Document of The World Bank FOR OFFICIAL USE ONLY Report No. 8958 PROJECT COMPLETION REPORT MALAWI SECOND TECHNICAL ASSISTANCE OPERATION (CREDIT 1428-MAI) AUGUST 13, 1990 Country Operations Division Southern Africa Department r%is documeut ha a efidcted dibstbutio and may be ued by reeplent only in the perfomnme of their offkic dues. its contefnts ny no odthwise be dicosed wihout Wodd Dank authorhzatio CURRENCY EQUIVALENTS Currency Unit = Malawi Kwacha (MK) Annual Average ExchanRe Rates (Kwacha per US Dollars) Year Kwacha per US Dollar 1984 1.413 1985 1.719 1986 1.861 1987 2.209 1988 2.561 As of June 1989 2.73 PRINCIPAL ABBREVIATIONS AND ACRONYMS ADMARC - Agricultural Development and Marketing Corp. DSB = Department of Statutory Bodies DPMT = Department of Personnel, Management and Training ESCOM = Electricity Supply Commission of Malavi IDP = Institutional Development Project ILO = International Labor Organization MDC = Malawi Development Corporation MOF - Ministry of Finance SAL = Structural Adjustment Operation TRA = Tobacco Research Authority UNDP = United Nations Development Program FISCAL YEAR April 1 to March 31 FOR OICIAL USE ONLY THE WORLD SANK Washington. D.C. 20433 U.S.A. ONzce i ov.cUvGneami Opifawia EvAhaaban August 13, 1990 M-ORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Malawi - Second Technical Assistance OReration (Credit 1428-MAI) Attached, for information, is a copy of a report entitled "Project Completion Report on Halawi - Second Technical Assistance Operation (Credit 1428-MAI)" prepared by the Africa Regional Office. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment I Thisdtuc nt ha aoeidabb itiitandrmaycbeausedibyimwithsu ion Btanpfannuoe| |of thir offieW dutib Its cwontsn may nUot Krwh be dwWekd wkhout Wodd Bank a_ lmi FOR OMCIL USE ONLY MALAWI SECOND TECHNICAL ASSISTANCE PROJECT Credit 1428.MAI PROJECT COMPLETION REPORT Table of Contents Page No. Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluation Summary . . . . . . . . . . . . . . ii PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE I. INTRODUCTION ....... . . . . . . . . . . . . . . . 1 TI: ECONOMIC BACKGROUND . . . . . . . . . . . . . . . . . . . . . . 2 III. OBJECTIVES AND DESIGN OF THE STRUCTURAL ADJUSTMENT PROGRAM . . . . . . . . . . . . . . 3 IVs THE ROLE OF TECHNICAL ASSISTANCE . . . . . . . . . . . . . . . 4 The Second Technical Assistance Credit . . . . . . . . . . . 4 Project Supervision and Implementation . . . . . . . . . . . 7 Project Results.. . . . . . . . . . . 7 V: LESSONS FROM EXPERIENCE. .. .......... 11 Bank and Borrower Performance . . . . . . . . . . . . . . 11 Sustainability . . . . . . . . . . . . 14 Lessons Learned .. .. . . . 14 Reconimendations .16 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE. . . . . . . . 17 PART III: STATISTICAL INFORMATION Credit Data .. . . . .. . .. . . 1 Related Bank Loans and IDA Credits . . . . . . . . . . 19 Credit Disbursements.. . . . . . . 20 ANNEX Seven Case Studies on Individual Components of the Second Technical Assistance Operation . . . . . . . . . . . . . 21 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. - i - NALAVI SECOND TECHNICAL ASSISTANCE PROJECT Credit 1428-MAI PROJECT COMPLETION REPORT Preface This is a report on the completion of the Second Technical Assistance Project in Malawi for which a credit (1428-MAI) of SDR 1.4 million (US$1.5 million equivalent) was approved on December 20, 1983. The Borrower was the Government of Malawi and the credit was closed on June 30, 1989, two years behind schedule. The credit was fully disbursed. This PCR was prepared by staff in the Country Operations Division of the Southern Africa Depar-ment. In February 1990 the Bank sent Parts I and III to the Government with the request for their comments and Part II of the report. Neither comments nor Part II were received from the Government. This report has relied heavily on a case study of the First and Second Technical Assistance Projects dated May 22, 1989 and carried out by OED in conjunction with an Evaluation Study of Free Standing Technical Assistance in Support of Public Sector Management in Sub-Saharan Africa. In addition, material from Bank files, visits to Malawi and discussions with Bank staff formerly connected with the project were used in the preparation. - ii - MAL&VI SECOND TECNIChAL ASSISTANCE PROJECT Credit 1428-MAI PROJECT CO)GLETION REPORT Evaluation Suzmsarv Obiectives i. The second Technical Assistance Credit was approved by the Board of Executive Directors on December 20, 1983 in conjunction with the Second Structural Adjustment Credit. The purpose of the credit was to support the Government of Malawi's Structural Adjustment Program, and, given the wide scope and varied nature of the SAL, TA II was also a diverse project. The Government'c adjustment program is described in paras. 4-14. The TA project, pre-defined five components and left a sixth component open for 'other studies associated with the Second Structural Adjustment Project...'. Ui. The five specific components of the project were: (A) Strengthening the energy planning capabilities of the Economic Planning Division of the Borrower's Office of the President and Cabinet, including training; (B) Carrying out by the Tobacco Research Authority (TRA) of a pilot fuelwood savings program; (C) Carrying out of an electric power tariff study by the Borrower's Electric Supply Commission; (D) Strengthening of the Agricultural Development and Marketing Corporation's financial management capabilities; and (E) Strengthening the Borrower's Ministry of Finance's debt management capabilities, including training and acquisition of equipment; iii. Six other studies associated with the Second Structural Adjustment Project were carried out. some of quite substantial volume (cost), others quite small: (Fl) Agricultural Diversification Study (Analysis of the viability of a proposed agricultural credit institution for the estate sub-sector); (F2) Comprehensive Human Resources Study (Manpower Survey); (F3) Study on (the revision of) the code for government procurement; (F4) to (F6)s Financing parts of project preparation activities for the proposed Institutional Development Project (IDP) (short- term contract for at expert in preparation of the Malawi Institute of Management component, short-term contract for a second expert in a similar context and financing of 16 cases of training abroad for personnel of the Ministry of Finance.) Details of the individual components are given in paras. 16-18 and the attached annex. Imnlementation Experience iv. On the Government's side, the overall project was under the supervision of the Ministry of Finance and, on the Bank's side, overall supervision was under the Country Programs Division and then the Country Operations Division after the reorganization. The various subcomponents were supervised by technical people in appropriate divisions both within the Government and the Bank. Given the varied nature of the subcomponents, this allocation across various groups made sense, but it complicated coordination of activities and decreased central control and responsibility. Implementation of subprojects varied greatly and is described in the Annex. The Bank supervised the overall project three times in six years, May 1984, July 1986 and July 1988. Each supervision - iii - was done by a different staff member. In addition numerous supervisions of subprojects were carried out, often in conjunction with other tasks in the field. On Government's side the project was under the Finance Officer in charge of dealing with the World Bank and it did not receive much attention or supervision. Still, on the whole most of the subcomponents were implemented successfully. The project was extended twice and closed two years later than originally scheduled. Results v. Results varied from subproject to subproject. The many different systems of delivering know-how led to widely differing results. (See paras 23-28.) While support for the country's structural adjustment was the project's primary goal, and here the project was mostly successful, one must also assess the institution building aspects of the project as well. Here it did not do as well. The Bank's assistance included a wide spectrum of relatively small technical assistance components, greatly differing in their objectives, means of delivery, and comprehensiveness of the resources provided. Only for some of the components one can see a fairly close link to the policies of Structural Adjustment. Problems of coordination, personnel management, extent of use of local professionals, and insufficient planning and supervision hurt some of the subprojects. Sustainability vi. The best way to ensure that the adjustment process is sustained, is to help to build up the Government's capacity and willingness to *internalize" the process of policy reform as quickly as possible; in other words, to ensure that the country accepts the adjustment program as its own and not the Bank's, and that it is designed by the country itself. This, so far, has been the least successful aspect of the adjustment process. For the technical assistance subprojects, sustainability is defined as the recipient organizational unit being maintained after the end of technical assistance, and the local professionals trained under the project remain available with this unit for the work still to be done. It only can apply where positive short-medium-term effects have been achieved, i.e., where a professionally sound output has been produced and has been accepted by the recipient institution and where some training and transfer effects have taken place. Unfortunately, the subprojects have many examples of non- sustainability. Even when certain training effects were achieved during the study, such effects often were not sustainable, with the local professionals who had participated in project having moved on to other, non-related activities or for overseas training. There were cases where sustainable effects are likely to be achieved within the target group, but often these were not public institutions. *(See paras 43-45.) Findings and Lessons Learned vii. Evaluation of the overall project is difficult because the various components differed so from each other and because in many of the cases there were no documents that outlined clearly the objectives and targets. Also some of the components had very short term objectives, while others were more of a longer term, institution building nature. The short term projects could be judged successful or not at this time, but for the - iv - long-term projects, a final judgement may need more time to be rendered. In all cases though, it should be kept in mind that the major purpose of the TA II project was to help the Government in carrying out its adjustment program. In this regard the lack of predetermined objectives and the availability of uncommitted funds added flexibility to the project which was useful as new needs were identified over the course of the SAL implementation. Often unforeseen events, both external shocks and internal difficulties, create the need for additional studies or the recruitment of either short-term or long-term consultants and experts. Funding for these needs is often required on short notice and the TA II project was well- placed in this regard. With hindsight, of course, the priority of what were seen once as pressing needs may later be questioned. For example the training courses taken by the staff in the Ministry of Finance should not have been approved without a comprehensive staffing and training program. Both the Bank and the Government failed to put the technical assistance needs into a longer term context. Also support to a broad-based SAL led to an overly diffuse TA project. Just as the adjustment operations have become more focussed, so must future technical assistance to Government if it is to be effective. viii. The evaluation of the Third SAL concluded that the adjustment program has had limited success in insulating the economy from exogenous factors. A lesson emanating from this experience is that the assumption underlying the three SALs that the constraints and distortions in the Malawian economy were relatively mild, and that with successful implementation of broad measures, a sufficient supply response could be achieved, appears to have been too optimistic. The Bank has come to recognize that the constraints to growth are much more deep-seated than previously realized and the Government's ability to implement an adjustment program is not as strong as we had thought. Administratively and politically the Government has not been able to formulate or implement the adjustment program as quickly as anticipated. This implies that the technical assistance supplied in these areas was not sufficient or adequately absorbed and retained. The adjustment program issues are now being addressed through the design of much more focused operations, increased emphasis on key supply bottlenecks and efforts to strengthen the administrative ability of the Government and key development institutions. ix. Future technical assistance oriented to institutional development should try to avoid or to minimize some disadvantages of the Bank's present technical assistance: namely the tendency towards a 'blueprint approach' (which is more suitable for capital projects than for assistance to social processes), and the Bank's insufficient supervision of technical assistance projects and sub-projects. More molding of the project as both sides learn from the experience of implementing the project is needed. Regularized supervision of both the overall project and possible subprojects should be implemented. x. Future technical assistance should concentrate on fields where the Bank has a strong comparative advantage over other donors (for example, projects which help develop macro and micro economic analysis capability). Project components should be as closely related as possible. Unidentified components could be developed during the implementation of the project, but extra funds should not be looked upon by both sides as free resources to be - v - used in an uncoordinated way. It seems more appropriate to organize the assistance country or sector-wise with one or a few major partner institutions being involved not only administratively but also professionally. Clearly an institutional development strategy needs to be devised along with economic policy. xi. Assistance complementing SALs should not be given in the form of free-standing multi-sectoral "umbrella' agreements, but are better to be integrated into the SAL program and project itself. Just as the Government must feel it owns' the adjustment program, so must it own the technical assistance that goes with it to help in implementation. Strengthening of key institutions is a key component of adjustment, but given its longer term nature, it should probably be put into separate institutional development projects. In turn, these ID projects should be phased to complement the priorities identified in the adjustment program. MALAWI SECOND TECHNICAL ASSISTANCE PROJECT Credit 1428-MAX PROJECT CONPLETION REPORT PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE I. INTRODUCTION 1. The Second Technical Assistance Operation was approved by the Board of Executive Directors on December 20, 1983. It was presented with the Second Structural Adjustment (SAL II) operation and had been processed in parallel with SAL II. Its raison d'etre was to support the structural adjustment program, and given the wide scope and varied nature of the SAL, TA II was also a diverse project. The Agreement on TA II provided for an IDA Credit in various currencies equivalent to 1.4 million SDR on standard IDA terms (0.752 interest, repayment over 50 years including a grace period of ten years). Schedule 1 of the Agreement specified three categories of items to be financed out of the proceeds of the Credit: (1) vehicles, equipment and office supplies (230,000 SDR); (2) consultants' services and training (990.000 SDR); (3) unallocated (180,000 SDR). Schedule 2 of the Agreement gave a description of the project, pre-defining 5 components and leaving a sixth component open for 'other studies associated with the Second Structural Adjustment Project...'