Zambia - Public Service Capacity Building Program Project

Report No. PID8804 Project name Zambia-Public Service Capacity Building... Program Region Africa Sector Public Sector Management Project ID ZMPE50400 Borrower(s) Government of the Republic of Zambia Implementing agency Professor B. Mweene Deputy Secretary to the Cabinet Cabinet Office Lusaka, Zambia Tel: (260+1) 251065 Email: pscap@zamnet.zm Environment Category C Date this PID prepared December 8, 1999 Projected Appraisal date October 8, 1999 Projected Board date March, 2000 Country and sector background Government began a radical social and economic reform process in the early 1990s. Economic liberalization included removal of subsidies, the privatization of parastatal companies, and redefinition of the role of the public service from that of controlling the overall economy to that of providing an enabling environment for increased participation of the private sector and individuals in the economic and social development of the country. The redefinition of the role of the public service was based, in part, on the realization that service delivery by the public service, in general, and the Civil Service, in particular, had deteriorated. Some progress has been made in meeting the objectives of the Public Service Reform Program which was launched in 1993. These include the retrenchment of almost 20 per cent of civil servants in 1998 and 1999; a wage freeze to bring public costs under control; the privatization of over 80 per cent of 280 state-owned enterprises; the implementation of a policy process that emphasizes coordination; substantial decentralization in the health and agriculture sectors; the preparation of restructuring plans for all ministries; the introduction of frameworks for improving legal and accounting capacity; and the preparation of a national capacity building program for good governance. However many problems remain to be addressed: the public service is still highly centralized; civil service wages are low and highly compressed; most Cabinet decisions are not implemented as planned; recruitment is only loosely linked to merit; and there is no effective system of sanctions for misappropriation and misapplication of public resources. The quality of many services is declining rather than improving.  Program objectives The objective of Public Service Capacity Building Program (PSCAP) is to transform the structures and processes of service delivery so that citizens and businesses receive the public services they need and can afford. Since such a transformation of public service delivery is expected to take almost a generation, PSCAP has been designed as a thirteen-year Adaptable Program Loan (APL). Phase 1 will put in place the basic financial management, personnel and other systems, continue public service rightsizing, begin to reform wages, and implement the restructuring of the public service, the theme of which is to move services provision nearer to clients -- in general, getting the public service ready for results-oriented management. Phase 2 will roll out performance management throughout the public service, leading to many clear service improvements; increasingly, service provision will be decentralized to private providers, local government, and executive agencies, with greater community involvement. Phase 3 will institutionalize performance management by establishing cycles of "use new systems, monitor and adjust." During the first, three-year phase of PSCAP a number of critical system-wide reforms to support improved service delivery will be introduced. These include reducing public service staffing, reforming pay, introducing more effective human resources management, and improving resource allocation and financial management systems. The first phase will also support progress being made under ongoing programs to restructure, decentralize, and improve accountability and transparency in the public service. By the end of the program as a whole it will be possible to characterize the public service as follows: Model for decentralization of service provision institutionalized Local government units more active in service provision Final phase of privatization completed Executive agencies established to provide services where private provision not appropriate Model for client-responsive, result-oriented leadership and management established throughout the public service Environment conducive to foreign and local investment established Decentralized human resources management in place Strong linkage between policy process and resources established Most policies implemented as planned Public service fully sustained from budgetary resources Public servants routinely trained and retrained in skills needed for the result-oriented public service Capacity developed for private and public training institutes to deliver the training needed by public servants Office of the Auditor General (OAG) fully autonomous and decentralized Effective and transparent public procurement system in place Commission of Investigation (COI) with well trained and equipped personnel Program description Each of PSCAP's five components builds upon past and ongoing institutional reforms that aim to establish a more effective, efficient and decentralized - 2-  provision of public services: Rightsizing and Pay Reform Policy and Public Service Management Financial Management, Accountability and Transparency Judicial and Legal Decentralization Right-sizing and Pay Reform: The objective of this component is to