Mali - Economic Management and Training Project

Document of l Y The World Bank FOR OFFICIAL USE ONLY Report No. P-3356-MLI REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF US$10.4 MILLION TO THE REPUBLIC OF MALI FOR AN ECONOMIC MANAGEMENT AND TRAINING PROJECT November 15, 1982 This document has a restricted distribution and may be used by reciients only in the performance of their official duties. Its contets may not Otherwise be discsed witbout Weld Bank ntorizton.  CURRENCY EQUIVALENTS Currency Unit = Malian Franc (MF) MF 1 million = US$1,471 US$1 = MF 680 ABBREVIATIONS AND ACRONYMS ACM - Association des Comptables du Mali CAA - Caisse Autonome d'Amortissements CCP - Comptes Cheques Postaux tEPI - Centre d'Etude et de Promotion Industrielle CIDA - Canadian International Development Agency CMDT - Compagnie Malienne pour le Developpment des Textiles CNRA - Commission Nationale pour la Reforme Administrative COMATEX - Compagnie Malienne de Textiles DNAE - Direction Nationale des Affaires Economiques DNFPP - Direction Nationale de la Fonction Publique et du Personnel DNP - Direction Nationale de la Planification DNSI - Direction Nationale de la Statistique et de l'Informatique DNUC - Direction Nationale de l'Urbanism et de la Construction FAC - Fonds d'Aide et de Cooperation (France) FAO - Food and Agriculture Organization FED - Fonds Europeen de Developpement ICB - International Competitive Bidding IDA - International Development Association IER - Institut de l'Economic Rurale ILO - International Labor Office (Geneva) IPGP - Institut de Productivite et de Gestion Previsionnelle ODR - Operation de Developpement Rural OPAM - Office des Produits Agricoles du Mali OSRP - Office pour la Stabilisation et la Regularisation des Prix PCU - Project Coordinating Unit PPF - Project Preparation Facility SEPOM - Societe d'Exploitation des Produits Oleagineux du Mali SNED - Societe Nationale pour les Etudes de Developpement SOMIEX - Societe Malienne d'Importation et d'Exportation UNDP - United Nations Development Program UNCTAD - United Nations Conference for Trade and Development USAID - United States Agency for International Development WAMU - West African Monetary Union WFP - World Food Program FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY MALI ECONOMIC MANAGEMENT AND TRAINING PROJECT Credit and Project Summary Borrower: Republic of Mali Amount: SDR 9.7 million (US$10.4 million) Terms: Standard Project Description: The objective is to strengthen management of the Malian economy by improving financial and economic policies and public institutions and by training Malian civil servants. Assistance would focus on: (i) cereals marketing; (ii) rural development agencies; (iii) state enterprises; (iv) economic policy analysis and data management; (v) the civil service bureau; (vi) the public debt agency; and (vii) the business management training institute. The project would also provide training and support a Project Coordinating Unit to implement the project. The IDA credit would finance specialists, equipment, operating costs, studies, scholarships, and construction. The major benefit is to reinforce the Government's commitment to improve economic policies and institutions. The major risk is that the assis- tance will not be effectively utilized owing to delays and to unanticipated constraints. These risks will be partially offset by strengthening implementation and supervision. 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.  - ii - Estimated Costs (including taxes and duties of US$0.6 million) Category Local Foreign Total --------- US$ millions ------ Cereals marketing 0.27 0.62 0.89 Rural development agencies 0.52 1.13 1.65 State enterprises 0.45 0.97 1.42 Economic policy analysis and data management 0.46 0.76 1.22 Civil service (DNFPP) 0.32 0.62 0.94 Public data management (CAA) 0.07 0.13 0.20 Business management training (IPGP) 0.51 0.89 1.40 Follow-up technical assistance and studies 0.21 0.59 0.80 Project Coordinating Unit (PCU) 0.39 0.59 0.98 Base Costs 3.20 6.30 9.50 Physical contingencies 0.13 0.47 0.60 Price contingencies 0.47 0.93 1.40 Total Project Costs 3.80 7.70 11.50 Financing Plan ----------US$ millions--------- IDA 2.7 7.7 10.4 Government 1.1 - 1.1 TOTAL 3.8 7.7 11.5 Estimated Disbursements: FY83 1/ FY84 FY85 FY86 Annual 2.0 3.7 3.2 1.5 Cumulative 2.0 5.7 8.9 10.4 1/ Includes US$1 million disbursed under PPF advances. -  - iii - Rate of Return: N.A. Staff Appraisal Report: N.A. Map: IBRD 16539   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF MALI FOR AN ECONOMIC MANAGEMENT AND TRAINING PROJECT 1. I submit the following report and recommendation on a proposed development credit of SDR 9.7 million (US$10.4 million equivalent) on standard IDA terms to the Republic of Mali to help finance a proposed Economic Manage- ment and Training Project. PART I - THE ECONOMY 2. Two reports entitled "Economic Memorandum on Mali" (3200-MLI) and "Mali-Special Economic Study--Planning Institutions and the 1974-78 Plan" (3333-MLI) were distributed to the Executive Directors on June 30, 1981. The following paragraphs are based on these reports and the findings of recent World Bank and IMF economic missions. Annex I gives country data. Introduction 3. Mali is one of the poorest countries in the world. Economic