Madagascar - Second Social Fund Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 20294 IMPLEMENTATION COMPLETION REPORT (CREDIT 27780) ON A CREDIT IN THE AMOUNT OF US$40 MILLION TO THE REPUBLIC OF MADAGASCAR FOR FOR THE SOCIAL FUND II PROJECT May 1, 2000 Human Development IV Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective November 30, 1999) Currency Unit = FMG franc FMG 1 = US$ .00016 US$ 1 = FMG 6260 FISCAL YEAR 2000 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy FAO Food and Agriculture Organization FID Social Fund (Fonds d'Intervention pour le Developpement) IDA International Development Association NGO Non-Governmental Organization PCD Project Concept Document SECALINE Food Security and Nutrition Project (S&curite Alimentaire et Nutrition Elargie) SAR Staff Appraisal Report Vice President: Callisto Madavo Country Director: Michael Sarris Sector Manager: Arvil Van Adams Task Team Leader: Eileen Murray  FOR OMCIAL USE ONLY CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 1 4. Achievement of Objective and Outputs 4 5. Major Factors Affecting Implementation and Outcome 6 6. Sustainability 7 7. Bank and Borrower Performance 8 8. Lessons Learned 10 9. Partner Comments 11 10. Additional Information 12 Annex 1. Key Performance Indicators/Log Frame Matrix 13 Annex 2. Project Costs and Financing 14 Annex 3. Economic Costs and Benefits 16 Annex 4. Bank Inputs 17 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 19 Annex 6. Ratings of Bank and Borrower Performance 20 Annex 7. List of Supporting Documents 21 This document has a restricted distinbution and may be used by recipients only in the perfomance of their officia duties. Its contents may not otewise be disclosed without World Bank authoization.   Project ID: P035669 Project Name: SOCIAL FUND 2 Team Leader: Eileen Murray TL Unit: AFMMG ICR Type: Core ICR Report Date: May 1, 2000 1. Project Data Name: SOCIAL FUND 2 LIC Number: 27780 Country/Department: MADAGASCAR Region: Africa Regional Office Sector/subsector: SA - Social Funds & Social Assistance KEY DATES Original Revised/Actual PCD: 04/05/95 Effective: 06/25/96 06/25/96 Appraisal: 08/15/95 MTR: 11/01/98 11/22/98 Approval: 09/14/95 Closing: 12/31/2000 12/31/99 Borrower/Implementing Agency: Governrnent of Madagascar/Office of the Prime Minister/Fonds d'Intervention pour le Developpement (Social Fund) Other Partners: -STAFF Current At Appraisal Vice President: Callisto Madavo Edward V. K. Jaycox Country Manager: Michael N. Sarris N.A. Sector Manager: Arvil Van Adams Alain Colliou Team Leader at ICR: Eileen Murray ICR Primary Author: James Wright 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: UN Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The project objectives, as stated in the SAR, were to alleviate poverty and support community development through partnership with NGOs and beneficiary communities. The project would provide supplemental financing to the Fonds d'Intervention pour le Developpement (FID), which had been active in the provinces of Antananarivo and Toliary since 1993.  The objectives were stated somewhat generally which made the assessment of their attainment difficult. However, they were appropriate and in line with Government strategy. In 1993, 54% of the population lived below the poverty line (based on 90% of the FAO recommended daily caloric intake plus essential non-food items). An estimated 92% of the poor lived in rural areas. The rural infant mortality rate was 107, and fewer than one in three children completed the five year priinary school cycle. Poverty reduction was a pillar of the Government's development strategy. A poverty assessment developed by the Bank and the Government proposed a poverty reduction strategy using a participatory process. NGO and community participation was in line with Bank policies and consistent with the need to involve communities, both for implementation and for longer-term community commitment to maintenance. The FID II Project was developed as a complement to the ongoing macroeconomic adjustment process in order to provide important elements of a social safety net program in Madagascar. It was an important cornerstone of the CAS discussed by the Board on July 18, 1994. Its risk was limited since it was a follow-on to the successful FID component of the then ongoing SECALINE Project which had strong borrower support. 3.2 Revised Objective: The objectives were not revised. 3.3 Original Components: The project components included: (a) construction and rehabilitation of basic infrastructure, including schools, health centers, water supply, small irrigation systems, rural roads, small bridges, as well as reforestation and protection of the environment; (b) income generating activities, including activities pertaining to the Community Nutrition Program under the Food Security and Nutrition Project; and (c) private sector support programs, including training programs for small enterprises and consulting firns, and development of community groups and local NGOs. There were also studies: (i) to identify the demand for potential income generating activities to be financed under the project; (ii) to develop a training needs assessment and training plan for contractors and engineering consultants; and (iii) to complete a diagnostic evaluation of technical and contracting procedures to strengthen implementation of sub-projects by contractors and engineering consultants. Since the project was to be demand driven, exact amounts were not earmarked for each component. It was assumed, however, that most of the funding would be for category (a) social infrastructure. The SECALINE Project (Credit 2474-MAG) which was approved in March 1993 had included the creation of the Fonds D 'Intervention Pour le Developpment (FID). FID was established as a non-profit organization to implement labor intensive works through a delegated contract management system in the Provinces of Antananarivo and Toliary. Under SECALINE, FID developed the capacity to achieve poverty alleviation and development objectives. It acquired the capacity to develop infrastructure sub-projects, income generating activities and training sub-projects. This experience provided the foundation for the expansion of FID's activity to all six provinces in the country under the FID II Project. Several lessons from the SECALINE Project were taken into account in the design of this project (see section 3.5). 