Malawi - Wood Industries Restructuring Project

Document of The World Bank FOR OMCIAL USE ONLY ReoR No. 8744 PROJECT COMPLETION REPORT MALAWI WOOD INDUSTRIES RESTRUCTURING PROJECT (LOAN 2486-MAI) JUNE 13, 1990 Industry and Energy Operations Division Southern Africa Department Africa Regional Office This dmnt has a restricted ditibution and may be used by recipients only In the performac of their officia duties Its contents way not otherwise be diclosed witout World Bank authorization  EXCHANGE RATE HISTORY Currency Unit: Malavi kwacha (MK) MK/ 1982 1.06 Appraisal 1983 1.17 1984 1.41 Negotiations 1985 1.72 Disbursement started 1986 1.86 1987 2.21 1988 2.56 1989 Quarter I 2.66 1989 Quarter II 2.79 1989 Quarter III 2.82 Loan closed 1989 Quarter IV 2.77 ANCRONYMS ERR - Economic Rate of Return FID - Forest Industries Division OED - Operations Evaluation Department PCR - Project Completion Report SAR - Staff Appraisal Report TA - Technical Assistance WICO - Wood Industries Corporation FISCAL YEAR April 1 - March 31  FOR OFFICIL US ONY THE WORLD BANK Washmgton,D.C. 20433 UIlA. 01K.e of om.c4tw4al 0POsrata Ivalutwaln June 13, 1990 HEMORAMDUM TO THE EXECUTIVE DIRECTORS AND TEE PRESIDENT SUBJECT: Project Completion Report on Malawi Wood Industries Restructuring Project (Loan 2486-MAI) Attached, for information, is a copy of a repqrt entitled "Project Completion Report on Malawi - Wood Industries Restructuring Project (Loan 2486-MAI)" prepared by the Africa Regional Office. No eudit of this project has been made by the Operations Evaluation Department at this time. 77 Attachment I This document has a rstriced distribution and may be used by recipients only in the perfomance | of th&t official duties. Its contents may not otherwise be disclosed without World Ibnk authoration.  ]FOR OffCIAL USE ONLY PROJECT COPLEON RRT WOOD INDUSTRIES RESTRUCTURING PROJECT (LOAN 2486-HMA) TABLE OF COtTEMTS Paot No. PREFACE i................*e*******ee************ee*******e*** i EVALUATION SUMIRY *............................, .iii PART I: PROJECT REVIEW FROM BANR'S PERSPECTIVE .......... ..... 1 A. Project Identity o ........................... o.....oooo ........... lo Bo Background I.............................. C. The Company . 2 D. Sawnvood Market *...........**.... 2 E. Changes in Project Scope ...3............................ 3 F. Project Implementation 4..................... ...** 4 G. Project Results ................................. 5 Project Objectives .... 5..................... ....e 5 Project Costs ........ ..........*********************** 5 Financial Performance ...5............................. 5 Economic Performance .................................. 6 H. Lessons Learned ...........7.. .......................... 7 PART IIs PROJECT REVIEW FROM BORROWER'S PERSPECTIVE o .......... 8 I. PROJECT IDENTIFICATION PREAPPEAISAL AND APPRAISAL .o..... 14 II. PROJECT IMPLEMENTATION AND MANAGEMENT ... oo ................ 15 (a) Project Scope ..... ................................. 15 (b) Project Management ...................... ........... 16 (c) Use and Performance of Consultants ................. 17 (d) Performance of Contractors and Suppliers ........... 17 (e) Procurement ..................................... 17 (f) Implementation Schedule ............................ 18 (g) Capital Cost .... .................................... 18 III. PROJECT OPERATING PERFORMANCE ........................... 20 (a) Commissioning and Start-up ......................... 20 (b) Manpower Developments ....... ...................... 20 (c) Borrower's Ownership and Organization Structure .... 21 (d) Environment Effects .... ........................... 22 (e) Build-up of Production and Capacity ................. 22 This document has a restricted distibution and may be used by recipients only in thd performance of their official duties. Its contents may not otherwise be disclosd without Word Bank authoriaon.  TABLE OF CONTENTS (cont'd) Page No. IV. MARKETS ................................................. 24 V. FINANCIAL AND ECONOMIC PERFORMANCE ...................... 25 (a) Sale, Performance .2........5.................... . . 25 (b) Production Costs ............. . . .. , 25 (c) Overall Financial Results ......................... 25 (d) Financial Rate of Return for the Project ..... ...... 26 (e) Economic Benefits .................................. 27 VI. BANK'S PERFORMANCE ...................................... 27 VII. CONCLUSION .............................................. 29 PART III: STATISTICAL INFORMATION ............................ 37 A. Related Bank Loans/Credits .............................. 37 B. Project Timetable .................... 37 C. Loan Disbursements .........3...7. ............... ... . 37 D. Project Cost and Financing .............................. 38 E. Project Results ................................................... 39 F. Status of Covenants ...... ............................... 40 G. Staff Inputs ..................................................... 41 ATTACHMENT Comments Received from the Borrower ..................... 