Malawi - Public sector management review : selected issues (Vol. 2 of 2) : Annexes

Report No. 9643-MAI Malawi Public Sector Management Review Selected Issues (In Two Volumes) Volume II: Annexes March 31, 1993 Country Operations Division Southern Africa Department Africa Region FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. tis contents may not otherwise be disclosed without World Bank authorization.  ANNEXES Annex 1 Summary of PSMR's Recommendations Annex 2-1 Malawi -- Economic Classification of Central Government Recurrent Expenditures Annex 2-2 Malawi -- Targets for Total Government Wage/Salary Bill Annex 2-3 Malawi -- Common Service Cadres Annex 2-4 Recommendations on Individual Common Services Annex 2-5 Methodology Overview for Reviewing Management Issues in Government Ministries and Departments Annex 2-6 Examples of Dysfunctional Management Practices in Ministries and Departments Annex 3-1 Public Enterprises as of January 1991 Annex 3-2 Consolidated Financial Summary of Parastatals Annex 3-3 Net Financial Flows Between Government and Parastatals Annex 3-4 Profit and Loss Data on Parastatals - 19.4/85-1989/90 Annex 3-5 Financial Summary of Non-Commercial Parastatals Annex 3-6 Profit and Loss Data on Commercial Treasury Funds Annex 3-7 Selected Financial Indicators, Non-Commercial Treasury Funds Annex 3-8 Wages Scales in Parastatals at 31/03/90 Annex 3-9 Employment of Commercial Parastatals Annex 3-10 Parastatals Costs for Employee Housing in 1989/90 Annex 3-11 Training of Parastatal Employees 1989/90  FOR OMCIAL USE ONLY ANNEX,.I Page 1 of 7 SUMMARY OF PSMR'S RECOMMENDATIONS MANAGEMENT ISSUE IN TE CENTRAL GVRMN A. Management o' Civil Service Emplovment and Wages (a) Employment (i) Freezing the creation of new establishment positions while it is reviewing the Establishment Register and reconciling the number of existing positions between Treasury and DPMT; future growth should be constrained - probably in the range of 1-2 percent - and concentrated on the priority social sectors, so that emphasis can be placed on improving wages; (ii) making the Establishment Register an authoritative document, published annually along with the Budget; .(iii) ensuring that the recruitment procedure includes a check that posts are (a) established and (b) vacant before recruitment proceeds; (iv) making forward projections (ceilings) of Establishment posts as a manpower planning framework for each Ministry; and (v) improving monitoring of non-Established posts and including their estimated numbers, for record keeping purposes, in the annual Establishment Register. (b) WrIgs (i) Government should adjust salaries regularly, preferably on an annual basis. In adjusting salaries, Government should consider the following factors: a. maintain an appropriate relationship between public, parastatal and private remuneration; b. maintain an efficient and equitable Government salary structure by keeping the compression ratios and incentives for scarce skills under regular review, and by limiting the role of indirect benefits, such as housing sand training, by making these benefits transparent and accessible to all civil servants, and, over time and as salaries improve, reducing indirect benefits as a proportion of total compensation. (ii) Government should strengthen its capacity for the timely analysis of remuneration issues. Responsibility for developing a detailed 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.  ANNE12K Page 2 of 7 Government policy statement on pay and related issues should be vested in the Office of the President and Cabinet, drawing on staff from Treasury, DPMT, EP&D, the Department of Statutory Bodies and the Ministry of Labor. Responsibility for rapid analysis of budgetary implications of differentiated pay adjustments should rest with EP&D, who also should be responsible for including a review of pay and cost of living trends in the Annual Economic Report and Budget Speech. B. Management of Common Services (a) Excessive Staff Turnover (i) adopt guidelines on reposting and promotion to minimize inter- Ministerial transfers (guidelines to require, inter alia, advance consultation between responsible officer and controlling officer); (ii) improve personnel record keeping and information systems to better track staff rotations; (iii) encourage guidance rather than transfer as the first reaction to difficulty; (iv) for each Common Service, review balance of senior posts (promotion opportunities) between core ministries