. 2. TA I and II were evaluated as case studies in a recent Operations Evaluation Department (OED) Evaluation Study of Free-Standing Technical Assistance in Support of Public Sector Management in Sub-Saharan Africa. This Project Completion Report draws heavily on this document, especially for the factual data on the project, but it pree'nts its own conclusions and lessons learned, which differ in some respects from those reached in the OED Evaluation Study. 3. This technical assistance project will be evaluated in the context of the Structural Adjustment Program that it was supporting. In June 1987, the Bank's Operations Evaluation Department issued an evaluation of the first two SALs and the first TA project 1/, which contains extensive background information on the nature of the economic and financial difficulties that led to the adoption of the structural adjustment program of which SAL II and TA I1 are parts. This report, therefore, gives only a brief summary of this background. In addition a Projection Completion Report on the Third Structural Adjustment Operation was issued in June 1989 and this report has drawn on that document also. 4. Initially, it was envisaged to assist Malawi's structural adjustment program with a sequence of five SALs of a relatively general nature, complemented with specific technical assistance and project lending. During implementation of the adjustment program, however, certain 1/ Report No. 6833 'Malawi - First/Second Structural Adjustment Loan/Credit,' Operations Evaluation Department, June 12, 1987. weaknesses of the BanX's general approach became apparent, as a result of which the Bank has not continued its general, broad approach after SAL III, but has instead concentrated on more narrowly focused sectoral adjustment operations. Similarly, while there was a broad technical assistance component in SAL III to support the Adjustment Program, as TA I and II had supported SALs I and II, the Bank has since shifted to a more focused approach to technical assistance. An Institutional Development Project, which concentrates on a small number of public sector management issues, was approved by the Bank's Board of Executive Directors on June 13, 1989. II. ECONOMIC BACKGROUND 5. From Independence in 1964 until the late 1970s, the Malawian economy grew at a satisfactory average rate of about 5.5 percent a year. The leading sectors were estate agriculture, producing such export crops as tea, tobacco and sugar, and agro-industries and textiles. What budgetary and balance of payments difficulties occurred during that period, remained fairly well manageable. The adverse impact of the first oil shock in 1973 was generally offset by rising export prices. 6. Malawi's economic growth in that period was stimulated by pragmatic economic policies. The Government had adopted an outward-looking strategy, based on agriculture and private sector initiative. Foreign investors were welcome, and fiscal policies were conservative and prudent. Although economic control mechanisms, such as wage and price controls and exchange regulations were in place, they were used relatively unobtrusively and were judged not to have caused significant distortions in the allocation of resources. 7. From about 1978 on, however, a number of external and internal factors combined to cause serious setbacks to the economy. A generally unfavorable development of prices for Malawi's export crops, and the rise in import prices associated with world inflation after the second oil shock in 1979 led to an unprecedented fall of 40 percent in Malawi's terms of trade between 1977 and 1980. Droughts in 1980 and 1981 caused declines in agricultural production and export volumes, and forced the country to import maize. At the same time, rebel activity in Mozambique caused serious disruptions of rail traffic to the ports of Beira and Nacala, on which Malawi had traditionally relied for its external trade. Developing longer alternative routes brought sharply increased external transport costs. Also, in the late 19709, there was a reversal in the Government's conservative policies. Large pay increases led to increases in recurrent expenditures without commensurate revenue increases, and major public investments of a nonproductive character were undertaken, financed, in part, by non-concessional borrowing. 8. As a result of all this, the deficit on the balance of payments current account increased from 8-9 percent of GDP in the mid 1970s to about 20 percent in 1978-80. The debt service ratio rose from 7 to 26 percent between 1977 and 1981. Foreign reserves declined to precarious levels. The Government's budgetary deficit rose from 7-8 percent of GDP in the mid 1970s to more than 16 percent in 1981. GDP showed declines in real terms in both 1980 and 1981. - 3 - 9. Recognizing the unsustainable nature of the external and internal deficits, and eager to restore growth in the economy, the Government prepared, in consultation with the IMF and the Bank, a medium- term stabilization and adjustment program. Restoring financial equilibrium and improving demand management were considered the most pressing needs at the time. It had also become apparent that certain structural weaknesses in the economy had to be overcome before sustained growth could resume. First, the growth of agriculture had been mainly in the estate sector, making the country vulnerable to wide fluctuations in prices of the three main export crops. Second, in spite of substantial foreign-assisted attempts at rural development, smallholder supply response had failed to materialize, largely, it was thought, owing to low producer prices. Third, formal and informal price controls reduced incentives in the productive sectors. Fourth, administration and management of the public sector, central government and parastatals alike, had weakened in recent years and needed considerable strengthening if it were to deal with the difficult financial and economic situation. III. OBJECTIVES AND DESIGN OF THE STRUCTURAL ADJUSTMENT PROGRAM 10. Although initially the Government attempted to bridge the growing financial gaps by increased external borrowing, it soon became clear that more stringent measures were needed. Beginning in 1979, the Government undertook a number of short-term demand management measures. These were supported by a series of programs with the IMF largely aimed at reducing both balance of payments and budgetary deficits. Performance criteria involved phased ceilings on total domestic credit and on net bank credit to the Government, as well as a limit on Government-guaranteed borrowing. Specific measures included increases in taxes and duties on imported and domestically produced goods and the use of an active exchange rate policy. The Government was encouraged to seek debt relief. 11. In designing the SALs, close cooperation was maintained with the IMF. The strategies adopted in the first two SALs addressed four main areas of the economy: the balance of payments through renewed export growth, diversification and savings on imported energy; price incentives and incomes; resource management; and institutional improvements. As, in spite of the economic difficulties, the economy was judged to be relatively free of major distortions in any particular field, the SAL programs were broad-based with simultaneous actions on several fronts to enhance efficient resource allocation in the produlctive sectors, and to improve efficiency in supporting institutions, including the Government itself. 12. The program under SAL II was more concrete than that under SAL I with, among other things, major policy reforms in two key areas. First, decreasing the Agricultural Development and Marketing Corporation's (ADMARC) implicit taxation of the smallholders sector with the implementation of producer price increases, and, second, improving the management and achieving restructuring of the private sector conglomerate Press Holdings and other key institutions in the economy. -4.. 13. At the time SAL III was initiated, it was still difficult to make a firm judgment on the accomplishments under the first two phases of the program. The implementation record of SALs I and II was mixed. Mach of the implementation met with some delays or was initially less than agreed, which led to postponements of six months of release of the second tranches of both SALs. Nevertheless, there were the development and utilization of a mechanism for determining relative crop price levels, the removal of most price controls, the rationalization of budget preparation, and the difficult steps that were taken in the restructuring of major parastatals and Press Holdings. A Department of Statutory Bodies (DSB) was established to oversee the commercial parastatals. 14. Although there was not yet any clear evidence of a sustained supply response, the economy showed hopeful signs of recovery during SAL I and II. In the period 1982-84, GDP grew by more than 4 percent a year on average. The balance of payments current account deficit remained high through 1983, but then declined sharply to about 2 percent of GDP. The Government's budgetary deficit fell from 16 percent in 1981 to 8 percent in 1984. Although demand management measures had started to take effect, much of the economic and financial improvement had been due to exogenous factors, such as normal recovery from losses caused by earlier droughts, an improvement in terms of trade led by record world prices of tea in 1984, and an increase in export volumes, as large accumulated stocks of tobacco and sugar could be moved. IV. THE ROLE OF TECHNICAL ASSISTANCE 15. When preparing the first SAL, the Bank recognized that it lacked sufficient specific knowledge to design a program with the desired degree of prescriptive detail. Under SAL I the Bank had basically sought and obtained government commitment to increase producer prices for agricultural products, increase budgetary allocations to agriculture, move towards price decontrol, and increase tariffs of various parastatals. Furthermore, the government agreed to undertake studies, and draw up action plans, which would lead to more concrete institutional and policy reforms in following phases of the program. For this purpose, the first SAL was accompanied by a free-standing technical assistance credit. At the time of the preparation of the second SAL it was clear that still more knowledge needed to be accumulated in certain key areas, and also that the Government lacked the expertise to carry out an adjustment program without external technical assistance. A second technical assistance project was therefore coupled with SAL II. The Second Technical Assistance Credit 16. Five specific components of this project were identified at the time it was approved, with a sixth category left for other studies. They weret (A) Strengthening the energy planning capabilities of the Economic Planning Division of the Borrower's Office of the President and Cabinet, including training. - 5 - This component has been carried out mainly in the form of one long-term expert assignment (1986-1988) at a cost of approximately 283,000 SDR; there was cofinancing from the United Nations Development Program (UNDP) mainly for training and equipment. (B) Carrying out by the Tobacco Research Authority (TRA) of a pilot fuelvood savings program. This component involved the financing of two experts for research and extension work for a period of two years. The component may be regarded as the partial financing (approximately 240,000 SDR) of a project strongly supported by UNDP. (C1) Carryi- out of an electric power tariff study by the Borrower's Electric Supply Commission and (C2) an industrial price control study by the Borrower's Ministry of Trade, Industry and Tourism. Component (C2) was dropped; the Government had strongly reduced its price control system without requiring external expertise for this process. Component (Cl) was carried out at a cost of approximately 102,000 SDR. (D) Strengthening of the Agricultural Development and Marketing Corporation's financial management capabilities This component consisted of a two-year extension (costing an equivalent of approximately 121,000 SDR) of the assignment of a Financial Controller who had been financed from another Bank project before. This was following a recommendation from a consultancy under TA !. (E) Strengthening the Borrower's Ministry of Finance's debt management capabilities, including training and acquisition of equipmer.t. This is a follow-up on a component of TA I. Support under TA II was limited to purchase of additional equipment; proposed advisory assistance was supplied directly by staff of the External Debt Division of the World Bank who undertook seven missions in the period of 1983-1988. (F) Other studies associated with the Second Structural Adjustment Project. Under this category six more components have been carried out, some of quite substantial volume (cost), others quite small: (Fl) Agricultural Diversification Study (Analysis of the viability of a proposed agricultural credit institution for the estate sub-sector) This study was carried out at a very early stage of TA II (1984/ 85) at a cost of approximately 82,000 SDR. The study has shown that credit demand could be met without creating a new institution. - 6 - (F2) Comprehensive Human Resources Study (Manpower Survey) Cost-wise this study was the largest component of TA II (equivalent to approximately 350.000 SDR or 25 Z of the total credit amount). The study was carried out by a team provided by International Labor Organization (ILO), in cooperation with the Department of Personnel, Management and Training (DPMT). (F3) Study on (the revision of) the code for government procurement (*procurement code study") This study (cost approximately 33,000 SDR) has been completed as a draft which has been reviewed recently by the Government and will be completed by the end of 1990. (F4) to (F6): Unutilized funds of TA II have been used for financing parts of project preparation activities for the proposed Institutional Development Project (IDP) (short-term contract for an expert in preparation of the Malawi Institute of Management component, and short-term contract for a second expert in a similar context). Also in connection with the IDP (and with delays in the utilization of the TA II funds) one may see the financing from TA II of 16 cases of training abroad for personnel of the Ministry of Finance, a purpose for which Schedule 2 oZ the Credit Agreement did not make any provision. These three components of TA II seem closely related to what seems to signal a trend leading away from the original technical assistance projects. Details of the individual components are given in the attached annex. 