43  PROJECT CONPLETION REPORT WOOD INDUSTRIES RESTRU%URING PROJECT (LOAN 2486-IAI) PREFACE This is the Project Completion Report (PCR) for the Wood Industries Restructuring Project in Malawi, for which Loan 2486-MAI in the amount of US$6.4 million was approved on March 19, 1985. The loan was closed on August 1, 1989, 5 months ahead of schedule. The last disbursement was made on July 15, 1989, and an undisbursed balance of US$1.5 million was cancelled. The PCR was jointly prepared by the Industry and Energy Division of the EMENA Technical Department (on behalf of the Industry and Energy Operations Division of the Southern Africa Department) and the project sponsor who prepared Part II. Preparation of this PCR was started during the Bank's final supervision mission of the project in June 1989, and is based, inter alia, on the Staff Appraisal Report, the Loan Agreement, the Project Agreement, supervision reports, and financial reports of the company. This PCR was read by the Operations Evaluation Department (OED). The draft PCR was sent to the Borrower for their review, and their comments have been taken into account in finalizing the report and are reproduced as an attachment.  - iii - PROJECT COMPLETION REPORT NLAW WOOD INDUSTRIES RESTRUCTURING PROJECT (LOAN 2486-MNI) EVALUATION SUMMARY Obiei as The objectives of the project were: (i) to mod&aiize and increase the production capacity of the state-owned sawvills, (ii) to improve the operating skills and management in these plants, (iii) to encourage privatization in the industry, and (iv) to develop alternative uses for the Viphya forest in northern Malawi. These objectives have been partly achieved. As discussed in Part I, section E, the failure of the domestic demand for sawvwood to increase as anticipated in the SAR meant that the project scope had to be changed. Therefore, wiile modernization of the mills took place, the objective of increasing savnwood production became redundant and instead, the rehabilitation of the mills was directed more towards vertical integration rather than merely increasing production. Training of operating crews and management was achieved largely as expected, and a computerized accounting system has been put into place. However, most of the overseas training for middle management staff was curtailed by the Government's reluctance to use IBRD funds for oversees travel. Privatization of WICO has been much discussed throughout project * implementation, and a study by consultants financed by UNDP of the alternative means to achieve privatization has been completed. Also, IFC has been introduced to the client and have had some initial discussion,s about possible participation. However, at project completion, WICO remains a government owned and controlled company. Only small advances have been made in the utilization of the Viphya forest. The IFC supported VIPLY project is now utilizing about 9,000 ha of the 45,000 total plantation to supply its new plant producing plywood and sawnwood. Also a demonstration charcoal unit has been established which now sells charcoal for household use. However, full utilization of the forest in an economically supportable industrial development continues to be an elusive objective (paras. 1-13). Implementation Experience Once the change in project scope was agreed, implementation proceeded smoothly. The client made full use of the special account facility provided for in the loan (paras. 14, 15).  Although the originally defined objectives were not fully achieved, WICO ls now a more efficient producer with a better trained management and operating staff. The company now regularly earns foreign exchange through export of furniture components (paras. 16-23). SustaanabL=LL At the present time, WICO is not profitable, mostly due to its low capacity utilizatLon. This appears to be partly due to insufficient and irregular supply of logs to the Blantyre mill. If the log supply problem can be solved WICO has medium and long term potential for considerably increasing its earnings through domestic and export furniture sales - - demand in both markets considerably exceeds WICO's current output, and improvements to WICO's manufacturing line have been made under the project to allow it to supply more of this demand. The problem of log supply is currently under discussion and it is expected that a formal log supply agreement between the Forestry Department and WICO will soon be finalized. This will hopefully lead to a more consistent supply of raw material to allow WICO to fully utilize its new productive capacity (paras. 