening actions proposed for the Accountant General's Office and the National Audit Office had been constituted into self-standing sub-components, implementation could have taken place in the two areas. 11  PART 11. Comments Contributed By The Borrower Ministry of Finance Ref. No. 32/l/32NIV/72 8 December 1995 Mr. Ladipo Adamolekun Principal PSM Specialist Capacity Building and Implementation Division Africa Technical Department The World Bank 1818 H Street, N.W. Washington D.C 20433 USA Dear Sir, INSTITUTIONAL DEVELOPMENT PROJECT (IDP I) CREDIT 2036 - MAI: IMPLEMENTATION COMPLETION REPORT I acknowledge receipt of the draft Implementation Completion Report (ICR) on the First Institutional Development Project which you presented to us in February 1995. I regret the inconveniences caused by our delay in submitting our comments on the report to you. 2. While we generally accept the contents of the draft report, I wish to inform you that we have problems in accepting the point made [in paras 28-30] to the effect that the implementation of the Ministry of Finance's component of IDP I did not take off mainly because of lack of continuity and quality of staffing of the Ministry of Finance in some critical positions. 3 . You may wish to note that in 1990, the Ministry of Finance established an Implementation Management Group (IMG) to coordinate the activities of the project. The IMG consisted of representatives from the Ministry of Finance Headquarters and the Departments of Accountant General, Auditor General, Customs and Excise, Income Taxes and Data Processing. The IMG was headed by a Senior Deputy Secretary and its meetings were often attended by senior officers such as the Deputy Accountant General, Deputy Auditor General, Controller of Taxes, etc. This representation, for us, illustrates serious commitment to the project. 4. In 1990 and 1991, the IMG worked very closely with the UNDP consultant, Mr. Peter Dean in preparing a project document which we believe was subsequently approved by both the Government and UNDP. However, in January 1992 the UNDP informed us that they had decided to retitle the project to reflect the fact that the project would address problems being faced by both Ministry of Finance and the Audit Department. A revised document was then submitted to the Government in which the UNDP contribution was reduced from the original US$3.5 million to US$2.5 million; no reason was given for the reduction. In addition, a number of the activities proposed by the IMG were 12  removed, while considerable additional UN technical assistance was introduced in the revised document without any prior consultations with the IMG. 5. The revised document was therefore not immediately approved by the Government because it was felt that the Government did not need all the TA that was being proposed by UNDP. The Government's position was fully discussed with Mr. Dean. The delay in approving the document was further caused by the need on the part of the IMG to review the various project components in line with the reduced resources from UNDP. 6. It was at this point that we were informed of a further reduction of the UNDP contribution from US$2.5 million to US$1.1 million. The reduction, I understand, was largely due to a general reduction in UNDP's support to Malawi. This was finally followed by the UNDP's decision to reallocate the project's resources to a new initiative related to capacity building. 7. In light of the above, we do not accept the conclusions stipulated [in para 34] of the draft final report that "the Ministry of Finance staff did not seem committed to the project" and that there was "limited local management capacity". We believe our commitment was duly illustrated by the establishment of the IMG which worked closely with UN consultant throughout the time the project was being discussed. A project document was jointly prepared by the two parties and was subsequently apparently approved by the UNDP. The problems arose when the consultant or UNDP decided to revise the project document unilaterally. In the revised document, the original components were changed, additional technical assistance introduced and project costs revised. It is indeed worth noting that during this process, the UN consultant, Mr. Dean, was the main link in the discussions between the government and UNDP. This is rather unusual, since we normally, in matters like this one, deal directly with UNDP staff either from the UN Headquarters or the UNDP resident office. 