17. Of the originally identified five studies or activities, three were connected with the energy sector and two were connected with Strengthening of key development institutions, one a parastatal and one a component of a Government ministry. These were addressed under the TA project because of the belief by the Bank and the Government that they were vital parts of the Adjustment Program and needed to be acted upon quickly. At least implicitly there was a belief that grant financing from other donors was not available for these activities. Other TA components, such as the development of the extension and management training programs for the estate sector, were left for other donors and indeed the first component above (the strengthening of the energy planning capabilities) has subsequently been picked up by UNDP under grant financing. It is not possible to know if greater effort at the time of the preparation would have enabled the Bank and the Government to find grant financing for all the components of TA II. 18. The 'other studies associated with the Second Structural Adjustment Project' were very heterogeneous and it appears that these funds were looked upon by both the Bank and the Government as a fund to be tapped for various activities for which other funding could not be found, even if the links to the SAL were somewhat tenuous at times. For the Bank the major expenditure was on a Comprehensive Human ResourcE's Study. The links of this to the SAL were not firmly established and when it experienced a cost overrun of over 40 percent, it consumed over a quarter of the total -7 funds in the project. Another major use was to help prepare the Institutional Development Project which was closely tied to the goal of strengthening development institutions, especially the Ministry of Finance. On the Government's side, the main use of these unallocated funds was for training, especially for staff of the Ministry of Finance. Proiect Supervision and Implementation 19. On the Government's side the overall project was under the supervision of the Ministry of Finance and on the Bank's side overall supervision was under the Country Programs Division and then the Country Operations Division after the reorganization. The various subcomponents were supervised by technical people in various divisions both within the Government and the Bank. For example the energy efficiency component was supervised by the Energy Division of the Central Projects, while the manpower study was supervised by the departmental Education Division, the debt monitoring component by the country programs and country operations divisions with assistance from the External Debt Division. Given the varied nature of the subcomponents, this allocation across various groups made sense, but it complicated coordination of activities and decreased central control and responsibility. 20. The Bank supervised the overall project three times in six years, May 1984, July 1986 and July 1988. Each supervision was done by a different staff member. In addition numerous supervisions of subprojects were carried out, often in conjunction with other tasks in the field. On Government's side the project was under the Finance Officer in charge of dealing with the World Bank and it did not receive much attention or supervision. This can be seen in the haphazard submission of disbursement requests without any central tracking by the Government. As a result there was generally confusion about the amount of funds still available under the project and what components had received payments. Only after the supervision mission in 1988 was the Government able to construct a complete flow of funds to the project that was agreed with the Bank. An indication of the lack of central control on both sides was the Government's submission twice for reimbursement of a computer purchase of more than MK460,000 (about SDR157,000) and the Bank's paying twicel Once the error was caught, the Bank applied future disbursement requests against the overpayment, further complicating the calculations of the sums remaining in the credit. The already mentioned large overruns on the Human Resources Study are another example of a lack of central control. Proiect Results 21. The OED Evaluation Study identified a number of problems with technical assistance in general in Malawi and many of these are evident in this project. As presented at a seminar in Lilongwe in April 1988 these includeds (a) The lack of sufficient Government coordinating capacity, able to define technical assistance needs on the basis of own personnel development plans, and to request and supervise technical assistance from various donors accordingly. (b) Difficulties in the Government's system of personnel management, leading to a loss (or insufficient use) of trained personnel (including personnel trained in the context of technical assistance). (c) The unsolved issue of whether and to what extent foreign donors should make more use of local professionals instead of expatriates (advantages in terms of cost and training opportunities, disadvantage of creating distortions in local pay scales). (d) Competition and non-coordination among donors; influence of own interests of donor agencies and experts (e.g., prolongation of assignments beyond actual needs). (e) Difficulties of donor agencies to react fast and flexibly to assistance needs and to recruit fully qualified personnel. (f) Insufficient planning and supervision of the individual technical assistance projects, both through donor and recipient agencies, particularly in respect to asoftu objectives like training of local personnel. (g) Sigh cost of technical assistance (even if given on a grant basis); strong reluctance to use loans or credits for technical assistance purposes. 22. Issue (a) is regarded a key issue; without strengthening the Malawi Government's capacity for a better coordination and supervision of technical assistance, little progress can be made in solving any of the other issues. 23. Looking at the sub-projects it is very difficult to discover any common denominator except the following: - Funds from the TA loan/credit are used for the import of expert services (including payment of salaries for expatriates already living in the country) and, in some cases, of goods with a high technology content. - These imported services (goods) are not directly linked to other Bank-financed capital projects (e.g., infrastructure projects) or import programs (as financed under SAL); however, in several cases there are quite strong indirect links (e.g., studies relating to sectors where the Bank is or intends to be involved). Three subprojects (ADMARC, Electricity Supply Commission of Malawi (ESCOM), Debt Management Unit in the Ministry of Finance) are linked to SALs while two are not and two are doubtful. - In principle, all the sub-projects refer to the import of know- how (thought to be not available in Malawi) which is to be -9- brought to use, in quite different ways, within the Malawi Government's and para-statal institutional framework. 24. The latter seems importantt There are at least four different ways of bringing to use the foreign know-howt (a) Foreign experts work in line positions, making direct use of their know-how with or without transfer to others (case Di Financial Controller). (b) Foreign experts act as advisors and trainers, transferring their know-how to local professionals who actually bring it to use (in none of the cases existing in pure form; however, to some extent, transfer of know-how in the Energy Unit and the Fuelwood Savings Project). (c) Foreign experts produce a study; this 'product' incorporates the experts' know-how and work results, and it is left to the recipient institution(s) to make use of it (dominating form in the case of the Power Tariff Study and the Human Resources Study; there are strong elements of this "delivery system' also in other cases like support to the Ministry of Finance). (d) Through training abroad foreign know-how is transferred to local professionals who, at a later stage, will have to make use of that know-how in their own work situation (almost nonexistent in the Bank-financed technical assistance to Malawi, except the recent, more or less unplanned, training for the Ministry of Finance personnel). 25. The seven cases differ widely in respect to the 'delivery system' of the technical assistance through which foreign expertise is transferred to, and brought to use in Malawi. They also differ widely in their objectives especially in the scope of their ambitions to contribute to public sector management and institutional development. Since there are no generally accepted categories for a classification of such objectives, such differences can be described here only in a pragmatic way; one may distinguish the following types of cases: (a) There are some cases where, at least in principle, the technical assistance was/is meant to lead to a broad-based and sustainable strengthening of a specific institution: this seems to be the case with the strengthening of the Energy Unit of OPT (case A) and the support to the Ministry of Finance (cases E and F3-6.) (b) There are other cases where it was intended, through the provision of a study, to contribute to specific strategic decisions which would play a decisive role for the development of a certain institution: an example is the Power Tariff Study for ESCOM (case C). One may say that these are one-shot contributions to institutional development. - 10 - (c) The Human Resources Study (case F2) is not oriented to a specific institution; it is providing basic information potentially relevant for many different institutions. (d) There are other cases where the main objective seems to have been the filling of a specific gap within the personnel structure of an institution: e.g. the Financial Controller of ADMARC (case D). This is a form of so-called "substitution, technical assistance. (e) The pilot Fuelwood Savings Project (case B) had little ambition of institutional development and public sector management; it is a classical project meant to produce a certain output (research results) and to deliver those results to the target group. (f) In addition there are a number of components not discussed here in detail, which have the character of feasibility studies on potential future projects. 26. Several cases combine elements of several categories; the given classification may not do full justice to them. It also should be noted that in some cases the Bank-financed assistance covers only a part of the foreign inputs; other important contributions to the same "project" had been made by other donors, for instance, by UNDP. In such cases neither the success nor the problems can be fully attributed to the Bank's assistance. 27. Despite the formation of a debt monitoring unit in the Ministry of Finance and improved record keeping and data analysis, little progress was noted with developing an external borrowing strategy, and in general, with the monitoring capabilities of the Ministry of Finance (MOF). The MOF's administrative capacity has remained weak. Strengthening financial management is now an important objective of the recently initiated Institutional Development Project (Cr. 2036-MAI). 28. Parastatal operations generally improved. The restructuring and restoration of the financial and operational soundness of Press Holdings and Malawi Development Corporation (MDC) had been largely accomplished under SAL8 I and II. The Government monitors the operations of these organizations through representation on their Boards. Both organizations have continued to make progress, both financially and operationally. At the time of the review mission, plans were being worked out for the divestiture of a number of ADMARC's non-marketing activities. ADMARC's operations became the main focus of the program under the SAL III Supplement. However, there was less success in restructuring the operations of Department of Statutory Bodies (DSB). Its staffing has remained weak and implementation of a new system giving more freedom to parastatals to implement agreed upon annual plans has yet to be implemented. 