growth has been reasonable since independence in 1960, although highly variable. But economic management has encouraged consumption more than productive investment, with the result that this growth was obtained at the cost of increasing imbalances in public finances and on foreign accounts. By the end of 1980, these imbalances were severe enough that the Malian Government began to recognize deficiencies of past policies. It embarked on a cautious path heading toward economic and financial restructuration, and IDA and the IMF were asked to assist in this new effort. Nevertheless, growth in the near future will be limited by poor physical resources and underdeveloped human resources and infrastructure, although there is some potential for longterm economic development. Economic Resources and Constraints 4. Mali has a population of 7 million inhabitants, in an area of 1.24 million square kilometers in the middle of sub-Saharan West Africa. In 1981, GNP per capita was only US$190. Mali manifests all the signs of a least developed country, including a subsistence-oriented economy (85 percent of the population depends on the primary sector), dependence on a few commodity exports, an extremely low rate of domestic savings (minus 3.6 percent of GDP in 1980), a high population growth rate (2.7 percent), a low level of educa- tion (less than 10 percent adult literacy), and difficult living conditions that give a life expectancy of only 43 years. 5. Poor physical and underdeveloped human resources, as well as inadequate infrastructure, constrain economic growth in Mali in the short and medium term. Potential for agricultural growth is limited by uncertain  - 2 - rainfall, fragile soils prone to exhaustion and erosion, and low-yielding, traditional crop and livestock technology with little scope for intensifica- tion. Mineral and energy resources are limited and difficult to exploit. Human resources are underdeveloped, in part because access to basic amenities like clean water, better health care, and educational opportunities remains quite limited. There are shortages of skilled workers and experienced managers. Transportation and communication are extremely expensive by world standards, because Mali is landlocked and internal distances are vast. The above factors result in low incomes, small domestic markets, and limited potential for industrial development. Finally, Mali is a small open economy, with trade concentrated in a few commodities. Imports and exports together amount to more than half of GDP. Cotton and livestock comprise four-fifths of exports, and petroleum and foodstuffs, one-third of imports. Thus, the country is extremely vulnerable to changes in world prices and declining terms of trade. 6. Although economic development will be difficult in the short and medium term, Mali has economic potential that can be developed over the long term. Malian farmers are among the most proficient in West Africa. Rainfed maize production could be significantly expanded in the south. Mali has more irrigated rice land than any other Sahelian country, as well as the largest physical scope for expanding irrigation. Hydroelectric generating potential on the Niger and Senegal rivers is significant. Although mineral resources remain largely unexplored and unexploited, they may offer longer-term oppor- tunities. Economic Performance 1960-82 7. The Malian Government has attempted since independence to promote growth while trying to improve social equity and raise consumption from very low levels. During 1960-81, annual growth of GNP per capita averaged 1.1 percent in constant prices, although there were large swings from a decline in GNP in one year to jumps of over 10 percent in the next. The economic structure has shifted as the agricultural sector has become less important while the services sector has become more so. Although this tendency is normal for developing economies, in Mali it also reflects the effect of policies that have shifted resources to the urban sector and to public consumption. At the same time, the industrial sector has stagnated despite government efforts to create a modern industrial base. Because of drought and declining terms of trade, as well as continuing mistakes in economic management and poor allocation of public resources, there have been since independence consistently large and worsening imbalances in public finances and on foreign accounts, with declining domestic savings and growing foreign indebtedness. While economic and social objectives have been partially achieved, the process has led to severe financial and economic disequilibria that could be sustained only by dependence on foreign borrowing. 