18-21). Lessons _Learne The main lesson learned in this project, as discussed in Part I, section H, is to be wary of too much optimism during the project appraisal -- in this project, the market projections were totally misleading. Because of a major devaluatLon of the local currency during the period of project implemAntation, the company is unable to service the subsidLary loan. This suggests that in countries where the Bank is advocating major economic reforms which will inevitably lead to devaluation, the impact of exchange rate fluctuations on financial viability needs to be more carefully evaluated during project appraisal. One positive lesson learned is the value to the project and the councry of the Bank being responsive to changes in project scope and reallocation of funds to more appropriate categories to meet such changes. The lesson is that Bank supervision missions slhould be alert to the need to modify project scope and react quickly to requests for reallocation. Finally, the matter of raw material supply should be carefully considered during appraisal, and thte project designed with suitable safeguards to ensure supplies on a long-term basis and at economic prices (paras. 24-28).  PROJECT COMPLETION REPORT ALAWI WCOD INDUSTRIES RESTRUCTURING PROJECT (LOAN 2486-MAI) PART I. PROJECT REVWEW FROM BANK'S PERSPECTIVE A. Pro1ect: Identity -Project Name: Wood Industries Restructuring Project -L4an Number: 2486 MLI -RVP Unit: Africa Regional Office Southern Africa Department -Country: Malawi -Sector: Industry -Subsector: Forest Industries B. Backeround 1. The utilization of the substantial forest resources of the Viphya pine plantations in the northern part of Nalavi has been studied by many international agencies and private interests over the last 15 years. While it is the stated intention of the Government to establish a large export pulp mill all efforts to define a such major industrial development to fully utilize the resource have been frustrated by the poor economic prospects stemming from high capital investment and crippling transportation costs for imported inputs and exported outputs. In 1983 the Bank, together with IFC, at the request of the Government, examined the prospects for at least a partial utilization of the forest by establishing a smaller industrial plant. A project to produce mainly plywood and blockboard, but utilizing only 9,000 ha of the available 45,000 ha, was subsequently defined. At the sam time, to satisfy the domestic demand for sawnwood, a complementary project to restructure the existing sawmills operated by the Forest Industries Division (FID) of the Ministry of Forests was developed, although this latter project was intended to use only the forest resources of the southern part of the country. 2. It was agreed that because of an expected participation of the private sector in the northern green-field project, which became known as the Viply Project, IFC would support that development, and the Bank would deal with the restructuring project in the south. The Viply mill, with assistance from IFC, was completed and went into operation in May, 1989. The plant has been built to an excellent technical standard, but for at least the immediate future it will suffer from the low demand in the domestic market. At present the company plans to export 80Q of its product, principally through the northern corridor into Tanzania and to the port of Dar es Salaam. The difficulties already faced by Tanzanian exporters at this port is not encouraging for Viply.  - 2 - 3. The smaller Bank project, in addition to rehabilitation of the existing sawmilla, included a TA component to examine possible alternative uses of the Viphya resources. The Bank project, involving an IBRD loan US$6.4 million was approved by the Executive Directors in December. 1984, and it is this project which is the subject of the present PCR. C. The Comganv 4. The Wood Industries Corporation (WICO), which implemented the project, is a company spun off from FID as a first stop towards privatization. The creation of VICO as a separate entity responsible for the operation of all 5 of the FPD mills was a key step leading to appraisal of the rehabilitation project as it was visualized by both the Bank and the Government that once its mills were modernized and made efficient producers, the Company would become attractive to private investors. However, at present, WICO is in no sense a private sector company: it is entirely Government owned with a board of directors appointed by the Government and is under the control of the Department of Statutory Bodies within the Office of the President and Cabinet. 5. Throughout the implementation of the project, the privatization of WICO was a frequent topic of discussion and analysis, but only at the end of the implementation period were any positive steps taken. In late 1988, the Government undertook a study with the assistance of consultants financed by UNDP, to place a value on VICO's assets and to investigate privatization alternatives. This study is currently being finalized. Also, IFC has had some exploratory discussions with a view to possible participation in WICO together with other private sector interests, perhaps a foreign firm. In the meantime, WICO suffers from an inadequate equity base stemming frcm the time of its incorporation when the Government provided no nbe# funds to launch the company, leaving WICO to finance from its limited cash flow all the local costs of the rehabilitation project, as