8. It is therefore clear to us that the failure in the implementation of the Ministry of Finance component of IDP I was largely a result of poor coordination among the three parties involved, but mainly between the UNDP and the Government. We believe that there is a clear lesson that we should in future be careful on we use [sic] consultants during preparation of project proposals. 9. We hope that with these few observations, you will now finalise the preparation of the final report of IDP I. We once again apologize for the delay in submitting our comments to you. Your faithfully, (signature) J. Chiteyeye for Secretary to the Treasury 13  Malawi Institute of Management P.O.box 30801, Lilongwe Ref. No. MIM.A.2.0.Vol.IV 11 December 1995 Professor Ladipo Adamolekun World Bank Washington D.C. USA Dear Prof. Adamolekun, DRAFT IMPLEMENTATION COMPLETION REPORT IDP I (CREDIT 2036 - MAI) I have read the draft ICR for IDP I and confirm that it is a fair representation of MIM's activities. Yours sincerely, (signature) Dr. B.F. Kandoole Executive Director 14  PART Ill. Statistical Tables6 Table 1A: Summary of Assessments (MIM) Substantial Partial Negligible Not applicable A. Achievement of objectives Institutional Development X Endowment Fund X Likely Unlikely Uncertain B. Project sustainability X Highly Satisfactory Deficient Highly satisfactory unsatisfactory C. Bank Performance Identification X Preparation assistance X Appraisal X Supervision X D. Borrower performance Preparation X Implementation X Covenant compliance X Operation X E. Assessment of outcome X Table 1B: Summary of Assessments (Tax Modernization Program)7 Substantial Partial Negligible Not applicable A. Achievement of objectives x Likely Unlikely Uncertain B. Project sustainability X l_X Highly Satisfactory Deficient Highly satisfactory unsatisfactory C. Bank Performance Identification X Preparation assistance X Appraisal X Supervision X D. Borrower performance Preparation X Implementation X Covenant compliance X Operation X E. Assessment of outcome X 6 Tables 7A, 7B and 7C refer only to the MIM component. 7 The Bank's systematic supervision of this sub-component ended when disbursement was completed in mid-1991. The ad hoc nature of the funds provided thereafter accounts for the "deficient" scores recorded. '5  Table 1C: Summary of Assessments (Composite of Tables IA and 1B)8 Substantial Partial Negligible Not applicable A. Achievement of objectives X Likely Unlikely Uncertain B. Project sustainability X Highly Satisfactory Deficient Highly satisfactory unsatisfactory C. Bank Performance Identification X Preparation assistance X Appraisal x Supervision x D. Borrower performance Preparation x Implementation x Covenant compliance x Operation x E. Assessment of outcome x 8 These ratings reflect those in Table IA for MIM because of the preponderance of the MIM component in the project. 16  Table 2: Related Bank Credits Credit Title Year of Achievement/Purpose j Status Approval l l Preceding Operations 1. Loan 2027-MAI 1981 Produce studies on which Closed 5/30/85 Technical Assistance I reforms were to be based 2. Credit 1428-MAI 1983 Closed 6/30/89 Second Technical Assistance Operation Following Operation 1. Credit 2624-MAI 1994 In progress Second Institutional Development Project Table 3: Project Timetable Steps in Project Cycle Actual Date (Month/Year) Preparation 10/86, 2/87, 7/87, 2/88, 7/88 Appraisal 11/88 Negotiations 04/89 Board Presentation 06/89 Signing 09/89 Effectiveness 01/90 Mid-term Review 06/92 Project Completion 07/94 Credit Closing 06/96 17  Table 4: Cumulative Estimated And Actual Disbursements (US$ Million) Bank FY 1990 1991 1992 1993 1994 1995 1996 Appraisal estimate 1.5 4.0 6.5 9.0 10.5 11.3 n.a. Actual 3.1 5.0 7.0 9.0 10.5 11.0 12.1 Actual % of Credit 28% 44% 62% *80% 93% 97% 107% *The final figure is higher than the original amount because of exchange fluctuation Table 5: Project Estimated Costs (US $ Million) Category Appraisal Estimate |___________ |Local Foreign Total Actual (Total) Malawi Institute of Management 5.3 7.8 13.1 17.889 Ministry of Finance Budgeting/Financial Management 0.4 1.2 1.6 Accounting/Audit Tax Modernization 0.1 1.8 1.9 0.82'0 Sub-total 0.5 3.0 3.5 Total Baseline Costs 5.8 10.8 16.6 Physical Contingencies 0.2 0.3 0.5 Price Contingencies 0.5 1.3 1.8 ___ Total Project Cost 6.5 12.4 18.9 18.7 9 This amount includes IDA's actual disbursement ($11.3 million) and the actual amount provided the UNDP and the Government of Malawi. 