29. Summarizing one may say that Bank's assistance given under the free-standing technical assistance agreement TA II, although assumed to support SAL II, included a wide spectrum of relatively small technical - 11 - assistance components, greatly differing in their objectives, means of delivery, and comprehensiveness of the resources provided. Only for some of the components one can see a fairly close link to the policies of Structural Adjustment. Such links may be seen in the attempted strengthening of the para-statal organizations (ADMARC, ESCOM) or in the strengthening of core institutions (Energy Unit in the Department of Planning and Development, Ministry of Finance). In the case of the Fuelvood Savings Project and the Human Resources Study it is more difficult to see such links. Consequently, although the TA projects were appraised at the same time as SAL I and II and were presented to the Board simultaneously with the SALs, some of their components were in fact only loosely related to such SALs. V. LESSONS FROM EXPERIENCE Bank and Borrower Performance 30. With the possible exception of the Fuelvood Savings Project, which was the most technical and practical project, all the sub-projects had shortfalls in respect of one or more of the following success criteria which, though not explicitly formulated in any of the project documents, can be regarded as necessary conditions of successful technical assistance activities: (a) The professional quality of the personnel involved and the job performed. (b) The correspondence to needs in the sense that the output really fits a felt need, making the recipient institution(s) to absorb and fully utilize the technical assistance output. (c) The efficiency/economy of producing the output at reasonable cost (particularly without undue and costly delays). (d) The training and transfer effect: having local professionals to participate in the work process and absorbing the know-how brought in by expatriates. (e) Sustainability: the recipient organizational unit is maintained after the end of technical assistance, and the local professionals trained under the project remain available with this unit for the work still to be done. (Discussed in a later section.) 31. The cases investigated differ widely as to the extent to which those success criteria have been met. In respect to the professional quality (criteria a) no really strong critical comments were voiced. However, some doubts were raised in several cases by the former local counterparts and/or Bank supervision reports, whether really an optimum choice of personnel had been made, particularly referring to the Energy Advisor (case A) and the team working on the Human Resources Study (case P2). - 12 - 32. The problem of technical assistance not really matching the needs of the recipient institutions is case C: ESCOM was never really convinced that the tariff problem under study (tariffs based on long-term marginal cost) was an issue of urgent concern; the study remained an academic exercise. 33. Doubts concerning the efficiency/economy of the technical assistance have been and may be raised in respect to several sub-projects. In case B (Fuelwood Savings Project) long delays in the execution must be seen as the only major shortfall in this project. The Human Resources Study (case F2) ran into substantial difficulties due to budget over-runs. 34. The lack of training and know-how transfer is a negative feature common to practically all the sub-projects, perhaps with one exception: the execution of the Human Resources Study (case P2) was done in a form conducive to familiarize the local professionals with relevant techniques for manpower surveys and manpower planning. 35. Project management has been done with very low intensity and with techniques which could be improved: - On both sides, in the Bank and in the Ministry of Finance, documentation on the project/agreement is kept only in the form of purely chronological files, taking in information if and when it comes up. Apart from the few Supervision Reports there are no other instruments producing information on a routine basis in a standard form. There is no standardized information on the individual subprojects (subproject data sheet) giving some major data like objectives, targets, responsibilities assigned to different institutions or persons, budget, commitments, actual disbursements. Disbursements are not made/classified by subprojects but only by types of cost (equipment, consultants etc.); "project managers' have difficulties to find out from the files what commitments and disbursements actually have been made in respect to individual sub-projects. In the course of implementing TA II there were periods in which the responsible persons on both sides had great difficulties to decide how many funds were still available under the agreement and how much room there would be to enter into further activities. Clearly more frequent supervision of the overall project by the Bank staff would have been useful. 36. The Project Completion Report (PCR) for SAL III has pointed out that ideally the adjustment program should be the Government's own program. reviewed and endorsed by the Bank, which would be supported by structural adjustment lending. But, as in so many other countries, the Malawian Government's own capability to analyze and formulate policies was weak, and the first two SAL operations were basically Bank-designed programs. Strengthening the Government's policy formulation capabilities was one of - 13 - the objectives of the TA credits, but little progress was made and the further phases of the program continued to be designed mostly by the Bank. 37. In respect to the "other projects" which were still to be defined, no clear pattern seems to exist. There seems to be at least three different types of casest - Project ideas coming up from other Malawian institutions looking for a source of finance (example: Human Resources Study) - Ideas connected with other Bank activities (example: consultancies connected with the preparation of the Institutional Development Project) Ideas resulting from the desire to make a quick and u..complicated use of some left-over funds under the Agreement (example: training abroad for Ministry of Finance personnel). 38. Only in some cases terms of reference were still traceable in the files. In general, they seemed adequate, sufficiently precise to give direction, sufficiently flexible to adapt to changing or unknown needs. A common feature seems to be that training tasks, though principally part of technical assistance operations, are not detailed clearly in the terms of reference or contracts. 39. In none of the cases serious mistakes in selecting the expatriate personnel seem to have happened. However, there seems to be some tendency to give preference to contracting large and well-established firms rather than experimenting with smaller firms or even individuals who might be available at lower cost. 40. In principle, the individual subprojects which were executed by various Government institutions were to be supervised, from the Malawi side, by the Ministry of Finance as the agency responsible for the overall project. This supervision, however, was largely confined to the financial and administrative aspects. On the Bank's side there was some substantial supervision (also in professional terms) only in respect to the energy- related subprojects and the strengthening of the external debt unit. 41. With the exception of the Fuelwood Savings Project, no regular activity or progress reports were prepared which could have been a basis for a somewhat regular monitoring of the progress by the Bank or by Malawi institutions. It is not known whether a final report has been prepared on any of the subprojects; no such report, prepared by a consultant or by an executing agency, could be found in the files. 42. The change of personnel and organization in the Bank led to less than optimal supervision of the project--a certain minimum amount of standardized and routine flow of information would avoid this problem of less than optimal supervision, particularly in times of rapid changes in personnel and organization. In addition the Resident Mission in Malawi was just being organized during the implementation of the project and it was not able to play as substantive a role as would be expected. - 14 - Sustainability 43. The best way to ensure that the adjustment process is sustained, is to help to build up the Government's capacity and willingness to "internalize" the process of policy reform as quickly as possible; in other words, to ensure that the country accepts the adjustment program as its own and not the Bank's, and that it is designed by the country. This, however, has been the least successful aspect of the adjustment process. The Government has made increased efforts to design its own reform program and it has been successful in developing a medium term policy framework. Still in spite of attempts to bring about a strengthening of the Government's capability to carry out policy analysis, the programs under the three SALs continued to be mainly designed by the Bank. It has become apparent that instead of becoming easier and more acceptable, it became more difficult for the Government to reach and implement difficult decisions. Actions carried out only to meet requirements of the lender are soon abandoned and don't have a lasting impact. Examples are the continuing weaknesses in forward budgeting and recent deterioration of the debt unit. 44. For the technical assistance subprojects, sustainability is defined as the recipient organizational unit being maintained after the end of technical assistance, and the local professionals trained under the project remain available with this unit for the work still to be done. 45. Sustainability, only can apply where positive short-medium-term effects have been achieved, i.e., where a professionally sound output has been produced and has been accepted by the recipient institution and where some training and transfer effects have taken place. A striking example of non-sustainability seems to be the Human Resources Study. Although certain training effects were achieved during the study such effects were not sustainable: all the local professionals who had participated in this project have left the Department; the former Manpower Unit practically has been dissolved. In case of the Energy Unit (case A) training effects during the assignment of the advisor seem to have been below optimum, and their sustainability is endangered by the fact that the local professionals who had worked with the advisor will leave the unit for further long-term training abroad. In case B (fuelwood savings) sustainable effects are likely to be achieved within the target group (tobacco growers); they were not intended to be achieved in the public institutions. Lessons Learned 46. Evaluation of the overall project is difficult because the various components differed so from each other and because in many of the cases there were not planning documents that outlined clearly the objectives and targets in such a way that success could be measured against pre-defined yardsticks. Also some of the components had very short term objectives, e.g. the production of a least cost energy plan or the payment of the salary for a financial controller for ADMARC, while others were more of a longer term, institution building nature, e.g. the strengthening of the debt unit in the Ministry of Finance. The short term projects could be judged successful or not at this time, but for the long-term projects, a - 15 - final judgement may need more time to be rendered. In all cases though, it should be kept in mind that the major purpose of the TA II project was to help the Government in carrying out its adjustment program. In this regard the lack of predetermined objectives and the availability of uncommitted funds added flexibility to the project which was useful as new needs were identified over the cource of the SAL implementation. Often unforeseen events, both external shocks and internal difficulties, create the need for additional studies or the recruitment of either short-term or longer consultants and experts. Funding for these needs is often required on short notice and the TA II project was useful in this regard. With hind sight, however, the priority of what were seen as pressing needs may later be questioned. Certainly the training courses taken by the staff in the Ministry of Finance should not have been approved without a comprehensive staffing and training program. Both the Bank and the Government failed to put the technical assistance needs into a longer term context. Also support to a broad-based SAL led to an overly diffuse TA project. Just as the adjustment operations have become more focussed, so must the technical assistance to Government if it is to be effective. 47. The evaluation of SAL III concluded thaL the adjustment program has had limited success in insulating the economy from exogenous factors. The cyclical ups and downs in growth and financial performance coincided to a large extent with movements in the external terms of trade, which on the downside were reinforced by droughts and the consequences of the conflict in neighboring Mozambique. This experience shows that the assumption underlying the three SALs that the constraints and distortions in the economy were relatively mild, and that with successful implementation of broad measures, a sufficient supply response could be achieved, appears to have been too optimistic. The Bank now recognizes that the constraints to growth are much more deep-seated than previously realized and the Government's ability to implement an adjustment program is not as strong as we had thought. Administratively and politically the Government has not been able to formulate or implement the adjustment program as quickly as anticipated. This implies that the technical assistance supplied in these areas was not sufficient or adequately absorbed and retained. The adjustment program issues are now being addressed through the design of much more narrowly focused operations, increased emphasis on key supply bottlenecks and efforts to strengthen the administrative ability of the Government and key development institutions. 48. The improvement of economic management was most noticeable in the cases of the private sector conglomerate Press Holdings and large established parastatals, such as MDC and ADMARC. Within a relatively short time those organizations were restructured, their respective functions clarified, their management improved and they were put on sounder financial footing. Much less successful were the attempts to create new institutions that would provide services to productive sectors such as agricultural extension for the estate sector and export promotion facilities. 49. Within central Government, management improved more on stabilization and public finance, with which Government official were familiar. However, the capability and willingness of the Government to develop and carry out market-oriented indirect policies, and to stimulate - 16 - liberalization and privatization, came under great stress in times of financial duress. In fact, in 1986 and 1987, the SAL programs were seriously endangered by the introduction of new quantitative controls. 