well as its incremental working capital. p). Sawnwood Marsket 6. The Bank appraisal was based on the market projections of consultants which at the time were considered conservative. In fact, the projections have proved to be excessively optimistic. To illustrate, domestic demand for sawnwood is currently about 20,000 m3/yr, compared with a projection for 1989 at the time of appraisal of more than 50,000 m3/yr. 7. The over-optimistic demand projection seems to arise from two basic assumption errors. It was assumed that annual growth in domestic demand for sawnwood would proceed at a steady rate of 4X into the 1990s. This did not happen. In fact, recent Bank studiesl/ have shown that in the industrial world, consumption of sawnwood is scarcely growing at all, and in developing countries demand has an income elasticity close to one. As Malawi' s actual I/ Ewing, Andrew J. and Raymond Chalk, Th Fgorest Industiesi Sector, World Bank Technical Paper Number 83, 1988.  annual GNP growth is only 1.4X, the 41 growth rate projected at the time of appraisal was clearly too high. 8. Another and more important factor leading to the optimistic estimate of demand is the assumed projection base of 40,900 m3 demand in 1982. While this was presumably the a_zual consumption in that year, the level was probably inflated from the norm by the surge of construction activity in Lilongwe while the new capital was being built in the late 1970s. Although it was recognized that a drop in domestic demand had occurred from a peak of 49,000 m3 in 1975 to 40,900 in 1982, it was assumed that this declining trend had stopped and that steady growth would begin. 9. A further factor which influenced WICO's donestic market potential was unexpected competition from pit sawyers. While there had always been some production of sawnwood by this traditional hand method, in 1986 the Forestry Department, now free of its manufacturing interests following the formation of WICO, made sawlogs more easily available to private individuals, and this caused a surge in manufacturing by pit sawyers. Although the quality of the pit-sawn material is low, so is the cost and price, and pit sawyers became an important influence in the market. E. Changes in Prolect Scope 10. With the Increased competition from pit sawyers apd the imminent start-up of the Viply project which would capture the entire northern market for sawnwood, and with the realization that the market projections were too optimistic, WICO was quick to realize the need to alter the project scope to avoid investing in unneeded assets. During the second Bank supervision mission in October, 1986, about one year after the loan became effective and before any major equipment had been purchased, WICO presented their proposed reduction in project scope, and the Bank was able to agreed immediately -- thus, all procurement was subsequently undertaken within the changed project scope and no unnecessary equipment purchased. The physical components planned at appraisal and those actually implemented, are summarized below: Planned at Annraisal Actual Mazamba Sawmill: -add debarking and sorting line cancelled -improve band-sawmill cancelled -purchase log handling equipment cancelled Dedza Sawmill., -purchase saw doctoring equipment cancelled -install new framesaw moved to Blantyre -purchase log handling equipment completed -expand capacity of kiln dryer cancelled -install glue-laminating facilities cancelled ZombA Sawmill: -rehabilitate sawmill including headrig completed -purchase spare parts completed  -4- -purchase log handling equipment completed lanl er Sawmlil: -install furniture and jotnery equipment completed and expanded. -framesaw installed 11. Although it was originally expected that the WICO mill in Blantyre would eventually be closed after the rehabilitation program, it in fact becaais the main focus of the project. This was due to the move of WICO's head office from Lilongwe (from where the mills had formerly been administered by FID) to Blantyre, which is the commercial center of the country and the major sawnwood market area for the southern region. Wlth the installation at Blantyre of new equipment under the project. WICO's entire domestic market share for sawnwood could easily be manufactured at this single site, and WICO therefore recommended that all the other mills be closed, and that Blantyre become the sole manufactur..ng center. 12. Bank supervision missions analyzed the alternatives of singli plant operation compared with multiplant operation and agreed with WICO's contention that. concentrating all production at Slantyre made good financial sense. However, in spite of the Bank's support of the WICO recommendation, the Government, through WICO's board of directors, instructed WICO management to continue operating two other plants, at Dedza and Zomba. This decision was presumably based primarily on social considerations. In any case, at project completion, WICO co tinues to operate Blantyre, Dedza, and Zomba mills, although the scope of physical rehabilitation was much reduced from the appraisal plan at Dedza and Zomba and increased at Blantyre. 