10 This represents the actual amount disbursed by IDA. Data on the actual amounts provided by the UNDP and the Government of Malawi were not available to the ICR mission. 18  Table 6A: Project Financing (US $ Million) Source of funds Planned at Appraisal Revised Actual IDA 11.3 11.3 12.1* UNDP 6.0 4.2 4.1 Government 1.6 1.6 2.5 TOTAL 18.9 17.1 18.7* * The higher figures were due to gains arising from the appreciation of the SDR. Table 6B: Allocation Of Credit Proceeds Category Original Actual Original Actual Allocation Disbursement Allocation (US$ Disbursement (SDR) (SDR) million) (US$ million) 1. Civil Works 3,110,000 4.0 4.0 4.85 2. Vehicles 390,000 0.50 0.5 0.43 3. Furnishing & Equipment 860,000 1.1 1.1 1.64 4. Operating Costs 1,870,000 2.4 2.4 2.80 5. Technical Assistance & training 620,000 0.8 0.8 0.82 6. Refunding of Project Preparation Advance 1,170,000 1.50 1.5 1.51 7. Unallocated 1.0 8. Difference due to cross- exchange 39,344.74 9. Amount to be cancelled 99,340.91 TOTAL 8,800,000 8,800,000.00 11.3 12.1 19  Table 7A: Participants at MIM's Courses Year Planned* Actual Generic In-house Total 1990 100 361 278 639 1991 180 586 444 1030 1992 360 711 82 793 1993 540 236 200 436 1994 720 N.A N.A. 529 * At Appraisal Table7B: Consulting Projects by Category 1990 1991 1992 1993 1994 Totals % Management Studies 7 16 5 7 7 42 19% Management Systems 11 7 11 5 8 42 19% In-House Courses 20 23 5 12 22 82 38% Organization Development -9 2 6 5 6 28 13 % Executive Assessment - - 4 3 8 15 7% Facilitation (Conference & 2 2 2 6 3 % Seminars) Other 1 - - - 1 1 0% Totals 47 48 33 34 54 216 100% Table 7C: Consulting Projects by Sector 1990 1991 1992 1993 1994 Total Civil Service 9 7 8 7 13 44 (20%) Statutory Bodies 12 19 9 11 15 66 (31%) Private Sector 14 7 5 9 19 54 (25%) Inter-Government 9 11 10 6 1 37 (17%) NGOs 3 4 1 1 6 15 (7%) Totals 47 48 33 34 54 216(100%) 20  Table 8: Compliance With Credit Covenants (Reference to Development Credit Agreement) Section/Para Covenant Compliance 2.01 (b) The Borrower shall open a Special Account Opened in Citibank on May 28, 1990 2.01 (c) The Borrower shall provide MIM with the Kwacha This was being done equivalent of $320,000. annually. 4.01 (b) The Borrower shall have all accounts audited by Audit was prepared for independent auditors, including the Special Account and each year with occasional SOEs. delays. Schedule 4 1. MIM shall be established as an autonomous body Part A with a Board of Governors. Done 5. MIM shall consult with IDA on the qualifications Done twice (1992/1994) and experience of future candidates for Principal. 6. MIM shall develop a plan for its consulting practice, including a schedule of fees to be charged and arrangements for sharing with staff. Done 7. MIM shall (i) establish an endowment fund and (ii) (i) Done prepare a strategic plan for its operation. (ii) Done 8. MIM shall prepare a strategic plan for its future technical assistance requirements. Done Schedule 4 1. By December 1989, Ministry of Finance will carry Not done. Funding Part B out its Development Plan, including measures to approved by UNDP in introduce forward budgeting, develop TOR for user September 1990 ($3.5 needs study of computerization requirements, prepare a million) was reduced to plan for improving its audit services. It will also $1.1 million in July 1993 prepare a human resources development plan for filling and diverted to a more vacancies in MOF. broad-based capacity building effort in 1994. 