3.4 Revised Components: Component (b) to support income generating activities was dropped fiom the project in 1998 because it was felt that the small loans program was incompatible with the country's financial sector policies and that -2 -  this type of initiative could best be managed by financial intermediary institutions (see section 4. 1). This was not a major restructuring since the funds could be easily allocated to other FID programs through a demand-driven process. 3.5 Quality at Entry. The rapid implementation and disbursement of FID II from effectiveness is an indication of its readiness and quality at entry (27% of credit disbursed in first year). Under the SECALINE Project, FID had an ongoing successful program in two provinces prior to the initiation of the FID II Project. By the time of its completion in 1998, the FID component of the SECALINE Project had implemented 348 infrastructure sub-projects, 36 income generating activities and 10 training sub-projects. The SECALINE project therefore provided a foundation for program expansion under FID II. FID is a non-profit organization operating under a Convention between FID and the Government and a Manual of Procedures covering lending criteria, model agreements and contracts, procurement procedures, financial management procedures, and administrative procedures. Broad participation in FID management and membership involved interested parties at all levels. The Board of Directors included one representative of the Prime Minister (President of the Board), the donor community, NGOs, civic organizations and two elected by members. Members comprised a broad spectrum of government, NGO, private sector and community groups. There were also regional advisory committees. The Project Agreement stipulated that FID would revise the Manual of Procedures not later than June 30, 1996 based on the results of the studies listed above (section 3.3). In the end, three separate manuals were produced. The issue of previous poor quality rural road works was identified and later addressed in the revisions of procedures manuals and through improved training of engineering frms and contractors. As a demand driven project, FID I did not have fixed implementation targets, but indicative program monitoring indicators were agreed to (see Annex 1). A set of agreements and operating procedures was put in place to ensure that this programmatic approach would function smoothly. Regional Directors were given the authority to approve sub-projects requiring less than US$5,000 from FID, the FID Executive Director could approve projects requiring less than US$25,000, and larger sub-projects had to be approved by FID's Board of Directors. IDA's approval was required for project grants in excess of $50,000 (US$100,000 for rural roads). It was agreed that annual work programs and budgets would be prepared for review with IDA and that annual technical audits would be carried out. The articles of agreement, By-laws and Manual of Procedures of FID, and the framework agreement between the Government and FID were required to remain acceptable to IDA. The Executive Director, Deputy Executive Director, and Regional Directors of FID, were at all times to have qualifications and experience acceptable to IDA. The FID II project design incorporated successful features of the SECALINE Project, including: (a) involvement of beneficiaries at all stages; (b) regional launch workshops involving all stakeholders; (c) a decisive Director General who recruited competent staff and let them work independently while monitoring performance in relation to agreed outcomes; and (d) the organization of FID along private sector lines, staffed with competent managers. Additional lessons of the SECALINE Project which were taken into account in designing FID II included: * Projects executed outside of traditional govemment structures tend to be more efficient and flexible in getting quick results in the field and serving the communities; reliance on NGOs and community groups contributes to success. * Communities should participate in project design and implementation. * The delegated contract management system for the construction or rehabilitation of infrastructure - 3 -  works well at a reasonable cost in rural as well as urban areas. * Implementation and manual of procedures are very important to facilitate implementation. 