bring about the restructuring necessary rationalize the functions of government and to generate the financial resources needed to begin to create the pay incentives needed to motivate staff. Phase I will build upon progress made under the UNDP supported restructuring of ministries and the retrenchment carried out over the past year and assist Government in rationalizing the structure and size of the Public Service. It is expected that the establishment will be reduced from 136,000 in June 1997 to about 112,000 by the end of 1999 and about 110,000 by the end of 2000. The long term goal is to have a core civil service of 10-12,000. The main activities to be carried out under this component in Phase 1 would be: (i) separation of excess and redundant staff; (ii) creating a computer-based Complements and Gradings Register; (iii) putting in place payroll and establishment control systems; (iv) enhancing social safety net programs; (v) restructuring of the public service; (vi) enhancing capacity of the PSC to undertake selection and placement of appropriate personnel in the restructured Ministries; (vii) identifying and divesting non-core functions; and (viii) reform pay through monetization, negotiating performance contracts with PSs and increasing salaries, especially the salaries of key technical and professional staff. The Management Development Division in the Cabinet Office will lead this component. Policy and Public Service Management: As direct service provision is decentralized, policy formulation and monitoring will become the business of government. The core civil service, which may contract to about 10-12,000 staff after 13 years, will be prepared for its new role under this component. PSCAP will continue the work begun with IrishAid support and will assist Government Ministries and other institutions to establish a results-oriented, professional and well motivated public service. The specific activities to be undertaken under this component in Phase I will be to: (i) enhance the performance of priority services through a Performance Improvement Fund and a "quick wins" program; (ii) create a gender sensitive public service; (iii) introduce a results oriented public service; (iv) train staff in strategic management; (v) and assess the impact of AIDS on the public service. PSCAP will also continue the capacity building and process reform started under USAID funding, by supporting activities that will improve the capacity to formulate, analyze and co-ordinate policies. Critical elements of this component include: (i) activation of a Policy-Budget Linkages Task Force; (ii) training staff in Ministry of Legal Affairs (MOLA) and the Ministry of Finance and Economic Development (MOFED) to analyze proposed policies; (iii) designing and piloting an in-service policy-oriented training program; (iv) revising the classification scheme for policy-related documents; (v) introducing mechanisms for public debate on policies and policy proposals; (vi) establishing a computer-based cabinet documentation unit; and (vii) -3 -  designing and piloting a policy monitoring system. The Cabinet Office's Policy Analysis and Coordination Division (PAC) will lead this component, with MOLA and MOFED playing supporting roles. Financial Management, Accountability and Transparency: This component combines capacity building MOFED, OAG, Zambia National Tender Board (ZNTB), and the National Assembly's Public Accounts Committee since the effectiveness of processes in one depends upon support from the others. Under MOFED's sub-component, which sets out to implement many of the recommendations made in the Bank's recent Financial Management Sector Study, and builds upon progress made under a number of donor supported programs, including EU's, PSCAP will put in place mechanisms that would ensure that: (i) financial resources are efficiently, effectively and economically acquired, allocated and utilized, including the introduction of the Medium Term Financial Framework to the budgetary process; (ii) capacity of Zambia Institute of Chartered Accountants (ZICA) and other training institutions is enhanced; (iii) financial management policies procedures, and processes are revised; and (iv) capacity developed in MOFED to monitor and supervise revenue collection and allocation, and expenditure processes. All these activities would be spearheaded by MOFED. The OAG and ZNTB sub-component follows up on the Bank supported FILMUP Project. The activities included under this component are referred to in GRZ recently prepared Governance Policy. The activities will include: (i) enhancing the independence of the Office of the Auditor General; (ii) improving the capacity of the Office of the Auditor General; (iii) decentralizing the operations of the Office of the Auditor General; and (iv) developing and/or strengthening mechanisms that would ensure that all public institutions comply with procurement regulations and procedures. PSCAP will also augment the capacity of the National Assembly's Public Accounts Committee to review and recommend action on reports from the OAG through training and giving the Committee access to specialist assistance. Judicial and Legal. The planned outputs and activities under this component are predominantly a continuation of those initiated under the Financial and Legal Management upgrading Project (FILMUP, IDA Cr. 2535ZA) which is now coming to a close. These include (i) training staff in MOLA and the Judiciary, and developing where necessary, procedures/systems in MOLA and line