2. MOF will implement the tax reform program. Final phase of implementation through HIID was extended to June 30, 1995. Table 9: Bank Resources: Staff Inputs Actual Stage of Project Cycle Weeks US$'ooo Preparation to Appraisal 52.5 125.0 Appraisal 16.3 36.8 Negotiations through Board approval 8.0 16.0 Supervision 70.3 194.6 Completion 8.2 14.5 TOTAL 155.3 385.9 21  Table 10: Bank Resources: Missions Performance Rating Stage of Month/ No. of Specialized Types of Problems Project Cycle Year Persons Staff Skills Implementation Development Impact Represented Status Through Appraisal Appraisal through Board Approval Supervision I 12/89 2 (MS, E) 2 2 II 6/90 3 (MS, FE, IDS) 2 2 III 12/90 2 (MS, E) 2 2 IV 7/91 3 (MS, E, IDS) 2 2 V 1/92 2 (MS, E) 2 2 VI 8/92 2 (MS, IDS) 2 2 VII 2/93 2 (MS, E) 2 2 VIII 11/93 3 (MS, E, IDS) 2 2 IX 7/94 2 (MS, E) S S Completion 2/95 2 (MS, E) 1) MS = Management Specialist; E = Economist; IDS = Institutional Development Specialist 2) G = General; P = Procurement; M = Management; F = Financial 22  APPENDIXES   Appendix A List of Persons Met during the Mission 1. Mr. R. Kavinya, SecretarN to the Treasury, Ministry of Finance 2. Mr. J. Chiteyeye, Deputy Secretary, Ministry of Finance 3. Mr. Benlamlin, Deputy Resident Representative, United Nations Development Program 4. Mr. J.G. Mbeye, National Program Officer, United Nation Development Program 5. Mr. A. Bobbe, United Nation Development Program 6. Dr. B. Kandoole, Principal, Malawi Institute of Management 7. Mr. M. Kambuwa, Deputy Principal, Malawi Institute of Management 8. Mr. C. Mkandawire, Principal Management Devclopment Consultant, Malawi Institute of Management 9. Mr. H. Chibwana, Registrar, Malawi Institute of Management 10. Mr. B. Mawindo, Project Manager, Public Sector Management Improvement Unit (PSMIU) former Principal Secretary Department of Human Resources Management and Development 11. Mr. S.B. Chikoti, Management Development Consultant, Malawi Institute of Management 12. Mr. C.J. Evans, Manpower Development Manager, Press Corporation 13. Mr. R.D. Kachigamba, Personnel Manager, Lilongwe City Council 14. Mr. E.E. Zilemba. Assistant Chief Accountant (Training), Account General's Office, Ministry of Finance 15. Mr. B. Mvalo. United States Agency for International Development 16. Mr. W. Sabola, Training Officer, PROMAT 17. Mrs. V.L. Msasata, Assistant Accountant, Lilongwe Water Board 18. Mr. H.E. Nyemba, Human Resources & Training Manager, Lilongwe Water Board 19. Mr. F.G.J. Kankwamba, Commercial Manager, Lilongwe Water Board 20. Mr. A. E. Chinyanga, Operations Engineer, Lilongwe Water Board 21. Mr. M.J. Chirwa, Assistant Projects Engineer, Lilongwe Water Board 22. Mr. F.H.D. Imfa. Training Officer, Lilongwe Water Board 23. Mr. S.M. Kalyati, General Manager, Mining Investment and Development Corporation 24. Mr. G.M. Musaya, Administration Manager, Mining Investment and Development Corporation 25. Dr. Chawani, Principal Secretary, Department of Human Resources Management and Development 26. Mr. Mwadiwa, Ministry of Finance 27. Mrs. Kaluma, Ministry of Finance 28. Mr. Roger Ganse, Principal Partner, Development Management Associates 29. Mr. Nick Marshall, Principal Partner, Development Management Associates 30. Mr. Warrender, Controller of Buildings, Ministry of Works 31. Mr. Mulenga, In-charge of Training, Ministry of Labour 32. Mr. L. Chinkhuntha, Staff Development Officer, Ministry of Education 33. Mr. S. Salamu, Staff Development Officer, Ministry of Education 1  34. Mr. G. Phiri, Human Resource Development Officer, Ministry of Education 35. Mrs. Makungwa, Training & Public Relations Officer, New Building Society 36. Mr. D. Nkosi, Chairman MIM Governing Board 37. Mr. Mvula, National Insurance Company 38. Mr. J. Chipeta, Deputy Principal, The Polytechnic, University of Malawi 39. Dr. A.G. Phiri, Principal, The Polytechnic, University of Malawi; also Member, Governing Board of the Malawi Institute of Management 40. Dr. G. Mthindi, Dean, Faculty of Commerce, The Polytechnic, University of Malawi 41. Mr. E. Sankhulani, Head, Management Center, The Polytechnic, University of Malawi 42. Mr. S. Pamdule, ASP Consulting 43. Mr. Masikini, Data Processing Department 44. Mr. W.J.F. Slater, Senior Partner, Deloitte & Touche 45. Mr. Chimombo, Commissioner, Income Tax Department 46. Mr. Robert Chesteen, Computer Consultant, HIID 2  Appendix B Twinning Arrangement Between Ara Consultants And The Malawi Institute Of Management At the outset of the creation of MIM, consideration was given to link MIM with an experienced institution in the delivery of management courses, consulting and research. Through a rigorous process, a Canadian firm, ARA, was selected. This consulting firm was