4. Achievement of Objective and Outputs 4.1 Outcome/achievementofobjective: The FID II Project has had an important impact on poverty conditions. By the end of the project, 6.1 million person days of temporary employment had been created (121% of target), and 1,546 permanent jobs had been created (55% of target). FID expanded its program throughout the country. At the mid-term review there was a decision to spread the program to the poorest, most isolated regions. A 1999 beneficiary survey of 60 FID financed projects finished before December 31, 1997 gives an indication of the program's effectiveness and social impact. The survey shows generally positive impacts, but the limited sample sizes for each type of project may limit the significance of some of the conclusions. (i) In 12 of 15 rehabilitated schools, the number of students increased, in many cases by 25% to 50%. Beneficiaries in all cases indicated that school rehabilitation had been a priority. (ii) In seven of the ten health centers surveyed visits had increased, and in all except one case the beneficiaries indicated that the health center improvements had been a priority. Impact was dampened by a lack of health personnel (see section 6.2). (iii) The number of beneficiaries of water supply systems increased in all five cases in the sample. In four of five cases beneficiaries expressed medium or high satisfaction; all considered the projects a priority. (iv) In five of six irrigation projects, the irrigated area increased. In four of these cases double cropping was enabled. (v) The number of vendors increased in 6 of 8 market projects. In all cases beneficiaries considered the markets a priority, but there was less than full satisfaction with the utilization of the facilities. (vi) All 9 road projects assessed provided improved access to isolated areas; 7 of these were considered priorities by beneficiaries. The component to promote income generating activities involved loans for agriculture and other productive purposes. A separate Manual of Procedures was established for this component after signing. FID was to give grants to NGOs called "Agences d'Encadrement" which would lend to beneficiaries. Beneficiaries would repay the loans to the NGOs at interest rates stipulated by a benchmark rate of the Central Bank. The component got off to a slow start. When the benchmark rate of the Central Bank was raised, lending rates under the FID program were not increased, and the program became inconsistent with Madagascar's fmancial sector policies. To correct this, it was decided that loans should be channeled through savings and loan associations. At the mid-term review in 1998 it was decided to drop this component from the FID programn altogether and leave rural credit to other programs. The amounts which would have been used for income generating activities by FID were allocated under other components. For environment, the project was rated "C" with no significant environmental issues. Some projects enhanced environmental protection such as reforestation and erosion control. Roads were on existing aligmnents and schools and health centers were rehabilitated on existing sites. 4.2 Outputs by components: Physical Objectives By project completion (including sub-projects still in progress as of 1/1/2000) FID had surpassed several of its physical improvement targets. FID had worked with NGOs (309 contracts) and community groups to rehabilitate 450 schools (428% of target) and 185 health centers (229% of target). In addition, 967 km of rural roads (97% of target) had been rehabilitated and 11,171 ha. had been irrigated (37% of target). - 4 -  Costs of FID investments were comparable to projects financed under other programs, with the exception of schools which have cost about 30% more than other programs in order to make them cyclone proof. The project was implemented more rapidly than planned, closing one year ahead of the original closing date of December 31, 2000. Private Sector Development Implementation of the 1998 program was slowed by 20% due to a lack of sufficient competent engineering firms, indicating the need to focus on training in project preparation and site supervision. Efforts were made throughout project to improve the targeting of training to engineering firms and small contractors, especially for the design and implementation of rural roads sub-projects and to help beneficiaries create maintenance associations. By December 31, 1999, 55 training courses had been provided for employees of engineering firms, small/medium contractors and loan program promoters. Since the inception of FID, 226 managers and technicians from more than 100 contracting firms and 374 persons from some 80 engineering firms have been trained. Participants in FID's training programs have assessed the program's impacts and an impact study of FID training was undertaken as part of the 1999 beneficiary survey. Participants were unanimous in recognizing both the impact of the training in winning contracts and in deepening the professionalism of their firms. FID represents a significant share in the volume of business of many consulting frms and contractors. Many firms have been able to win contracts from other sources as a result of their experience with FID. Strengthening the personnel of small and medium contractors, especially at technical levels, has enabled many firms to develop towards entry into the formal sector. A total of 1796 contracts had been made with small and medium enterprises (121% of the target) by December 31, 1999. The 1,796 FID contracts with small and medium enterprises, together with contracts from other sources, have enabled many firms to acquire construction and office equipment. 4.3 Net Present Value/Economic rate of return: FID sub-projects in economic sectors (transport and small-scale irrigation) are subjected to economic analysis and have been required to have at least a 15% economic rate of return in order to qualify for financing. Sub-projects in income generating activities and support to the private sector were expected to have at least a 20% rate of return. As part of the 1999 beneficiary survey, ex-post economic rates of return were calculated for rural roads. Four roads had economic rates of return ranging from 41% to 349%; one had a rate of return of only 3%. For small-scale irrigation, three projects were calculated to have ex-post rates of return ranging from 22% to 99%; one had a rate of return of only 6%. The lower rates in some road and irrigation sub-projects reflect political influence in project selection and/or poor quality of technical work in some project preparation. Since only rehabilitation was undertaken for schools and health centers, not new construction, these sub-projects are assumed to have yielded high economic rates of return, although no calculations were made. 4.4 Financial rate of return: No financial rates of return were calculated for this project. 