8. Mali's economic history can be divided into four periods (1960-67, 1967-74, 1974-80, and 1981-82) based roughly on changes in economic and  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF MALI FOR AN ECONOMIC MANAGEMENT AND TRAINING PROJECT 1. I submit the following report and recommendation on a proposed development credit of SDR 9.7 million (US$10.4 million equivalent) on standard IDA terms to the Republic of Mali to help finance a proposed Economic Manage- ment and Training Project. PART I - THE ECONOMY 2. Two reports entitled "Economic Memorandum on Mali" (3200-MLI) and "Mali-Special Economic Study--Planning Institutions and the 1974-78 Plan" (3333-MLI) were distributed to the Executive Directors on June 30, 1981. The following paragraphs are based on these reports and the findings of recent World Bank and IMF economic missions. Annex I gives country data. Introduction 3. Mali is one of the poorest countries in the world. Economic growth has been reasonable since independence in 1960, although highly variable. But economic management has encouraged consumption more than productive investment, with the result that this growth was obtained at the cost of increasing imbalances in public finances and on foreign accounts. By the end of 1980, these imbalances were severe enough that the Malian Government began to recognize deficiencies of past policies. It embarked on a cautious path heading toward economic and financial restructuration, and IDA and the IMF were asked to assist in this new effort. Nevertheless, growth in the near future will be limited by poor physical resources and underdeveloped human resources and infrastructure, although there is some potential for longterm economic development. Economic Resources and Constraints 4. Mali has a population of 7 million inhabitants, in an area of 1.24 million square kilometers in the middle of sub-Saharan West Africa. In 1981, GNP per capita was only US$190. Mali manifests all the signs of a least developed country, including a subsistence-oriented economy (85 percent of the population depends on the primary sector), dependence on a few commodity exports, an extremely low rate of domestic savings (minus 3.6 percent of GDP in 1980), a high population growth rate (2.7 percent), a low level of educa- tion (less than 10 percent adult literacy), and difficult living conditions that give a life expectancy of only 43 years. 5. Poor physical and underdeveloped human resources, as well as inadequate infrastructure, constrain economic growth in Mali in the short and medium term. Potential for agricultural growth is limited by uncertain  - 2 - rainfall, fragile soils prone to exhaustion and erosion, and low-yielding, traditional crop and livestock technology with little scope for intensifica- tion. Mineral and energy resources are limited and difficult to exploit. Human resources are underdeveloped, in part because access to basic amenities like clean water, better health care, and educational opportunities remains quite limited. There are shortages of skilled workers and experienced managers. Transportation and communication are extremely expensive by world standards, because Mali is landlocked and internal distances are vast. The above factors result in low incomes, small domestic markets, and limited potential for industrial development. Finally, Mali is a small open economy, with trade concentrated in a few commodities. Imports and exports together amount to more than half of GDP. Cotton and livestock comprise four-fifths of exports, and petroleum and foodstuffs, one-third of imports. Thus, the country is extremely vulnerable to changes in world prices and declining terms of trade. 6. Although economic development will be difficult in the short and medium term, Mali has economic potential that can be developed over the long term. Malian farmers are among the most proficient in West Africa. Rainfed maize production could be significantly expanded in the south. Mali has more irrigated rice land than any other Sahelian country, as well as the largest physical scope for expanding irrigation. Hydroelectric generating potential on the Niger and Senegal rivers is significant. Although mineral resources remain largely unexplored and unexploited, they may offer longer-term oppor- tunities. Economic Performance 1960-82 7. The Malian Government has attempted since independence to promote growth while trying to improve social equity and raise consumption from very low levels. During 1960-81, annual growth of GNP per capita averaged 1.1 percent in constant prices, although there were large swings from a decline in GNP in one year to jumps of over 10 percent in the next. The economic structure has shifted as the agricultural sector has become less important while the services sector has become more so. Although this tendency is normal for developing economies, in Mali it also reflects the effect of policies that have shifted resources to the urban sector and to public consumption. At the same time, the industrial sector has stagnated despite government efforts to create a modern industrial base. Because of drought and declining terms of trade, as well as continuing mistakes in economic management and poor allocation of public resources, there have been since independence consistently large and worsening imbalances in public finances and on foreign accounts, with declining domestic savings and growing foreign indebtedness. While economic and social objectives have been partially achieved, the process has led to severe financial and economic disequilibria that could be sustained only by dependence on foreign borrowing. 