and satellites; and (v) minimize disruptive effects of training by longer horizon for training plans. (b) Excessive Vacancies (i! streamline the recruitment process by eliminating unnecessary steps and allowing parallel rather tha-. serial procedures where possiale (the MIM study has identified measures that could reduce the recruitment time from 32 to 12 weeks); (ii) investigate measures to reduce time for promotions (the MIM study has identified measures that would reduce the promotion time from 62 weeks to 14 weeks for competitive positions and 6 weeks for non-competitive ones); (iii) revive the use of DPMT's training pool to allow long-term training vacancies to be covered; and (iv) review bonding regulations and either enforce or abandon them.  ANNEXI Page 3 of 7 (c) InsuMcient Understanding within the Common Services of their Roles and Functions (i) schemes of service be introduced that show overall duties of each cadre 5ob descriptions) as well as entry, training and promotion requirements for all Common Services; (ii) procedures manuals be prepared for various functions undertaken by common service personnel (e.g., accounting, stores, budgetary, etc.), induction training be provided for new recruits, and professional seminars and other in-service training be organized to assist career development; and (iii) an open performance appraisal system be introduced. MANAGEMENT OF THE PARASTATAL SECTOR A. Institutional Framework of ParsJttls (a) Department of Statutory Bodies (i) DSB's future role should be limited to establishing performance indicators, monitoring and evaluating parastatal performance, providing assistance in accounting, financial analysis and investment appraisal, helping to implement policies that affect the sector (e.g. housing, terms and conditions of service), assisting in management development and designing and supervising a privatization policy for Government. (ii) The Ministry of Justice or other appropriate Government entity prepare concrete proposals for DSB's legal status, objectives, authority and responsibilities. An appropriate structure would be one that is similar in status to the Reserve Bank of Malawi - an entity that is part of Government, but which can pay salaries at levels cioser to the private sector. However, DSB should not be established as a parastatal holding company (as is the Reserve Bank) as that would create the need to establish another oversight capability to monitor DSB's performance. Perhaps establishing DSB as a Board or Commission would provide the appropriate legal framework. (iii) DSB take immediate steps to recruit outside consultants to identify performance indicators for selected statutory bodies. (iv) DSB extend the performance system to include senior managers of commercial statutory bodies as soon as h nas been tested on a pilot group of General Managers.  ANNEX-1 Page 4 of 7 (v) DSB augment its accounting staff in Lilongwe and consider opening an office in Blantyre so that accounting advice may be offered more easily on an ongoing basis to statutory h-.dies in the southern part of the country. (vi) DSB improve its capacity to perform economic analyses of investments by appointing a senior-level economist and sending its other economists for special training. (vii) Government and donors review the current incentive structure for local trainirng. (viii) Government move responsibility for monitoring completely non- commercial subverted parastatals - MCA, National Library, MEPC, PCC, Chichewa board, Accountants board, National Herbarium - from DSB to Parent Ministries. (ix) Government continue its privatization program and direct DSB to formulate a privatization policy statement and action plan. Government should consider directing DSB to supervise the sale - partial or whole - of the following enterprises within the next five years: a. Parastatals: Malawi Book Service, Malawi Dairy Industries. b. MDC's Portfolio: Packaging Industries, MPICO, Import and Export Company, Tourism Development, Bata, Chillington Agrimal, ECO Systems, ENCOR, Leopard Match, Pipe Extruders, Commercial Bank of Malati, National Insurance Company. This would require reinforcing MDC staff capacity to manage these sales. (b) Ministry of Finance. Parent Ministries and the Department of Economic Planning and Development (i) To avoid unnecessary duplication, Government concentrate tiie economic analysis of parastatals within DSB and reduce EP&D's oversight responsibilities for parastatals B. Operational Effectiveness of Statutory Bodies (a) Corporate Planning and Budgeting (i) Ministries be required to send senior level representatives (mininum P7 level) to serve on the board and, by implication, on the Budget subcommittee. If Government decides to retain a separate Budget Committee then, at a minimum, it must insist that the same higher level individuals attend both board and Budget Committee meetings.  