charged with the following duties and roles to perform: i) Recruitment of up to eight expatriate lecturer/consultants on a contract basis; ii) Provide advice on architectural design (if not completed in phase I) and assistance in supervision of construction; iii) Training of Malawian staff; iv) With Malawian faculty, prepare curricula and training materials for courses; v) Assist in developing local teaching and case materials; vi) Initiate and develop MIM's consultancy program; vii) Set up MIM's Library; viii) Provide staff to run short courses from time to time; ix) Administer financing arrangement with donor agencies on behalf of MIM; x) Continue liaison activities begun in Phase I with existing Malawian training institutions in keeping with MIM's role as coordinating body for management training in Malawi; and xi) Establish operating procedures and the "culture" of the Institute. By the end of 1989, MIM had been established as the national institution responsible for providing management training and consulting services to organizations in all sectors, private, parastatal and public. Within the twinning arrangement, areas of specialty and individuals were contracted as follows: 3  ARA Staff Plan for 1990 Title Name Months Principal F. Schindeler 11.76 Consultancy Adviser B. Maude 0.14 Trainer K. Boulter 6.12 D. Chicanot 0.79 D. Marion 12.00 D. Weachter 11.93 L. Hallett 1.98 l ____________________ _ ,N. Maddock 5.68 H. Auld 1.52 F. McDonald 0.46 L. Jones 3.52 Consultancy Adviser R. Dunlop 8.19 Trainer D. Charron 1.00 Consultants Service Requirements from 1989 to Dec. 1994 Position Person Months Planned Actual % Var. Principal 36.0 31.2 -13 Consulting Manager 36.0 37.9 + 1 Management Trainers 312.0 223 -29 4  Local Staff as at 1990 Name Position Staff Development Plan 1. Dr. Fletcher Banda Deputy Principal Attend first half of one year MPA Program 2. Mr. S. Chikoti MDC - Accounting and Attend first year of an 18 Finance month professional accounting course 3. Mr. V. Kumwenda MDC - Accounting and Attend last segment of Finance professional accounting course 4. Mr. M. Kambuwa MDC - Organizational Attend short course in Behavior and communications followed Communications by first half of a 1 year MA in Organizational Analysis and Behavior 5. Mr. D. Lakudzala MDC - Management Attend short course in a Information Systems specialized aspect of MIS 6. Mr. C,C. SMDC - Human Resources Attend short course in the Mkandawire Management area of personnel management or general management 7. Mr. H. Kuchande MDC - Human Resources Attend a short course in an Management area of personnel management or general management 5  Component Budget Component Budget (US Dollars) UNDP Contribution Project Component Total 1993 1994 1995 1. Evaluation Mission 21,265 2,821 0 I 2. Sub-contract link 3,042,599 112,772 217,116 94,327 3. Fellowships: Long-term 198,641 12,937 9,050 0 Short-term 258,880 67,664 115,343 30,014 4. Group Training and 23,182 0 12,276 0 Study Tours 5. In-service training 106,779 95,380 11,399 0 (workshops) 6. In-country Fellowship 498,089 134,788 126,093 0 (Fund) 7. Equipment 28,420 0 5,000 0 8. Miscellaneous 22,145 1,002 5,000 0 Total 4,200,000 427,364 501,277 124,341 As is common in most TA arrangements, a lot of funds are earmarked for TA payments. In this particular case, the ARA link costs represent 72% of the available funds with only 28% for everything else. It is not easy to make value judgment regarding the allocation of these resources. However, on the basis of the evidence provided by various studies and interviews carried out, it appears reasonable to conclude that this was a worthwhile investment. Evaluation of Skill Transfer Successes One major achievement worth mentioning at the outset is the fact that ARA, under the leadership of Dr. Fred Schindeler, established and set up the tone for MIM. Dr. Schindeler's leadership was essential for the starting and development of a management institution in a country where no such institution had ever been established. After a one-year trial phase, the first Principal was able to initiate and evaluate a market study that was the basis of establishing the MIM curriculum. This provided the basis for selecting the eight ARA experts and corresponding counterparts. Most of the systems used by MDCs in course development and delivery were imparted by the ARA. The recruitment procedure for the initial batch of consultants was professionally done. A Training of Trainers (TOT) course and consultancy skills workshops helped to ensure a solid foundation for MIM in staff development. 