8. Mali's economic history can be divided into four periods (1960-67, 1967-74, 1974-80, and 1981-82) based roughly on changes in economic and  - 3 - political conditions. The changes in economic and financial structure during these four periods are indicated in the following tabulation:l/ 1960 1967 1974 1980 1981 2/ GDP (US$ millions, current) 273 241 414 1,325 1,119 Agriculture (percent GDP) 55 50 35 42 Industry (percent GDP) 10 13 16 10 Services (percent GDP) 35 37 49 48 Terms of trade index 100 73 58 64 Gross domestic savings (percent GDP) 9.5 1.3 -19.2 -3.6 -5.7 Budget deficit (percent GDP) .. 5.3 3.5 4.0 2.3 Resource gap (percent GDP) -4 -16 -33 -20 -21 Net foreign assets (US$ millions) 2 3/ -56 -139 -249 -218 Longterm foreign debt (US$ millions) .. 269 441 853 GNP growth rate (percent per year)4/ .. 3.5 1.8 6.8 0.2 These figures (as well as the economic indicators in Annex I) illustrate some of the major trends in the Malian economy. 9. Post-independence, 1960-67. After independence, the first government undertook a major program of modernization that included an independent monetary system, an ambitious five-year development plan, a program of indus- trialization based on state enterprises, and a welfare orientation intended to keep prices down and to assure consumers an adequate supply of basic commodi- ties. During this period, GDP growth was high but public pricing and invest- ment policies created imbalances that could not be sustained. Government budgetary deficits often exceeded 5 percent of GDP. By 1967 the resource gap had quadrupled (as a percent of GDP), net foreign assets had turned negative, and the debt service ratio had risen to 19 percent. The economic crisis led to the signature of monetary accords with France in early 1967, followed by a 50 percent devaluation in mid-1967, and to reintegration with the franc zone in early 1968. At that time, the French Treasury opened an Operations Account for Mali to provide overdraft facilities to support the convertibility of the Mali franc. 10. Economic Reform, the Sahelian Drought, and the Energy Crisis, 1967-74. In late 1968, a new government launched an ambitious but pragmatic reform program that proposed to increase official commodity prices and liberalize private trade--especially in cereals. But the shock of the severe Sahelian drought ('1968-73), followed by a quintupling of petroleum prices during 1/ The symbol ".." means "not available". 2/ Figures are provisional and subject to change. 3/ 1962. 4/ At constant market prices in Malian francs. Growth rate refers to period preceeding year under which the figure is given.  1972-74, prevented the new government from carrying out the reforms. Economic performance during 1967-74 was poor, reflecting these shocks. Output in the primary sector fell, and real per capita income declined. Economic policies remained inadequate. For example, low official prices discouraged agricultural production and led to increased food imports; and recourse to bank credit to finance the mounting losses of state enterprises led to increased external debt. By 1974, the economic imbalances--already large 7 years earlier--had either not improved or had deteriorated. The resource gap was larger, reflecting partly the large inflow of foreign aid to sustain consumption after the 1968-73 drought. Domestic dissaving was greater, net foreign assets had fallen by over 100 percent, and public external debt more than doubled. 11. Uneven recovery, 1974-80. Compared to the drought years, the subsequent period was favored by generally better weather and more foreign aid. There was more rapid growth of GDP, led by agriculture and reflecting recovery from low drought levels. But the severe disequilibria in public finances and external accounts created earlier were not corrected. Inflation increased. Domestic dissavings and the resource gap remained high. The need to finance increasingly large Government Treasury deficits and growing losses in the state enterprises sector caused short-term foreign liabilities to double. Borrowings to finance the 1974-78 development plan caused external long-term public debt to double as well. Despite a few abortive efforts late in the period, the Goverment did not develop and carry out reforms. While continuing external shocks, like a second jump in petroleum prices, hampered reform efforts, availability of substantial foreign resources also made the imbalances more manageable and relieved some of the pressures to change policies. 12. New orientations, 1980-82. Faced with worsening financial disequi- libria but less central bank financing resulting from reduced access to the Operations Account provided by France, the Malian Government at the end of 1980 requested technical and financial assistance from both the Bank and the IMF to help it carry out a program of economic reform and adjustment. Supported in part by technical assistance financed by an IDA PPF for the proposed project approved in early 1981 (para. 28), the Government has started to liberalize cereals marketing, reduce the role of the agricultural produce marketing board, restructure the state enterprise sector and improve the viability of key enterprises, and study how to restructure rural development agencies. The government initiated several major fiscal improvements in 1981, despite difficult circumstances including poor rains in 1980 and a further deterioration in the terms of trade. These measures include credit restraint, improved tax collection, higher taxes on staple consumer goods and petroleum, fewer subsidies to