50. When the Government is engaged in crisis management, there is very little time to think through long-term adjustment measures, and it becomes very tempting to resort to direct controls. BuL even when the new direction in economic management (reducing direct controls) is accepted by our main partners in the dialogue, the Ministry of Finance and the Economic Planning Department, they still need to convince the ministries and agencies whose main role has been to control, allocate, and license. Eventually those 'control agencies' will have to be transformed into 'service agencies'. This will be a difficult and time-consuming process that the Bank has only begun to address. Further work in public sector management and going beyond the economic ministries to the sector ministries will be needed in the future. Recommendations 51. Future technical assistance oriented to institutional development should try to avoid or to minimize some disadvantages of the Bank's present technical assistances namely the tendency towards a 'blueprint approach' (which is more suitable for capital projects than for assistance to social processes), and the Bank's insufficient supervision of technical assistance projects and sub-projects. More molding of the project as both sides learn from the experience of implementing the project is needed. Regularized supervision of both the overall project and possible subprojects should be implemented. 52. Future technical assistance should concentrate on fields where the Bank has a strong comparative advantage over other donors (for example, projects which help develop macro and micro economic analysis capability). Project components should be as closely related as possible and not just a grab bag of odds and ends thrown together. Unidentified components could be developed during the implementation of the project, but extra funds should not be a slush fund looked upon by both sides as free resources to be used in a haphazard way. It seems more appropriate to organize the assistance country or sector-wise with one or a few major partner institutions being involved not only administratively but also professionally. Clearly an institutional development strategy needs to be devised along with economic policy. 53. Assistance complementing SALs should not be given in the form of free-standing multi-sectoral 'umbrella' agreements, but are better to be integrated into the SAL program and project itself. Just as the Government must feel it lownsu the adjustment program, so must it own the technical assistance that goes with it to help in implementation. Strengthening of key institutions is a key component of adjustment, but given its longer term nature, it should probably be put into separate institutional development projects. In turn, these ID projects should be phased to complement the priorities identified in the adjustment program. - 17 - PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE The Bank has requested the Malawi authorities to submit their own evaluation of the TAP, but this document has not been received. - 18 - PART III. STATISTICAL INFOMITION CREDIT DATA (Amount: US)1.50 M) As oft November 30, 1989 Original Disbursed Cancelled Repaid Outstanding Credit 1428-VAI 1.5 1.67 .01 - 1.80 Original Credit Dates Actual or Re-estimated Initiating Memorandum February 1983 23 April 1983 Letter of Development Policy November 1983 25 November 1983 Negotiations November 1983 11 November 1983 Board Approval December 1983 20 December 1983 Credit Agreement December 1983 20 December 1983 Effectiveness January 1984 6 January 1984 Credit Closing 30 June 1987 30 June 1989 Actual Completion 31 December 1987 15 November 1989 CUMULATIVE CREDIT DISBURSEENT FY84 FY85 FY86 FY87 FY88 FY89 FY90 (i) Planned 0.10 0.80 1.40 1.50 -0- -0- -0- (ii) Actual 0.00 0.20 0.51 1.17 1.58 1.66 1.67 (iii) (ii) as X of (i) 0.02 25.0X 16..4 78.0X 1052 110X lllZ 1XSSION DATA No. of No. of Staff Date of Month, Year Weeks Persons Weeks Report Preparation June 82 2 3 6 21 July 82 Preparation Feb. 83 2 1 2 24 Feb. 83 Appraisal June 83 3 7 21 6 July 83 Supervision I* May 84 1 3 1 June 84 Supervision II July 86 2 1 2 12 August 86 Supervision III July 88 2 1 2 5 AuQust 88 Completion Feb 90 1 1 1 * These do not include separate supervision missions for various subprojects - 19 - RELATED BANK LOANS AND IDA CREDITS Loan/Credit Year of Title Purpose Approval Status Comments Loan 2026 Support 1981 Closed PCRz 8/12/86 SAL I Government"s 8/12/82 Structural Adjustment Program Loan 2027-MAI Produce 1981 Closed PCR: 8/12/86 Technical studies on 5/30/85 Assistance I which reforms were to be based. Credit 1427-MAI Continue 1983 Closed PCR: 8/12/86 SAL II support for (PY 1984) 6/30/85 Government's Structural Adjustment Program Credits 1644-MAI Continue 1985 Closed PCR: 6/23/89 A-90, A-91 support for (FY1986) 9/30188 Supplemental SAL III Government's approved Structural 1987 Adjustment Program Credit 1920-MAI Continue 1988 In Second Tranche Industry and Trade Support for progress. Release Policy Adjustment Government's approved 8/89; Credit Structural IDA reflows Adjustment supplements Program signed 5/89 & 12/89 Credit 2036-MAI Strengthen 1989 In Signed 12/89 Institutional national progress. & effective Development economic 1/90 management. _ 20 - CREDIT DISBURSUEBNTS Disbursements (SDRs) Categorv Descriktion Credit Aareement Actual 1 Vehicles, equipment 230,000.00 217,858.26 and office supplies 2 Consultants' services 990,000.00 1,182,141.74 and training 3 Unallocated 180.000.00 1,400,000.00 1,400,000.00 -21- ANNEX SEVEN CASE STUDIES ON INDIVIDUAL COMPONENTS OF THE SECOND TECHNICAL ASSISTANCE OPERATION 1/ 1. This annex gives a detailed description and assessment of the major sub-projects of TA II. In the case of AD4ARC and the Debt Management Unit of the Ministry of Finance support was given under both TA I and TA II but handled as one case study here. 2. The text on the seven cases follows a standard patternt - Sources of information: documents consulted in the course of this study - Context and objectives: a brief description of what had been the reasoning and the intentions which had led to requesting and implementing this specific technical assistance activity. - Input and activitiess the number and sources of the major technical assistance inputs (particularly consultants) and the main activities performed by the technical assistance personnel and their direct partners. - organization and supervision - Achievements, success: mainly based on the statements made by the interview partners in Malawi, supplemented by the author's views on the quality of documents, the assessment refers to the quality of the *products, the degree to vhich it was brought to use, and aspects of sustainability. - Issues, special remarks: this paragraph is meant to highlight some major points from the other five items which seem to deserve particular attention in the context of this study. 3. In term of cost, these case studies make up for about 90Z of the assistance given under TA II. Case Bs Strengthening the financial management of the Agricultural Development & Marketing Corporation (ADMARC) Sources of Information Bank files only. I/This section is taken virtually verbatim from the Evaluation Study of Free Standing Technical Assistance. - 22 - ANNEX Note: Contacts were restricted to one meeting on December 7, 1988 which proved difficult to arrange. The executives at the assistant general manager level were reluctant to discuss the subject (although they had worked with the Bank-financed controller) and did not agree to any appointment before the subject had been brought to the General Manager who was to return from abroad on December 6. 1988. Context and Obiectives 4. ADMARC is one of Malawi's large parastatal organizations, involved in various agricultural development schemes and particularly in helping the smallholder farmers to market their cash crops. In the context of SAL I and SAL II the strengthening of ADMARC was important in respect of two objectives: providing better price incentives to the farmers and reducing the government budget deficit to which losses of various parastatals had been contributing. 5. In the same way as MDC and Press Holding, ADMARC was to screen and streamline its portfolio, an operation which required capacity for financial analysis and carrying out investment/disinvestment decisions. Assistance to ADMARC was not explicitly mentioned in the TA I Agreement. However, a short-term consultancy was financed under this agreement in 1982 (carried out by an expert who had previously served as ADMARC's Company Secretary). Apart from other recommendations the consultant strongly emphasized the necessity of strengthening ADMARC's financial management. This was taken up in the President's Report for TA II proposing assignments of two financial experts: (a) a financial analyst, (b) a financial controller (to head the finance and accounting department). Input and Activities 6. The assignment (a) never materialized (reasons unknown). For the post (b) recruitment was already made before the Credit Agreement TA II was signed: from mid-1983 the employment of a financial controller (on the basis of an individual contract) was financed through the Bank Project NRDP I for a period of two years. The President's Report for TA II already mentioned that TA II funds should be used for further extending that assignment beyond mid-1985. Nothing is known about the recruitment/selection process and whether the Bank was involved (information possibly in files on NRDP I). Organization and Supervision 7. Identification and planning: The President's Report for TA II explicitly refers to la study of the financial and operating efficiency of ADMARC, financed by the first technical assistance loan. Among the seven major recommendations of that report two relate to restructuring of ADMARC's investments and to strengthening ADMARC's financial management. - 23 - ANNEX The President's Report does not show why only the field of financial management, and not the five other areas of concern, were to be taken up as subjects of technical assistance under the "free-standing, agreement. How ever, the other areas of concern may have been taken up in the framework of other agriculture-related Bank activities or the more recent UNDPIFAO ADMARC project. 8. Supervisions The only supervision report on TA II which gives some detailed information on most of the project's components (August 12, 1986) states that "the financial controller.... has been actively involved in developing ADMARC's divestiture program in collaboration with IDA and with USAID. Given the recent preparation of the ADMARC project, the present mission did not actively supervise this component". 9. In this context a question of the General Manager of ADMARC made during the meeting of December 7, 1988 seems remarkable: 'Why do you evaluate this now? You should have done that during the assignment. Now one can't change anything. At that time we did not see anybody from World Bank who would have looked into that matter." Achievements, Success 10. In the period in which the Financial Controller was financed from TA II funds, unforeseen market developments (inter alias increasing purchases at fixed prices, decreasing export prices) brought ADMARC into financial difficulties. The financial management had to play a particularly important role at that time. In the view of the present management it had been the right decision (in 1983) to establish the post of the Financial Controller and to recruit an expatriate for this post since sufficiently qualified Malawians were not available at that time. However, ADMARC management did not wish to discuss in detail whether one really had found the best person for the job. 11. Summarizing, it is felt that the controller certainly played an important role in ADMARC's day-to-day operations. However, he also tended to do things on his own instead of making other persons understand why and with which perspective things had to be done. (Note: the circumstances of the present discussion, and the reluctance to agree on an appointment at all with the OED mission, seem to indicate that the working relationship between the controller and the present general manager was not free of tension). Issues. Snecial Remarks - Supervision and Reporting - Funding one expert assignment out of different projects (first NRDP I, then TA IIl: How does that affect supervision? - Technical assistance, without proper monitoring by a central institution or the donor, can lead to difficulties for the - 24 - ANNEX recipient institutions "things don't get easier if you have somebody in your managing team who is not on your payroll' (remark made by the ADMARC general manager). Case C: Study on Power Tariffs for the Electricity Supply Commission of Malawi (ESCOM) Sources of Information 12. Coopers & Lybrand Associates in cooperation with Merz & McLellan, Tariff Study - Final Report, July 1985; ESCOM, summary of She Tariff Study and comments on the report, December 1985 Context and Obiectives 13. The government's medium-term program (1981/82-1985/86) which was formulated in the context of the First Structural Adjustment Program made the review of price systems and tariffs one of four areas of priority concern. A study on power tariffs and suitable formulas for future adjustments was rational in that context. It appears that the Bank, at the same time, was interested to use the Malawi case (among others) as a test case for a fairly new concept of developing a tariff structure which reflected, as closely as possible, the long-run marginal cost to the economy of meeting power demand. Considering the fact that, in comparison to other Halawian parastatal organizations, ESCOM had maintained a relatively sound economic position, no particularly pressing reasons for introducing a new power tariff structure seem to have existed at the time of conceiving the TA II Program. However, this study, though being the only ESCOM-related activity under the "free-standing" TA agreement, was but one of many Bank-supported activities related to ESCOM. There had been TA components in various capital projects, and there are still such components in the Bank's more recent sectoral projects. The study is not as "free- standing" as it might appear at first glance. Input and Activities 14. The contract for the study was given to Coopers & Lybrand Associates (London) who, in cooperation with Merz & McLellan, provided a team of three experts (two economists, one engineer). The team visited Malawi for about 3 weeks primarily for fact finding. During this period ESCOM staff was active in providing data, primarily on the demand structure and cost characteristics of the various elements of the power system. The analysis of the data and drafting of the report took place mainly in Britain with members of the ESCOM management participating only in the final phase (FebruarylMarch 1985). Organization and Supervision 15. Bank sector staff obviously had been quite active in