Malawi - Institutional Development Project

 Institutional development project Report No: ; Type: Report/Evaluation Memorandum ; Country: Malawi; Region: Africa; Sector: Institutional Development; Major Sector: Public Sector Management; ProjectID: P001656 The Malawi Institutional Development Project, supported by Credit 2036-MAI for US$11.3 million equivalent, was approved in FY89. The credit was closed on June 30, 1996, three extensions and 18 months after the original closing date, and US$0.14 million was canceled. The UNDP provided cofinancing of US$4.1 million. The Africa Regional Office prepared the Implementation Completion Report (ICR), which includes the Borrower’s comments. The UNDP did not submit written comments on the draft ICR. The main objective of the project was to strengthen national economic management. The components were designed to: (i) establish the Malawi Institute of Management (MIM), which would offer courses for Malawian managers in both the public and private sectors; (ii) support an ongoing tax modernization program within the Ministry of Finance (MOF); and (iii) as part of a comprehensive development plan, strengthen the MOF’s institutional capacity in specific areas such as forward budgeting, accounting and auditing, and debt management and claims. At the end of the project, the MIM was to be financially self-sufficient, with income generated by an Endowment Fund and training fees. The project met most of its objectives. The MIM was established as planned and for the first three years of the project exceeded its training targets. During the last two years, however, leadership problems within the MIM affected performance, and the institute failed to meet appraisal targets. The MIM staff carried out more consultancy assignments than projected, and clients from both the private and public sectors expressed satisfaction with the quality of service. Because the number of trainees exceeded targets in the early years and more consultancy assignments were carried out than expected, the Endowment Fund was larger than projected at appraisal. By end-1994, however, the MIM was not yet self- financing due to a failure to contain costs, raise course fees, and phase out fellowships, and an unsound investment strategy for the Fund. The tax modernization program helped in the reform of tax policy and legislation, broadening the tax base, introducing a value-added tax, and improving administration through training and new computer systems. The long-term usefulness of these new systems is in doubt, however, because of design problems. The component for strengthening MOF capacity was not implemented, in spite of agreement in principle among UNDP, the World Bank, and the ministry, because the MOF and UNDP were unable to agree on a final document. The ICR rates the project’s outcome as satisfactory, institutional development as substantial, sustainability as likely, and Bank performance as satisfactory. OED agrees with all the ratings except institutional development, which it downgrades to modest. The lower rating is based on three factors: first, the institutional capacity building envisaged for MOF was not carried out; second, demand for MIM training at the end of the project had fallen below conservatively projected levels; and third, the MIM was not yet financially self-sufficient. This project offers two major lessons. It clearly shows that a successful outcome requires both firm commitment from the Borrower and good donor coordination. And it demonstrates that ongoing, consistent Bank supervision positively affects project performance (in this case, preventing major procurement mistakes), just as its absence can lead to suboptimal investments (such as the problematic computerized systems). The ICR is satisfactory. It gives a balanced account of the project’s strengths and weaknesses and assesses the outcomes appropriately. No audit is planned.