ministries; and (ii) identifying and reviewing current laws and legislation impacting on accountability and transparency. Government has adopted a modest program of civil works in Phase I of the project. These civil works are considered to be priority investments for the judiciary, and they are confined to rehabilitation of three courts in the first phase of PSCAP. The balance of most of the funds under the component will be used in technical assistance and training for specialist skills Decentralization. PSCAP will provide bridging activities to further the discussion and decisions regarding decentralization - until such time as other anticipated initiatives, more focused on local government per se, can come on line. PSCAP's contribution will be assisting in the definition of the policy and development of a strategy for its implementation. PSCAP will also establish a fund for an external organization, such as a university- based research institute, to carry out surveys of the quality of service - 4 -  delivery to various segments of the population, including the poor, disadvantaged, residents of rural areas and small businesses. These surveys will give "voice" to those not normally involved in the reform of public services. Program costs Component Sector Indicative % of Total Bank- 9 of Bank- Costs financing financing (US$M) (US$M) Right- sizing and pay reform 15 33 4 16 Policy and public service management 9 21 9 32 Financial management, account- ability, transparency 16 35 10 37 Judicial and legal 2 5 2 7 Decentra- lization 1 2 2 0 Project management 2 4 2 7 Total 45 100 27 100 Program implementation The Program will be led by what is collectively referred to as the Leadership and Management Team, which is firmly embedded inside the public service itself. The Leadership and Management Team is comprised of the Deputy Secretary to the Cabinet - Fin./Econ. Dev., the chief executive of each implementing agency, and the following groupings: the Steering Committee, Program Implementation and Coordination Team (PIC), and the Technical Committee. The Steering Committee, which serves an advisory and coordinating function, is comprised of the Deputy Secretary to the Cabinet - Fin./Econ. Dev. and the chief executive of all implementing agencies. The technical staff of PIC consists of the Director/PIC, Finance Manager/PIC, Procurement Manager/PIC and M&E Manager/PIC. Their function is to advise the Deputy Secretary to the Cabinet - Fin./Econ. Dev. and implementing agencies on program-related matters that require their attention. The PIC also serves a coordinating and facilitative role to maximize program effectiveness and timeliness. The Technical Committee, which is meant to serve as a venue to discuss operational program implementation matters, includes as its members - 5 -  the technical PIC staff and a designate from each of the implementing agencies, who will be known as sub-component task managers. Program sustainability Capacity building approach. Past project approaches have had a limited impact on sustainability as they constituted a series of uncoordinated projects that were often too dependent on external expertise. That approach failed to develop the necessary systems and local capacity to sustain the activities beyond the projects' life. To ensure sustainability under this program, no new institution will be created. Existing agencies will basically carry on with their functions, except as those functions are revised under the program. These agencies will in general be required to build upon or adjust activities in which they are already engaged. The program sets out to enhance the capacity of individuals and institutions; it will work by building capacity to achieve sustainability. Government commitment. The program will be sustained because the Government is committed at the highest levels. GRZ has demonstrated its commitment to public sector reform by privatizing over 150 state-owned enterprises, one of the best records in Africa; by retrenching 22,000 public servants; and by introducing measures that make it almost impossible for retrenched civil servants to return to the civil service. During the recent Country Assistance Strategy (CAS) process, the Government itself identified "local capacity building" and "public service capacity building" as among its own development principles and priorities. Civil Service commitment. The effective and willing participation of civil servants at the highest levels in the preparation of this program demonstrates their commitment to make the program work. The staff involved in the preparation of the PCD and the PAD have given up months of their own time; and their PSs have released them for many more months to assist in the preparation. Most of the costs of this have been borne by the Government. The Secretary of the Cabinet/Head of the Civil Service has supported the preparation of the program throughout and has reviewed and approved all drafts of the documents. Each component of the program has been cleared with the departmental or agency head responsible for its implementation. Ownership. Zambian ownership of the project - a result of the capacity building approach and Government and Civil Service commitment -- is the best guarantee of sustainability. The donors that have been involved in the preparation of the program will sustain the program through their ownership. Lessons learned from past operations in the country/sector Important lessons were learned from the first six years experience of implementing