ANNEXY L Page 5 of 7 (ii) Corporate plans be incorporated as a planning tool for all larger commercial parastatals. tu) Board of Directors (i) Government issue a directive which defines the role of the board and enhances its autharity over certain decisions. (ii) The composition of the board should be carefully scrutinized to ensure competence of members in analytical issues. There should be a better balance of technical and socio-cultural skills. (iii) Board members serve a three year term and terms be staggered to ensure continuity. (iv) The attendance at board meetings be restricted to certain level of seniority (P7/S7 and preferably P5/S5) and the chairman be given a list of Government alternate representatives in advance. (v) All correspondence from Government to the general manager be copied to the chairman and that a communication link be established between the general manager, the chairman and DSB. (c) The Management of Parastatals (i) Expatriate managers should be required to train Malawian counterparts to assume their positions. Preferably, a switch in positions should occur in the middle of the expatriate's term. (ii) If donor salary limits for expatriate technical assistance are too low to attract the needed expertise, then Government should top up these salaries so that the right individuals may be recruited. (iii) If the performance system for general managers is successful during its pilot stage, then Government should extend the system to the next layer of staff and eventually include all staff members who contribute to the achievement of performance targets. (d) Wages and Salaries (i) Government issue a policy paper on tying staff remuneration more closely to achievement of performance targets. DSB should design and supervise its implementation for selected commercial statutory bodies. (ii) Smaller commercial parastatals share accountants engaged on a full-time basis through DSB or contracted directly with a group of statutory bodies. These roving accountants would review the work of parastatal bookkeepers and prepare financial statements and budgets.  ANS&L Page 6 of 7 (e) Housing Benefi (i) DSB design and supervise the implementation of a home ownership program on a pilot basis. Long-term technical assistance will be needed to design a scheme which is reasonable, affordable and equitable. The Government might consider requesting assistance from the World Bank or other donors in funding a trust fund to help finance a parastatal housing scheme. (M) Other Benefits (i) Parastatals transfer the function of providing staff loans for major asset purchases - cars, furniture, stoves, refrigerators - to commercial banks. Parastatal would continue to provide loans for emergency purposes. (g) Training (i) Government change the incentive structure for training. Training should be linked directly to job requirements. C. Treasur= Funds Organization and Performance (a) Ministrv of Finance Sunervislon (i) Government transform selected Treasury funds into Statutory Bodies and delegate .nonitoring to DSB. Candidates include: Malawi Post Office, Plant and Vehicle Hire Organization, Government Hostel and District Rest Houses Fund. The case for transforming Central Government Stores and Central Medical Stores into Statutory Bodies should also be examined. Government should determine which services currently performed by these entities could be subcontracted to the private sector. (ii) Government consider sale of the Egg Marketing Funds in Blantyre, Lilongwe and Mzuzu, the Manufacturing and Production Fund and the Borehole Construction Fund. (iii) Government review whether the remaining Treasury Funds should be entirely supervised by their Parent Ministries or remain within the purview of the Treasury Funds unit. If the latter option is chosen then Government must strengthen the capacity of the unit within Treasury so that it can adequately supervise these entities. (iv) Comprehensive external audits be performed on all commercial Treasury Funds within the next two years. (v) Treasury take initiative to settle Government arrears owed to Treasury Funds.  