13. UICO's increasing awareness of the developing imbalance between sawnwood production capacity and domestic demand, lead it to explore vertical integration into higher value-added products, specifically furniture, knocked- down furniture kits, and furniture components. Initial response in the domestic and exports market was strong and WICO discussed with the Bank further changes in project scope, to which the Bank agreed, to allow increased furniture manufacturing capability at the Blantyre mill. The manufacture of furniture by WICO is a departure from the original project scope only in the sense of magnitude and timing -- it was intended in the original project that studies would be undertaken to investigate such a possibility, but it was not expected that furniture would immediately replace a large portion of sawnwood as a major output. F. Proiect Imnlementation 14. The project was in two parts: Part A covezed the rehabilitation of WICO and related TA, and was implemented by WICO; Part B covered TA to the Government to explore alternative uses of the Viphya forest resource and was the responsibility of the Ministry of Forests. In fact, the activity visualized for Part B, after only initial studies were completed under the Project, were transferred to a nw IDA Wood Energy Project. Consequently, Part B of the Project is referred to only briefly in this PCR.  15. Once WICO had settled on a revised project scope and cleared the changes with the Government and the Bank, implementation proceeded smoothly with no unusual difficulties. There were no significant procurement disputes. WICO made full use of a special account--virtually all payments to suppliers were made directly by WICO from this account. G. Project Rgsults Proiect Objectives. 16. The original objective to rehabilitate the existing Government. owned sawmills has been achieved, although not in the form visualized in the appraisal report (para 8 to 11). The TA centering on training of operating crews and middle management has also been largely completed and the plants are now operated and managed entirely by Malawians. Some of the training objectives requiring overseas travel were cut back because the Government was reluctant to use IBRD loan funds for this purpose. The objective of using TA to the Government to identify alternative uses of the Viphya forest was only partially successful -- a demonstration pine charcoal production unit has been established near the Viply plant and is selling charcoal for household uses. However, large-scale utilization of charcoal for industrial purposes, eg. tobacco curing, have not yet taken off. Furthermore, none of the more esoteric alternative uses identified such as silva-chemicals production are financially or economically attractive. At this writing, the utilization of the Viphya forest r; sins an enigma. xroject Costs. 17. Because of the change in project scope it is not particularly useful or even valid to compare appraisal cost estimates with actual costs. However, as would be expected with the reduced level of physical rehabilitation undertaken, actual total cost was only 65X, and the foreign portion 771, of the appraisal estimate. Approximately US$1.5 million of the loan was therefore cancelled.Z/ Financial Performance. 18. Compared with expectations at the time of appraisal, WICO's financial performance has been poor. In addition, the Government did not live up to its legal commitment to make WICO financially viable. Despite the efforts of several supervision missions which discussed the subject of capital structure and financial restructuring, WICO at present stands 10O debt financed, is unable to pav interest and principal on the subsidiary loan onlent by the Government from the IBRD loan which financed the project, and is thus technically bankrupt. Another contributing factor to WICO's financial / It should be noted that Malawi is now an IDA country, and this is one of the last IBRD loans. Caneiellation of the outstanding amount, rather than reallocation to some other purpose, was considered appropriate to reduce Malawi's debt service.  - 6 - distress has been the substantial devaluation of the Malawi Kwacha, which more than doubled the debt service costs in local currency without a corresponding increase in selling prices. 19. From the time of its incorporation, WICO has been short of cash. The Government provided no equity when the Company was formed, and WICO had to finance all the local costs of the project and its incremental working capital from its meager cash flow. The change in project scope required by the lack of domestic market share for sawn wood has kept WICO's sales at a relatively low level. Entry into the export market for furniture has required substantial d rounts. 20. -her major cause of poor sales has been low production because of erratic Ih: - ?pplies. In early 1989, because of the shortage of lop, WICO was forced to purchase sawnwood fron the VIPLY mill to keep its furniture factory operating. The problem with log supply is expected to be solved shortly when a formal log supply agreement specifying volume requirements and prices is finalized between WICO and the Forest Department. 