4.5 Institutional development impact: Under the project FID expanded its capacity from limited operations in two provinces to much larger-scale nationwide operations in six provinces. There is now a regional office in each province. A monitoring and evaluation system has been established. All regional directorates have an e-mail, and reporting information is transferred to the central directorate in real time. This system allows FID to manage beneficiary -5 -  requests, monitor contracts, monitor beneficiary contributions, follow performance indicators, and manage the annual work program. FID produces its monthly reports in real time. The increased capacity gained by FID in this project has enabled it to undertake a subsequent project and to plan a fourth. FID has been able to accomplish this program expansion while keeping its operating expenses below the target of 10% of its expenditure. FID's operating costs did rise to 14% of expendliture in 11996, but this was reduced to 9.74% by 1997. The project has supported the Government's decentralization policy which was introduced during the period. FID made increasing efforts during the project to encourage development at the community and local government levels. Under this policy local governments (commuanes) have received increased funding allocations and authority. Beginning in 1998 some mayors of decentralized rural communes became involved in project selection and funding. By August 1999 25% of projects were being implemented with some involvement of communes, consistent with decentralization policy. While it is important for elected local govemment to support sub-projects, especially by allocating funds in their budgets for operation and maintenance, FID recognized the need to limit politization by balancing the involvement of mayors vis-a-vis community groups. Mayors' contributions have been limited to 25% ofthe total beneficiary contribution. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: N.A. 5.2 Factors generally subject to government control: While FID was able to implement the programn satisfactorily, there were problems at the political level which had to be overcome. During the SECALINE project, the FID Director General had been removed for political reasons. Recruitment of the new Director General involved some political constraints which may have limited the scope of recruitment, but this did not seriously aifect the outcome of the project. A new Director General was appointed as a condition of effectiveness for FID II. In 1997 the President of the Board of FID had to resign for political reasons and the Board of I)irectors did not function well for a year. Sub-projects requiring Board approval could not be authorized. During that time the thresholds for projects requiring Board review were raised to $45,000 for infrastructure project and $90,000 for feeder roads to enable approvals without Board involvement. The lack of an effective Board of Directors and a President delayed the mid-term review from June to October 1'998. 5.3 Factors generally subject to implementing agency control: The agency contributed to the success of the project by expaniing implementation to a national scile managing implementation well. FID's management systems have worked well, and its increased capacity provides the base for further, more ambitious projects in the future (see section 4.5). 5.4 Costs andfinancing: Differences in appraisal and actual costs were not significant in most cases (see Annex 2). Savings on the cost of FID subproject consultants were possible because some consullants were financed from other projects, as were some costs of equipment and vehicles. Savings on incremental recurrent costs reflect the efficient operations of FID. These savings allowed somewhat more to be spent on FID sub-projects and on TA, Training, Studies & Audits. Beneficiaries contributed slightly more than expected at appraisal. - 6-  6. Sustainability 6.1 Rationale for sustainability rating: FID is a strong institution which has demonstrated its ability to manage a growing program throughout Madagascar with competent staff and efficient operating procedures. The requests by the Government for continuing phases of FID involvement are further evidence of the viability of FID. There has also been considerable improvement in the capacity of local contractors and consulting frms. However, these gains are not likely to be sustainable without continued external funding. Maintenance problems were noted during the SECALINE project and during FID II. A 1998 survey indicated that maintenance problems were particularly evident in rural roads but much less evident in the case of small irrigation projects. FID and the Bank have carried out an increasing effort to ensure the proper use of new facilities and to improve community involvement to enhance prospects-for maintenance and sustainability. At the mid-term review of FID/SECALINE in 1996 a strategy was developed to make beneficiaries more responsible for infrastructure. Five percent up-front deposits were required from communities to ensure long-term commitment. NGOs and consulting firms were involved to a much greater extent to build awareness about maintenance issues. Maintenance manuals were required for all sub-projects. Local governments (communes), newly elected under government decentralization policy, were asked