Mozambique - Local government reform and engineering

 ICRR 10533 Report Number : ICRR10533 ICR Review Operations Evaluation Department 1. Project Data : Date Posted : 02/29/2000 PROJ ID : P001791 OEDID: OEDID : C2530 Appraisal Actual Project Name : Local government US$M ) Project Costs (US$M) 24.5 12.9 reform and engineering Country : Mozambique Loan/ US$M ) Loan /Credit (US$M) 23.2 12.4 Sector, Major Sect .: Urban Management , US$M ) Cofinancing (US$M) Urban Development L/C Number : C2530 FY ) Board Approval (FY) 93 Partners involved : Closing Date 03/31/1998 03/31/1999 Prepared by : Reviewed by : Group Manager : Group : Roy T. Gilbert Alice Gallenson Gregory K. Ingram OEDST 2. Project Objectives and Components a. Objectives (i) to support the Borrower's decentralization and municipal capacity building programs in the Project Cities (Maputo, Beira, Pemba, Quelimane, and Nampula); and (ii) to assist the Borrower to create a suitable municipal investment policy framework, prepare urban investment plans and carry out pilot subprojects . The reforms focused on the legal, institutional and fiscal framework of local government in order to create a suitable structure for self -sufficient and accountable local authorities, and to include support for municipal development programs and pilot projects in five urban areas. b. Components With the Ministry of State Administration's (MSA) National Directorate for Local Administration as principal counterpart, there were four components . Part A . Legal and institutional reform; Part B . Fiscal, financial and organizational reform; Part C . Urban/environmental management, including local planning and pilot physical investments; Part D . Capacity building, institutional support, and project management . c. Comments on Project Cost, Financing and Dates Final costs were US$12.9 million, half the US$24.5 million expenditures planned at appraisal . There were shortfalls in all components except Part B . The pilot physical investments and technical assistance to MSA were not implemented. Of an original IDA Credit of US$23.2 million, IDA disbursed one half, or US$12.4 million that amounted to 95.4% of final project costs (the same share of total costs foreseen at appraisal ). The full amount of the remainder--US$10.8 million--is to be cancelled. The project was approved in June 1993 and closed March 1999. 3. Achievement of Relevant Objectives : Objective (i) was achieved only in part. The project helped decentralization through providing the legal framework for municipal elections. But weak performances by both the Bank and the Borrower led to a breakdown of the partnership, undermining project support for local governments in one of the Bank's poorest borrower countries. Increased revenue generation at the local level is nevertheless evidence of municipal capacity building. Notwithstanding exploration of new techniques of municipal service delivery, the project failed to build service provision capacity through the intended hands-on experience that the intended physical investments--which were dropped--would have provided. ii) was not achieved. Pilot works planned under the project were not implemented due to procurement Objective (ii) problems, inadequate Bank/borrower communication and poor performance by consultants . Structure plans were prepared for five cities, but these did not help local governments prepare investment plans and carry out investment subprojects as intended. According to the ICR, the main failures of the project were in not implementing any of the physical pilot projects and the inability to build local government capacity . 4. Significant Outcomes /Impacts : Legal texts relating to local government in Mozambique . 5. Significant Shortcomings (including non -compliance with safeguard policies ): Breakdown of Bank/Borrower partnership and dialogue, undermining the trust that such a relationship needs to be built upon. Under a new follow-on project currently under preparation, a new Bank team and improved  attention by Bank management the Bank /Borrower relationship has improved considerably . Flawed project design: (i) implementation risks and problems underestimated; (ii) complex internal structure with unclear responsibilities; (iii) no provision for a central project unit with authority to manage project; (iv) dependency upon strong inter -ministerial coordination that was not forthcoming; and (v) inappropriate treatment of political decisions as controllable project outputs . Implementation was flawed through: (i) serious and recurrent procurement delays; (ii) Bank's overly rigid and bureaucratic approach (in eyes of Government); (iii) unreliable counterpart funding; (iv) Borrower delays in contract approvals. Rapid turnover of Bank task managers --three between project identification and credit effectiveness, for instance--causing shifts in Bank's approach to project . The project's Mid-term Review was only a formality and becoming a missed opportunity to restructure a failing project. Weakness of Borrower's performance was evident from : (i) lack of coordination; (ii) lack of initiative to restructure the project; (iii) inadequate management of consultant contracts; and (iv) inadequate provision of counterpart funds. 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Marginally Satisfactory Project did not achieve a fully satisfactory outcome in building capacity, investment policy and investment in pilot projects at the municipal level. Among project shortcomings: (i) breakdown of partnership with Borrower; (ii) a flawed project design that understated risks was not understood either by Bank or Borrower; (iii) project support for reform was undermined by poor Bank/Borrower dialogue; (iv) project only half implemented overall through failure to build local government capacity to invest; and (v) project's own physical investments and TA to MSA not executed. Institutional Dev .: Partial Modest Sustainability : Likely Uncertain Training of key staff who would maintain reform momentum not done. A key reform in the form of the 1994 Decentralization Law was already overturned before project completion. Bank Performance : Deficient Unsatisfactory Project experience clearly demonstrates how the Bank should not manage a project. Poor Bank performance contributed to a breakdown in the partnership and dialogue with one of its weakest and most needy borrowers (thankfully being repaired under a follow-on project with a new Bank team). At appraisal, Bank underestimation of political difficulties and implementation constraints led to a flawed project design. Borrower Perf .: Satisfactory Unsatisfactory ICR cites lack of coordination, lack of initiative to restructure project, poor management of consultants and inadequate provision of counterpart funds . Quality of ICR : Unsatisfactory 7. Lessons of Broad Applicability : After a civil war, the Bank should focus primarily upon post -conflict reconstruction, with attention to rebuilding trust at the local level and conflict mitigation . Ambitious reform programs cannot be immediately grafted upon an eroded state in a country facing severe problems of extreme poverty, weak institutions, a dual economy, limited access to social services, and excessive concentration of economic growth among narrow segments of the country.  With a breakdown of a Bank/borrower partnership and dialogue, the Bank's overriding effort and top priority should be to rebuild trust in order to restore and effective and fruitful partnership . (This lesson has already been applied by a new Bank team in the preparation of a follow -on project.) In assisting a borrower facing acute development challenges in a post conflict situation, the Bank should field staff and consultants with knowledge of post -conflict reconstruction or engage other experts and partners who have experience in this field . Either through their own experience or that of others, Bank management, staff and consultants need to be aware of the constraints upon effective action by an eroded state in post -conflict circumstances. 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR gives a candid account of the project's weaknesses but does not provide ratings consistent with its own critical analysis. The ICR does not include the Future Operation chapter that could have provided some insight into the expected outcomes in the coming years, as well as insights into sustainability . The ICR--October 12, 1999 draft--does not include a Borrower ICR as an attachment . There are several errors and omissions in Part II (Statistical Tables ): (i) Final project costs appear overstated by US$ 0.9 million reported as contingencies (corrections would be needed to ICR text, cost tables, financing plan and disbursement schedule ); (ii) Disbursement schedule does not report cumulative estimated and actual disbursements; (iii) Impact/outcome indicators for the project are not reported; (iv) Compared with those presented at appraisal ICR Indicators of Project Implementation are few and presented in a different format from the MOP, making appraisal intentions and actual achievements difficult to compare; (v) Table 11 on Compliance with Operational Policy Statements is not completed .