offset price increases, restraint on government personnel costs, savings on maintenance of government material, reductions in scholarships, and suspension of some education expenditures. Initial steps have been taken to restructure the state enterprise sector and to improve the medium-term viability of key enterprises. To improve incentives for agricultural production, the government has substantially raised commodity prices for the 1981-82 season and increased official consumer prices for cereals. In May 1982, the IMF approved a one-year Standby Loan for SDR 30.375 million (about US$33.9 million). The government has also formally asked to rejoin the West  -5- African Monetary Union (WAMU), a move that would improve Mali's financial and monetary position. Finally, the new Five-Year Plan for Economic and Social Development for 1981-85 puts special emphasis on the need for policy reforms to re-establish fundamental financial and economic equilibria, notably by balancing the government budget, reducing the balance of payments deficit, redticing the losses of the state enterprises, and controlling training and recruitment for the Civil Service. Development Policies 13. 1981-85 Development Plan. The new plan continues to give priority to water development for the rural population, livestock, and irrigation; to agricultural and livestock production for achieving food self-sufficiency, for supplying an expanded agro-industrial sector, and for increasing commodity exports; to energy development; and to conservation of natural resources-- especially forests and pastures. These objectives seem to respond fairly well to the major economic constraints facing the country. The new Plan clearly accepts the coexistence of the public, mixed, and private sectors, and it seeks -o increase local private participation in investments. 14. Development expenditures proposed by the new Plan are estimated at US$2.2 billion (in 1981 prices and exchange rates), of which US$1.7 billion would be required during the five-year planning period. Roughly 70 percent would finance actual capital investments, the rest being for supporting expenditures. Foreign sources will be expected to provide over 85 percent of the financing. Compared to the previous planning period (1974-80), the implied annual investment level appears to be 50 greater. Judging from past experience implementation of the Plan may encounter delays and difficulties in project preparation and execution, partly because the link to budgeting is weak. 15. Foreign Aid. Foreign aid finances practically all public investment in Mali and is therefore critical for promoting future growth. More than half of this aid is in the form of grants, and almost all the rest is loaned on highly concessional terms by official aid agencies. Multilateral agencies provide about two-fifths of long-term loans. IDA is by far the largest multilateral lender, accounting for over half the multilateral loans and for 21 percent of total debt committed and outstanding. Long-term external public debt (about three-fourths of which is disbursed) has increased substan- tially over the last 10 years, although debt levels per capita and as a share of GDP have declined, reflecting the increase in official grant aid and growing recourse to short-term liabilities drawn on the Operations Account. Actual debt service payments on long-term debt have been modest, amounting to US$11.1 million in 1980, or only 4.1 percent of exports of goods and non-factor services. This ratio is lower than in the late 1960s and the early 1970s, and has been made possible by rescheduling some debts and by converting some loans into grants. However, the debt-service ratio could rise signifi- cantly in the future unless rescheduling is extended or further conversion occurs, which seems probable.  - 6 - 16. Sustained and viable growth of Mali's economy in the longer run depends crucially on policy reforms and investments that will strengthen the economy. As noted, the Government has recently taken some initial steps in this direction, including changes in certain economic policies, improvements in public finances, and a new emphasis on policies in the 1981-85 Plan. The Government's actions indicate a new commitment to economic reform-- including more reliance on the private sector--and warrant cautious optimism that reforms will be carried out. However, while these are positive signs, it is still too early to judge if the measures can be sustained. Similar efforts have been initiated in the past but postponed because drought, world inflation, structural constraints and poverty leave the country little margin for maneuver. Continued progress in these directions will be difficult because policy reforms will take time and needed investments will require increased resources. Regarding policies, existing patterns of high domestic consumption--both public and private--will have to be switched carefully to avoid undue hardship on an already poor population. Regarding investments, Mali's financing capacity for initial expenditures and recurrent costs is severely constrained by both the legacy of high spending levels and the limited savings potential when per capita income is extremely low. IDA can assist in designing and implementing policies and can help finance