to make budget provisions for operation and maintenance in advance of works. It was decided that communities would not be eligible for further FID financing if maintenance was not undertaken. The need to focus on maintenance was again stressed by supervision missions during 1998 and at the Mid-term review in October 1998. It was agreed that communities providing a commitment of more than 5% would be given priority for new sub-projects, and tolls would be charged for rural roads. Community commitment would be encouraged even more strongly by a proposed future operation which will enable communities to undertake many types of works directly. After the mid-term review, a large maintenance support program was launched in 1998 aimed to: (a) inspect the maintenance of projects finished before December 1997; (b) improve the promotion of maintenance with beneficiaries through technical assistance; and (c) elaborate an improved maintenance strategy for FID projects. The survey indicated that 49% of sub-projects still under contractors' guaranties were considered poorly maintained and another 21% were only moderately well maintained. These figures improved to 35% poorly maintained and 29% moderately maintained after consultants visited the sites again. Sub-projects which had been turned over to communities were better maintained (47% poorly and 32% moderately before consultants' visits and 26% poorly and 28% moderately after consultants' visits). Despite improvements after FID efforts, the results indicate the difficulty of the maintenance issue. Problems in the staffing of health centers and schools also suggest sustainability problems (see section 6.2). However, FID's consistent efforts to face these problems gives some optimism that better results can be achieved in the future. 6.2 Transition arrangement to regular operations: Agreements were made with sector ministries that schools and health centers will be properly staffed and FID has entered into Protocoles d'accord with them. Regional Consultative Committees (CCRs) which have representation from sector ministries and concemed NGOs have also approved projects and made staffing commitments before appraisal. However, there, have been consistent problems in staffimg health centers by the Health Ministry. At the time of the mid-tenr review many facilities were not properly staffed. In the 1999 beneficiaries survey, insufficient personnel was cited as a problem in 9 out of 10 health centers. This problem also existed for schools, but was less severe (6 of 16 schools had insufficient - 7 -  personnel). In 1998 FID determined it would not finance more health centers until this problem is rectified. Relevant performance indicators: * Degree to which project was a priority of beneficiaries; degree of satisfaction * Staffing levels of schools and health centers * Budgets for maintenance and maintenance levels of health centers, schools, irrigation systems, markets. * Quality of infrastructure * Number of pupils in schools (before and after), indicators of irmproved education * Number of patients in health centers, and indicators of improved health * Increased area of irrigation/production * Ex-post ERRs of roads and irrigation systems * Number/types of employees of consulting and contracting firmts trained. Recommended follow-up by the Bank. Continued beneficiary surveys with larger samples to assess satisfaction and design and maintenance arrangements. 7. Bank and Borrower Performance Bank 7.1 Lending: The project was prepared during supervision missions for the SECALINE P'roject which led to economies in preparation. The essential elements for a project of this type were put in place during SECALINE and expanded for FID II. This included a good institutional structure, sound procedures and a plan for extending the program into new regions. The fact that it began disbursing so rapidly is an indication that it was well prepared. Bank performance is rated satisfactory. 7.2 Supervision: The project was supervised by local hire staff and headquarters staff based in the field. This contained costs and enabled informal supervision between missions. Teclmical audits by an engineer also complemented Bank supervision and reduced cost. Supervision costs were further reduced because Bank staff allocated time to several FID projects at once which were in various stages of preparation and implementation and specialist consultants funded by trust funds were frequently used. Annual reviews were carried out with the borrower, including a mid-term review in 1998. The annual technical audits carried out by an engineer complemented supervision efforts, and financial audits were also carried out as planned and reviewed by supervision missions. -8 -  A social impact study of the project at the beneficiary level was made at the end of the SECALINE project. A further study was not undertaken until 1999, although the SAR called for them on an ongoing basis. It is doubtful, however, that additional early studies would have affected the implementation of the rest of the project, since implementation was proceeding at a rapid pace. However, these surveys have helped in the design of subsequent projects. Annual technical audits inspected samplings of FID projects and gathered some of the information normally collected in a beneficiary assessment (e.g. quality, status, usefulness of works). On balance supervision is judged to be satisfactory. 7.3 Overall Bank performance: Especially given the rapid implementation, one year ahead of schedule, and positive results of impact assessments, supervision by the Bank is rated satisfactory. Borrower 7.4 Preparation: The project was well prepared by FID as a follow-on to the FID component of the SECALINE Project. FID drew lessons from the previous project and was able to set up a nationwide network to implement the project. Performance is rated satisfactory. 