initiating the study and financing it under the "free-standing" TA II agreement. Files do not show any Bank involvement during the process of the study. - 25- ANNEX According to statements of the Financial Controller, ESCOM has sent the final report and its own comments to the Bank but did not receive a reply. In fact, a reply may have been given orally during a supervision mission carried out by energy sector staff in September 1986. A back-to-office report reports on discussions held with ESCOM on the results of the study. This report indicates, that ESCOM did not agree to some of the assumptions and conclusions of the study (see 5 below) and states that "it was agreed that the results of the study should be held in abeyance until some time in 1987, when firmer information.... becomes available". Achievements, Success 16. The study seems to have created a certain understanding of the new concept of tariffs strongly reflecting future marginal energy cost. How ever, the results of the study as such have not been implemented probably for two reasons: - The process of the study (fact finding mission and subsequent write-up of the report in London) was not conducive to a dialogue between the consultants and the client, convincing ESCOM management of the suitability of the concept and making the study team sufficiently aware of specific questions or constraints which ESCOM thought to be important. - Some assumptions on which the study was based did not become true. 17. There was little participation of ESCOM staff in actually carrying out the analysis; therefore, training effects were very limited. Issues. Special Remarks - Free-standing TA agreement only served as a bridge (or convenient source for filling a gap) between various project- related activities. - Fairly strong Bank role in initiating the study; obviously little commitment on the recipient's side. - The work process of the study (with major parts carried out abroad) was not conducive to active recipient participation and training. Case D: Assignment of an advisor to the Energy Unit (EU) of the Department of Economic Planning and Development (EPD) Sources of Information 18. Bank files; National Energy Plan 1988-1997 (Draft, October 1988). - 26 - ANNEX Context and Obiectives 19. The President's Report on TA II (in this part identical with SAL I, SAL II and TA I) describes the economic background very briefly as follows: 'Malawi is totally dependant on imported petroleum. While imports increased only 82 in volume between 1977 and 1980, their cost doubled and as a share of total imports rose from 10 to 12.5Z. Fuel wood accounts for some 80? of the total energy consumed in Malawi... Thus, the Government faces the task of developing indigenous energy sources in the rural areas and reducing the modern sector's dependance on imported oil". 20. However, the two SAL operations and the corresponding Government's Medium-Term Program do not explicitly refer to energy as one of the priority issues requiring immediate political action. Obviously this issue was thought to need more long-term attention through intensified research (e.g., in the area of fuel wood savings in the tobacco industry) and over all planning. For this the ground had been prepared through the comprehensive ESMAP study jointly carried out by the Bank and UNDP in 1982. This study had clearly identified the need for more thorough planning in regard to the various energy sub-sectors (like petroleum, power, fuel wood, etc.) keeping in view the linkages and the savings potential through substitution among those sub-sectors. Keeping in view that the various sub-sectors were taken care of by different government institutions (not by a Ministry of Energy), the strengthening of an Energy Unit in the Planning Department of the Office of the President and Cabinet appeared to be the rational approach. 21. Towards this end the Government agreed to employ additional professionals (in particular: an economist as head of the unit) and requested IDA to finance the assignment of an experienced energy economist/planner for a period of 18 months. 22. The original request for the advisor (March 1984) emphasized product-oriented duties like preparation of an overall national energy policy, identification of energy resources, identification and priority ranking of projects etc. However, keeping in view the context in which the energy economist would work, one has to assume that a double role was expected: - Producing (or contributing to) specific planning products (documents). - Assisting in further building up the Energy Unit through staff development, strengthening the organization, etc. 23. The team with which the expert was to work was planned to consist of up to five professionals. Input and Activities - 27 - ANNEX 24. According to the Credit Agreement the work was to start in mid- 1984. In fact, there were considerable delays until a contract with a consulting firm (Louis Berger International) was concluded (mid-1985?) and until the energy advisor actually arrived on the spot (June 1986). It took another several months until a core group of Malawian professionals (less than planned) joined the Energy Unit. 25. The work of the advisor, in overall terms, seems to have been adequate, although there were critical comments in supervision reports (September 1986 and August 1987). As planned, the work concentrated on producing strategic documents (contribution to DEVPOL 1987-1996, and as the main "product": the National Energy Plan 1988-1997). At the same time efforts were made to strengthen the unit's internal organization (including rudimentary data banks) and its external links to the various institutions involved in the energy sector. 26. The National Energy Plan became ready (draft) in October 1988, necessitating an extension of the advisor's assignment by three months. This was not financed by World Bank TA II but from UNDP funds which also were used for acquiring computer equipment and sending Malawian staff members for training abroad. Organization and Supervision 27. From what could be ascertained from the files, the assignment of the energy advisor was supervised by Bank regional staff only once at the very beginning; more regular and intensive supervision came from the Bank sector staff who were also involved in supervising or preparing other activities in the energy sector. The Malawian members of the unit interviewed in the course of this study were not aware of any professional input given by the consulting firm to the Unit (except direct discussions with the advisor on his work program). 28. For some time cooperation between the advisor and his Malawian colleagues was made difficult by the former's double (and not clearly defined) role of a performer being charged with specific own tasks, and of an advisor supposed to assist the Malawian staff in getting the unit's work done. Achievements. Success 29. The major achievements are: - The National Energy Plan: It is a fairly comprehensive and read able document providing data and concepts; it appears to be a suitable basis for further planning and coordination within and between the various sub-sectors, - The working relations established with the various institutions involved in the sector; the joint work on the Energy Plan (to -28 - ANNEX which all the institutions contributed) was instrumental to this. 30. Three Malawian staff members benefitted from the cooperation with the advisor (in their own view: primarily regarding work organization, establishing external links, use of computers). Not all the benefits may be sustainable: These staff members are due to go abroad for training, with returning colleagues replacing them shortly. 31. It was planned to establish the core of a computerized data bank on the energy sector. No sustainable results were achieved in this field. Data on one sub-sector were stored on the hard disk of the advisor's private PC; they got lost during an attempted transfer to one of the unit's PCs. Issues. Special Remarks - The expert's role as an advisor and trainer was made difficult by his role as a performer which quite often tended to dominate (perhaps particularly so in the case of contracts with consulting firms). - Long delays before start of the assignment - Cofinancing with UNDP: was this really useful in "projects* of such a small scale? - Reporting; the advisor left without leaving any final report on his assignment and (according to his Malawian colleagues) without proper information on how to follow up with his own work and contacts. Case E: Partial financing of a pilot fuelwood savings program at the tobacco Research Authority (TRA) Sources of Information 32. Bank files (mission reports, May 1984, June 1985, April 1986, July 1987); UNDPIWorld Bank: Tobacco Industry Energy Efficiency Project, phase I final report, January 1988. Context and Obiectives 33. The President's Reports on SAL I. SAL II, TA I and TA II all mention the rising cost of energy resources as one issue becoming increasingly important in Malawi and other countries. The government's medium-term program (1981/82-1985/86), as far as it is shown in the President's Reports, does not give specific emphasis to the energy sector and to energy savings in particular. However, already in 1980 the phase II (wood energy) of the National Rural Development Program (Credit 992-MAI) embarked on various measures to increase forest resources and the creation - 29 - ANNEX of an energy unit in the Forestry Department of the Ministry of Agriculture and Natural Resources. No specific efforts relating to fuel wood savings in the tobacco sector were included in this project. 34. In 1981182 a broad-based energy survey was done in the framework of the UNDP/World Bank ESMAP activities. Probably as a result of this study, specific attention was given to the fuel wood savings potential in the process of curing tobacco. 35. The President's Report on TA II (para 94) describes the background as follows: 'Tobacco curing accounts for an estimated 40S of Malawi's fuel-wood consumption. Of this, some 400 growers of flue-cured tobacco use 75Z of the wood and 42.600 growers of fire-cured use the remaining 25Z. While energy savings are possible in both, the greatest immediate pottntial obviously lies in the flue-cured tobacco. Malawi's TRA estimates that the flue-curing tobacco estates consume between 0.02 cubic meter and 0.13 cubic meter of wood per kg of tobacco in their barns. Even the most efficient barns, however, use about 3 or 4 times more wood energy than the best ones in the United States". It is against this background that a pilot project was proposed with the following objectives: - To burvey wood use as well as the number and condition of the barns used in the flue-cured tobacco sector - To determine and demonstrate the possible savings in fuel usage made by improving furnaces and vents. and to show that such improvements are economic. - To disseminate the findings and results to growers for implementation. 36. Phase I of the project was intended as a pilot scheme to start in April 1984 and continue for two years. Input and Activities 37. It is important to note that this two-year period was rot to be a completely fresh starts it was to intensify and to widen the work already begun by a FAO-financed research officer who had been working with TRA already since 1980. Because of this the actual one-year delay of implementing this two-year project phase did not lead to a full loss of one season. The FAO expert was able to initiate the necessary survey work and some preliminary work on research equipment, the latter in informal cooperation with the instrumentation technician who had already been selected and was waiting in Malawi to get his contract. Due to various administrative delays, the actual project phase financed under TA II began about mid-1985 and comprised two major lines of action: - Research, mainly done by the instrumentation technician in cooperation with the FAO Research Officer, related primarily to barn trials measuring wood consumption for different existing and improved barn types. For one season this work was done in - 30 - ANNEX five different regions of Malawi; for the next season research was concentrated in one location allowing a much more controlled ano systematic comparison of different technical solutions and firing practices. - Extension, done by an extension expert with more than 20 years of experience in extension work in Malawi, comprised the development of extension material (and a monthly bulletin) on the research findings and their application. as well as the active dissemination through workshops and visits to tobacco growers. 38. Apart from the two-year assignment of the two expatriate experts, research equipment and vehicles worth 126.000 SDR were financed under the TA II project. 39. With the end of the project phase financed under TA II much had been achieved (see 5 below), but the project objectives had not been fully fulfilled. In fact, it had been planned from the outset that a further project phase (perhaps even at a wider scale) would have to follow. Therefore, the instrumentation technician was given a second contract of approximately two years, and the former FAO advisor to TRA, after the end of his contract in November 1987, stayed with the energy project under a special trust fund agreement with FAO financed by UNDP/World Bank Energy II Project. From the same funds some further equipment was provided (partly even before the end of the TA II project phase). Organization and Supervision 40. While the team leader was working under a UNDP/FAO contract, the two experts financed under TA II were working under individual work con tracts with the Government of Malawi, represented through the Ministry of Finance. In organizational terms the project suffered considerably from the following weaknesses: - The financing under TA II provided but one phase (about two years) of a project which actually started already before that phase and which had to go beyond that phase. This created a substantial amount of uncertainty as to the long-term perspectives of the project, and it certainly did not facilitate a consistent project management by the Bank and the Government of Malawi. - At the time of the TA II project phase the management and administration of the Tobacco Research Authority was weak and not really able to actively support the project in terms of logistics and financial administration (including liaison with the Ministry of Finance). - The Ministry of Finance did not take an active role in the administration of any of the individual sub-projects of TA II. Responsibilities for dealing with the individual sub-projects - 31 - ANNEX were not defined; the project personnel often did not know whom to approach in matters relating to their work contract. The Bank field office did not offer assistance on such matters. 