sound productive investment, including a high level of recurrent, local-cost financing to reduce delays in project implementation. PART II - WORLD BANK GROUP OPERATIONS IN MALI 17. The proposed credit would be the Association's twenty-seventh credit extended to Mali (including two supplementary credits), which would bring total commitments of IDA funds to US$248.3 million equivalent. Of the twenty- six operations already approved, ten have been for agriculture, eight for transport, two for education, two for telecommunications, one each for small- scale industries, urban development, petroleum exploration promotion, and power and water supply. Transportation and agriculture represent the largest share of past commitments, with 26 and 33 percent respectively of total commitments. The experience with ongoing operations has been mixed. The Mali-Sud area development project (cotton) is doing reasonably well while the other agricultural projects have experienced considerable difficulty. Highway reconstruction and improvement has been successful while highway maintenance has lagged. Implementation has gone fairly smoothly in the urban project, though somewhat behind schedule in the railway and education projects. Con- siderable delays have been experienced in the small-scale enterprise project. In general, project implementation has been hampered by Mali's difficult public finance situation, although the disbursement profile for Mali is slightly more rapid than for both the West Africa Region and all IDA countries. In addition, the International Finance Corporation has made two investments for a total of US$3.2 million, in a company manufacturing bleach and plastic products, and in a company processing sheanut butter for export. Notes on the execution of ongoing projects are in Annex II. 18. The Bank Group's strategy in Mali is governed by the constraints and potentials set out in Part I. The principal objectives of Bank Group assistance are to help improve the country's economic policies, to finance  - 7 - productive investments, and to help develop institutions to implement policies and projects effectively. Regarding policies, the strategy is to encourage those that promote economic growth, redress the financial imbalances of the public sector, and correct the biases of expenditures now favoring urban areas. Regarding investments, the strategy gives priority to those that will help increase agricultural production, meet the needs of the rural population in terms of health, literacy and rural infrastructure, and provide an adequate transport and communications network. The scope and pace of IDA's program depends on an on-going assessment of the country's economic management, particularly upon the willingness and ability of the government to address policy issues and undertake reforms where they are needed. The current IDA lending program for Mali contains projects with objectives closely related to policy and institutional reform. IDA has attempted to maintain a dialogue with the government on policy issues and to encourage it to undertake reforms that strengthen economic management. In turn, the responsiveness of the government in this policy dialogue determines not only the pace at which these projects are going to be carried out but ultimately the scope of the IDA assistance. 19. The future IDA lending program for Mali is expected to increase from US$28.2 million per year during FY80-82, reflecting the positive but cautious assessment of the Government's improved economic management per- formance described in Part I (paras. 12 and 16). In the agricultural sector, major focus will be on pricing and institutional issues. Future lending in the road transport sector would address the problem of generating and alloca- ting adequate recurrent cost financing. Projects are also being prepared for rural health and water, with Board presentation scheduled for October 1983. A proposed project for gasohol production scheduled for Board presentation in February 1983, would aim at alleviating Mali's dependence on imported energy. PART III - TECHNICAL ASSISTANCE IN MALI 20. In the past, the Malian Government has been understandably cautious about relying too heavily on expensive expatriate technical assistance, but it recognizes its value in helping solve problems of internal management and efficiency in specific agencies, enterprises, and projects. It also values highly assistance for training and studies. But the Government does not have a well-formulated national strategy to direct the use of technical assistance, nor is there a specific Government agency to coordinate that provided by different donors. Despite the fragmented and often ad hoc nature of past technical assistance, it has provided useful support to public agencies for implementing projects and has contributed to running ministries and occasionally to making specific policy reforms. Of course, there have been the usual implementation problems, like difficulties in recruiting capable specialists and shortages of qualified local staff to be cQunterparts. The Government is also increasingly concerned that training and studies be as operationally relevant as possible. Annex IV describes the major programs of technical assistance to Mali over the last decade.  - 8 - 21. Most previous technical assistance has not focused on economic and financial policy analysis and reform, in part because the Malian Government did not sufficiently recognize the need for it and in part because there was no overall program of reform into which it could be placed. However, in the face of continuing financial and economic deterioration, the Malian govern- ment formally requested technical and financial assistance from both IDA and the IMF at the end of 1980 to help carry out a program of economic reform and structural adjustment. This request indicates a significant change in attitude of the Malian Government, which is coming to recognize that economic restruc- turing and improved public financial management must be part of any lasting solution to the country's economic problems. Now that the Government is open to a deeper economic dialogue with IDA, technical assistance is needed to help elaborate policy options, as well as to enhance Mali's institutional capacity to devise and carry out reforms. This technical assistance is thus a necessary first step leading to formulation of a structural adjustment program. The Government is especially receptive to this assistance, even in key central agencies, as the need for policy reform has become more apparent. 22. The proposed technical assistance credit would be a valuable adjunct to the recently approved IMF Standby Loan (para. 12). The IMF and IDA have collaborated closely on the economic dialogue with the Malian Government. The specialists and studies under this project would help devise and carry out policies included in the adjustment program of the Standby, especially for cereals marketing and state enterprises. The Standby program complements the proposed project in that the IMF's ongoing discussions with the Ministry of Finance would provide an occasion to pursue public finance recommendations developed by the project. 23. The proposed project has been designed to build on and to complement the technical assistance provided by other donors while avoiding duplication. Basically, it would aim to help develop a cohesive program of economic reform and would provide assistance to support policy analysis at the sectoral level instead of simply focusing on the operation of specific institutions and projects, which are often covered by other technical assistance. Where opera- tional problems threaten to impede effective implementation of sectoral reforms, however, it would strengthen relevant institutions by supplementing or prolonging existing technical assistance and training provided by other donors. 24. Because there is no master plan or coordinator for technical assis- tance in Mali, it was necessary to discuss extensively with other donors during preparation of this project the scope and content of existing and planned technical assistance and training, in an attempt to identify major gaps in technical assistance and training required for strengthening manage- ment of the Malian economy and improving relevant government institutions. In this process, proposed IDA assistance was then tailored to fill these gaps left by other donors. The discussion of each component in Part IV gives examples of this iterative, informal procedure of coordination.  - 9 - PART IV - THE PROJECT Background 25. The project responds to a Government request in late 1980 for assistance in designing and carrying out a program of economic and financial structural adjustment (para. 12). An advance of US$1 million was extended through the Project Preparation Facility (PPF) to prepare and start imple- menting the project (para. 28). Appraisal took place in April-May 1982. Negotiations were held in October 1982 in Washington with a Government delega- tion led by the Minister of Plan. A credit and project summary is given at the beginning of this report. No Staff Appraisal Report is being issued. A supplementary project data sheet is at Annex III. Project Objectives and Description 26. This project would help strengthen management of the Malian economy by helping identify improved public financial and economic policies, by helping improve government institutions to elaborate and implement reforms, and by training Malian civil servants to make the improved institutions function better. Its long-term objective would be to improve the Government's administrative capacity to plan and implement better economic policies. The project would provide training, major diagnostic studies of rural development agencies and the state enterprises sector to lay the groundwork for reforms and subsequent technical assistance in these areas, specialists and supple- mental supporting studies to analyze, recommend and help implement policies, a limited amount of construction, equipment, and operating support, and prepara- tion of a second phase project. The assistance would amount to about 425 work months of specialists--including the PPF phase--and the equivalent of about 380 months of overseas fellowships (although much of the training would, in fact, occur in-country). The table below sets out the seven components as well as follow-up and implementation support for this project, together with estimated costs and main objectives of each.  - 10 - Total Estimated Of Which Component Cost 1/ Training Support Main Objective -_