7.5 Government implementation performance: Although, as noted above, there were some problems with support for the project from the Government level, these problems did not seriously affect the outcome of the project. In fact, the rapid implementation of the project was due in large part to strong support from the Govermment. The Prime Minister took a direct interest in FID, and the government always provided counterpart funding on time. Government performance is therefore rated satisfactory. 7.6 Implementing Agency: FID successfully extended the project throughout the country. Technical audits indicate that over the course of the project FID reacted to many of the problems and constraints that were identified. The need to improve the existing capacity of consulting and engineering firms was identified early in the project and FID worked to accomplish this, although capacity is still a constraint. FID's procedures were noted to improve during the project, beneficiary participation improved, and FID's ability to make payments on time improved. Work quality problems persisted, but they diminished towards the end of the project. One problem cited by beneficiaries in the 1999 beneficiary survey was the lack of contact and animation at the local level by FID. Insufficient animation was cited for 9 out of 16 school projects, 5 out of 10 health center projects, 4 out of 10 small-scale irrigation projects and 6 out of ten market projects. This suggests that FID lacked the resources to support community mobilization efforts to the extent desired. Consultants were hired for this purpose but this did happen quickly enough during the project. Financial audits were late during early years of the project due to the high volume of work. By mid 1989 the audit was on time, but the auditor was still unable to give an opinion because of problems distinguishing between FID I, II and III. This was a minor problem. FID could identify which works were financed under each credit, but in some cases costs related to the reception of the works could not be distinguished. In spite of the above points, FID's performance is rated satisfactory. It successfully expanded an efficiently managed program throughout the country and it implemented the project one year ahead of -9-  schedule. It implemented the maintenance support program and is following up to improve the prospects for sustainabillity in future operations. 7.7 Overall Borrower performance: Given the successful implementation of the project, the overall performance of the borrower is rated satisfactory. 8. Lessons Learned The lessons learned are being addressed as part of the Communiity Development Fund and have been incorporated into the PCD for that project. * Projects designed and managed .outside of Government can recruit more competent staff and get better results, but they cannot be completely isolated from political influence. One way to minimize government influence is by building partnerships wilh communities and local governments, giving them more influence at all stages. * Direct beneficiazy involvement in implementation, currently being piloted by FID, should also improve the influence of beneficiary communities. The proposed Community Action Program being considered for FID IV, which would finance a range of infrastructure and services selected by communities, would further empower beneficiaries. v A large commitment to maintenance is essential in this type of program to improve the likelihood of sustainability. Using consultants to follow up and animate commumities on maintenance issues has helped. Maintenance improved after consultant visits, but more needs to be done in a program of this scope (see section 6.1). v Inadequate animation by FID and inadequate results on maintenance were risks of a program of this size and scope, spread throughout a country as large and as difficult to travel in as Madagascar (see section 7.6). In many cases FID lac.ked the resources to follow up as necessary, since it was committed to keeping its operating expenses at 1 0%4) of total expenditure. It may be more efficient to spend a somewhat higher percentage for operating expense if this can be used to improve community outreach and maintenance. * It is important to ensure that the FID's activities are in line with the strategies of sector ministries, not only at the national level but within the decentralized structLre. Such coordination is also important within the Bank to ensure that infrastructure constructrion and maintenance is in line with the programs supported by the social sub-sectors in the Bank (see section 6.2). * A simpler structure to oversee non-governmental organizations like FID might help to minimize infighting and political interference (see section 5.2). FID was set up to have wide representation from a broad spectrum of groups in order to provide for broad participation and checks and balances. However, this sometimes led to stalemates and indecision. This happened when the Board ceased to function well in 1997. The size and communications problems of Madagascar made it difficult for the Board and the members to come togethLer when necessary. * Training programs for engineering firms and small and mediunm contractors have improved the competence of these firnns and the quality of work and should be continued (see section 4.2). Feedback from trainees indicates that courses should be expanded for roads and building sites and - 10 -  should include technicians from local governments. In addition, courses in micro-irrigation for consulting firms should be expanded, and courses for senior technicians, including management, should be added to the