41. No counterparts were provided for the experts financed under TA II. Even after establishing the required posts, it was not possible to get them filled. Potential candidates were reluctant to join the project because of its uncertain perspective. Only from April 1988 counterparts were employed after establishing the respective posts with TRA proper (not with the project as such). 42. In contrast to some other sub-projects of TA II this component was fairly closely supervised or guided by Bank staff, particularly by the sector staff taking a quite active interest in this project and its results. From what could be established from the files, supervision missions took place initially about once a year, later twice a year. The project team reported fairly regularly on the project's progress. In fact, this is the only sub-project on which some progress reports could be found in the TA II project files. Achievements, Success 43. Up to now the project made substantial achievements. However, it is not possible to clearly isolate those achievements which were made during the phase financed under the 'free-standing' TA II agreement. The major achievements are: - The project has clearly established that flue-curing of tobacco is possible with an input of less than 10 cubic meters of fire wood per ton of tobacco using low-investment technology. - Suitable technical solutions have been developed, tested and are being propagated through extension material. - The project has caused a general awareness of the fuel wood problem and the savings potential amongst growers. An extension system (with five agents in different regions coordinated by an extension engineer at TRA) has been made operational and will be able to further propagate the project's message for some time to come. - It is estimated that, with strong influence by the project, total fuel wood consumption in flue-curing of tobacco in Malawi has been reduced by 502 since 1984. This means that about 400.000 cubic meters are saved annually. Valued at 15 K per cubic meter (a price just reflecting the logging and transport operations, not the true value of the wood), this amounts to annual savings in the range of 5 to 6 million K. There is likely to be a potential for further cutting down the wood consumption to about 50t of the present level. - 32- ANNEX 44. This is a projecto in the true sense: it aims at achieving a specific objective (reduction of fire wood consumption), not at establishing or strengthening an institution for carrying out long-term tasks. On the job training effects were very limited during the TA II period since no counterparts were available to the Bank-financed experts. A substantial transfer of knowledge, however, has taken place since spring 1988 vhen counterparts finally were employed. Issues. Special Remarks 45. - Little direct links to SAL. - 'Free-standing" technical assistance provided the funds only for a certain period and certain parts of a project which should have been regarded as one entity. Severe weaknesses in the management and administration of the Malawian implementing agency caused substantial delays. The Bank's monitoring and support was not strong enough to help over come the difficulties. Case F: Comprehensive Human Resources Study (Manpower survey) for the Department of Personnel, Management and Training (DPHT) Sources of Information 46. Bank files; Malawi Government, Comprehensive Human Resources Study-An Assessment of Manpower and Development - Results of the 1987 Manpower Survey (Draft February 1988). Context and Obiectives 47. The context of this study is not quite clear. None of the various reports or agreements on SAL or technicul assistance mentions the non-availability of data on human resources or manpower (existing or missing) as a problem deserving specific attention. An issues paper on SAL II and TA II dated July 29, 1983 refers to a proposed consultancy on personnel policy guidelines and a public service manpower and training program. How ever, this proposal is neither identical with the comprehensive human resources study nor made it its way into the actual agreement on TA IT. 48. The official request (telex from May 29, 1985) reads as follows: I... we propose to carry out a human resource development study to produce a public and private sector manpower development program to enable the government meet the national objectives of self-sufficiency in skills in short supply. This study is related to the achievement of the institutional development objectives of the government's ongoing structural adjustment program'. This study was not mentioned in the credit agreement on TA II; however, that agreement envisaged (under part F of Schedule 2) - 33 - ANNEX "other studies associated with the second structural adjustment project...'. This connection to SAL is not obvious. Input and Activities 49. By mid-1986 the government entered into an agreement with ILO to carry out the study, based on a proposal elaborated by a consultant before. Under this contract ILO was to provide two long-term experts for about one year each plus short-term assignments of two consultants (among which the consultant who had drawn up the proposal). The Chief Advisor (from Ghana) arrived by November 1986, the second advisor (statistician, from Sierra Leone) by March 1987. The survey involved substantial field work; more than 1.100 establishments and more than 30.000 skilled employees were covered. Processing of data was planned to be fully handled by the Data Processing Unit (DPU) of the Ministry of Finance, but had to be done partly with DPMT's own resources. A draft report was produced by end-1987; the final version is being printed at the time of this evaluation. Organization and Supervision 50. The remarkable feature of this sub-project is the discrepancy between the original cost (and time) estimate and the actual requirements. It appears that the original proposal grossly under-estimated the work and time required to get the sufficient number of enumerators and supervisors selected and trained, and to get the required number of questionnaires returned from the respondents (establishments and individuals). There may have been some differences of opinion in interpreting the original work proposal, leading to more work than originally intended. The files show that the government asked for three (March, August and October 1987) additions (total approximately US$127.000) to the project's budget of originally US$321.000. The Bank's reaction cannot be fully ascertained from the files. According to information from the Ministry of Finance total disbursements amounted to approximately SDR 350.000. 51. According to information from DPMT there was no real supervision from the Bank (except for casual talks during missions having a different focus). ILO representatives came twice to assist in overcoming the difficulties the project had run into. Achievements. Success 52. There has been some disagreement regarding the quality of the study. Some particularly critical comments from the Bank's Field Officer seem to have reduced its 'sales value". 53. In DPMT's view (shared by the author) the study, in spite of some weaknesses, can be regarded as a useful basis for setting priorities in planning future investments in manpower training. It not only provides data on existing (and missing) skilled manpower but also comments on avail able training capacity and the priority needs for expanding such capacity. - 34 - ANNEX 54. The Malawian members of the team (4 professionals) have learned in the process (including some short-term training abroad). However, this training effect was not sustainablet the four Ma.awian team members who have gained some experience in planning, organizing and evaluating the manpower survey have left the Manpower Unit of DPMT. None of them is available to assist in *selling" the product to potential users and to serve as a bridge for future up-dating of the data generated in this survey. Issues. Special Remarks 55. - What really was the link to the SAL operations? (there may be a link to the new institutional development project, particularly to its component 'Malawi Institute of Management"). - Unrealistic project design resulting in under-funding. - Rigid/inflexible time frame for long-term expert secondments through organizations of the UN system is not conducive to organizing a work process as required for this type of study. - Complete loss of training effect because Malawian staff members left the Manpower Unit of DPMT (by transfer or voluntarily). Case G: Support to the Ministry of Finance: Debt Management Unit (TA I and TA II) Sources of Information 56. Bank files; aide memoire, debt management mission, June 1988; internal MOF status report (in connection with review of SAL III?): Malawi debt management system; minutes of the Malawi public debt task force meeting held on 5th December, 1988. Context and Obiectives 57. During preparations for SAL I and TA I the need for strengthening Malawi's debt management capacity was emphasized. The President's Report on TA I (para. 62) states: "Although Malawi's debt reporting and management performance had been satisfactory in the past there is a need to strengthen debt management and to monitor more closely external borrowing ...; it was further agreed during negotiations that a Bank staff member would visit Malawi .... to assist the government in standardizing and streamlining its debt reporting system". However, no explicit provision was made under TA I for technical assistance in this field. 58. Nevertheless, the final disbursement statements on TA I (and the PCR, para. 2.66) show what disbursements have been made for support to debt management. Neither the exact amount nor the type of support are known since the disbursement figures refer to a total which also includes - 35 - ANNEX services to ADMARC. The PCR does not give any further detail on the technical assistance in regard to debt management under TA I. It is assumed that the disbursements refer to purchases of some computer hardware and possibly a short-term consultancy "to finish computerizing the recording and monitoring system" (mentioned in the President's Report on TA II, para. 102, but not mentioned in the PCR on TA I). 59. The President's Report on TA II emphasizes the "continued improvements in institutions dealing with external debt and investment screening" as one of the important aspects of the government's development policy in the context of the Second Structural Adjustment Credit (para. 28), and it makes the "strengthening the debt management capabilities of the Ministry of Finance' an explicit component of the TA II project (para. 102)s "The project includes funds to computerize the system (purchase of micro-computer and associated equipment) and six to eight months of consultant services to strengthen further the debt management system including helping formulate an appropriate debt management policy". Input and Activities 60. The actual implementation of this proposal (and some more precise targets for a second phase) may be read from a telex dated April 21, 1986, from the Ministry of Finance to the Bank: "Under the technical assistance loan II, credit 1428 MAI, the Ministry of Finance acquired a Burroughs B25 micro-computer system for use in developing the debt management capabilities in the Ministry of Finance. It has become necessary that we acquire additional equipment in order to affect phase II of the Malawi Debt Management Program. Phase I developed and tested the computer programs for debt stocks and flows, and updated the existing data on debt. Phase II will develop the capability for simulations, projections, and the incorporation of micro-economic variables into the analysis of debt. This phase will enhance capability for decision-making and choice of debt management options. The equipment will also provide additional capacity to enable projections and analysis of the recurrent and development budgets. The required equipment will include two micro-computer terminals of at least 10 megabytes each....; training wll also be required for the full utilization of the system. The estimated cost for the equipment and supporting elements.... amounts to US$65,000 61. According to a supervision report (July 1986) a Bank mission recommended a modified list of purchases (expected cost totalling US$30,000) and "suggested that advisory assistance to firmly establish the above described analytical capacity could be financed from the project". 62. Such technical assistance was actually replaced by free assistance from the Bank's own External Debt Division. The system has been developed in consultation with Malawian professionals, and in particular a systems analyst who joined the unit in 1982 (coming from the data processing department) and left the unit in spring 1987. - 36- ANNEX Organization and Supervision 63. The debt management's system is part of MOF's Economic Affairs Division. In terms of personnel and equipment it is highly integrated with the other tasks of that division and cannot be regarded as a separate unit. 64. On the Bank's side, responsibility for supervision rested with the Africa Region (Country Team and AFTPS), with the Debt and International Finance Division, International Economics Department, giving extensive assistance, sending seven missions to the country in five years. Achievements, Success 65. The present state of the system and its utilization may be described by quoting the "aide memoire' produced by a June 1988 mission: "the mission was pleased to note that progress has been made since the inception of the project in inter-agency communication on debt issues and that the computer system is, in most respects, ccmplete. However, while only some minor problems exist in the computer programs, the system is still not being effectively used. The mission determined that the causes of these problems were: (a) Inadequate data collection, partly due to insufficient communication between the various agencies having access to debt information and lack of clear guidelines on the responsibilities of each agency; (b) Lack of knowledge of the system capabilities by users, due to insufficient documentation and minimal communication of system capabilities to people who could use the information; (c) Poor data quality in the computer's data base, due to inadequate and inappropriate staffing in the debt unit, inadequate programmatic validation of data, and insufficient checking of data after it has been entered into the computer; (d) Insufficient knowledge and testing of system functions, due to staff-turnover and lack of systematic testing procedures; (e) Incomplete records in the ledgers maintained il. the office of the Accountant General." 