ANNEXI Page 7 of 7 (b) Operational .ffectiveness of Treasury Funds (i) A performance monitoring and evaluation system be introduced for all Treasury Funds which includes: a. a five year corporate plan, modifl; each year. b. an annual plan which establishes both financial and technical performance objectives. c. quarterly financial reports. (ii) A performance system for managers, similar to that being introduced for parastatals, be designed and inplemented for the larger commercial Treasury Funds.  Al*l 2-1 Page 1 of 1 PS9 --PAY fALAJI -- ECOONIC CLASSIFICATION OF CENTRAL GOVERUEJET RECURRET EXIPETtITUES (OK dillion) 1981/82 19883 1983/84 1964/a5 1955186 196/87 19s 8a 1989 1989/90 1990/91 Revised Esti ete Gross Coruaaption 151.35 170.79 183.81 214.49 259.72 339.90 365.77 458.47 564.39 68.44 Salaries and Iges 57.67 67.99 76.66 85.43 104.62 131.97 163.14 174.26 253.24 263.54 Other Goode and Services 93.68 102.80 107.15 129.06 155.10 207.93 202.63 284.21 311.15 420.90 Less: Fees, Sates and Recoveries -10.19 -13.74 -8.91 -10.37 -9.49 -12.72 -13.75 -19.47 -17.86 -16.34 Net Cansa ption 141.16 157.05 174.90 204.12 250.23 327.18 352.02 439.00 546.53 668.10 Interest on Debt 51.92 59.80 55.92 105.59 93.24 152.24 180.40 161.28 210.00 157.36 Grants and Subsidies 21.10 24.98 43.50 33.65 43.59 53.23 54.75 53.56 91.48 103.59 Locat Authorities 1.57 1.17 4.60 3.84 4.52 4.84 1.79 1.81 6.85 5.89 PubLic Bodies 17.11 21.72 34.59 25.32 31.46 39.74 38.61 42.24 71.26 79.98 Private 1.40 1.06 2.64 2.55 4.84 4.39 10.02 4.22 6.11 9.29 Abroad 1.02 1.03 1.67 1.94 2.77 4.26 4.33 5.29 7.26 8.43 Gross Fixed Capital Foemtion 6.96 5.09 5.36 8.04 26.56 13.14 13.55 19.55 35.39 36.91 LOens end Capital Transfers 0.53 0.04 0.50 3.01 2.53 2.00 2.04 2.34 3.18 4.21 Totat Recurrent Expeditures 231.86 260.70 289.09 364.78 425.64 S60.51 616.51 69S.20 904.4 986.51 Plus: Debt Amortization 41.16 17.75 26.19 52.01 93.62 97.26 112.32 152.34 152.17 182.23 TOTAL 273.02 278.45 315.28 416.79 519.26 657.77 728.83 847.54 1056.61 1168.74 Add: Extra-Budgetary 36.70 26.00 46.70 GRAND TOTAL 309.72 278.45 315.28 416.79 545.26 704.47 7MM.83 847.54 1056.61 1168.74 Vages and Salas is as Z of non-debt recurrent expenditure 32.02 33.8a 32.9X 33.02 31.52 32.3Z 37.42 32.62 36.52 31.82 Wages ad Salaries as Z of Gross Consumption 38.1Z 39.82 41.72 39.82 40.32 38.82 4.62 38.02 44.9X 38.5Z Source: Halaui Gaverent, Economic Report (1989 and 1990).  ANEX2-2 Page 1 of 1 NAAUUI -- TARGETS FOR TOTAL GOVERNIENT AGEISALARY BILL 1987/88 1988/89 1989/90 1990/1 1991/92 1992/93 A. Uage bilt as X of GDP (a) 4.2X 4.8X 5.0X 4.9X 4.72 B. Growth of GOP (b) 3.32 4CAi 3.42 5.02 4.52 C. Target Wage Bill Index (c) 100.0 119.2 128.4 132.1 132.4 O. Rec. Wages/salaries (Km) (d) 163.14 174.26 253.24 263.54 E. CPI change (e) 25.82 31.42 17.81 10.4X MA MA F. Actual bages ('88/89 prices) (f) 214.37 174.26 208.16 194.10 MA MA G. CPI (Aprit 1988 a 100) 131.4 100.0 82.2 73.7 MA MA H. Actual Wage Bill Index 100.0 119.5 111.4 MA MA 1. Actual (H) as X of Target (C) 100.02 100.2X 86.8X MA MA (a) From PER page 31, Table II.C.6. (b) From PfP, p24, TabLe 1, first line; calendar 1988 is used for 1988/89, etc. (c) Target Index of total Govt. expenditure on wages and salaries. (1987/88 bill factored up by growth in GDP and growth in target wage share of MIP.) (d) From Annex 2-2; recurrent budget only {e) Composite Retail Price Index, year to April. (f) D adjusted by E.  Page 1 of 9 NA . m .ra CA. f - ------- ------ -- ---....-----.- ---Gr-- ......... -- -................................... Nfnistry/Dept. Pi P2 P3 P4 W P6 P7 PS PO SEO Eo SW co 005 State R -ld0nce 1 1 2 1 4 006 Auditor Gnral I 1 1 007 Jiudlcil 1 2 4 2a 068 Parltiemnt I I 1 1 4 009 O.P.C. 1 1 3 1 6 S 3 4 26 010 Defence 1 2 3 2 011 E.P. AD. 2 3 1 012 District Admin. 1 3 4 4 6 44 013 Lan1 1 1 1 2 2 a 15 014 N.S.o. I 1 2 4 015 Police 016 Prfnt A Statfonery I I * 1 3 12 018 Surve" 1 1 3 019 Agriculture 1 1 10 12 18 14 47 47 386 021 Fisher" - 2 4 2 7 022 Forestry 4 2 3 6 6 40 023 GeologfeaL Survey 1 1 7 025 Education and Cuture 1 1 5 10 3 17 39 125 026 External Affairs I I I - 1 1 1 6 027 Finance 1 3 1 3 3 5 7 33 028 Cust and Excise I 1 1 2 3 8 029 Inco.. Tax I - 2 4 2 030 Office Equipment I 1 031 Health 1 1 4 3 2 6 31 6 73 032 SocIal Welfare 1 1 1 2 2 2 20 034 Tourism I I - 6 035 Justfee 1 1 1 - 2 5 21 07 Labor 1 1 3 1 4 2 13 038 Local Governimnt I I I - 2 3 13 039 Trade InduBtry & Touris 1 1 2 1 2 6 3 13 040 Tramport I - 2 - 1 3 2 20 041 Posts & Telecam. Finance