6  Failures On the negative side, there was a problem of mis-timing. Although the table above shows an impressive number of staff years of expertise, often this was not timely. The skills transfer model attempted could only have worked to the optimal levels if both the expert and trainee are interacting. What happened most of the time is that the expert held the fort while the MDC went overseas for training. By the time the counterpart retumed, the expert's contract was up, hence no real opportunity for skills transfer. This was the case regarding the first local Principal: he spent very little time interacting with the Principal provided by ARA. The second problem encountered was in the selection of the experts. In some instances, the experts had very little to add to the MDCs. In order to get the maximnum out of such twinning, one has to assess the quality of the expert in relation to the MDC with whom the expert has to work. Principal The first principal for MIM was an expatriate who managed, within two years, to put MIM on the map. However, this good quality of leadership could not be maintained. The Principal's counterpart had not put in sufficient time to understudy him. To begin with the two never really spent time together. Either the Principal was on leave, or the counterpart was on training. To make matters worse, the counterpart had other responsibilities, including being chairperson or member of various boards. This did not allow skills transfer to effectively take place. The capacity for the counterpart to leam institutional management was limited. This manifested itself in the management style he portrayed soon after taking over from the expatriate principal. One important lesson learnt from this type of arrangement is the need to allow a transitional period during which the counterpart taking over from the expatriate could have been assisted by a senior management consultant, serving as Advisor for six to twelve months. Advisory, Consulting and Research Skills Arrangement was made to engage an ARA Business Development Advisor to develop MIM's business culture in management training, consulting and research. Unfortunately, the advisor appointed was ineffective. This was clearly a fault in the identification and selection of the incumbent. Failure of MIM to develop a business culture is largely due to this gap in its staffing. Thus, by the end of the project, MIM was characterized by an administrative culture focusing on regulating activities instead of a pro-active business oriented culture creating opportunities for revenue/profit generating and cost minimizing. Although most of the ARA consultants were selected with special care, not all had the complete skill mix required. While ARA provided some qualified and experienced consultants, there were other consultants with limited expertise. A good example was in HRM, where the consultant had done a good job in training, developed good HRM programs, but had virtually no experience in consulting and research. Her replacement also had limited experience in consulting. This resulted in the abandonment of an on-going HRM Consulting Project. The problem could have been avoided if the second expert had been selected with due regard to the need for skill and experience in consulting. 7  Attachments to Management Training Institutions and Industry MIM had, among its strategies, the plan to second or/and attach its members of faculty to industry and to regional institutions that are in similar business. Attachment of selected staff to industry would have compensated for the lack of private sector experience by attaching them to private corporations. Similarly, attachment to regional management training institutions would have exposed the staff concerned to some lessons of experience. This strategy was never implemented. The following excerpts from written comments on the ARAIMIM twinning experience provided by three MIM staff in February 1995 provide further elaboration on the summary provided above.