66. Following the recommendations of the mission mentioned above, a task force has been created recently which involves representatives from HOF, Accountant General, Department of Planning and Development, Reserve Bank of Malawi. The group will have to improve and secure the flow of data on which the system fully depends. The group also will have to clarify the division of labor (complementary functions) of the debt unit in MOF, the debt information system of the Reserve Bank of Halawi and the (to be established) debt management system in the Department of Economic Planning and Development. Within MOF, apart from the need to check and clean up the existing data files, the main task still seems to be to build up an -37- ANNEX analytical capacity sufficient to really make use of the system, i.e., a team of economists really versed in the mechanisms of international financial markets and possible strategies of debt management. Issues. Special Remarks 67. - Planned technical assistance in the form of consultancies was replaced by free assistance from Bank's own External Debt Division. - Professional capacity of the MOE staff was not sufficiently developed to make full use of the facilities for simulations and analysis of alternative strategies. Case H: Support to the Ministry of Finance: Foreign training and other activities aiming at institutional development Preliminary Remarks: 68. Apart from strengthening the debt management unit (see chapter above) the Bank has been assisting the Ministry of Finance in two other lines: in financing short-term training abroad for MOE staff members (under Technical Assistance II), and in financing a number of studies and consultancies as preliminary steps to a more long-term strengthening of the MOE. The latter is expected to take shape in an Institutional Development Project (IDP) which is to combine Bank assistance with assistance from other donors (particularly UNDP) and which would relate to strengthening MO? as well as establishing a Malawi Institute of Management (MIM). The studies and consultancies relating to IDP have been partly financed under SAL III and mainly under a Project Preparation Facility (PPF). 69. The training abroad as well as the activities oriented to IDP are still ongoing. This is why this report can only briefly coment on these activities and cannot follow the same outline as the reports above. Trainina Abroad 70. Schedule 2 of the Credit Agreement 1428 provides the project components of TA II. Training is included in two of the five explicitly defined project components: strengthening the EPD Energy Unit (Part A) and strengthening the Ministry of Finance's debt management capabilities (Part E). There is no provision for training in general, and the most flexible Part F (other studies associated with the Second Structural Adjustment Project...') provides for studies and not for training. 71. In 1987 MO? asked the Bank to agree to financing under TA II some individual short-term training measures (MO? staff members attending courses abroad). The Bank agreed although the link between the course topics and debt management (Part E of Schedule 2) appears to be somewhat vague. The Bank-financed MOF training 'prOgram' obviously gained momentum in mid-1988 when it became obvious that commitments and disbursements under - 38 - ANNEX the TA II Agreement were lower than expected. A proposal for extension of the closing date of the Agreement to June 30, 1989 (memo from the Country Department (AF6CO) dated June 17, 1988) gives the following information: "Almost US$ 200.000 is still to be committed under the project (including approximately US$ 90.000 which is being reimbursed by the government from a previous duplicate disbursement). Funds are still left in the project because expenditures have not been as high as expected and new uses have not come up as quickly as anticipated. All of these funds should be committed and disbursed during the next year. Most of them will be used for foreign training and seminars, with some to also go for additional computers for the Ministry of Finance....". At the time of this evaluation MOF had prepared a list of training cases to be financed under TA II giving the names of 16 staff members (including the cases from 1987) with the topics and the cost (some in the range of 5.000-10.000 K, mostly in the range of 25.000-35.000 ') of their training. The total cost of this training "program" amounts to approx. 100.000 SDR. According to the desk officer (multi-lateral) at MOF an agreement on funding this program under TA II (or if a re-calculation of actual disbursements would show a shortage of funds: under PPF for IDP) was reached during a supervision mission of the Bank's Country Officer in July 1988. The Aide Memoire on this visit does not explicitly refer to the subject of widening the training assistance to such a wide range of training topics (not related to debt management). The list of topics includes: - Investment planning, appraisal and management for development finance institutions. - Agricultural and rural project management. - Public budgeting and financial management. - Public enterprise policy and management. - Use of computers in financial management. - Use of computers in public budgeting and financial management. - Procurement and material management. 72. Such courses have a duration of 6-10 weeks and are held mostly in UK or USA. The list also shows several participants in World Bank disbursement seminars, partly in Washington, D.C., partly in Kenya. 73. In the course of this study four of the trainees (two economists and two administration officers) were interviewed. All of them stated and explained that the course content was relevant for (at least a part of) their present task at HOF. However, all of them also stated, that their participation in that specific training program was not the outcome of a deliberate planning effort on the part of the Ministry; it was mainly an outcome of own initiative after having heard of specific courses being offered by training institutions in the US or UK, and funds being potentially available under the TA II scheme. This may be a quite normal - 39 - ANNEX procedure. However, it is somewhat surprising in a situation where, at the same time, a UNDP-financed consulting firm is drawing up a Development Plan for the Ministry of Finance whose implementation (as part of the IDP) was to involve a thorough planning of future manpower and related training needs of MOF. 74. This evaluation does not provide a basis for really criticizing the decisions made. However, there are reasons to believe that the actual shape which this training took was heavily 'supply-driven't The avail ability of unutilized funds, and the fact that courses were actively advertised by institutions in the US and UK, very much intensified the 1988 HOF training 'program' which, of course, was in line with the wide-spread individual prefer^nces for attending training courses abroad. Although all the training cases were certainly endorsed by the superiors of the trainees, there are no indications that these endorsements were part of a well-thought-of concept taking into consideration that the Bank's assistance to this training came in the form of a credit, a form of assistance otherwise rarely used for financing training abroad. Other Assistance to the Ministry of Fin nce 75. Apart from the attempts to Lrengthen the Ministry of Finance's debt management capacity, efforts have been made for several years to lay the ground for a more long-term process of strengthening the Ministry's capacity in other areas, namely relating to a reform of Malawi's tax system and to an improvement of the accounting and budgeting processes. In the context of SAL III (partly financed under SPPF) some preliminary studies were carried out for both of these areas. From the end of 1987 and the beginning of 1988 two groups of consultants have been working on a follow- up which was meant to lead to a several-years' process of technical cooperation under a new Institutional Development Project which would comprise the establishment of the Malawi Institute of Management and strengthening the Ministry of Finances (a) A group of experts from Price Waterhouse (London), financed by UNDP, has been preparing a study for the Ministry of Finance giving specific attention to human resources and information systems, economic strategy and forward budgeting, formulation of budgets, expenditure monitoring and government accounting, as well as cash and debt management and claims processing. A draft report of the study (which was more the "blueprint" type) was rejected both by the Government and the Bank in November 1988. The consultant's final version provides a more flexible approach which recognizes that institutional development is an organic process which evolves over time and cannot be specified rigidly in advance, which is a basic lesson from Case H. (b) A resident advisor and several short-term consultants from Harvard Institute of International Development (HIID) have been assigned to assist OF in the implementation of a tax reform program. After studies undertaken in 1985-86 the Government decided to implement a tax reform program and signed a US$2.4 .. 40 - ANNEX million con tract in 1987. The initial payments made under SAL III with the IDP funding the remainder of the contract. Some thought was given to extending the program but, during the IDP approval, the Government said it wanted first to evaluate progress under the existing program. While IDP includes no funds for an extension of the program, this issue may be again discussed with the Bank as MOF has indicated recently that it wishes to proceed with an extension of the tax program. 76. Both the present technical assistance components as described under (a) and (b) above were organized in the form of consulting contracts. These contracts were made for a limited period focusing on specific tasks, including the formulation of a tax reform program for future implementation (HIID contract) and a study (PW) which looked very much as a 'blueprint of things to be done in the first draft but was then revised with a more flexible approach. - In both cases the selection of the consulting group was made with the view (though without obligation) that these firms may continue their work also through a future phase. - Especially in case (a) the first draft suggested a "blueprint" on the basis of which one would enter into new technical assistance agreements. When terms of reference are not very clear from the outset, consultants may be tempted not to be too moderate in defining the future technical assistance needs. - By end 1988, the Malawi Government was not really satisfied with the initial results achieved so far. Reservations referred to both the substance of proposals and the form of their presentation respectively the form of communication between the consultants and their Malawian partners. In respect to (a) the consultants seem not to have sufficiently considered the achievements and improvements already made by the Ministry of Finance (which should be regarded as the starting point of further action) and the need to organize institutional changes as a process fully led by the Malawi Government rather than by a pre-designed technical assistance program. In the case of (b) the consultants (especially the resident advisor) were not sufficiently successful in establishing a policy dialogue with the representatives of the Malawi Government. - Because of these reservations the Ministry of Finance at present did not wish to be obliged to continue the cooperation with the consulting firms contracted so far and, in the case of (b), has suggested an external evaluation to be made before the end of the present contract. 77. In November 1988 it seemed uncertain whether the Bank at all would be involved in the future strengthening of the Ministry of Finance through technical assistance, or whether the Malawi Government prefers to draw the necessary technical assistance from other sources, namely the - 41 - ANNEX UNDP. The fact that the Bank's technical assistance was to be given on a credit basis, as against the grants given by other donors, may play a significant role in this context. However, another significant consideration seemed to be that the Bank's modalities for giving technical assistance may not be conducive to organizing a flow of technical assistance sufficiently flexible to support processes of institutional change. 78. As shown in a paper given as Annex B to an Aide Memoire submitted by Bank staff to the Government in November 1988, the Bank's financing requirements would require the Ministry of Finance to 'prepare a concise plan for its proposed strengthening program (DEVPLAN). The DEVPLAN should provide a clear basis for the subsequent preparation of bidding documents for any consultancy services it entails n. This is further qualified by statements as: "each component should be described in terms of what exactly should occur during the project period April 1989 to April 1994...'; 'the types of expert assistance by specialty should be identified, and whether it can be provided locally. The aggregate amount of time for each consultant and the estimated cost by staff month should be provided'. 79. This is in some contrast to concerns raised by the Malawi Government during the recent IDP appraisal mission which have been summarized under the heading "Principles and Basic Strategy" in a paper given as Annex A to the Aide Memoire (title: Defining the Ministry of Finance Component of the IDP - A Possible Approach). Some paragraphs of that chapter which seem particularly relevant in this context are quoted belows Para. 5 The strengths of the existing system and institutions must be recognized and built upon. Para. 6 Precisely because there are considerable strengths in current performance, it is important to minimize risks. This has at least two direct implications: (a) Initial efforts should go towards improving existing systems (e.g., the computerized accounting system) rather than seeking to start afresh. (b) The programme's approach to training shoula be diffuse: i.e., the maintenance of an improved system should not be all - 1 t
Группа Всемирного банка · Project Completion Report
Malawi - Second Technical Assistance Project
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Project Completion Report
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Малави
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Всемирный банк