curriculum. Courses should also be made available for sociologists and other employees of consulting firms dealing with community development. * It is important for low income groups in rural areas to have access to credit to enhance their income earning potential. However, effective small loan programs are difficult to establish, and their impact will remain limited if they operate outside a country's financial markets. It is preferable for small loan programs to be integrated within existing financial policies, markets and institutions (see section 4.1) 9. Partner Comments (a) Borrower/implementing agency: N/A (b) Cofinanciers: N/A (c) Other partners (NGOs/private sector): The following comments have been provided by local governments and private contractors: 1. Mr. REMI, Mayor of the Rural Commune Joffreville - Antsiranana: The beneficiaries' involvement required for the community health center in Joffreville is a bit heavy, not in monetary terms but in the amount of animation required, and that led to a delay in starting and the progress of the work. The Government played no role on the project, as is customary for the people in collaborating with FID. The main thing that cannot be overlooked is maintenance. The population now understands the difficulties in construction. Tomorrow it will learn that maintenance will be necessary to ensure the center will stay functioning. In my opinion, we can count on sustainability through maintenance, since the members have already planned for it. 2. Mrs. RAZAFIIARZAY Jonshon, Director of the construction firm MILANTO - Antananarivo: I had three contracts during the period with DRT and two with DRA. Competition was hard because of the large number of participants and because it involved construction. Every contract benefited us. However small the profit, it suited us because FID works are financed autonomously and bills are paid alnost immediately. In the beginning there were serious difficulties responding to bid requests because the number of documents and details of pricing requested. Only after the first contract did we understand the need and importance of these details. In general this method brought a lot to us. 3. Mr. RAYMOND Claude, Co-Director of the construction firm ORIMBATO - Antananarivo: My results with FID are good. I had 12 contracts, 9 in Antananarivo and 3 in Toliara. The results were generally positive, varying with the time and locality of the sub-projects. FID not only contributed to the development of my firm, but it also developed the technical knowledge of our personnel. FID enabled us to create temporary employment which is very important, especially in the regions where we work. 4. Mr. ANDRIAMIHAJA Pierre, construction frmn ECOMET - Mahajanga: -11 -  I congratulate FID for having been able to decentralize since 1995. It is a great advantage for the small and medium enterprises in the provinces. We hope decentralization is applied at the regional level. The problem in this sector is that there are not enough qualified technicians working. FID should increase the training of enterprises. FID should consider the age of the enterprises preselected which have always worked with it. The process of disbursements is too slow whiich affects the cash flow of small enterprises. Strict application of the rules would promote professionalism and be very much appreciated. 5. Mr. FAROUK, Mayor of the Commune of Masomeloka (Faritany Toamasina): The rural commune of Masomeloka worked with FID in 1999 to construct the Masomeloka Market. Generally we have good relations with FID. But we deplore, nonetheless, the difficulties in communication in our region which constrain our communication with FID. The municipality is satisfied with the construction of the first lot. Unfortunately, because of communications difficulties and problems in mobilizing, we were not able to finish our contribution for the second lot. For this reason FID put off the second lot. From the beginning of the project, we had in place a provisional committee in charge of contributions. We haven't yet occupied the project because we are waiting for the provisional reception. But this is the same committee which is supposed to sensitize users and collect maintenance funds. At the level of the commune, we plan to sell tickets for each market day and include FMG 2000 in our budget for maintenance. 6. Mr. LAIMISONDROTRA Thomas, Mayor of Beforona (Faritany Toannasina): Individuals found their own water supply for a long time in Beforona. Since December 1999, thanks to FID, the problem was solved. However, we note that since the 15 standpipes and the wash basin function at the same time, the amount of water is insufficient. The design firm explained to us that we should organize water management by water committees which we have established. For the moment, we have water committees for each standpipe, but after discussions with FID and the design finn we are convinced that the committees should be drawn into one more formal association which we are now doing. Above all, these committees need to be reinforced because some of the standpipes are next to the street and are vandalized by people passing by. 7. Mr. RABAKO Justin, President of the project cell (PC College Rainisoalambo- Fenerive Est) (Farantany Toamasina): We have good relations with FID. In every community project we have appreciated the confidence FID has given us to completely manage the project. We also recognize that the FID team has spent a lot of time training us to manage the project. For us, the collaboration of FID in the community project has been enriching, because there were many new aspects: consultation of partner-s, procurement, control of works, etc. FID has been too rigid about the 20% contribution necessary. For. some months we have been putting money aside to have our maintenance fund. Our community already is accustomed to take charge of maintaining its assets. If FID plans to develop community projects, we hope the 20% deposits will be reduced. We also would like project cells to be trained by FID) before starting projects. 