21. During the period 1986/87 to 1988/89, sales grew from MK 3.5 million to SK 5.4 million while cost of sales increased from HK 3.8 million to MK 5.6 million. After fixed costs, including interest and depreciation, accumulated losses for the period totaled MK 8.9 million or about 62X of sales. Forecasts prepared by WICO through 1993/94 show increasing sales volume and revenues, and the company making an operating profit of about 12 to 15S of sales. However, WICO projects continuing losses because of interest and exchange losses. Economic Performance. 22. Because of the change in project scope comparison between the appraisal and actual estimates of the Economic Rate of Return (ERR) may not be particularly valid, but in any case the current estimate is 7X compared with 25X at appraisal. The main reason for the sharp decline is the much lower revenue currently received, due in large part to lover prices for sawnwood. At appraisal, the financial price of sawnwood was taken as the economic price. This was seen to be a conservative approach as the estimated equivalent import price, less duties and taxes, was more than double the domestic price. As prices of sawnwood in Malawi had been decontrolled (and continue to be) it was reasoned in the SAR that prices would increase as quality improved from the rehabilitated WICO mills. Therefore, in rhe financial projections, upon which the ERR was based, prices were allowed to increase 51 per year. In the sensitivity tests it was noted that if this price increas% ',r quality was excluded, the ERR dropped from 251 to 191. Furthermore, if sales volume was decreased by 101 the ERR dropped to 141. It follows that if sales price dropped by the same 10, the ERR would drop even lower. Thus the SAR clearly demonstrated the sensitivity of ERR to price. In fact, the price has dropped much lower than the 10 tested in the sensitivity analysis: the domescic price at appraisal was 200 MK/m3, which in 1989 terms is equivalent to 442 Mk/m3, while at project completion, the actual 1989 price is 265 MK/m3, a reduction in real terms of 402.  -7 - 23. The argument in the SAR that the financial price was a conservative proxy for the economic price was supported by the estimated high price of equivalent imports. The import price was based on supply from a major world supplier, in this case Canada, by adding to the fob west coast Canadian price, ocean freight and local transport through Mozambique to Blantyre. This may have been a valid argument at the time, when reasonably large volumes were being considered. However, the actual situation at project completion is that the small volume of sawnwood being sold, if not produced by WICO, would be supplied by other domestic producers. Had this situation been foreseen at the time of appraisal, a more cautious approach would no doubt have been taken. The fact that it wasn't is a direct reflection of the over optimistic market projections. H. Lessons Learned 24. WICOs major and continuing problem in planning and executing its operational strategies is the insecurity of the raw material supply. The lesson learned from this experience, which is applicable to any natural resource processing project, is that in such projects, the matter of raw material supply should be carefully considered during appraisal, and the project designed with suitable safeguards to ensure the long term supply of raw material at economic prices. 25. It is clear that the original design of this project suffered from too much optimism during appraisal, particularly regarding the market projections. However, in spite of the fact that market realities forced significant modification in the project scope, the broad objective of rehabilitating the government owned mills was still achieved, and WICO is a more efficient company than it was before the project. 26. The local currency was devalued from 1.3 Kwacha per US dollar at the time of appraisal to 2.8 at project closing, thus more than doubling the company's debt service obligations under the onlending agreement with the government. The company is unable to service this debt. This appears to be a problem in other of the Bank's industrial projects, particularly in countries where major economic reforms are being advocated. The lesson learned is that appraisals need to pay more attention to the sensitivity of the project's financial viability to exchange rate fluctuations. Had the effects of a major devaluation been tested in this project, up to the level which actually took place, the project might not have proceeded. 