PSRP. Some of these lessons highlight the need to improve the capacity of managers in the public service. The Issues Study carried out at the beginning of the preparation of the program demonstrated that even after many years managers still did not think strategically, especially about implementation. Although restructuring plans were developed, little has been done to implement them Other lessons point to the need to establish linkages, think about phasing and do " first things first." One reason for the lack of - 6-  retrenchment was that the Government was not able to find any way to pay retrenched staff . Thus, it is necessary to link restructuring to retrenchment in order to release budgetary resources to pay for the retrenchment. Similarly, funding was never made available to decompress salaries, an essential precondition for motivating staff to perform more effectively. Over the years capacity deficiencies have become increasingly recognized as major impediments to growth. During the recent CAS process the Government identified weak public service capacity as one of the main reasons for weak economic performance and limited success in alleviating poverty. The past few years also demonstrated the importance of putting in place the means to link sectoral and government-wide institutional reform with realistic budgets. At the same time the Cabinet set out to substantially reduce the size of the public service, strategies were being prepared in some sectors that involved considerable staffing increases. Mechanisms did not seem to be in place to reconcile the proposed increase in the numbers of teachers, policy, prison workers and health workers with budgetary constraints. One of the most important lessons learned during the preparation of the project, and the preparation of the Public Sector Reform and Export Promotion Credit (the current adjustment operation), is the importance of having an effective management structure. The original plan under PSREP was to locate the management of the Public Service Reform Program outside the civil service along the lines of the Zambia Privatization Agency. This did not work, mainly because it did not take into account the constitutional responsibilities of the Secretary to the Cabinet, who is also the Head of the Civil Service and the President's Principal Advisor. Since the Secretary to the Cabinet has the constitutional responsibility to implement any policies concerning the civil service, an agency outside could not have the authority needed to implement the necessary reforms. Therefore PSCAP will be managed from within the civil service, in fact, from the very heart of the civil service, the Cabinet Office, under the authority of the Secretary to the Cabinet. The project design has drawn upon the Bank's own experience of public service reform and capacity building. The paper, "The World Bank: Addressing the Challenge of Reforming Public Institutions," recommends five broad changes in the Bank's approach. Each will be significantly addressed in this program: Shift focus from the content of public policy to the way policy is made and implemented. One of the program components, policy management will do just this. Address a broad range of mechanisms that promote public sector reform. The accountability and transparency component will have an impact on rules and restraints; the rightsizing and public management component will promote the commercialization of the provision of public services; and the program has been prepared with substantial voice and partnership, as explained below under Participation. Emphasize good fit over best practice. The program has been prepared by a Zambian team very familiar with reform efforts to date and the institutions and processes that need to be reformed - 7-  Enhance institutions through longer-term programmatic lending. A 13-year APC is proposed for a program that focuses on capacity building Develop skills to do better institutional work. Above all else, PSCAP is setting out to develop skills to reform processes and institutions. Program Benefits The benefits of the Program include: an improved quality of life of the Zambian people through the cost-effective provision of public services; a reduction in poverty through better targeting of subsidies to the poor and the effective implementation of public policies that will promote private sector development; a public service that will deliver quality services at relatively lower costs; public servants motivated to perform well; a public service that will deliver quality services at relatively lower costs; and promoted on the basis on merit alone; public servants who are accountable for their decisions and actions; policy decision-making and service provision that is more transparent to the beneficiaries. The people of Zambia are the ultimate target population, in particular the poor, who have such limited access to public services. PSCAP will aim to improve the capacity of the people in the private and public sectors who are expected to supply public services, and the capacity of the processes they will use to provide those services. Environmental Assessment Category Rating: C Contact Points: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Task Manager Harry C. Garnett The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-8188 Fax: (202) 473-8368 Note: This is information on an involving project. Certain components may not be necessarily included in the final project. Processed by the InfoShop week ending March 17, 2000. - 8 -