10. Additional Information NA - 12 -  Annex 1. Key Performance Indicators/Log Frame Matrix Outcome I Impact Indicators: -Temporary days of employment created: 6,065,300 Objective: 5,000,000 (121.3% of target) - Penmanent jobs created. 1,546 Objective: 2,800 (55.2% of objective) - Number of contracts with artisans: 122 Objective 200 (61% of objective) - Number of contracts with local SMEs: 1,796 Objective: 1,200 (149.6% of objective) - Schools Rehabilitated 450 Objective: 105 (428.5% of objective) - Health centers rehabilitated 183 Objective: 89 (228.7% of objective) - Kmn of feeder roads rehabilitated 967 (Objective: 1,000) (96.7% of objective) - No. of hectares irrigated 11,071 (Objective: 30,000 (36.9% of objective) Output Indicators: Separate Outcome/Impact Indicators and Output Incicators were not provided for in the SAR. End of project -13 -  Annex 2. Project Costs and Financing Project Cost by Comr nent (in US$ million uivalent) Equipment 0.40 0.18 45 Vehicles 0.70 0.27 39 FID Projects 31.80 37.64 118 FID Sub-Project Consultants 3.10 0.07 2 TA, Training, Studies & Audits 1.60 1.75 109 Incremental Recurrent Costs 2.60 2.30 88 Total Baseline Cost 40.20 42.21 Physical Contingencies 4.00 Price ConfIngencies 1.20 Total Project Costs 45.40 42.21 Total Financing Required 45.40 42.21 Proiect Costs b Procurement Arran ements (A raisal Estimate US$ million e uivalent 1_^~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~f /V E S i 1. Works 0.00 32.20 3.60 0.00 35.80 (0.00) (27.70) (3.10 (0.00) (30.80) 2. Goods 1.00 0.00 0.40 0.00 1.40 (0.90) (0.00) (0.30) (0.00) (1.20) 3. Services 0.00 0.00 5.30 0.00 5.30 (0.00) (0.00) (5.30) (0.00) (5.30) 4. Recurrent Costs 0.00 0.00 2.90 0.00 2.90 (0.00) (0.00) (2.60) (0.00) (2.60) 5. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) 0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00 (0.00) Total 1.00 32.20 12.20 0.00 45.40 (0.90) (27.70) (11.30) (0.00) (39.90) - 14 -  Proiect Costs b Procurement Arran ements Actual/Latest Estimate (US$ million equivalent 1. Works 0.00 33.97 3.04 0.00 37.01 (0.00) (27.68) (2.69) (0.00) (30.37) 2. Goods 0.00 0.00 0.45 0.00 0.45 (0.00) (0.00) (0.42) (0.00) (0.42) 3. Services 0.00 0.00 2.45 0.00 2.45 (0.00) (0.00) (2.14) (0.00) (2.14) 4. Recurrent Costs 0.00 0.00 2.30 0.00 2.30 (0.00) (0.00) (2.06) (0.00) (2.06) S. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) S. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (O .00) (O .00) (.0 Total 0.00 33.97 8.24 0.00 42.21 ==________________ (0.00) (27.68) (7.31) (0.00) (34.99) " Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies 2Ilncludes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. Project Financing by C mponent (in US$ million equiv alent) l ~~~~~~~~~~~~~~~~~~~~~~Percentage of Appraisal Component Ap raisal Estimate Actual/Latest Estimate Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF. FID Projects 30.60 3.60 1.80 30.37 3.79 2.85 99.2 105.3 158.3 FID Sub-Projects Consit 3.50 0.69 0.01 19.7 0.0 0.0 TA,Train,Studies, Audit 1.60 1.45 0.30 90.6 0.0 0.0 Equip,Veh,Furn, Other 1.40 0.42 0.03 30.0 0.0 0.0 Incremental Recur Cost 2.90 3.60 2.06 0.24 71.0 6.7 0.0 Notes: 1. Latest estimates of cost and financing amounts were provided by implementing agency and reflect amounts of US Dollars disbursed at current exchange rates during the project period. They underestimate actual dollar cost and financing amounts. 2. Cofinancing amount in "Project Financing by Component" table represents beneficiaries' contribution. - 15 -  Annex 3: Economic Costs and Benefits FID sub-projects in economic sectors (transport and small-scale irrigation) are subjected to economic analysis and have been required to have at least a 15% economic r ate of return in order to qualify for financing. Sub-projects in income generating activities and support to the private sector were expected to have at least a 20% rate of return. As part of the 1999 beneficiary survey, ex-post economic rates of return were calculated for rural roads. Four roads had economic rates of return rakging from 41% to 349%; one had a rate of return of only 3%. For small-scale irrigation three projects were calculated to have ex-post of return ranging from 22% to 99%; one had a rate of return of only 6%. Since only rehabilitation was undertaken for schools and health centers, not new construction, these sub-projects are assumed to have yielded high economic rates of return, although no calculations were made. - 16 -  Annex 4. Bank Inputs (a) Missions:.-__ Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, I FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation This project was prepared during supervision missions for the SECALINE Project Appraisal/Negotiation 5 Economist, Imp. Spec., Nutritionist, IEC Specialist, MIS Specislist Supervision 6196 4 Implementation Spec, Social S S Fund Spec., Procurement Spec., Engineer 12//96 2 Implementation Spec, Social S S Fund Spec. 8/97 2 Implementation Spec, Social S S Fund Spec. 2/98 5 Implementation Spec, Portfolio S S Assist, Operations Assist, Disbursement Spec, Procurement Spec. 7/98 2 Implementation Spec, S S Procurement Spec 10/98 3 Implementation Sped, Social S S Funds Spec, Engineer 8/99 Implementation Spec, ???? S S 5/99,2/99&10/99, Missions for the preparation of the Community Dev. Fund Project (FID IV) also supervised final stages of FID II ICR 1/00 I Implementation Spec S S - 17 -  (b) Staff Stage of Project Cycle Ac___atest_ ___Estimate_E _ _| : : ; j N. j