27. Privatization has not yet taken place. While a study has been completed, and many discussions have been held with various potential partners, nothing concrete has developed, and there does not appear to be much enthusiasm to privatize. The lesson might be that governments, when faced with the final dectsion to sell their assets after going through the process of improving them have second thoughts: "Now that it works well and has the potential of earning revenue for the state, why should we sell?"  28. Perhaps the most important lesson for Bank staff and management is to be flexible when faced with the need for project redesign. It would have been foolish to proceed with the full rehabilitation project as described in the SAR and in the legal documents, and the flexible attitude of the Bank in allowing reallocation of loan funds, within the broad objectives of the project, proved to be most beneficial to the company and the country. Perhaps the Bank would better serve its clients and ach.lieve its development objectives if it were more general in its allocation of loan funds as specified in the legal documents, and more flexible and responsive to borrowers requests for reallocation. PART II. PROJECT REVIEW FROM BORROUER'S PERSPECTIVE The following contribution was prepared by the client prior to the date of the new PCR format. The client was responding to questions in a guideline given to him during a previous supervision mission. Certain questions have cryptic answers which are meaningless unless read in parallel with the questionnaire. Therefore a copy of the questionnaire follows immediately and minor editorial comments have been added in the text of the client's pages where reference to the questionnaire is required to clarify the response. Also, as the client's portion was originally prepared almost a year before the final supervision/PCR mission, certain of the tables became outdated, and updated pages, prepared by the client, have been added. Other than this, Part II which follows has been prepared entirely by WICO.  -9- TRE 1 SA - LUM ?='OJECTS DE?AR=1 PR= CCWlE?TO= REPORT ThO0*TO REOUIt3E t. wuW.nPROJE= MENTZTCAflOMI M RISAL & APPRAISAL (a) Comparison between the projeet scops as orig a.ly e.visage by the Company and as finalLy agreed with, the ank. Discuss the origin ad evolution of project scope. (b) Role of Bank and borrow.r in. fosaLing project scope and project implemencation amgements. What alterative compo5ents or arg ts wee o lly considd. (c) t^ho prpared the project? If prepared by consultants, what vas tha exent of the bo es Input In the feasibilit study? What was tha Bank. Involvement in the proces? (d) How long it tookl for the borrow to prepare the project? . Which were the steps involve in project preparation. (e) Comment on the Bank's involvemet and performance during tha process of project identification, preparation, appraisa, aesotiations and Loan siin. T2I. PROJECT '"La=1-ATT=. & MANAGOWT (a) Project Scone (i) Comeent on the appropriateness of the project scope, configucation and technology, in view of developmens duxing 4ipiuaenution. (IL) Discuss major changes in scope during project exeution ad the reasons for it. Who iitiated or s these changs. (b) Proiect Kaasemeut (I) Describe the project management systea used to pla ad mitor the iWLemantationof the proj . (Ii) D"ecribe tha rlationships during implbetween the borrower, consultants, technicaL advisors, caetoA and suppliers.  - 10 - (M) CM on ahe app rpriateness of the abde 43d what vent wrong with thea. Wght ceU ham ben don to avoid th problem. (*) W"as ce Bank icolved Ia tha desip of ths project L-4"e Meatiog and rerlosbl" bemeam the borrower, cotus, eC Ca adViso n cos. (c) Use ald Perfaorance of Consultats (i) Assess the coultant's perfcrmnce la prjec desig e anieig, construction supervisiom, IaSXsL opuratio (IL) Pravide with specific ea Ian that Iuaaze amy indicated lack of perforzance by canauLtasts. (d) Perforgance of Contractors and Sut1liers (1) Asse the contractors' and supplirs' v n regardin quality of se8vice and wz s dLasq quai of eaquipm and delve tla, and a aci;i (IL) mdi ajor problems or uie n cth cOeCR nd supplLers atI a" whetr and bar the could hae bee avoided. (LU.) Prvide with specific examplea that iuain. -lak of performance by contractors and supplim. (e) Procuremec *(i) Describe the procuremec procedures ucr4ted for the project.. (S1) Did the borrower hsv difficuLties In foUZnwIg the Bank's Pro eIc guideline. (LIi) ftet problem. or constraints occurreed l g prject ImpLensucatlon that were due to p - & 0suppis. (Uv) that specific beefits did Int. itius blddiAg provide to the borrower. (f) I.plementation Schedule (1) Comparison btween appraisaL and a dma L schodples, as a whole and for the ads PhysicaL Componets- (Li) Tudicate the ajor works and co_pooee were ca opLeted by the origiala target date.  - 11 - (it) What wer the major factors causing deLas or advances Inwork.? When did they occ Cml ttey itave bee forese anA avoitdd. (Lv) W6at wer the effects and izpact of th delay on project benatits? (v) 6hat actions wave takan by the borrowet and coutractors to avoid or remedy delays. Ho appropritat were thase actions? (g) Casital Cost. Financing & Disbursements (i) Protvd a breakdown of actual and esetjd project cost by major equipment, works and sevices in a tabular fou, d